Annual Report 2017
Bell City, Preston, VIC
ELANOR INVESTORS GROUP
Annual Report 2017
CONTENTS
Highlights
Message from the Chairman
CEO’s Message
Financial Report
Directors’ Report
Auditors Independence Declaration
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance
Security Holder Analysis
Corporate Directory
1
2
3
4
8
9
33
34
41
97
98
103
104
106
FINANCIAL CALENDAR
17 October 2017
December 2017
February 2018
March 2018
June 2018
August 2018
September 2018
September 2018
Meeting of security holders
Estimated interim distribution
announcement and securities
trade ex-distribution
Interim results announcement
Interim distribution payment
Estimated final distribution
announcement and securities
trade ex-distribution
Full-year results announcement
Final distribution payment
Annual tax statements
MEETING OF SECURITY HOLDERS
The meeting of security holders will be held at 10:30am (Sydney time)
at Computershare, Level 4, 60 Carrington Street, Sydney NSW 2000,
on 17 October 2017.
RESPONSIBLE ENTITY
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).
Elanor Investors Group Annual Report 2017
2
HIGHLIGHTS
CORE EARNINGS
for the financial year 2017
DISTRIBUTIONS
(per security)
FUNDS UNDER MANAGEMENT
at 30 June 2017
$12.67m
12.78c
9.6%
12.8%
$682m
40.7%
SECURITIES ON ISSUE
at 30 June 2017
SECURITY PRICE
at 30 June 2017
NET ASSET VALUE
(per security)
89.2m
$2.14
$1.75
25%
13.8%
27.7%
ELANOR INVESTOR GROUP’S OWNED
AND MANAGED INVESTMENTS
Northern Territory
GEARING
at 30 June 2017
4.2%
from
7.5%
Western Australia
Northern Territory
Northern Territory
South Australia
Queensland
Queensland
Western Australia
Western Australia
South Australia
South Australia
New South Wales
New South Wales
New South Wales
Victoria
Victoria
Auckland
Hotels, Tourism and Leisure
Special Situation Investments
Real Estate
Victoria
Tasmania
Tasmania
NEW ZEALAND
Elanor Investors Group Annual Report 2017
Tasmania
MESSAGE FROM THE CHAIRMAN
3
On behalf of the Board, I am pleased to
present Elanor Investors Group’s Annual
Report, including its Financial Statements
for the year ended 30 June 2017.
Paul Bedbrook
Chairman
The year ended 30 June 2017 has
been another successful year, Elanor’s
third financial year since its IPO in
July 2014. The Group has achieved
significant growth in both funds under
management and security holder
value since its IPO.
Our solid growth was driven by a clear
focus on our strategy to grow funds
under management by identifying and
originating investments that deliver
strong performance for both Elanor’s
funds management capital partners
and Elanor’s security holders. The
successful execution of this strategy
resulted in significant growth in funds
under management of 40.7% over
the year. Since the listing of the Group
in July 2014 Elanor has delivered
a total security holder return of
approximately 28% per annum.
ACHIEVEMENTS
We continue to build our funds
management platform as an ASX listed
public company. Our core earnings of
$12.7 million reflected a 9.6% increase
on the prior year. Distributions per
security were 12.78 cents per stapled
security for the year, a reduction
of 12.8% on the prior year, on a 25%
increased equity base following the
Group’s capital raising in July/August
2016. Underpinning this result is the
strong performance of the funds
management business, growing its
earnings over the year by 43% to
$11.3 million.
Particularly pleasing has been our
ability to increase funds under
management during the year to
$682 million as at 30 June 2017. A
significant achievement of the Group
during the year was the inaugural
listing of an Elanor managed fund,
the Elanor Retail Property Fund. The
Elanor Retail Property Fund (ASX: ERF)
listed in November 2016. As at 30 June
2017, ERF had a gross asset value of
$260.8 million reflecting a $17.5 million
or 7.2% increase in the valuation of
the portfolio of properties over the
8 months since its listing.
The growth in Elanor’s funds under
management over the year has
been achieved as a result of the
establishment of three new syndicates,
the listed Elanor Retail Property Fund,
the Elanor Commercial Property Fund
(a multi asset commercial office fund),
and the Hunters Plaza Syndicate (to
acquire a retail shopping centre in
Auckland, New Zealand).
The Group also continues to focus
on maintaining a strong balance
sheet to support the execution of
its strategy. In July and August 2016
we strengthened our balance sheet
with the successful completion of a
$30 million Institutional Placement
and a $3 million Security Purchase
Plan. In addition to this, the Group
has maintained its low gearing,
being 4.2% at 30 June 2017.
GOVERNANCE
The Board continues to focus on
the Group’s corporate governance
structure and processes consistent
with the strategic intent and operating
activities. Good governance is
fundamental to our operations as the
Group continues to grow and execute
on its stated strategy.
ACKNOWLEDGEMENTS
I wish to thank my fellow Board
members, our executive management
team led by the CEO, and all of our staff
across the Group, for their contribution
during the year.
Finally, thank you to all Elanor security
holders for your continued support
and confidence. I look forward to
discussing the business further at our
Annual General Meeting in Sydney on
17 October 2017.
Yours sincerely,
Paul Bedbrook
Chairman, Elanor Investors Group
Elanor Investors Group Annual Report 2017
4
CEO’S MESSAGE
We have continued to
successfully grow our
business during the year.
The Group’s core earnings of
$12.7 million reflected a 9.6% increase
on the prior year. Pleasingly, earnings
from the funds management business
grew by 43% to $11.3 million for the year,
reflecting a 40.7% increase in funds
under management to $682 million.
The Group’s net asset backing of
$1.75 per security as at 30 June
2017 represents a 27.7% increase on
the prior year, primarily driven by a
$25.8 million increase in the value of
Elanor’s Hotels, Tourism and Leisure
balance sheet assets.
STRATEGY AND INVESTMENT
APPROACH
The key strategic objective of the Group
is to grow funds under management by
identifying and originating investments
that deliver strong returns for both
Elanor’s funds management capital
partners and ENN security holders.
Elanor’s investment focus is on
acquiring and unlocking value in
assets that provide strong, stable cash
flows and high quality capital growth
potential. We evaluate acquisition
opportunities through a strong value
and risk management lens; our highly
active approach to asset management
is underpinned with urgency and an
acute focus on results.
Elanor Investors Group Annual Report 2017
I am pleased to present Elanor Investors
Group’s annual report for the year ended
30 June 2017.
Glenn Willis
Managing Director and
Chief Executive Officer
We seek to co-invest with our funds
management capital partners for both
strategic and alignment purposes. We
also originate and hold investments on
balance sheet to provide opportunities
for future co-investment by Elanor’s
capital partners. The core sectors of
Elanor’s investment focus are the real
estate sector and the hotels, tourism
and leisure sector. Furthermore,
our special situation investments
encompass other real estate-backed
assets that generate strong cash flows.
KEY RESULTS
– Core earnings for the year were
$12.7 million, representing an
increase of 9.6% on the prior year.
– Distributions for the year were
$11.4 million, or 12.78 cents per
stapled security. This represents
a 12.8% decrease on the prior
year on a 25% higher number
of securities on issue.
– Net Tangible Assets (NTA) per
security increased by 31.5% during
the year, from $1.27 to $1.66
per security.
FUNDS MANAGEMENT
–
Funds under management
increased by $197 million, or 40.7%,
from $485 million to $682 million.
– Earnings from funds management
increased by 43% to $11.3 million.
– Successful listing of Elanor Retail
Property Fund (ASX: ERF) in
November 2016. ERF was formed
by the stapling of two existing Elanor
managed funds and the acquisition
of two new properties, the Tweed
Mall Shopping Centre located in
Tweed Heads, NSW, and Northway
Plaza Shopping Centre located in
Bundaberg, QLD. ERF had a gross
asset value of $260.8 million as
at 30 June 2017.
The level of growth in funds under
management has been significant.
The Group established three new funds
during the period, being the ASX listed
Elanor Retail Property Fund, the Elanor
Commercial Property Fund (ECPF),
comprising initially two commercial
office assets located in Cannon Hill and
Mt Gravatt, QLD, and the Hunters Plaza
Syndicate (a retail shopping centre
in Auckland, NZ).
The Group successfully completed an
Institutional Placement and Security
Purchase Plan in July/August 2016,
raising $31.7 million net of costs. The
proceeds from the capital raising were
substantially deployed to fund co-
investments in both ERF and ECPF.
CEO’S MESSAGE
continued
5
Cradle Mountain Lodge, Cradle Mountain, TAS
During the year the Group generated
significant performance fees from
asset realisations including the Auburn
Central Syndicate (generating a 24%
internal rate of return for investors),
the sale of the Super A-Mart Auburn
property (generating a 23.3% internal
rate of return for investors), and the
sale of the properties in the John
Cootes Diversified Property Syndicate
(generating a 29.5% internal rate of
return for investors).
On 21 August 2017, the Group
announced the establishment of
Elanor Metro and Prime Regional Fund
with an initial fund size of $80.6 million.
This is our second multi-asset hotel
fund. The fund will initially comprise
a portfolio of 3 Australian Hotels
with strong, diversified cash flows
and significant and high quality
medium term development and
redevelopment potential.
The Group’s strong track record
and investor base continues to be
evidenced by the demand from its
capital partners for newly established
funds. Furthermore, the Group has
significantly increased its investment
origination and capital raising capability
during the six months ended 30 June
2017 with several key appointments
to the business. Elanor is strongly
positioned to grow its funds
management business.
INVESTMENT PORTFOLIO
The value of the Group’s investment
portfolio totalled $159.2 million as
at 30 June 2017, having grown by
$51.8 million, or 48.2% during the year.
Elanor’s investment portfolio consists
of the Group’s co-investments in funds
managed by Elanor and wholly owned
assets that provide opportunities
for future co-investment by external
capital partners.
In keeping with our strategy of co-
investing alongside our capital
partners, co-investments totalling
$22.7 million were made in managed
funds during the year, including in
the Elanor Retail Property Fund and
in the Elanor Commercial Property
Fund. Further to this, the Group also
co-invested in a new managed fund,
the Hunters Plaza Syndicate, in July
2017. The financial performance of the
investment portfolio remains strong.
During the year our Hotels, Tourism and
Leisure balance sheet assets increased
in value by $25.7 million.
Our investment portfolio includes
26,135 square metres of development
land located at Merrylands, NSW,
which was acquired as part of the
John Cootes Furniture acquisition.
Further progress has been made during
the year in relation to the Merrylands
Property. Whilst the Expression of
Interest campaign initiated in July 2016
did not result in a satisfactory offer,
the Group is in advanced discussions
with several parties in relation to
the property.
Elanor Investors Group Annual Report 2017
I wish to thank my fellow Board
members, my executive leadership
team and all our staff, both at Group
level and at each of our investments,
for their dedication and commendable
efforts over the year.
Yours sincerely,
Glenn Willis
Managing Director and
Chief Executive Officer,
Elanor Investors Group
6
CEO’S MESSAGE
continued
CAPITAL MANAGEMENT
As mentioned above, in July and August
2016, the Group undertook an equity
raising of $33 million via an institutional
placement of $30 million and a security
purchase plan of $3 million.
During the year the Group further
reduced gearing levels to 4.2% as
at 30 June 2017, down from 7.5% at
30 June 2016.
Our intention remains for the Group’s
balance sheet to be lowly geared, while
maintaining borrowing capacity to take
advantage of opportunities arising from
asset valuation cycles. In this regard,
during the coming year, the Group plans
to issue a corporate bond to improve
the efficiency of Elanor’s capital
structure by providing medium term,
permanent, non-dilutive capital. This
capital, in conjunction with available
bank facilities, will be used to fund
short to medium term growth.
SOCIAL RESPONSIBILITY
At Elanor, we are acutely aware of our
responsibility to the communities in
which we operate and to society more
generally. During the year the Group
supported a number of charitable
causes and organisations including
the FSHD (Facioscapulohumeral
Muscular Dystrophy) Foundation, Big
Brothers Big Sisters, Disability Sports
Australia, Life Education Australia
and The One Foundation Australia. In
addition to these organisations, across
the Group, Elanor supports a number
of community focussed initiatives.
