Milton
Annual Report 2020

Plain-text annual report

Annual Report 2020 Company Profile Milton Corporation Limited Milton was established as a private investment company for four shareholders in 1938. It became a public company in 1950 and listed on the Sydney Stock Exchange in 1958. Milton is now an investment company for 29,500 shareholders and is listed on the Australian Securities Exchange (ASX) under the code MLT. Shareholders have an investment in a low cost, efficiently managed company with total administration costs that represent 0.14% per annum of total assets. Milton’s board oversees the performance of its executives who are employed by the company to manage its investments for the benefit of shareholders. Important Dates Final Dividend Ex date: Payment date: DRP application closing date: 13 August 2020 2 September 2020 17 August 2020 Annual General Meeting Meeting date: Virtual Meeting The AGM will be webcast and can be viewed at the following link. https://agmlive.link/MLT20 20 October 2020 at 3.00pm Investment philosophy Milton is predominantly a long term investor in companies and trusts listed on the ASX that are well managed, with a profitable history and an expectation of increasing dividends and distributions. Turnover of investments is low and capital gains arising from disposals are reinvested. Milton also holds liquid assets such as cash and term deposits as well as real property development through joint ventures. Milton aims to pay increasing fully franked dividends to shareholders over time. Benefits of investing Shareholders receive fully franked dividends semi-annually. Ordinary fully franked dividends are paid out of profit after tax excluding special investment revenue and costs associated with the acquisition of subsidiaries. Dividends have been paid every year since listing and they have been fully franked since the introduction of franking. Special fully franked dividends may be paid out of special investment revenue. The investment portfolio provides shareholders with exposure to diversified assets. Milton’s $2.7 billion equity investment portfolio comprises interests in companies and trusts which are listed on the ASX and are expected to deliver increased investment revenue over the long term. Consistent application of this investment philosophy over many years has created a portfolio that is not aligned with any securities exchange index. i Company ProfileMilton Corporation LimitedMilton Corporation Limited Annual Report 2020Key Highlights Net Profit after tax Underlying Operating Profit(1) A$ A$ 116.9m 111.3m Basic Earnings Per Share cents per share 17.45 Fully Franked Ordinary Dividends cents per share 17.5 Total Assets A$ 2.9Bn Underlying Earnings Per Share cents per share 16.6 Dividend Yield(2) 4.3% Management Expense Ratio 0.14% (1) Underlying operating profit excludes special investment revenue (1) Underlying operating profit excludes special investment revenue and acquisition costs net of tax. and acquisition costs net of tax. (2) Based on share price as at 30 June 2020 and excludes benefit of (2) Based on share price as at 30 June 2020 and excludes benefit of franking credits franking credits www.milton.com.au www.milton.com.au Contents Directors Report Operating and Financial Review Dividends Five Year Financial Summary Portfolio Performance Review of Investments Top 25 Investments Classification of Investments Management Expense Ratio (MER) COVID19 concerns and Impacts 2021 Financial Year Outlook Board of Directors and Company Secretary Remuneration Report Auditor’s Independence Declaration 2 2 3 4 5 6 6 7 8 8 8 9 12 19 Milton Corporation Foundation 20 Financial Statements Directors’ Declaration Independent Auditor’s Report Corporate Directory ASX Information 21 48 49 53 54 Corporate Governance Statement Our Corporate Governance Statement is available on the company website at milton.com.au/corporate-governance.html and is lodged with ASX with this Report. ASX: MLT 1 Directors Report for the year ended 30 June 2020 The directors present their report together with the financial statements of the consolidated entity (“Milton”) consisting of Milton Corporation Limited and its subsidiaries for the financial year ended 30 June 2020 and the independent auditor’s report thereon. Principal activities The principal activity of Milton is investment. Milton invests in companies and trusts, real property development, fixed interest securities, and liquid assets such as cash and term deposits. There has been no significant change in the nature of this activity during the financial year. Operating and Financial Review Financial Highlights Milton