Elanor, as owner of Featherdale Wildlife
Park, is committed to animal welfare
and native animal preservation.
Featherdale is a pre-eminent
contributor to numerous endangered
species preservation programs for
Australian native animals. Featherdale
is a major social contributor to the
Western Sydney community and
across the State of NSW in the areas
of animal preservation, education
and animal rescue. Featherdale is
committed to maintain its social
contribution into the future.
OUTLOOK
The Group remains well positioned
to continue to grow earnings and
value for its security holders. Our
core strategy is focused on growing
earnings from the funds management
business and actively managing our
investment portfolio.
We have an active pipeline of potential
funds management opportunities
in a market where identifying and
acquiring quality assets that meet
our investment criteria has been
challenging, particularly over the last
six months.
Continued growth in core earnings
will be dependent on the Group’s
ability to grow funds under
management through the acquisition
of quality assets, and the timing and
size of future performance fees.
Elanor Investors Group Annual Report 2017
7
Cannon Hill, Brisbane, QLD
Mt Gravatt, Brisbane, QLD
Hunters Plaza, Auckland, NZ
Elanor Investors Group Annual Report 2017
88
FINANCIAL REPORT
for the year ended 30 June 2017
CONTENTS
Directors’ Report
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
Directors’ Declaration
Independent Auditor’s Report
9
33
34
35
36
38
40
41
97
98
Elanor Investors Group Annual Report 2017 DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
DIRECTORS REPORT
9
Directors’ Report
The Directors of Elanor Investors Limited (Company), and the Directors of Elanor Funds Management Limited (Responsible
Entity or Manager), as responsible entity of the Elanor Investment Fund present their report together with the consolidated
financial report of Elanor Investors Group (Group, Consolidated Group or Elanor) and the consolidated financial report of
the Elanor Investment Fund (EIF Group) for the full year ended 30 June 2017 (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 38, 259 George 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). 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 Company during the period and up to
the date of this report:
Paul Bedbrook (Chair)
Glenn Willis (Managing Director and Chief Executive Officer)
Nigel Ampherlaw
William (Bill) Moss AO
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 2017 comprise:
Distribution
Interim Distribution
Amount paid (cents per stapled security)
Payment Date
Final Distribution
Amount payable (cents per stapled security)
Payment Date
Year Ended 30 June 2017
7.77
3 March 2017
5.01
1 September 2017
A provision for the Final Distribution has not been recognised in the consolidated financial statements for the year as the
distribution had not been declared at the reporting date. The Final Distribution per stapled security will bring distributions
in respect of the year ended 30 June 2017 to 12.78 cents per stapled security.
3
Elanor Investors Group Annual Report 2017
10
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
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's 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 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 $484.5 million to $681.6 million. Co-investments of $22.7
million were made in new managed funds, and the Hotels, Tourism and Leisure portfolio of on balance sheet properties
showed a revaluation increment of $25.7 million, resulting in an investment portfolio of $159.2 million as at 30 June 2017,
an increase of approximately $52 million from 30 June 2016.
In August 2016, the Group successfully completed an institutional placement and Security Purchase Plan which raised
$31.7 million, net of raising costs. A total of 17.84 million stapled securities were issued as a result of these raisings, which
increased the Group’s stapled securities on issue by 25% to 89.22 million at the time.
The capital raising related to two key funds management initiatives that were completed in the six months ended 31
December 2016. These initiatives were:
•
•
•
•
The listing of Elanor Retail Property Fund (ASX: ERF) in November 2016. ERF was formed by the stapling of two
existing Elanor managed funds, and the acquisition of two new properties, the Tweed Mall Shopping Centre
located in Tweed Heads, NSW, and Northway Plaza Shopping Centre located in Bundaberg, QLD. ERF had a
gross asset value of $248.5 million as at 31 December 2016 which has increased to $267.9 million as at 30 June
2017 following a revaluation of the property portfolio at that date.
Elanor increased its co-investment interest in ERF to 17.00% during the six month ended 30 June 2017.
The establishment of Elanor Commercial Property Fund (ECPF), a multi-asset commercial property fund. ECPF
acquired 34 Corporate Drive, Cannon Hill, QLD in November 2016. In February 2017 ECPF acquired 96 Mount
Gravatt-Capalaba Rd, Upper Mount Gravatt, QLD. These acquisitions established the fund which had a gross
asset value of $51.5 million as at 30 June 2017.
In addition, the Hunters Plaza Syndicate was established in June 2017, acquiring the Hunters Plaza Shopping
Centre in Auckland NZ, with a gross asset value of $47.7 million at 30 June 2017. Elanor has also co-invested
in this syndicate, subsequent to year end
During the year the Group generated significant performance fees from exits / asset realisations including the Auburn
Central Syndicate (included in the Elanor Retail Property Fund IPO) generating a 24% internal rate of return for investors
in that fund, the sale of the Super A-Mart Auburn property generating a 23.3% internal rate of return for investors in that
fund, and the sale of the properties in the John Cootes Diversified Property Syndicate, generating a 29.5% internal rate of
return for investors in that fund.
ENN’s strong investment track record and investor base continues to be evidenced by the demand from investors for
ENN’s newly established funds. Elanor has a well resourced and scalable platform with capacity for growth. The Group
has significantly increased its origination and capital raising capability during the six month ended 30 June 2017 (people,
investor demand and balance sheet capacity and is strongly positioned to grow the funds management business).
Whilst prevailing market conditions for “value” investors are more challenging, the Group's pipeline is encouraging.
Elanor Investors Group Annual Report 2017
4
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO
The following tables show the Group's managed funds and investment portfolio:
Managed Funds
Funds
Location
193 Clarence Hotel Syndicate
Sydney, NSW
Type
Hotel
Auburn Central Syndicate
Auburn, NSW
Bell City Syndicates (4)
Preston, VIC
Elanor Hospitality and
Accommodation Fund
Elanor Retail Property Fund
NSW, TAS and ACT
Taree, NSW and
Glenorchy, TAS
Sub-regional shopping centre
Hotel, budget accommodation and
commercial complex
Six hotels across NSW (4), TAS
(1) and ACT (1)
Sub-regional shopping centre
Super A Mart Auburn Syndicate
John Cootes Diversified Property
Fund
Auburn, NSW
Penrith and Tuggerah,
NSW
Retail warehouse
Two retail showrooms
Limestone Street Centre Syndicate
Ipswich, QLD
Commercial office building
Disposals since 30 June 2016
Auburn Central Syndicate
Elanor Retail Property Fund
John Cootes Diversified Property
Fund
Auburn, NSW
Taree, NSW and
Glenorchy, TAS
Penrith and Tuggerah,
NSW
Sub-regional shopping centre
Sub-regional shopping centre
Two retail showrooms
Super A Mart Auburn Syndicate
Auburn, NSW
Retail warehouse
11
Gross
Asset
Value
$'m
24.6
74.8
154.6
98.0
64.2
28.6
10.8
36.6
(74.8)
(64.2)
(10.8)
(28.6)
Additions since 30 June 2016
Elanor Retail Property Fund (Nov
2016 IPO)
Elanor Commercial Property Fund
(Nov 2016 and Feb 2017)
Hunters Plaza Syndicate
Total Managed Funds
Auburn, Taree and Tweed
Heads, NSW, Bundaberg,
QLD, and Glenorchy, TAS
Cannon Hill and Mt
Gravatt, QLD
Auckland, NZ
Sub-regional shopping centre
267.9
Commercial office buildings
Sub-regional shopping centre
51.5
48.4
681.6
5
Elanor Investors Group Annual Report 2017
12
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO (CONTINUED)
Investment Portfolio
Asset
Location
Type
Note
Carrying Value
$'m
Hotels Tourism and Leisure
Featherdale Wildlife Park
Sydney, NSW
Wildlife Park
Hotel Ibis Styles Albany
Hotel Ibis Styles Canberra
Eaglehawk
Albany, WA
Canberra, ACT
Hotel
Hotel
Special Situations Investments
John Cootes Furniture
12 locations across NSW
Merrylands Property
Merrylands, NSW
Furniture retailer
Property associated
with John Cootes
Furniture
Hotel
Sub-regional
shopping centre
Hotel, budget
accommodation and
commercial complex
Six hotels across
NSW (4), TAS (1) and
ACT (1)
Sub-regional
shopping centres
Managed Fund
Co-Investments
193 Clarence Hotel Syndicate
Sydney, NSW
Auburn Central Syndicate
Auburn, NSW
Bell City Syndicates (4)
Preston, VIC
Elanor Hospitality and
Accommodation Fund
Elanor Retail Property Fund
Limestone Street Centre
Syndicate
Disposals since 30 June 2016
NSW, TAS and ACT
Taree, NSW and
Glenorchy, TAS
Ipswich, QLD
Commercial office
Auburn Central Syndicate
Auburn , NSW
Elanor Retail Property Fund
Additions since 30 June 2016
Taree, NSW and
Glenorchy, TAS
Sub-regional
shopping centre
Sub-regional
shopping centres
Elanor Retail Property Fund (ASX:
ERF - Nov 2016 IPO)
Elanor Commercial Property Fund
Auburn, Taree and Tweed
Heads, NSW, Bundaberg,
QLD, and Glenorchy, TAS
Cannon Hill and Mt
Gravatt, QLD
Sub-regional
shopping centres
Commercial offices
Total Investment Portfolio
Total Managed Funds and
Investment Portfolio
Elanor Investors Group Annual Report 2017
6
1
1
1
2
3
4
4
4
5
4
4
4
4
4
4
39.0
5.3
20.0
Cost
$’m
12.6
17.1
Equity accounted
value
$’m
1.1
0.6
11.8
19.4
7.0
1.4
(0.6)
(7.0)
31.0
0.5
159.2
840.8
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
13
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO (CONTINUED)
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 associates and accounted for using the equity method.
Note 5: The co-investment in Elanor Hospitality and Accommodation Fund has been consolidated in the financial statements. The amount
shown assumes that the investment was accounted for using the equity method.
REVIEW OF FINANCIAL RESULTS
The Group recorded a statutory profit after tax of $11.6 million for the year ended 30 June 2017.
Core or Distributable earnings were $12.7 million or 14.2 cents per stapled security. A Final Distribution of 5.01 cents per
stapled security has been declared for the six months ended 30 June 2017 (90% pay-out ratio on Core Earnings). Core
Earnings is considered more relevant than statutory profit as it represents an estimate of the underlying recurring cash
earnings of the Group, and has been determined in accordance with ASIC Regulatory Guide 230.
A summary of the Group and EIF Group's results for year is set out below:
Statutory financial results
Net profit / (loss) after tax ($'000)
Net profit / (loss) after tax ($'000) (EHAF equity
accounted)
Core Earnings ($'000)
Distributions payable to security holders ($'000)
Core Earnings per stapled security (cents)
Core Earnings per weighted average stapled
security (cents)
Distributions (cents per stapled security / unit)
Net tangible assets ($ per stapled security)
Net tangible assets ($ per stapled security) (EHAF
equity accounted)
Gearing (net debt / total assets less cash) (%)
Gearing (net debt / total assets less cash) (%)
(EHAF equity accounted)
Group
30 June
2017
Group EIF Group EIF Group
30 June
30 June
2016
2017
30 June
2016
11,626
4,143
38,774
3,789
11,400
12,670
11,403
14.20
14.49
12.78
1.96
1.66
21.15
6,810
11,560
10,404
16.19
16.36
14.65
1.65
1.27
28.15
33,590
7,720
6,948
8.65
8.83
8.74
1.45
1.13
30.01
5,544
8,540
7,686
11.96
12.09
10.82
1.17
0.80
36.80
4.24
7.50
7.04
27.38
As Elanor holds a 42.07% interest in the Elanor Hospitality and Accommodation Fund (EHAF or the Fund), for accounting
purposes, Elanor is deemed to have a controlling interest in the Fund given its level of ownership and role as manager of
the Fund. This means that the financial results and financial position of the Fund are consolidated into the financial
statements of the Group for the period ended 30 June 2017. All other managed fund co-investments are accounted for
using the equity method in the Group’s consolidated financial statements.
Presenting the summary consolidated financial results of the Group on the basis that the Fund was accounted for using
the equity method is important because Elanor considers that this gives the most appropriate presentation consistent with
management and reporting of the Group and to provide a comparable basis to the presentation of the results for prior
periods.
7
Elanor Investors Group Annual Report 2017
14
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF FINANCIAL RESULTS (CONTINUED)
The table below provides a reconciliation from statutory net profit / (loss) after tax to distributable Core Earnings:
Group
30 June
2017
$’000
Group
30 June
2016
$’000
EIF Group
30 June
2017
$’000
EIF Group
30 June
2016
$’000
Statutory Net profit / (loss) after tax
11,626
4,143
38,774
Adjustment to remove the impact of consolidation of
EHAF
Adjustment to include the impact of accounting for
EHAF using the equity method
(3,880)
4,668
(5,994)
3,654
(2,001)
810
(1,310)
3,789
3,064
Adjusted Net profit / (loss) after tax
11,400
6,810
33,590
5,543
Adjustments for items included in statutory profit/(loss)
Increase in equity accounted investments to reflect
distributions received / receivable
Building depreciation expense
John Cootes Furniture Insurance recovery adjustment
Straight lining of rental expense
Amortisation of intangibles
Gain on the sale of Peppers Cradle Mountain Lodge
and Mantra Wollongong Hotel
Net proceeds on the sale of Peppers Cradle Mountain
Lodge and Mantra Wollongong Hotel retained
Fair value adjustments on investment property
Amortisation of equity settled STI amounts
Tax adjustments
Core Earnings
2
3
5
5
4
1
190
324
-
20
150
-
-
-
676
(90)
3,480
(696)
2,997
851
(706)
32
150
10,009
(9,056)
-
-
-
-
-
-
-
-
(10)
(25,567)
393
-
-
-
-
-
-
-
-
-
-
12,670
11,560
7,720
8,540
Note 1: Core Earnings has been determined in accordance with ASIC RG 230 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, amortisation of intangibles, straight lining of rental expense, and
amortisation of equity settled STI amounts), and restating share of profit from equity accounted investments to reflect distributions received
/ receivable in respect of those investments.
Note 2: Share of profit from equity accounted investments includes depreciation and amortisation and fair value adjustments on investment
property that were added back in the determination of distributable earnings for 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 distribution received / receivable by the Group from those investments in Elanor managed
funds.
Note 3: During the year, the Group incurred total depreciation charges of $6.317 million, however only the depreciation expense on
buildings of $0.324 million has been added back for the purposes of calculating Core Earnings.
Note 4: During the year, the Group incurred non-cash profit and loss charges in respect of the amortisation of the equity component of
the Group’s Short Term Incentive (STI) amounts. These amounts have been added back for the purposes of calculating Core Earnings.
Note 5: In March 2016 the Group sold Peppers Cradle Mountain Lodge and Mantra Wollongong Hotel to Elanor Hospitality and
Accommodation Fund for $38.0 million and $9.0 million respectively. These assets were accounted for by the Group on a fair value basis
whereby revaluation increases arising from changes in the fair value of land and buildings are recognised in other comprehensive income
and accumulated within equity as opposed to being reflected in the consolidated profit and loss of the Group.
Elanor Investors Group Annual Report 2017
8
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
15
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS
The Group is organised into four divisions by business type.
Funds Management manages third party owned investment funds and syndicates.
Hotels, Tourism and Leisure originates investment and fund management assets. The current investment portfolio includes
Featherdale Wildlife Park, Ibis Styles Canberra Eaglehawk Hotel and Ibis Styles Albany Hotel, along with co-investments
in 193 Clarence Hotel Syndicate, four Bell City syndicates and Elanor Hospitality and Accommodation Fund. Hotels,
Tourism and Leisure also manages these syndicates.
Real Estate originates investment and fund management assets. The current investment portfolio comprises investments
in Elanor Retail Property Fund (ASX: ERF), Elanor Commercial Property Fund and the Limestone Street Centre Syndicate.
Real Estate manages each of these funds in addition to the newly established Hunters Plaza Syndicate.
Special Situations Investments contains the John Cootes Furniture business and the property associated with John Cootes
Furniture business at Merrylands, NSW.
Set out below is an adjusted presentation of the statutory financial results by segment, on the basis that the Group’s interest
in EHAF is accounted for using the equity method rather than on a consolidated basis. Elanor considers that presenting
the operating performance of the Group on this adjusted basis gives the most appropriate presentation of the Group
consistent with management and reporting of the Group and to provide a comparable basis to the presentation of prior
period results. The results provided on this basis are presented as the ‘ENN Group’.
The performance of the ENN Group for the period ended 30 June 2017, as represented by the aggregate results of its
operations for the period, was as follows:
ENN Group
Segment
Revenue
ENN Group
Segment
Revenue
ENN Group
Segment
EBITDA
ENN Group
Segment
EBITDA
ENN Group Revenue and EBITDA (adjusted to
reflect EHAF accounted for using
the equity method)
Funds Management
Hotels, Tourism and Leisure
Real Estate
Special Situations Investments
Total Segment Revenue and EBITDA
Unallocated corporate costs
Group EBITDA
Depreciation and amortisation
Group EBIT
Other Income
Interest income
Borrowing costs
Group net profit / (loss) before income tax
Income tax expense
Group net profit / (loss) after income tax
30 June
2017
$'000
14,176
23,601
2,437
31,000
71,214
30 June
2016
$'000
9,345
32,205
-
28,289
69,839
30 June
2017
$'000
30 June
2016
$'000
11,338
7,068
1,512
1,332
21,250
(6,063)
15,187
(1,865)
13,322
141
270
(908)
12,825
(1,425)
11,400
7,918
6,752
321
2,404
17,395
(6,400)
10,995
(2,727)
8,268
140
76
(1,062)
7,422
(612)
6,810
For further information on the segment performance, see Note 1 to the consolidated financial statements.
9
Elanor Investors Group Annual Report 2017
16
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Group EBITDA shown above includes the equity accounted result of the Group’s co-investments in funds managed by
Elanor, including EHAF. The Group measures the performance of its co-investments based on distributions received /
receivable from these co-investments, consistent with the treatment within Core Earnings. Group EBITDA, adjusted to
show distributions received / receivable from co-investments rather than the equity accounted result is as follows:
Operating Performance for year
ended 30 June 2017
ENN Group
EBITDA
Remove
Equity
Accounted
Result
Add
Distributions
received /
receivable
EBITDA
Contribution
to Core
Earnings
Funds Management
Hotels, Tourism and Leisure
Real Estate
Special Situation Investments
Unallocated Corporate Costs
EBITDA
Funds Management
$’000
11,338
7,068
1,512
1,332
(6,063)
15,187
$’000
-
(1,779)
(2,437)
-
-
$’000
-
2,641
1,765
-
-
(4,216)
4,406
The performance of the Funds Management division is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
Funds under Management
Opening funds under management
Increase in value of funds under management
Disposals / decrease in value of funds under management
New funds
Total
2017
$’000
14,176
11,338
80.0%
30 June
2017
$’m
484.5
24.7
(39.4)
211.8
681.6
$’000
11,338
7,930
840
1,332
(6,063)
15,377
2016
$’000
9,345
7,918
84.7%
30 June
2016
$’m
346.4
(4.6)
(56.2)
198.9
484.5
The Group has achieved significant growth in funds under management since July 2016, with the Group establishing three
new funds being Elanor Retail Property Fund (IPO of two existing funds on 9 November 2016 and the acquisition of Tweed
Mall and Northway Plaza on 10 November and 11 November 2016 respectively), the Elanor Commercial Property Fund (a
multi-asset fund comprising two commercial properties) and the Hunters Plaza Syndicate (a New Zealand based retail
shopping centre fund).
The Funds Management division delivered material outperformance relative to the prior period, with EBITDA of $11.3
million (FY16: $7.9 million) and a net increase in funds under management of $197 million to $682 million.
During the year, the Group received performance fees in respect of the Auburn Central Syndicate as a result of that
syndicate forming part of the Elanor Retail Property Fund which was listed in November 2016, the Super A Mart Auburn
Syndicate, and the John Cootes Diversified Property Syndicate as a result of the sale of the properties in those funds.
During the year the Group strengthened its internal asset management and investment management capabilities, along
with its asset origination resources, 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.
Elanor Investors Group Annual Report 2017
10
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
17
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Hotels, Tourism and Leisure
The performance of the Hotels, Tourism and Leisure division for the period is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
2017
$’000
24,463
7,930
32.4%
2016
$’000
35,873
10,420
29.0%
Hotels, Tourism and Leisure EBITDA contribution to Core Earnings, includes the results of Featherdale Wildlife Park, Ibis
Styles Canberra Eaglehawk Hotel and Ibis Styles Albany Hotel. The comparative result also included the results of Cradle
Mountain Lodge and Mantra Wollongong Hotel, until 21 March 2016, when they were sold to EHAF.
Hotels, Tourism and Leisure EBITDA contribution to Core Earnings also includes distributions received / receivable from
the Group’s co-investment in funds managed by the Group of $2.6 million for the year ended 30 June 2017 ($2.0 million
for the comparative period).
Distribution received / receivable from the co-investment in Hotels, Tourism and Leisure funds managed by the Group
represent an average annualized return of 8.2%.
The table below sets out the assessed value of each investment portfolio property at 30 June 2017.
Carrying Value of Properties
Featherdale Wildlife Park
Ibis Styles Eaglehawk Hotel
Ibis Styles Albany Hotel
Total
2017
$’m
39.0
20.0
5.3
64.3
2016
$’m
15.6
17.7
5.3
38.6
The carrying value of the Group’s Hotels, Tourism and Leisure co-investments as at 30 June 2017, using the equity method,
is as follows:
Carrying Value of Co-Investments
Elanor Hospitality and Accommodation Fund
Bell City Fund
193 Clarence Hotel Syndicate
Total
Real Estate
2017
$’m
19.4
11.8
1.1
32.3
2016
$’m
19.8
12.6
1.2
33.6
Real Estate comprises distributions received / receivable from co-investments in funds managed by the Group as
follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
2017
$’000
1,765
840
47.6%
2016
$’000
19
340
N/A
11
Elanor Investors Group Annual Report 2017
18
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Real Estate (continued)
The carrying value of these investments as at 30 June 2017, using the equity method, is as follows:
Carrying Value of Co-Investments
Auburn Central Syndicate
Elanor Retail Property Fund (ASX: ERF)
Elanor Commercial Property Fund
Limestone Street Centre Syndicate
Total
2017
$’m
-
31.0
0.5
1.4
32.9
2016
$’m
0.6
7.0
-
1.4
9.0
Subsequent to 30 June 2017, the Group has also invested in approximately 5% of the newly established Hunters Plaza
Syndicate.
Special Situations Investments
Special Situations Investments contains the John Cootes Furniture business and the property associated with John
Cootes Furniture business at Merrylands.
During the year new John Cootes Furniture stores were opened in Rutherford, NSW and Prospect in Sydney.
The performance of the Special Situations Investments division for the period is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings 1
Operating margin
2017
$’000
31,000
1,332
2016
$’000
28,289
1,698
4.3%
6.0%
Note 1: The EBITDA for Special Situation Investments for the period ended 30 June 2016 included $1.524 million of John Cootes Furniture
insurance recoveries that related to the loss of plant and equipment. Of this amount $0.706 million was deducted to arrive at Core Earnings
for that period. Therefore on a like for like basis, Special Situations Investments contribution to Core Earnings for the year ended 30 June
2016 was $1.70 million which reflects an operating margin of 6.0%.
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. In respect of the John Cootes Furniture business,
claims for loss of stock and plant and equipment have been fully settled.
At balance date, the business interruption claim was not fully settled. To date, progress payments in relation to the business
interruption claims of $2.3 million have been received from the insurer. A final claim for lost sales along with claim
preparation costs and additional costs over and above amounts received will be lodged in the short term.
Further progress has been made during the year in relation to the Merrylands Property. Whilst the Expression of Interest
campaign initiated in July 2016 did not result in a satisfactory offer, the Group is in advanced discussions with several
parties in relation to the property.