Corporation reported net profit after tax of $116.9 million for the year ended 30 June 2020, a decrease of 20.8% on the prior year. This represents earnings of 17.45 cents per share. Special dividend income was $5.8 million in 2020, a reduction of 59% from the elevated $14.1 million of special dividend income in the 2019 financial year. Special dividends from companies including ASX, RIO Tinto, Telstra, TPG and TUAS were received in 2020. Resource companies are continuing to enjoy favourable trading conditions and elected to return the capital generated to shareholders. TPG/TUAS was a result of corporate restructuring related to the TPG Vodafone merger. Underlying profit after tax for 2020, which excludes special dividend income, was $111.3 million, a decrease of 16.7% on the prior year. Milton’s Board primarily uses underlying profit when determining ordinary dividends to enhance their reliability. Underlying earnings per share decreased by 17.3% to 16.6 cents per share. Ordinary dividend income of $117.2 million, generated by Milton’s diversified $2.7 billion portfolio of Australian listed companies, declined by 15.1% in 2020. The lower dividend income was due to the reduction, deferral or elimination of dividends by many companies, but primarily banks in the second half of the 2020 financial year. Government mandated COVID19 business lockdowns, capital preservation requirements and elevated uncertainty forcing many companies to act to preserve cash. 2 Milton’s investment team took proactive actions in 2020 to reduce some bank and certain other shareholdings to reduce this impact. Milton’s bank shareholdings had been reduced materially in the first half of the financial year due to concerns regarding long-term earnings of certain banks. At the end of the financial year 17% of Milton’s investment portfolio was invested in retail banks, reduced from 28% at 30 June 2019. Trading income was materially higher in 2020 due to a large number of opportunities presented by COVID19 related capital raises. Dividends Milton’s Board of Directors have declared a final dividend of 8.5 cents per share, payable on 2 September 2020 to shareholders of record on 14 August 2020. Full year ordinary dividends of 17.5 cents per share were declared in relation to 2020 earnings. This represents a payout ratio of 105.5% of Milton’s 2020 underlying profit after tax. All 2020 dividends are fully franked and Milton has $98.4 million of remaining franking credits after the payment of the final dividend. It is the Board’s expectation that dividend income from Milton’s investment portfolio will remain under pressure in 2021 whilst uncertainty regarding the path and duration of COVID19 related lockdowns continues. Dividends paid or declared by Milton to members since the end of the previous financial year are shown in the table opposite. Dividend Reinvestment Plan (DRP) The DRP will be available for the final dividend. The last day for receipt of an election to participate is 17 August 2020. Milton Corporation Limited Annual Report 2020Dividends Declared and paid during the year Final 2019 ordinary fully franked Interim 2020 ordinary fully franked Declared after end of year and not provided for at 30 June 2020 Cents per share ¢ Total amount $’000 Date of payment 10.4 9.0 69,572 60,323 3 September 2019 5 March 2020 Final 2020 ordinary fully franked 8.5 57,063 2 September 2020 No LIC capital gain was included in the above dividends. Earnings and Dividends over 10 Years Dividends per share (DPS) Earnings per share (EPS) www.milton.com.au ASX: MLT 3 5.07.09.011.013.015.017.019.021.023.02011201220132014201520162017201820192020MLT DPSMLT EPSCents Per ShareFive Year Financial Summary Underlying operating profit after tax1 ($m) Underlying earnings per share (cents) Profit after tax ($m) Earnings per share (cents) Management Expense Ratio (%) Interim dividend (cps) Final dividend (cps) Full year ordinary dividend (cps) Special dividend (cps) 2020 2019 2018 2017 2016 111.3 16.6 116.9 17.45 0.14 9.0 8.5 17.5 – 133.6 20.1 147.7 22.2 0.14 9.0 10.4 19.4 2.5 128.8 122.0 126.4 19.6 18.7 19.5 130.0 122.4 127.9 19.8 0.14 8.8 10.2 19.0 – 18.8 0.12 8.7 10.0 18.7 – 19.8 0.13 8.7 9.9 18.6 – Net assets2 at 30 June ($m) 2,863 3,292 3,114 2,939 2,746 NTA per share pre-tax2 at 30 June ($) NTA per share post-tax3 at 30 June ($) Last sale price at 30 June ($) 4.26 3.83 4.09 4.92 4.30 4.71 4.73 4.16 4.61 4.51 3.99 4.51 4.22 3.79 4.28 All Ordinaries Index at 30 June 6,001 6,699 6,290 5,764 5,310 Ten year TSR (% per annum) Five year TSR (% per annum) Shares on issue (million) Number of shareholders 7.2 2.5 9.7 5.2 6.5 9.1 4.7 12.9 5.3 11.4 671.3 669.0 658.2 651.9 649.9 29,514 26,995 25,864 24,726 23,729 Notes Notes Underlying operating profit after tax excludes special investment revenue and costs associated with the acquisition of subsidiaries. 