Elanor Investors Group Annual Report 2017
12
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
19
4. Operating and financial review (continued)
Summary and Outlook
The Group's core strategy will remain focused on growing its managed funds and 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, movement in property valuations, tightening debt capital markets and possible weather related
events. 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, insurance arrangements and through the active
management of the Group and its managed fund capital structures.
During the coming year, the Group plans to issue a corporate bond to improve the capital structure efficiency of the Group
by providing medium term, permanent, non-dilutive capital. This capital will be used to fund short to medium term growth
in conjunction with available bank facilities.
The Group is committed to growing its funds management business as a result of the acquisition of quality assets based
on the Group’s investment philosophy and criteria. The Group has an active pipeline of potential funds management
opportunities in a market where identifying and acquiring quality assets that meet our investment criteria has been
challenging particularly over the last six months. Continued growth in Core Earnings will be predicated on the Group’s
ability to continue to grow funds under management through the acquisition of quality assets, and the timing of realisation
and size of future performance fees.
5.
Interests in the Group
In August 2016, the Group successfully completed an institutional placement and Security Purchase Plan which raised
$31.7 million, net of raising costs. A total of 17.84 million stapled securities were issued as a result of these raisings. The
capital raising related to two key funds management initiatives that were completed in the six months ended 31 December
2016.
The movement in stapled securities of the Group during the year is set out below:
Stapled securities on issue at the beginning of the year
Stapled securities issued for business acquisitions through Institutional
Placement
Stapled securities issued for Security Purchase Plan
Stapled Securities issued under the short term incentive scheme
Stapled securities on issue at the end of the period
Consolidated
Group
30 June 2017
'000
71,386
16,216
Consolidated
Group
30 June 2016
'000
70,645
-
1,622
-
89,224
-
741
71,386
13
Elanor Investors Group Annual Report 2017
20
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
6. Directors
Name
Paul Bedbrook
Particulars
Independent Non-Executive Chairman
Paul was appointed a Director of both the Company and the Responsible Entity (also
the Responsible Entity of ERF) 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), CEO of the ING
Australia/ANZ Bank Wealth JV (2003-2008) 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.
Former listed directorships in the last three years: None
Interest in stapled securities: 257,327
Qualifications: B.Sc, F FIN, FAICD
Glenn Willis
Managing Director and Chief Executive Officer
Glenn was appointed a Director of both the Company and the Responsible Entity
(also the Responsible Entity of ERF) 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: 5,852,050
Qualifications: B.Bus (Econ & Fin)
Elanor Investors Group Annual Report 2017
14
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
21
6. Directors (continued)
Nigel Ampherlaw
Independent Non-Executive Director
Chairman, Audit and Risk Committee
Nigel was appointed a Director of both the Company and the Responsible Entity
(also the Responsible Entity of ERF) 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 CCI Ltd and a member of the Strategy Committee,
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: 164,654
Qualifications: B.Com, FCA, MAICD
William (Bill) Moss AO Non-Executive Director
Chairman, Remuneration and Nominations Committee
Bill was appointed a Director of both the Company and the Responsible Entity (also
the Responsible Entity of ERF) 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: None
Interest in stapled securities: 4,678,159
Qualifications: B.Ec
15
Elanor Investors Group Annual Report 2017
22
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
7. Directors’ relevant interests
Paul Bedbrook
Glenn Willis1
Nigel Ampherlaw
William (Bill) Moss
Stapled securities
At 1 July 2016
254,847
1,434,610
159,694
4,620,051
Net
Movement
2,480
17,440
4,960
58,108
Stapled securities at the
date of this report
257,327
1,452,050
164,654
4,678,159
Note 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.
8. Meetings of Directors
The attendance at meetings of Directors of the Responsible Entity and the Company during the year is set out in the
following table:
Elanor Board
(Responsible Entity &
the Company)
Attended
16
16
16
13
Held
16
16
16
16
Audit & Risk
Committee
Attended
5
5
5
N/A
Held
5
5
5
N/A
Remuneration and
Nominations
Committee
Attended
3
3
3
3
Held
3
3
3
3
Paul Bedbrook
Glenn Willis
Nigel Ampherlaw
William (Bill) Moss
9. Remuneration Report (Audited)
The remuneration report for the year ended 30 June 2017 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)
b)
c)
d)
e)
f)
g)
h)
Remuneration Policy and Approach
Key Management Personnel
Executive Remuneration Arrangements
Executive Remuneration Outcomes
Non-Executive Director Remuneration Arrangements and Outcomes
Additional Disclosures Relating to Long Term Incentive Plans and Securities
Loans to Key Management Personnel
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.
Elanor Investors Group Annual Report 2017
16
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
23
9. Remuneration Report (Audited) (continued)
a)
Remuneration Policy and Approach (continued)
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 NED's, which is then subject to security holder 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 security holders 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 2017 were:
Executive
Mr Glenn Willis
Mr Paul Siviour
Ms Marianne Ossovani
Mr Symon Simmons
Position
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
Non Executive
Mr Paul Bedbrook
Mr Nigel Ampherlaw
Mr William (Bill) Moss AO
Position
Independent Chairman and Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
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.
17
Elanor Investors Group Annual Report 2017
24
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
c)
-
Executive Remuneration Arrangements (continued)
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 security holders 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 may 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 $1.25 offer price at the
time of the IPO).
TSR was selected as the LTI performance measure to ensure an alignment between the security holder return and reward
for executives.
Elanor Investors Group Annual Report 2017
18
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
25
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes
The table below sets out summary information about the Group's earnings and movements in shareholder wealth for the
year ended 30 June 2017:
Total Income ($’000)
Net profit before tax ($’000)
Net profit before tax ($'000)
(EHAF equity accounted)
Net profit after tax ($’000)
Net profit / (loss) after tax ($'000)
(EHAF equity accounted)
Core earnings ($’000)
Security price at start of year
Security price at end of year
Interim distribution
Final distribution
Total distributions
Basic earnings per security
Basic earnings per security
(EHAF equity accounted)
Diluted earnings per security
Diluted earnings per security
(EHAF equity accounted)
30 June 2017
30 June 2016
30 June 2015
Prospectus
98,541
12,394
12,825
11,626
11,400
12,670
$1.88
$2.14
7.77 cents
5.01 cents
12.78 cents
13.29 cents
13.03 cents
12.20 cents
11.96 cents
76,425
5,070
7,422
58,180
3,297
3,297
56,743
1,064
1,064
4,143
2,720
664
6,810
11,560
$1.70
$1.88
7.31 cents
7.34 cents
14.65 cents
5.86 cents
9.64 cents
2,720
9,344
$1.25
$1.70
5.20 cents
6.70 cents
11.90 cents
4.10 cents
4.10 cents
664
7,864
$1.25 1
11.70 cents
1.09 cents
1.09 cents
5.37 cents
8.83 cents
3.74 cents
3.74 cents
0.99 cents
0.99 cents
Note 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 $12.8 million or $11.4 million after tax. This reflects a 13.03 cents basic earnings per security
based on average equity employed for the period.
For the year ended 30 June 2017 the Group achieved Core Earnings of $12.7 million, a 9.6% increase on 2016. Total
distributions per security in respect of the period were 12.78 cents.
The Group’s closing trading price on 30 June 2017 was $2.14 per security, a 13.8% increase on the $1.88 price at 1 July
2016.
For the year ended 30 June 2017, the bonus pool has been calculated in accordance with the STI plan rules. The 2017
STI bonus pool was approved on 18 August 2017. No deferred securities were issued in respect of the 2017 STI plan.
No LTI securities vested to executives during the year. However, as at 11 July 2017, the end of the vesting period, all
vesting conditions have been met and the Directors resolved to approve the vesting of the LTI awards on 18 August 2017.
19
Elanor Investors Group Annual Report 2017
26
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a
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
27
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes (continued)
Table 2: Remuneration components as a proportion of total remuneration on an annualised basis
Executive
Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
2017
2016
2017
2016
2017
2016
2017
2016
Fixed remuneration
(%)
Remuneration linked
to performance (%)
64.63
46.66
65.23
49.79
69.56
50.02
69.16
52.57
35.37
53.34
34.77
50.21
30.44
49.98
30.84
47.43
Total
(%)
100.00
100.00
100.00
100.00
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.
The Remuneration and Nomination Committee undertook a review of the remuneration of executive remuneration in June
2017, and resolved not to increase the remuneration.
Table 3: Employment contracts of key management personnel
Executive
G. Willis
P. Siviour
M. Ossovani
S. Simmons
Position
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
$500,000
$425,000
$425,000
$425,000
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
Benefits
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
21
Elanor Investors Group Annual Report 2017
28
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes (continued)
Termination
Employment shall
continue with the
Group unless
either party gives
12 months’ notice
in writing.
Employment shall
continue with the
Group unless
either party gives
9 months’ 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 NED's based on recommendations from the Remuneration
and Nomination Committee. The NED's individual fees are annually reviewed by the Remuneration and Nomination
Committee taking into consideration the level of fees paid to NED's by companies of similar size and stature. The
Remuneration and Nomination Committee undertook a review of the remuneration of NEDs in June 2017, and resolved
not to increase the amount of fees paid. The maximum aggregate amount of fees that can be paid to NEDs is subject to
approval by security holders at the Annual General Meeting (currently $500,000).
The NED's receive a fixed remuneration amount, in respect of their services provided to the Responsible Entity and Elanor
Investors Limited. They do not receive any performance based remuneration or any retirement benefits other than statutory
superannuation.
Table 4: Remuneration of Non-Executive Directors
Salary (including
Superannuation)
Committee
Fees$
Total (including
Superannuation) $
Non-Executive
Directors
P. Bedbrook
N. Ampherlaw
W. Moss
2017
2016
2017
2016
2017
2016
150,000
100,000
70,000
55,000
70,000
55,000
10,000
10,000
10,000
10,000
10,000
10,000
160,000
110,000
80,000
65,000
80,000
65,000
The following options were issued to the NED’s under the FY17 Fee Sacrifice Offer, approved by security holders on 10
November 2016:
During the financial year
Name
P. Bedbrook
N. Ampherlaw
W. Moss
Award
Type
Options
Options
Options
Year
2017
2017
2017
Number
Granted
851,064
1,063,830
957,447
Number
Vested
0
0
0
% of
Grant
Vested
0%
0%
0%
Number
Forfeited
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
% of the actual
compensation
for the year
consisting of
awards
25%
63%
56%
The fair value at grant date of each Option was $0.04. The NED option vesting period ended on 30 June 2017.
Remuneration and other terms of appointment of the NED's are formalised in contracts.
The NED's are employed on employment contracts with no fixed term. The NED's employment is subject to the
Constitutions of the Group, the Corporations Act, and the 3 year cycle of the rotation and election of Directors.
Elanor Investors Group Annual Report 2017
22
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
29
9. Remuneration Report (Audited) (continued)
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
Loan
Securities
Loan
Securities
Loan
Securities
Loan
Securities
Year
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
Number
Granted
0
0
2,800,000
0
0
1,100,000
0
0
1,000,000
0
0
280,000
Number
Vested
0
0
0
0
0
0
0
0
0
0
0
0
% of
Grant
Vested
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Number
Forfeited
0
0
0
0
0
0
0
0
0
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
% of the actual
compensation
for the year
consisting of
awards
0%
0%
22%
0%
0%
12%
0%
0%
12%
0%
0%
4%
The Loan Security plan has been accounted for as 'in-substance' options. The fair value at grant date of each Loan
Security was $0.10.
Details of Long Term Incentive Plan payments granted as Option compensation to key management personnel during the
current financial year:
During the financial year
Name
G. Willis
Award
Type
Options
Year
2017
2016
2015
Number
Granted
0
0
1,600,000
Number
Vested
0
0
0
% of
Grant
Vested
0%
0%
0%
Number
Forfeited
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
The fair value at grant date of each Option was $0.03
% of the actual
compensation
for the year
consisting of
awards
0%
0%
3%
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:
Name
G. Willis
Year
2017
2016
2015
Value of options
granted at the grant
date1
$
0
0
52,000
Value of options
exercised at the
exercise date2
$
0
0
0
Note 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.
Note 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 2017.
23
Elanor Investors Group Annual Report 2017
30
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
f)
Additional Disclosures Relating to Long Term Incentive Plans and Securities (continued)
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
Non-Executive
Directors
P. Bedbrook
N. Ampherlaw
W. Moss AO
Executive
Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
Opening
Balance
1 July 2016
254,847
159,694
4,620,051
1,434,610
479,254
150,608
186,840
Acquired1
Disposed
Closing
Balance
30 June 2017
2,480
4,960
58,108
17,440
104,960
0
27,027
0
0
0
0
0
0
0
257,327
164,654
4,678,159
1,452,050
584,214
150,608
213,867
Note 1: The number of stapled securities acquired during the year includes issues of securities under the FY2017 STI Bonus Plan, the
August 2016 Placement and Security Purchase Plan and securities acquired on market.
Options over Elanor Investors Group – Stapled Securities
Opening
Balance
1 July
2016
Acquired
under the
Group's
incentive
plans
Name
Closing
Balance
30 June
2017
Balance
vested at
Closing
Vested
but not
exercisable
Vested
and
exercisable
Options
vested
during
the year
Exercised
G. Willis
1,600,000
0
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.
Opening
Balance
1 July
2016
Name
Issued
under the
Group's
Salary
sacrifice
offer Exercised
Closing
Balance
30 June
2017
Balance
vested at
Closing
Vested
but not
exercisable
Vested
and
exercisable
Options
vested
during the
year
P. Bedbrook
0
851,064
0
851,064
N. Ampherlaw
0
1,063,830
0
1,063,830
W. Moss
0
957,447
0
957,447
0
0
0
0
0
0
0
0
0
0
0
0
Elanor Investors Group Annual Report 2017
24
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
31
9. Remuneration Report (Audited) (continued)
g)
Loans to Key Management Personnel
No loans have been provided to Key Management Personnel of the Group during the year.
h)
Other Transactions and Balances with Key Management Personnel and their Related Parties
There were no transactions with Key Management Personnel and their Related Parties during the financial year.
10. Company Secretary
Symon Simmons held the position of Company Secretary of the Responsible Entity 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 year.
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.
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 27 to the consolidated 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 27 to the consolidated financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit and Risk 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,
25
Elanor Investors Group Annual Report 2017
32
DIRECTORS’ REPORT
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
15. Non audit services (continued)
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.
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.
17.
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 2017 and fees paid to and expenses
reimbursed by its related entities during the financial year are disclosed in Note 23 to the consolidated financial statements.
18. Events occurring after reporting date
The Directors of the Responsible Entity and the Company are not aware of any other matter since the end of the period
that has or may significantly affect the operations of the Group, the result of those operations, or the state of the Group’s
affairs in future financial periods that are not otherwise referred to in this Directors’ Report.
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
In accordance with Legislative Instrument 2016/191 issued by the Australian Securities and Investments Commission
relating to the rounding off of amounts in the financial statements, amounts in the financial statements have been rounded
to the nearest thousand dollars in accordance with that Legislative Instrument, 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
Sydney, 18 August 2017
Glenn Willis
CEO and Managing Director
Elanor Investors Group Annual Report 2017
26
AUDITORS INDEPENDENCE DECLARATION
33
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 38, 259 George Street
Sydney NSW 2000
18 August 2017
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 consolidated financial statements of Elanor
Investors Limited and Elanor Investment Fund for the year ended 30 June 2017, 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
27
Elanor Investors Group Annual Report 2017
34
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
ELANOR INVESTORS GROUP
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2017
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2017
for the year ended 30 June 2017
Consolidated Statements of Profit or Lo
Consolidated Statements of Profit or Lo
The above Consolidated Statements of Profit or Loss should be read in conjunction with the accompanying notes
The above Consolidated Statements of Profit or Loss should be read in conjunction with the accompanying notes
Elanor Investors Group Annual Report 2017
28
28
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
for the year ended 30 June 2017
35
Consolidated Statements of Comprehensive Income
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes
29
Elanor Investors Group Annual Report 2017
36
as at 30 June 2017
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ELANOR INVESTORS GROUP
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2017
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2017
Consolidated Statents of Financial Position
Consolidated Statents of Financial Position
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
Elanor Investors Group Annual Report 2017
30
30
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ELANOR INVESTORS GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2017
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2017
as at 30 June 2017
37
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
31
Elanor Investors Group Annual Report 2017
31
38
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Elanor Investors Group Annual Report 2017
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40
CONSOLIDATED STATEMENTS OF CASH FLOWS
ELANOR INVESTORS GROUP
for the year ended 30 June 2017
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Consolidated Statements of Cash Flows
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes
Elanor Investors Group Annual Report 2017
34
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
41
Notes to the Financial Statements
About this Report
Elanor Investors Group (Group, Consolidated Group or Elanor) is a ‘stapled’ entity comprising Elanor Investors Limited
(EIL or Company) and its controlled entities (EIL Group) and Elanor Investment Fund (Trust) and its controlled entities (EIF
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). 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 format of Elanor Investors Group’s annual financial report has been changed to provide users of the financial report
with a clearer understanding of relevant balances and transactions that drive the Group’s financial performance and
financial position. Plain English is used in commentary or explanatory sections of the notes to the financial statements to
also improve readability of the financial report. Additionally, amounts in the consolidated financial statements have been
rounded off to the nearest one thousand dollars, unless otherwise indicated, in accordance with ASIC Corporations
(Rounding in Financial/Director’s Reports) Instrument 2016/191.
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 2017. 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 consolidated Financial Statements also include a separate column representing the consolidated Financial
Statements of EIF Group, incorporating the assets and liabilities of Elanor Investment Fund and all of its subsidiaries, as
at 30 June 2017.
Control of Elanor Hospitality and Accommodation Fund (EHAF)
EHAF comprises stapled securities in Elanor Hospitality and Accommodation Fund and EHAF Management Pty Limited.
The Group holds 42.07% of the equity in EHAF. The Group's 42.07% ownership interest in EHAF gives the Group the
same percentage of the voting rights in EHAF. EHAF is an unregistered trust for which Elanor Funds Management Limited
acts as the Manager of the asset and Trustee of the trust.
The responsible entity is owned wholly by the Group and governed by the licencing and legal obligations of a professional
asset manager. The powers of the Trustee are governed by the EHAF constitution, which sets out the basis of fees that
the Trustee can receive. These fees include management fees, performance fees, and acquisition fees.
Based on the assessment above, at the current level of equity investment in EHAF, the AASB 10 definition of control for
this investment is met, and therefore EHAF is consolidated into Elanor Investors Group Financial Statements.
35
Elanor Investors Group Annual Report 2017
42
NOTES TO THE FINANCIAL STATEMENTS
continued
The notes to the consolidated financial statements have been organised into the following sections for reduced
complexity and ease of navigation:
RESULTS
1. Segment information
2. Revenue
3. Other Income and expenses
4. Distributions
5. Earnings / (losses) per stapled security
6.
Income tax
7. Cash flow information
OPERATING ASSETS
8. Property, plant and equipment
9. Equity accounted investments
10. Inventories
FINANCE AND CAPITAL STRUCTURE
11. Interest bearing liabilities.
12. Derivative financial instruments
13. Contributed equity
14. Reserves
15. Financial risk management
GROUP STRUCTURE
16. Parent entity
17. Subsidiaries and Controlled entities
OTHER ITEMS
18. Other financial assets and liabilities
19. Intangible assets
20. Net tangible assets
21. Commitments
22. Share-based payments
23. Related parties
24. Significant Events
25. Events occurring after reporting date
26. Summary of other significant accounting policies
27. Auditor's remuneration
28. Non-Parent Disclosure
Elanor Investors Group Annual Report 2017
43
43
45
46
46
47
49
51
52
52
57
61
62
62
63
65
66
67
72
72
73
75
75
77
79
79
80
82
83
84
84
85
86
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
43
Results
This section focuses on the operating results and financial performance of the Fund. It includes disclosures of
segmental information, revenue, distributions and cash flow including the relevant accounting policies adopted in
each area.
1.
Segment information
OVERVIEW
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.
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.
BUSINESS SEGMENTS
The Group is organised into the following divisions by business type:
FUNDS MANAGEMENT
The Funds Management division manages third party owned investment funds and syndicates. As at 30 June 2017, the
Funds Management division has approximately $583.6m of external investments (excluding EHAF) under management,
being the managed investments.
HOTELS, TOURISM AND LEISURE
Hotels, Tourism and Leisure originates investment and fund management assets. The current investment portfolio includes
Featherdale Wildlife Park, Ibis Styles Canberra Eaglehawk Hotel and Ibis Styles Albany Hotel along with co-investments
in 193 Clarence Hotel syndicate, Bell City Fund and the Elanor Hospitality and Accommodation Fund (Peppers Cradle
Mountain Lodge, Mantra Wollongong Hotel, Mantra Pavilion Wagga Wagga, Best Western Port Macquarie, Best Western
Tall Trees and Parklands Resort Mudgee). Hotels, 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 Elanor Commercial Property Fund, Elanor Retail Property Fund and Limestone Street Centre syndicate. Real Estate
also managed Elanor Retail Property Fund, Limestone Street Centre, Super A Mart, John Cootes Diversified Property and
Auburn Central syndicates during the period.
SPECIAL SITUATION INVESTMENTS
Special Situations Investments comprises the John Cootes Furniture business and the property associated with John
Cootes Furniture business at Merrylands, NSW.
37
Elanor Investors Group Annual Report 2017
44
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1.
Segment information (continued)
The table below shows segment results:
Consolidated Group – 30 June 2017
Consolidated Group – 30 June 2016
Elanor Investors Group Annual Report 2017
38
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
45
2.
Revenue
OVERVIEW
This note provides a breakdown of revenue from operating activities by activity type.
Revenue from operating activities:
ACCOUNTING POLICY
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 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 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.
If not received at balance sheet date, revenue is reflected in the balance sheet as a receivable and carried at its recoverable
value.
39
Elanor Investors Group Annual Report 2017
46
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3.
Other Income and expenses
OVERVIEW
This note provides a breakdown of Other Income and Other Expenses, into the key components for the period.
(a)
Other income
1. These amounts relate to insurance payments received in relation to the fire at the John Cootes Furniture warehouse in July 2015.
ACCOUNTING POLICY
Income is brought to account on an accrual basis.
(b)
Other expenses
1. These amounts relate to expenses incurred in relation to the fire at the John Cootes Furniture warehouse in July 2015.
ACCOUNTING POLICY
Expenses
Expenses are brought to account on an accrual basis.
4.
Distributions
OVERVIEW
The Group’s aim is to provide investors with superior risk adjusted returns.
When determining distributions, the Group’s board considers a number of factors, including forecast earnings and expected
economic conditions. Elanor Investor Group aims to distribute 90% of Core Earnings, reflecting the Director’s view of
underlying earnings from ongoing operating activities for the period.
Elanor Investors Group Annual Report 2017
40
47
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
4.
Distributions (continued)
ENN Group
The following distributions were declared by the ENN Group either during the year or post balance date:
1. The interim distribution of 7.77 cents per stapled security was declared on 21 February 2017 and paid on 3 March 2017.
2. The final distribution of 5.01 cents per stapled security was declared on 18 August 2017. Please refer to the Directors' Report for the
calculation of Core Earnings and the Distribution.
5.
Earnings / (losses) per stapled security
OVERVIEW
This note provides information about Elanor Investor Group’s earnings on a per security basis. Earnings per security (EPS)
is a measure that makes it easier for users of Elanor’s financial report to compare Elanor’s performance between different
reporting periods. Accounting standards require the disclosure of two EPS measures, basic EPS and diluted EPS. EPS
information provides a measure of interests of each ordinary issued security of the parent entity in the performance of the
entity over the reporting period while diluted EPS information provides the same information but takes into account the
effect of all potential dilutive, ordinary securities outstanding during the period, such as Elanor’s options.
The tables below show the earnings per share of the Company, the parent entity of the Group and its controlled entities as
required by accounting standards.
The earning / (losses) per stapled security measure shown below is based upon the profit / (loss) attributable to
security holders:
1. The weighted average number of stapled securities and options granted used as the denominator in calculating basic and diluted
earnings / (losses) per stapled securities shown above is based on the number of stapled security on issue and options granted.