11 Underlying operating profit after tax excludes special investment revenue and costs associated with the acquisition of subsidiaries. 22 Before provision for tax on unrealised capital gains and before providing for the ordinary final dividend. Before provision for tax on unrealised capital gains and before providing for the ordinary final dividend. After provision for tax on unrealised capital gains and before providing for the ordinary final dividend. 33 After provision for tax on unrealised capital gains and before providing for the ordinary final dividend. 44 Annual Report 2020 Milton Corporation Limited Annual Report 2020 Milton Corporation Limited Directors Report continued Portfolio Performance Milton’s portfolio reflects the emphasis placed on investing in companies that pay increasing dividends over the long term from quality earnings streams. Milton’s portfolio is not aligned to any index so it may underperform broad market indices over the short term. Milton’s long term returns are shown below. The returns do not take into account the benefit of franking credits which may be utilised by some shareholders. Dividend and Investment Growth over 20 years If $10,000 invested in MLT in June 2000, and if dividends were re-invested over the 20 years, the value of the investment in June 2020 would be worth $54,670. Ordinary dividends increased from 8.60cps in FY2000 (adjusted for 5:1 split in Oct 2013) to 17.5cps in FY2020. Total Returns over Periods Up to 20 Years Total portfolio return (TPR) is the percentage change in Milton’s NTA per share plus dividends received by shareholders. Total shareholder return (TSR) is the percentage change in Milton’s share price plus dividends received by shareholders. TPR and TSR above do not take into account franking credits which may be of benefit to certain shareholders. www.milton.com.au ASX: MLT 5 010,00020,00030,00040,00050,00060,00070,0005101520252020201920182017201620152014201320122011201020092008200720062005200420032002200120000Ordinary dividendSpecial dividendInvestment value with dividends re-investedDividend (Cents per Share)Investment Value ($)-7.5%-2.5%-5%2.5%0%7.5%5%10%-10%1 Year3 Years (pa)5 Years (pa)10 Years (pa)20 Years (pa)15 Years (pa)MLT TPRMLT TSRPercent per annum-9.84-9.402.351.113.762.477.107.168.668.916.106.09Directors Report continued Review of Investments Milton’s total assets were $2.9 billion at 30 June 2020 (2019: 3.3 billion). Net Tangible Assets (NTA) per share before deferred tax liability was $4.26 per share. Total portfolio return, combining Milton’s NTA per share movement and dividends received by shareholders was -9.8%. Cash balances at 30 June 2020 were $114.1 million, increased from $110.3 million at 30 June 2019. Milton continues to have no debt. The 2020 financial year was transformative for Milton’s investment portfolio, with bank weighting reduced from 28% at 30 June 2019, to 17% at 30 June 2020. Our long- term bank shareholdings were reduced due to concerns regarding earnings and dividend growth. These concerns stem from declining credit quality, increased compliance costs and the impact of technology based disruption. In a large part these reductions occurred in the first half of 2020, before COVID19 concerns surfaced. Milton retains significant investments in Commonwealth Bank, Westpac and NAB and believe that the long-term outlook favours larger banks that are better able to continue to invest in their platforms. Milton’s portfolio is presently comprised of 71 listed companies, that number reduced from 85 at 30 June 2019. In a highly volatile year for the equity markets, which saw a 37% fall in the All Ordinaries from the peak in February 2020 due to COVID19 concerns and then a 31% rebound due to investor optimism, Milton remained invested and took advantage of the opportunities presented by volatility and company capital raises. During the 2020 financial year, $269.8 million was added to new and existing investments. Investments were increased in Macquarie Group, Transurban, Sydney Airports, BHP, Cleanaway, IOOF, Origin Energy, Sonic Healthcare, Amcor, REA, Charter Hall, Altium and Qube. New investments were made in Pro Medicus, Johns Lyng Group and Magellan Financial Group. $276.2 million of sales were made in 2020 and included the complete disposal of Milton’s investments in ANZ Bank, Bank of Queensland, Bendigo and Adelaide Bank, Auswide Bank, Janus Henderson, Flight Centre, Blackmores, New