41
Elanor Investors Group Annual Report 2017
48
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
5.
Earnings / (losses) per stapled security (continued)
The earnings / (losses) per stapled security measures shown below is based upon the profit / (loss) attributable
to security holders of the ENN Group:
1. The weighted average number of stapled securities and options granted used as the 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 ENN (equity accounted EHAF) results are shown on page 19.
ACCOUNTING POLICY
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 potential dilutive, stapled securities divided by the weighted average number of
stapled securities and dilutive stapled securities.
Elanor Investors Group Annual Report 2017
42
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
49
6.
Income tax
OVERVIEW
This note provides detailed information about the Group’s income tax items and accounting policies. This includes a
reconciliation of income tax expense if Australia’s company income tax rate of 30% was applied to the Group’s profit before
income tax as shown in the income statement to the actual income tax expense / benefit as well as an analysis of Elanor’s
deferred tax balances.
(a)
Income Tax Expense
(b)
Reconciliation of income tax expense to prima facie tax expense
1. Reversal of tax provision in respect of proposed tax legislation, subsequently not enacted.
ACCOUNTING POLICY
Accounting standards require the application of the “balance sheet method” to account for Elanor’s income tax. Accounting
profit does not always equal taxable income. There are a number of timing differences between the recognition of
accounting expenses and the availability of tax deductions or when revenue is recognised for accounting purpose and tax
purposes. These timing differences reverse over time but they are recognised as deferred tax assets and deferred tax
liabilities in the balance sheet until they are fully reversed. This is referred to as the “balance sheet method”.
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.
EIL 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.
43
Elanor Investors Group Annual Report 2017
50
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
6.
Income tax (continued)
ACCOUNTING POLICY (continued)
EHAF Management Pty Limited and its wholly-owned Australian resident entities are part of a tax-consolidated group,
formed on 21 March 2016, 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 EHAF
Management Pty Limited.
(c)
Deferred taxes
OVERVIEW
Management judgement is required in reviewing the recoverability of deferred tax assets carried by the Group, which
involves estimates of key assumptions including cash flow projection, growth rates and discount rates.
Elanor Investors Group Annual Report 2017
44
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
51
6.
(c)
Income tax (continued)
Deferred taxes (continued)
ACCOUNTING POLICY
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
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.
7.
Cash flow information
OVERVIEW
This note provides further information on the consolidated cash flow statements of the Group and the Trust. It reconciles
profit for the year to cash flows from operating activities and information about non-cash transactions.
Reconciliation of profit after income tax to net cash flows from operating activities
45
Elanor Investors Group Annual Report 2017
52
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
Operating Assets
This section includes information about the assets used by the Group to generate revenue and profits, specifically
relating to its property, plant and equipment, and investments.
8.
Property, plant and equipment
OVERVIEW
All owner occupied investment properties held by the Group are deemed to be held for use by the Group for the supply of
services, and are therefore classified as property, plant and equipment under Australian Accounting Standards.
(a) Movement in property, plant and equipment
A reconciliation of the carrying amount of property, plant and equipment at the beginning and end of the current period is
set out below:
A reconciliation of the carrying amount of property, plant and equipment at the beginning and end of 30 June 2016 is set
out below:
Elanor Investors Group Annual Report 2017
46
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
53
8.
Property, plant and equipment (continued)
(b) Carrying value of property, plant and equipment
The carrying amount of property, plant and equipment at the beginning and end of the current period is set out below:
Consolidated Group
As at 30 June 2017, the Directors assessed the fair value of the properties above, supported by external or internal
valuation reports.
Had the Consolidated Group's property, plant and equipment been measured on a historical cost less accumulated
depreciation basis, their carrying amount would have been as follows:
47
Elanor Investors Group Annual Report 2017
54
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8.
Property, plant and equipment (continued)
ACCOUNTING POLICY
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.
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 Pty Limited 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.
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
Furniture, fittings and equipment
40 Years
3 - 5 years
8 years
3 - 10 years
Elanor Investors Group Annual Report 2017
48
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
55
8.
Property, plant and equipment (continued)
(c) 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.
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 utilizing the information from a combination of asset plans
and forecasting tools prepared 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 between 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.
Capitalisation method
Capitalisation 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 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 regard to
market evidence and 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.
49
Elanor Investors Group Annual Report 2017
56
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8.
Property, plant and equipment (continued)
(c) Valuation technique and inputs (continued)
Assets measured at fair value
The significant unobservable inputs associated with the valuation of the Group's property, plant and equipment are as
follows:
Sensitivity Information
The key unobservable inputs to measure the fair value of investment properties are disclosed below along with sensitivity
to a significant increase or decrease set out in the following table:
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.
Elanor Investors Group Annual Report 2017
50
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
57
9.
Equity accounted investments
OVERVIEW
This note provides an overview and detailed financial information of the Group’s investments that are accounted for using
the equity method of accounting. These include joint ventures where the Group has joint control over an investee together
with one or more joint venture partners and investments in associates, which are entities over which Group is presumed
to have significant influence but not control or joint control.
The Group’s equity accounted investments are as follows:
51
Elanor Investors Group Annual Report 2017
58
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
9.
Equity accounted investments (continued)
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.
Elanor Retail Property Fund
The Elanor Retail Property Fund (“ERF”) is an externally managed real estate investment fund, investing in Australian retail
property, focusing on high investment quality neighbourhood and sub-regional shopping centres. ERF was listed on the
Australian Securities Exchange (ASX) on 9 November 2016.
As the Group has a 17% investment in the equity in ERF, the Group has significant influence by virtue of its role as
Responsible Entity 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 and
the Elanor Retail Property 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.
30 June 2017
Elanor Investors Group Annual Report 2017
52
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
59
9.
Equity accounted investments (continued)
Details of Material Associates (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
and the Elanor Retail Property Fund recognised in the consolidated financial statements:
30 June 2016
On 9 November 2016, the Elanor Retail Property Fund (ERPF) and the Auburn Central Syndicate were rolled into the IPO
of the new listed Elanor Retail Property Fund (ERF). Prior to the IPO, the Group held 24.4% of ERPF, and at balance date
the Group held 17% of the listed ERF, accounted for using equity method.
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
and the Elanor Retail Property Fund recognised in the consolidated financial statements:
53
Elanor Investors Group Annual Report 2017
60
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
9.
Equity accounted investments (continued)
Aggregate information of associates that are not individually material
ACCOUNTING POLICY
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.
Under the equity method, investments in associates are carried in the Statement of Financial Position at cost as adjusted
for post acquisition charges in the Group's share of profit or loss and other comprehensive income of the associate, less
any impairment in the value of individual investments.
The Group holds a 17.0% interest in ERF which has been classified as a material associated entity. Management of the
Group reviewed and assessed the classification of the Group's investment in the associated entities in accordance with
AASB 128 on the basis that the Group has significant influence over the financial and operating policy decisions of the
investee.
The Group holds a 17.6% interest in the Bell City Fund (Bell City) which has been classified as a material associated entity.
Management of the Group reviewed and assessed the classification of the Group's investment in the associated entity in
accordance with AASB 128 on the basis that the Group has significant influence over the financial and operating policy
decisions of the investee.
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 an 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.
Elanor Investors Group Annual Report 2017
54
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
61
10.
Inventories
OVERVIEW
Inventories are assets held for sale or consumables held in the ordinary course of operations. The Group holds current
inventory in respect of the John Cootes Furniture business, and non-current inventory in respect of its Merrylands property.
ACCOUNTING POLICY
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.
Inventory is carried at the lower of cost or net realisable value. The directors have assessed the carrying value of the
Goods held for resale and Property Inventory, and have not recognised any impairment during the period.
55
Elanor Investors Group Annual Report 2017
62
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
Finance and Capital Structure
This section provides further information on the Group’s debt finance, risk management arrangements including
derivatives, contributed equity and reserves.
Finance and Capital Structure
11.
Interest bearing liabilities
OVERVIEW
The Group borrows funds from financial institutions to partly fund the acquisition of income producing assets, such as
investment properties, securities or the acquisition of businesses. The Group’s borrowings are generally fixed either directly
or through the use of interest rate swaps and have a fixed term. This note provides information about the Group’s debt
facilities, including the facilities of EHAF.
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 2017, the Group had unrestricted access to the following credit facilities:
Elanor Investors Group Annual Report 2017
56
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
63
11.
Interest bearing liabilities (continued)
CONSOLIDATED GROUP
Included in the above numbers, the ENN Group has access to a $27.5 million facility, upon which both the Company and
the Trust can draw. The drawn amount at 30 June 2017 is $21.8 million which will mature on 11 July 2020. At 30 June
2017 the amount of drawn facilities is hedged to 47%.
Included in the above numbers, the EHAF Group has access to a $46.7 million facility, upon which both the Company and
Trust can draw. The drawn amount at 30 June 2017 is $46.7 million which will mature on 21 March 2019. At 30 June 2017,
the amount of drawn facilities is hedged to 100%.
All of the facilities have a variable interest rate. 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 2017, including the impact of the interest rate
swaps, is 4.39% per annum.
ACCOUNTING POLICY
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.
12. Derivative financial instruments
OVERVIEW
The Group’s derivative financial instruments consist of interest rate swap contracts to hedge its exposure to movements
in variable interest rates. 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.
ACCOUNTING POLICY
Interest rate swaps
The Group has entered into interest rate swap agreements with a notional principal amount totaling $56.7 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.
57
Elanor Investors Group Annual Report 2017
64
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12. Derivative financial instruments (continued)
Derivatives
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.
Valuation, techniques and inputs
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.
Elanor Investors Group Annual Report 2017
58
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
65
13. Contributed equity
OVERVIEW
The shares of Elanor Investors Limited (the “Company”) and the units of Elanor Investment Fund (“EIF”) are combined and
issued as stapled securities. The shares of the Company and units of EIF cannot be traded separately and can only be
traded as stapled securities.
Below is a summary of contributed equity of the Company and EIF separately and for Elanor’s combined stapled
securities. The basis of allocation of the issue price of stapled securities to Company shares and EIF units post stapling
is determined by agreement between the Company and EIF as set out in the Stapling Deed.
Contributed equity for the period ended 30 June 2017
(i)
On 4 August 2016 and 26 August 2016 the Group issued stapled securities under a Placement and a Security Purchase
Plan respectively to fund additional acquisitions of co-investments.
A reconciliation of treasury securities on issue at the beginning and end of the prior period is set out below:
Contributed equity for the period ended 30 June 2016
A reconciliation of treasury securities on issue at the beginning and end of the prior period is set out below:
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
13. Contributed equity (continued)
ACCOUNTING POLICY
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.
14. Reserves
OVERVIEW
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in the
business and not distributed until such time the underlying balance sheet item is realised. This note provides information
about movements in the other reserves line item of the balance sheet and a description of the nature and purpose of
each reserve.
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.
The stapled security-based payment reserve is used to recognise the fair value of loan, restricted securities and options
issued to employees but not yet exercised under the Group's DSTI and LTIP.
Elanor Investors Group Annual Report 2017
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
67
15. Financial risk management
OVERVIEW
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 responsibility 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 including those associated
with interest rates, currency rates and equity market price.
(i)
Interest rate risk
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:
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
15. Financial risk management (continued)
a)
Market risk (continued)
As at 30 June 2016, the Consolidated Group had the following interest bearing assets and liabilities:
(ii)
Interest Rate Sensitivity
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:
Elanor Investors Group Annual Report 2017
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
69
15. Financial risk management (continued)
b)
Credit risk
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 as detailed below:
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 21.
Trade and other receivables consist of GST, distributions and other receivables. At balance date 17.5% of the Group's
receivables were due from Australian tax authorities in respect of GST.
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:
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
15. Financial risk management (continued)
c) Liquidity risk
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.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
71
15. Financial risk management (continued)
d)
Capital risk management
The Group maintains its capital structure with the objective to safeguard its ability to continue as a going concern, to
increase the returns for security holders and to maintain an optimal capital structure. The capital structure of the Group
consists of equity as listed in Note 13.
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.
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)
(c)
$150,000; or
0.5% of the value of Scheme Assets; or
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 License.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
Group Structure
This section provides information about the Group’s structure including parent entity information, information about
controlled entities (subsidiaries) and business combination information relating to the acquisition of controlled
entities.
16. Parent entity
OVERVIEW
The financial information below on Elanor Investor Group’s parent entity Elanor Investors Limited (the “Company”) and the
Trust’s parent entity Elanor Investment Fund (“EIF”) as stand-alone entities has been provided in accordance with the
requirements of the Corporations Act 2001.
(a) Summarised financial information
1. Elanor Investors Limited is the parent entity of the Consolidated Group.
2. Elanor Investment Fund is the parent entity of the EIF Group.
(b) Commitments
At balance date Elanor Investors Limited and Elanor Investment Fund had no commitments (2016: none) in relation to
capital expenditure contracted for but not recognised as liabilities.
(c) Guarantees provided
At balance date Elanor Investors Limited and Elanor Investment Fund had no outstanding guarantees (2016: none).
(d) Contingent liabilities
At balance date Elanor Investors Limited and Elanor Investment Fund had no contingent liabilities (2016: none).
Elanor Investors Group Annual Report 2017
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
73
16. Parent entity (continued)
ACCOUNTING POLICY
The financial information of the parent entities of the Group and the EIF Group have been prepared on the same basis as
the consolidated financial statements.
17. Subsidiaries and Controlled entities
OVERVIEW
This note provides information about the Group’s subsidiaries and controlled entities.
Details of the Group's material subsidiaries at the end of the reporting period are as follows:
1. Elanor Investors Limited (“EIL”) is the head entity within the EIL tax-consolidated group. The companies in which EIL has 100%
ownership are members of the EIL tax-consolidated group.
2. EHAF Management Pty Limited is the head entity of the EHAF tax-consolidated group.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
17. Subsidiaries and Controlled entities (continued)
Elanor Investors Group Annual Report 2017
68
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
75
Other Items
This section includes information that is not directly related to the specific line items in the financial statements,
including information about contingent liabilities, events after the end of the reporting period, remuneration of
auditors, certain EIF Group disclosures, and changes in accounting policies.
18. Other financial assets and liabilities
OVERVIEW
This note provides further information about financial assets and liabilities that are incidental to the Group’s and the Trust’s
trading activities, being receivables and trade and other payables.
(a) Trade and Other Receivables
ACCOUNTING POLICY
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.
(b) Payables
ACCOUNTING POLICY
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 security holders 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.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18. Other financial assets and liabilities (continued)
(c) Provisions
ACCOUNTING POLICY
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.
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.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18. Other financial assets and liabilities (continued)
(d) Other liabilities
77
19.
Intangible assets
OVERVIEW
Management Rights
Management Rights represent the acquisition of funds management rights and associated licences from Moss Capital Pty
Limited at IPO for $1.5 million. 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.
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.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
19.
Intangible assets (continued)
ACCOUNTING POLICY
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.
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 2017 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 7% are consistent with forecasts included in industry reports. The discount rates used (17.34%)
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 2018 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 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.
Impairment test for goodwill
Goodwill is allocated to the CGU's identified. All of the goodwill carried at 30 June 2017 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 10 year operating forecast. The
average growth rates used 7% are consistent with forecasts included in industry reports. The discount rates used 17.34%
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 2018 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.
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72
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
79
19.
Intangible assets (continued)
Goodwill (continued)
Sensitivity
Management recognises that the calculation of recoverable amounts 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.
20. Net tangible assets
OVERVIEW
This note sets out the net tangible assets of the Group.
21. Commitments
OVERVIEW
This note sets out the material commitments of the Group.
(a) Contingent liabilities and commitments
Unless otherwise disclosed in the financial statements, there are no material contingent liabilities and commitments
(b) Lease commitments: the Group as lessee
The Group has non-cancellable leases in respect of premises. The leases are for a duration of between 1 to 10 years
and are classified as operating leases. The minimum lease payments are as follows:
In the opinion of the Directors, there were no other commitments at the end of the reporting period.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
22. Share-based payments
OVERVIEW
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. 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 security holders 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 may 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.
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 6.2 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 security holder return and reward for
executives.
The following share-based payment arrangements were in existence during the current reporting period:
Employee Loan Securities
Service and non-market conditions include financial and non-financial targets along with a deferred vesting period.
Elanor Investors Group Annual Report 2017
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
81
22. Share-based payments (continued)
Options
1. Service and non-market conditions include financial and non-financial targets along with a deferred vesting period
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.
Securities issued under STI plan
1. Service conditions include a deferred vesting period.
The total expense recognised during the year in relation to the Group's equity settled share-based payments was $676,000.
ACCOUNTING POLICY
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.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
23. Related parties
OVERVIEW
Related parties are persons or entities that are related to the Group as defined by AASB 124 Related Party Disclosures.
This note provides information about transactions with related parties during the period.
Elanor Investors Group
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 2017, this amount is $130,000.
Elanor Funds Management Limited (EFML) is the Responsible Entity of the Elanor Investment Fund (EIF) (a wholly owned
subsidiary of Elanor Investors Limited).
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 2017 was nil.
EFML acted as Trustee and Manager and/or Custodian of a number of registered and 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 performance fees. EFML
is also entitled to be reimbursed from each Scheme for costs incurred in properly performing or exercising any of its powers
or duties in relation to each Scheme.
A summary of the income earned during the year from these managed investment schemes is provided below:
Merrylands Property
On the sale of the Merrylands Property, Moss Capital of which Glenn Willis and William (Bill) Moss AO are directors and
shareholders, will be entitled to a performance fee of 20% of the amount by which the IRR on the Merrylands Property
exceeds 15%, plus GST.
Elanor Investors Group Annual Report 2017
76
83
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
23. Related parties (continued)
Key Management Personnel (KMP)
Executive
Mr. Glenn Willis
Mr. Paul Siviour
Ms. Marianne Ossovani
Mr. Symon Simmons
Position
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
Non-Executive
Mr. Paul Bedbrook
Mr. Nigel Ampherlaw
Mr. William (Bill) Moss AO
Position
Independent Chairman and Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
The aggregate compensation made to the Key Management Personnel of the Group is set out below:
24. Significant Events
Establishment of Elanor Retail Property Fund
The Group completed the Initial Public Offering of Elanor Retail Property Fund (ASX: ERF) on 9 November 2016, offering
81 million securities at an offer price of $1.35, raising $109.3 million. ERF listed with an initial market capitalisation of
$173.8 million.
Elanor holds a 17.0% co-investment in ERF and is therefore strongly aligned with the Fund’s investors.
ERF was formed by the stapling of two existing Elanor managed funds (Elanor Retail Property Fund and Auburn Central
Syndicate) and the acquisition of two new properties. Existing investors in these funds provided overwhelming support for
ERF, with 92% of existing investors electing to retain their investment. In addition, these investors elected to invest further
significant funds in ERF.
At 30 June 2017, ERF had a portfolio of five retail shopping centres, valued at $260.8 million.
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ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25. Events occurring after reporting date
Subsequent to the period end, a distribution of 5.01 cents per stapled security has been declared by the Board of Directors.
The total distribution amount of $4.5 million will be paid on or before 1 September 2017 in respect of the six months ended
30 June 2017.
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 the financial period subsequent to the
year ended 30 June 2017.
26. Summary of other significant accounting policies
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:
The significant policies which have been adopted in the preparation of these consolidated financial statements for the year
ended 30 June 2017 are set out below:
The financial statements were authorised for issue by the Directors on 18 August 2017.
(a)
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.
(b)
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.
(c)
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
Elanor Investors Group Annual Report 2017
78
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
85
27. Auditor's remuneration
OVERVIEW
The independent auditors of Elanor Investors Group (Deloitte Touche Tohmatsu) have provided a number of audit and
other assurance related services as well as other non-assurance related services to Elanor Investors Group and the Trust
during the year. Pitcher Partners provided audit services in respect of the Trust’s Compliance Plan.
Below is a summary of fees paid for various services to Deloitte Touche Tohmatsu and Pitcher Partners during the year.
79
Elanor Investors Group Annual Report 2017
86
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure
OVERVIEW
This note provides information relating to the non-parent EIF Group only. The accounting policies are consistent with the
Group, except as otherwise disclosed.
(a)
Segment information
Chief operating decisions are based on the segment information as reported by the consolidated Group and therefore EIF
is deemed to have only one segment.
(b)
Distributions
The following distributions were declared by the EIF Group either during the year or post balance date:
1. The interim distribution of 4.76 cents per stapled security was declared on 21 February 2017 and paid on 3 March 2017.
2. The final distribution of 3.98 cents per stapled security was declared on 18 August 2017. Please refer to the Directors' Report for
the calculation of Core Earnings and the Distribution.
(c)
Earnings / (losses) per stapled security
The earnings / (losses) per stapled security measure shown below is based upon the profit / (loss) attributable to security
holders:
1. The weighted average number of stapled securities and options granted used as the 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.
(d)
Taxation of the Trust
Under current Australian income tax legislation, the Trust and its sub-trusts are not liable for income tax on their taxable
income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income of
the Trust. Accordingly, the Group only pays tax on Company taxable earnings and there is no separate tax disclosure for
the Trust.
Elanor Investors Group Annual Report 2017
80
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
87
28. Non-Parent Disclosure (continued)
(e)
Rental income
Rental income from investment properties, received by the EIF Group, is accounted for on a straight-line basis over the
term of the lease.
(f)
Investment Property
Movement in investment properties
The carrying value of investment properties at the beginning and end of the current period is set out below:
Carrying value investment properties
A reconciliation of the carrying value of investment properties at the beginning and end of the current period is set out
below:
Refer to Note 8 Property, plant and equipment for further details.
ACCOUNTING POLICY
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.
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
81
Elanor Investors Group Annual Report 2017
88
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(f)
Investment Property (continued)
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 Director's 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.
Valuation, technique and inputs
Investment properties are categorised as level 3 in the fair value hierarchy. There were no transfers between hierarchies
during the period.
Fair value measurement
The significant unobservable inputs associated with the valuation of the Group's investment properties are as follows
Elanor Investors Group Annual Report 2017
82
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
89
28. Non-Parent Disclosure (continued)
(g)
Equity accounted investments
The Trust’s equity accounted investments are as follows:
The following information represents the aggregated financial position and financial performance of the Bell City Fund and
the Elanor Retail Property Fund. This summarised financial information represents amounts shown in the associate's
financial statements prepared in accordance with AASBs, adjusted by the Trust for equity accounting purposes.
30 June 2017
83
Elanor Investors Group Annual Report 2017
90
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(g)
Equity accounted investments (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
and the Elanor Retail Property Fund recognised in the consolidated financial statements:
30 June 2016
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:
Elanor Investors Group Annual Report 2017
84
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
91
28. Non-Parent Disclosure (continued)
(g)
Equity accounted investments (continued)
Aggregate information of associates that are not individually material
(h)
Interest bearing liabilities
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
EIF Group including Loan to Value ratio and Interest Cover covenants. The EIF Group is currently meeting all its covenants.
As part of the internal funding of the Fund, EIF entered into a long term interest-bearing loan with EIL at arm’s length terms,
maturing on 2024. As at 30 June 2017, the outstanding payable to the Company was $12.9 million.
Credit facilities
As at 30 June 2017, the EIF Group had unrestricted access to the following credit facilities:
Included in the above numbers, the EIF Group has access to a $26.5m facility, upon which both the Company and the
Trust can draw. The drawn amount at 30 June 2017 is $17.3m which will mature on 11 July 2020, At 30 June 2017 the
amount of drawn facilities is hedged to 58%.
Included in the above numbers, the EHAF Group has access to a $46.7 facility, upon which both the Company and Trust
can draw. The drawn amount at 30 June 2017 is $34.7m which will mature on 21 March 2019. At 30 June 2017, the amount
of drawn facilities is hedged to 100%.
85
Elanor Investors Group Annual Report 2017
92
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(i)
Derivative Financial instruments
The EIF Group enters into derivative financial instruments to manage its exposure to interest rate risk.
(j)
Reserves
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in the
business and not distributed until such time the underlying balance sheet item is realised. This note provides information
about movements in the other reserves line item of the balance sheet and a description of the nature and purpose of
each reserve.
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.