Hope, Regis, Adelaide Brighton, Boral, Dulux and Orica. Investments in Westpac and QBE were also reduced. There remains, as seen in previous years, a high level of dispersion between high growth companies and those that are perceived to be more defensive. Valuations in the industrials sector are at record levels with historically low 6 6 Milton Corporation Limited Annual Report 2020 interest rates a primary contributor. Sectors such as health care and technology outperformed banks and resource companies materially. The Milton management team, with the support of the Investment Committee, continue to review and modify our portfolio on an ongoing basis. Milton’s portfolio reflects the emphasis we place on companies that pay increasing dividends over the long term from quality earnings streams. We believe that the portfolio is well positioned to grow its dividend income over the long term, but recognise that the current situation is one of elevated volatility. Table B. Top 25 investments at 30 June 2020 Commonwealth Bank Macquarie Group Limited Westpac Banking Corporation W H Soul Pattinson & Company BHP Group Limited CSL Limited Wesfarmers Limited Woolworths Group Limited National Australia Bank Limited Transurban Group Limited Rio Tinto Limited AGL Energy Limited Brickworks Limited Coles Group Limited Telstra Corporation Limited ASX Limited A P Eagers Limited ALS Limited Perpetual Limited Amcor PLC Insurance Australia Limited Suncorp Group Limited Sonic Healthcare Limited TPG Telecom Limited Woodside Petroleum Limited Total market value of Top 25 Total Assets Market Value $m 218.0 192.8 179.2 179.2 173.9 172.5 129.0 109.5 88.7 82.2 65.5 60.9 51.2 49.4 47.7 46.9 45.9 39.9 36.6 35.2 34.8 29.7 28.6 28.1 27.9 2,153.3 2,866.1 Classification of Investments by Sector The following asset classification table shows the composition of Milton’s assets by sector. Closing position Additions Disposals3 Change in value Opening position 2020 Income Closing position weighting Classification1 $m $m $m $m $m Bank Diversified Financials Materials Consumer Staples Energy Health Care Transport Real Estate Insurance Commercial Services Utilities Telecommunications Retailing Media Capital Goods Information Technology Consumer Services Other shares Total equity investments Liquids2 Property joint ventures Other assets Total 486.0 344.6 329.5 309.7 227.9 224.5 136.4 111.1 95.1 87.5 84.0 76.8 72.4 39.7 31.7 26.7 21.5 1.1 – 112.1 39.6 – 10.4 9.1 36.1 19.2 6.1 14.1 – 1.2 – 10.6 2.5 7.8 1.0 – (180.1) (257.4) (11.7) (39.8) (24.6) (1.7) (2.5) – – (15.7) (0.2) – – – – – (0.5) (0.8) – (25.2) (39.1) 32.3 (44.1) 41.2 (16.2) (21.4) (25.2) (10.4) (9.9) (3.3) (20.0) 1.5 (17.6) 0.8 (13.2) – 923.5 269.4 368.8 302.0 263.3 176.7 116.5 113.3 129.9 84.0 93.9 78.9 92.4 27.6 46.8 18.6 34.5 1.1 $m 35.1 14.2 18.2 10.6 8.1 3.1 4.3 5.5 5.4 2.6 5.0 5.3 2.3 1.1 0.8 0.3 0.9 0.1 % 17.0 12.0 11.5 10.8 8.0 7.8 4.8 3.9 3.3 3.1 2.9 2.7 2.5 1.4 1.1 0.9 0.7 – 2,706.2 269.8 (277.6) (427.2) 3,141.2 122.9 94.4 125.0 24.7 10.2 2,866.1 125.5 23.1 4.1 1.5 0.9 1.5 4.4 0.9 0.3 3,293.9 126.8 100.0 Investments are grouped according to their asset classes using the Global Industry Classification (“GICS”) codes. Notes 1 2 Liquids include cash, term deposits, hybrid securities and dividends receivable. 3 Includes capital returns of $1.4 million. 7 www.milton.com.au ASX: MLTDirectors Report continued Management Expense Ratio (MER) 2021 Financial Year Outlook Milton is fully internally managed, with no performance or management fees paid. Investment staff are focused on maximising net returns to shareholders with Management and the Board aligned with shareholders. Milton forecasts that company earnings and dividend growth will remain limited as uncertainty regarding the impact of COVID19 persists and companies conserve cash in a highly uncertain environment. Milton’s MER for the 2020 year was 0.14% which is unchanged from 2019. As a result, we expect that Milton’s earnings will be lower in 2021. COVID19 Concerns and Impacts The emergence of COVID19 has had broad impact on economies, companies and individuals. The pandemic remains a major global issue, and is likely to have ongoing impact until a vaccine or treatment emerges. Milton have taken steps to ensure that its employees are working in a safe environment, and the company has continued to operate as normal, with some employees working remotely. This year’s Annual General Meeting will be held virtually to ensure the safety of shareholders and employees and to be consistent with government guidelines. Milton, as a long-only equity market investor focused on income growth, is directly exposed to the ongoing volatility in investment markets at present. We expect this volatility to continue and have taken steps to ensure that we retain an appropriate amount of financial flexibility. Milton’s portfolio has been adjusted to best reflect those concerns, with volatility during the year also providing opportunity to add to certain investments. Of particular concern to Milton is the likelihood that companies will continue to reduce, delay or cancel dividends in 2021. These decisions may be driven by further outbreaks, extended lockdowns, the impact of economic recession or regulators. These concerns have contributed to Board decisions regarding the final dividend, notwithstanding the elevated payout ratio at present, and is further expressed in the robust levels of cash held at 30 June 2020. Milton’s management team and Board are confident that we are well positioned and will continue to review the situation, and Milton’s portfolio, as new information emerges. We note however that forecasting in such an uncertain environment is very challenging. A disconnect currently exists between expensive asset prices and an uncertain short-term earnings environment. Much of the recent rise in asset prices is driven by the extraordinary actions of governments and central banks to support individuals and businesses affected by economic lockdowns with income support and low interest rates. Low interest rates are expected to persist for the near future, driving investors to equity markets and supporting valuations. Low term deposit rates will also reduce returns on Milton’s cash balances. Notwithstanding Milton’s much reduced bank sector investments, we remain particularly concerned about pressure on bank earnings and dividends due to compliance costs, declining credit quality and the impact of technology based disruption. We remain confident that our resource stocks are well positioned to generate growing income due to high iron ore prices and low debt levels. The accelerating impact of technology, climate policy and the rate of change in the business cycle continue to be major factors for all companies. Milton expects that special dividends of the magnitude received in 2020 are unlikely to recur in the 2021 financial year. Milton’s joint venture investments are positively exposed to growing first homebuyer activity and are expected to improve in 2021, assisted by generous government schemes. Milton’s strong balance sheet with no debt, available profit reserves and franking credits provides confidence in Milton’s ability to continue paying fully franked dividends. A further update on the portfolio and underlying market conditions will be provided at Milton’s Annual General Meeting to be held on 20 October 2020. 8 Milton Corporation Limited Annual Report 2020Board of Directors and Company Secretary Directors The directors of Milton at any time during or since the end of the financial year are: Robert D. Millner FAICD Independent non-executive chairman Justine E. Jarvinen BE(Chem), F Fin, GAICD Independent non-executive director Director of Milton Corporation Limited since 1998 and appointed chairman in 2002. Chairman of the Investment and Remuneration Committees. Extensive experience in the investment industry. Appointed a non-executive director of Milton since August 2017. Member of the Investment Committee. An Engineer with experience in equity markets and strategy development. Other current directorships: Director of Australian Pharmaceutical Industries Limited since 2000, Director of Apex Healthcare Berhad since 2000, Chairman of BKI Investment Company Limited since 2003, Director of Brickworks Limited since 1997 and appointed chairman in 1999, Director of New Hope Corporation Limited since 1995 and appointed chairman in 1998, Director of TPG Telecom Limited since 2000, Director of Tuas Limited since June 2020, Director of Washington H. Soul Pattinson & Company Limited since 1984 and appointed chairman in 1998. Former directorships in the last three years: Australian Pharmaceutical Industries Limited from 2000 to June 2020. Graeme L. Crampton B.Ec, FCA, FAICD Independent non-executive director Director of Milton Corporation Limited since 2009. Chairman of the Audit & Risk Committee and a member of the Remuneration Committee. A Chartered Accountant and former partner of a major firm of Chartered Accountants for more than 28 years and has extensive experience in the investment industry. Kevin J. Eley CA, F Fin, FAICD Independent non-executive director Director of Milton Corporation Limited since 2011. Member of the Investment and Audit & Risk Committees. A Chartered Accountant and has extensive experience