The stapled security-based payment reserve is used to recognise the fair value of loan, restricted securities and options
issued to employees but not yet exercised under the Group's DSTI and LTIP.
Elanor Investors Group Annual Report 2017
86
93
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(k)
(1)
(i)
Financial Risk Management
Market Risk
Interest rate risk
As at reporting date, the EIF Group had the following interest bearing assets and liabilities:
(ii)
Interest Rate Sensitivity
87
Elanor Investors Group Annual Report 2017
94
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(2)
Credit Risk
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 as detailed below:
Impairment losses
The ageing of trade and other receivables at reporting date is detailed below:
(3)
Liquidity risk
Elanor Investors Group Annual Report 2017
88
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
95
28. Non-Parent Disclosure (continued)
(3)
Liquidity risk (continued)
(l)
Other financial assets and liabilities
This note provides further information about material financial assets and liabilities that are incidental to the EIF and the
Trust’s trading activities, being receivables and trade and other payables.
Trade and Other Receivables
Payables
89
Elanor Investors Group Annual Report 2017
96
ELANOR INVESTORS GROUP
NOTES TO THE FINANCIAL STATEMENTS
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. Non-Parent Disclosure (continued)
(m)
Cash flow information
This note provides further information on the consolidated cash flow statements of the Trust. It reconciles profit for the year
to cash flows from operating activities and information about non-cash transactions
Reconciliation of profit after income tax to net cash flows from operating activities
Elanor Investors Group Annual Report 2017
90
DIRECTORS’ DECLARATION
ELANOR INVESTORS GROUP
to Stapled Security Holders
DIRECTORS’ DECLARATION TO STAPLED SECURITY HOLDERS
97
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 34-96 are in accordance with the corporations Act 2001 (Cth)
including:
i.
ii.
complying with Australian Accounting Standards,
mandatory professional reporting requirements; and
the Corporations Regulations 2001 and other
giving a true and fair view of the Group's and EIF's financial position as at 30 June 2017 and of their
performance, for the financial year ended on that date; and
b)
c)
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.
the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
d) 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
18 August 2017
91
Elanor Investors Group Annual Report 2017
98
INDEPENDENT AUDITOR’S REPORT
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 the Stapled Security Holders of
Elanor Investors Group and the Unitholders of EIF Group
Report on the Audit of the Financial Report
Opinion
We have audited the accompanying financial report of:
Elanor Investors Limited (the “Company”) and its controlled entities (“Elanor Investors Group”) which
comprises the consolidated balance sheet as at 30 June 2017, the consolidated statement of profit or
loss, the consolidated statement of other comprehensive income, the consolidated statement of cash
flows and the consolidated statement of changes in equity for the year then ended and notes to the
financial statements, including a summary of significant accounting policies and the directors’
declaration; and
Elanor Investors Fund (the “Fund”) and its controlled entities (“EIF Group”) which comprises the
consolidated balance sheet as at 30 June 2017, the consolidated statement of profit or loss, the
consolidated statement of other comprehensive income, the consolidated statement of cash flows and
the consolidated statement of changes in equity for the year then ended and notes to the financial
statements including a summary of significant accounting policies and the directors’ declaration.
In our opinion, the accompanying financial report of Elanor Investors Group and EIF Group is in accordance
with the Corporations Act 2001, including:
(i)
giving a true and fair view of Elanor Investors Group and EIF Group’s financial positions as at 30
June 2017 and of their financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of Elanor Investors Group and EIF Group, in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company and Elanor Funds Management Limited (the “Responsible Entity”), as
responsible entity for Elanor Investment Fund, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Elanor Investors Group Annual Report 2017
92
INDEPENDENT AUDITOR’S REPORT
continued
99
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matter
How the scope of our audit responded to the Key
Audit Matter
Property, plant and equipment valuation
As at 30 June 2017, Elanor Investors Group recognised
property plant and equipment valued at $162.5m
(2016: $136.1m) as disclosed in Note 8.
The fair value of property, plant and equipment is
calculated in accordance with the valuation policy set
out
two valuation
methodologies used by Elanor Investors Group.
in Note 8 which outlines
The capitalisation of net income method applies a
capitalisation rate to normalised market net operating
income. The discounted cash flow method uses a cash
flow forecast and terminal value calculation discounted
to present value.
The valuation process requires significant judgment in
the following key areas:
forecast cash flows,
capitalisation rates, and
discount rates.
In addition,
internal and external valuers apply
professional judgement concerning market conditions
and factors impacting individual properties.
The internal and external valuations are reviewed by
management who
recommends each property’s
valuation to the Audit and Risk Committee and the
Board in accordance with Elanor Investors Group’s
valuation protocol.
Our procedures included but, were not limited to:
Assessing management’s process over property
valuations and the oversight applied by the directors;
Assessing the competence and objectivity of the
external valuers and the competence of internal valuers;
Performing an analytical review and risk assessment of
the portfolio, analysing the key inputs and assumptions;
Assessing the assumptions used in the portfolio, with
particular focus on the capitalisation rate and discount
rate with reference to external market trends and
transactions and challenging those assumptions where
appropriate;
Holding discussions with management (and the external
valuers as needed) to obtain an understanding of
portfolio movements and their identification of any
additional property specific matters; and
Testing on a sample basis of properties, both externally
and internally valued, the following:
o
o
o
The integrity of the information in the valuation
by agreeing key inputs such as net operating
income to underlying records and source
evidence;
The forecasts used in the valuations with
reference to current financial results such as
revenues and expenses, capital expenditure
requirements, occupancy rates and average
room rates and visitor numbers; and
The mathematical accuracy of the models.
We also assessed the appropriateness of the related
disclosures included in Note 8 to the financial statements.
93
Elanor Investors Group Annual Report 2017
100
INDEPENDENT AUDITOR’S REPORT
continued
Key Audit Matter
How the scope of our audit responded to the Key
Audit Matter
Accounting treatment for investments
Elanor Investors Group’s capital management strategy
involves the holding of a number of investments in
funds which are managed by Elanor Funds Management
Limited, a subsidiary of Elanor Investors Group.
The accounting treatment for each type of investment
is dependent on the Group’s relationship with these
investments. The determination
for an individual
investment is the result of a critical accounting
judgement applied to many factors, principally including
consideration of the extent of its voting stake, the
relationship with other stakeholders, the constitutional
arrangements for the trust or fund, its manager and
responsible entity or trustee, and the extent to which
Elanor Investors Group’s economic exposure increases
when management fees are paid. Investments that are
determined to be controlled are treated as subsidiaries
and are consolidated into Elanor Investors Group.
Investments over which it is determined that Elanor
Investors Group is deemed to have significant influence
are classified as associates and are equity accounted.
As a result of the judgement required to determine the
appropriate accounting treatment, this is a key audit
matter.
Our procedures included but were not limited to:
Assessing management’s processes for their review and
determination of the accounting for its investments and
evaluating management’s position papers;
legal
Examining
business
arrangements relating to the constitution of the funds
and trusts, decision-making over their activities and
operations of the manager;
documentation
and
Assessing the impact of the existence of preferential
voting rights held by Elanor Investors Group and the
rights to remove the manager; and
return via ownership
Assessing the exposure of Elanor Investors Group to
the
variable
investments, the management fee arrangements and
assessing the expected economic return on the
investment, through management fees, service fees,
performance fees and the return from equity stakes.
interests
in
Other Information
The directors of the Company and the Responsible Entity (the “Directors”) are responsible for the other
information. The other information comprises the Directors’ Report, which we obtained prior to the date of
this auditor’s report. The other information also includes the following documents which will be included in
the Annual Report (but does not include the financial report and our auditor’s report thereon): the Message
from the Chairman, Message from the CEO and other documents which are expected to be made available
to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
When we read the Message from the Chairman, Message from the CEO and other documents in the Annual
Report, if we conclude that there is a material misstatement therein, we are required to communicate the
matter to the directors and use our professional judgement to determine the appropriate action.
Directors’ Responsibilities for the Financial Report
The directors are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing Elanor Investors Group and EIF
Group’s ability to continue as going concerns, disclosing, as applicable, matters related to going concern and
Elanor Investors Group Annual Report 2017
94
INDEPENDENT AUDITOR’S REPORT
continued
101
using the going concern basis of accounting unless the directors either intend to liquidate Elanor Investors
Group and/or EIF Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of Elanor Investors Group’s and EIF Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on Elanor Investors Group’s and EIF Group’s ability to
continue as going concerns. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause
Elanor Investors Group and EIF Group to cease to continue as going concerns.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
95
Elanor Investors Group Annual Report 2017
102
INDEPENDENT AUDITOR’S REPORT
continued
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 31 of the Financial Report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Elanor Investors Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Elanor Investors Limited and Elanor Funds Management Limited, as responsible entity of
Elanor Investment Fund, are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
AG Collinson
Partner
Chartered Accountants
Sydney, 18 August 2017
96
Elanor Investors Group Annual Report 2017
CORPORATE GOVERNANCE
103
The Board of Directors of Elanor Investors Group (Group) have approved the Group’s Corporate Governance Statement as at
30 June 2017. In accordance with ASX Listing Rule 4.10.3, the Group’s Corporate Governance Statement can be found on its
website at: www.elanorinvestors.com
The Board of Directors is responsible for the overall corporate governance of the Group, including establishing and monitoring
key strategy and performance goals. The Board monitors the operational and financial position and performance of the Group,
and oversees its business strategy, including approving the Group’s strategic goals.
The Board seeks to ensure that the Group is properly managed to protect and enhance security holder interests, and that the
Group, its Directors, officers and personnel operate in an appropriate environment of corporate governance.
Accordingly, the Board has created a framework for managing the Group, including Board and Committee Charters and various
corporate governance policies designed to promote the responsible management and conduct of the Group.
Elanor Investors Group Annual Report 2017
104
SECURITY HOLDER ANALYSIS
(as at 24 August 2017)
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 SECURITY HOLDERS
Number Security holder
1
2
3
4
5
6
7
8
9
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
RBC Investor Services Australia Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Armada Investments Pty Ltd
BNP Paribas Noms Pty Ltd
National Nominees Limited
10
Aust Executor Trustees Ltd
11
12
13
14
15
16
17
18
19
CPU Share Plans Pty Ltd
Citicorp Nominees Pty Limited
Citano Pty Ltd
Farallon Capital Pty Ltd
Moat Investments Pty Ltd
Dr David John Ritchie + Dr Gillian Joan Ritchie
BNP Paribas Nominees Pty Ltd
Citylight Asset Pty Ltd
Richjac Pty Ltd
20
Top 4 Pty Ltd
Total
Balance of Register
Grand Total
No. of
Securities
17,491,521
9,662,346
5,830,178
4,949,513
4,645,429
3,548,355
3,295,605
2,214,653
1,298,209
1,025,046
718,283
589,358
533,839
502,480
477,006
434,371
416,400
411,378
400,000
346,553
%
19.60
10.83
6.53
5.55
5.21
3.98
3.69
2.48
1.45
1.15
0.81
0.66
0.60
0.56
0.53
0.49
0.47
0.46
0.45
0.39
58,790,523
30,433,819
65.89
34.11
89,224,342
100.00
Elanor Investors Group Annual Report 2017
SECURITY HOLDER ANALYSIS
(as at 24 August 2017) continued
105
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
No. of
Securities
67,933,085
18,409,181
2,036,308
801,176
44,592
%
76.14
20.63
2.28
0.90
0.05
No. of
Holders
70
667
246
234
101
%
5.31
50.61
18.66
17.75
7.66
89,224,342
100.00
1,318
100.00
The total number of security holders with an unmarketable parcel of securities was 30.
SUBSTANTIAL SECURITY HOLDERS
Security Holder
Perpetual Limited
Auscap Asset Management Limited (Citicorp Nominees)
No. of
Securities
12,675,000
8,675,000
%
13.78
9.90
VOTING RIGHTS
On a poll, each security holder 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.
Elanor Investors Group Annual Report 2017
106
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 18,
123 Pitt Street
Sydney NSW 2000
WEBSITE
www.elanorinvestors.com
Elanor Investors Group Annual Report 2017
Head Office:
Level 38, 259 George Street
Sydney NSW 2000
T: +61 2 9239 8400