in the investment industry. Other current directorships: Director of EQT Holdings Limited since 2011 and HGL Limited since 1985. Director of Pengana Capital Group Limited since 2017 (formerly Hunter Hall International Limited from 2015 to 2017). Brendan J. O’Dea B.Ec, M.Bus, CA, MAICD Managing Director Managing Director of Milton Corporation Limited with effect from 1 August 2018. Member of the Investment Committee. A Chartered Accountant and has extensive investing and business management experience with over 22 years at a global investment bank as a Managing Director. Ian A. Pollard BA (Macq), MA (Oxon), D Phil (IMC), FIAA, FAICD Independent non-executive director. Director of Milton Corporation Limited since 1998. Member of the Audit & Risk and Remuneration Committees. An Actuary and over 43 years of involvement in the investment industry. Former directorships in the last three years: Billabong International Limited from 2012 to 2018, SCA Property Group from 2012 to 2018. Company Secretary Nishantha Seneviratne MBA, ACMA, CGMA, CPA, AICM, AGIA, ACIS Appointed Company Secretary and Chief Financial Officer in December 2012. Mr Seneviratne joined Milton as the Senior Accountant in March 2010. Prior to joining Milton, he was a Financial Controller for a group of private companies for over six years. He is an associate member of the Governance Institute of Australia (GIA) and Institute of Chartered Secretaries and Administrators (ICSA). 9 www.milton.com.au ASX: MLTDirectors Report continued Directors’ meetings The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of Milton during the financial year are shown in Table D below. Directors’ relevant interests No director has or has had any interest in a contract entered into since the last Directors’ Report or any contract or proposed contract with Milton or any subsidiary or any related entity other than as disclosed in note 17 to the financial statements. The relevant interest of each director in the capital of Milton at the date of this report is as follows: Director R.D. Millner G.L. Crampton K.J. Eley B.J. O’Dea J.E. Jarvinen I.A. Pollard Number of Shares 13,047,096 169,172 131,000 388,392 15,000 91,129 Table D. Directors’ Meetings Director R.D. Millner G.L. Crampton K.J. Eley B. O’Dea(2) I.A. Pollard J.E. Jarvinen Directors’ Meetings Investment Committee Meetings Audit & Risk Committee Meetings Nomination Committee Meetings Remuneration Committee Meetings A 7 7 7 7 7 7 B 7 7 7 7 7 7 A 21 * 22 22 * 19 B 22 * 22 22 * 22 A * 5 5 * 5 * B * 5 5 * 5 * A 1 1 1 1 1 * B 1 1 1 1 1 * A 1 1 * * 1 * B 1 1 * * 1 * A Number of meetings attended. B Number of meetings held during the time the director held office or was a member of the committee during the year. * Not a member of the relevant committee. 10 Milton Corporation Limited Annual Report 2020Non-audit services During the year, Pitcher Partners, Milton’s auditor, has performed certain non-audit services in addition to its statutory duties. Details of the amounts paid to the auditors and related practices of the auditor are disclosed in note 19 to the consolidated financial statements. The board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: a a All non-audit services were subject to the corporate governance procedures adopted by Milton and have been reviewed and approved by the Audit & Risk Committee to ensure they do not impact on the integrity and objectivity of the auditor, and The non-audit services provided do not undermine the general principles relating to auditor independence as set out in Professional Statement APES110 Code of Ethics for Professional Accountants (including Independence Standards), as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for Milton, acting as an advocate for Milton or jointly sharing risks and rewards. The auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 19. Rounding off The company is of a kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191, and in accordance with that legislative instrument, amounts in the Directors’ Report and financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. Indemnification and insurance of directors, officers and auditors Neither Milton nor any related entity has indemnified or agreed to indemnify, paid or agreed to pay any insurance premium which would be prohibited under Section 199A or Section 199B of the Corporations Act 2001 during or since the financial year ended 30 June 2020. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses insurance contracts as such disclosure is prohibited under the terms of the contracts. Significant changes in the state of affairs There were no significant changes in the state of affairs of Milton during the past financial year other than as disclosed in the financial statements. Events subsequent to reporting date Apart from the information contained in note 24 to the financial statements, no matter or circumstance has arisen since the end of the financial year that has or may significantly affect the operations, results or state of affairs of Milton in subsequent financial years. Likely developments Milton will continue its investment activities consistent with its objective of generating increasing revenue for distribution to its shareholders from its diversified portfolio of assets. The performance of Milton’s investments is subject to and influenced by many external factors and therefore it is not appropriate to predict the future results of the investments and Milton’s performance. This Directors Report contains information relating to Milton’s past performance, review of operations and outlook. Environmental regulations There are no significant environmental regulations that apply directly to Milton. Environmental, Social and Governance matters are considered by Milton’s Investment committee to ensure sustainability of income. 11 www.milton.com.au ASX: MLTRemuneration Report for the year ended 30 June 2020 This report, which is audited, details the policy for determining the remuneration of directors and executives and provides specific details of their remuneration. Remuneration of non-executive directors Non-executive directors are paid base fees, committee fees and superannuation contributions. Fees are not linked to Milton’s performance and no bonuses are paid or options issued. Each year the base fees and committee fees are determined by the board of directors who take into account the demands made on directors and the remuneration of non executive directors of comparable Australian companies. Base fees and committee fees (including superannuation contributions) 2020 $ 2019 $ Chairman base fee 147,358 143,764 Director base fee 73,679 71,882 Chairman of the Audit & Risk Committee fee Member of the Audit & Risk Committee fee Member of the Investment Committee fee 6,520 6,361 3,696 3,606 Non-executive directors, who were appointed before 30 June 2003, are entitled to retirement benefits in accordance with a shareholder approved scheme. In June 2003 the board resolved to cap retirement benefits for all directors at the amounts provided as at 30 June 2003. The total balance provided at 30 June 2020 is $100,905 (2019: $100,905). Remuneration of executives Executive remuneration is a key element of the staff retention strategy which is designed to attract and retain appropriately qualified and experienced professionals who share Milton’s goals and values and will seek to deliver superior long term returns to its shareholders. The remuneration of the managing director and senior executives is reviewed annually by the Remuneration Committee which then makes recommendations to the board for its consideration and approval. In formulating its recommendations, the Remuneration Committee considers: a a the short term and long term performance of the Company as measured by dividend growth and total returns; the contribution of the managing director and the senior executives to this performance; a market trends in remuneration in terms of both 6,520 6,361 quantum and structure; and The total remuneration paid to non-executive directors in 2020 was $475,546 (2019: $463,946). In October 2011 shareholders approved an increase in the maximum non-executive directors’ total remuneration to $700,000. a the remuneration of key management personnel of other listed investment companies with similar long term investment philosophies and objectives. Executive remuneration includes a component known as the Total Employment Cost Package (TECP), and it may include a cash bonus component and an equity component. 12 Milton Corporation Limited Annual Report 2020SSSP shares may not be sold, transferred, mortgaged or otherwise dealt with by the executive for a period of three years from the date of issue or until the executive ceases employment with Milton. If the executive’s employment ceases, the executive may within 30 days repay the loan and direct the trustee to transfer the shares to the executive or, provided the value of the shares is greater than the loan outstanding, direct the trustee to sell the shares, repay the loan and distribute the balance to the executive. Otherwise the trustee will sell the shares when so directed by Milton and apply the proceeds to the repayment of the loan. The board considers that the SSSP is appropriately designed to encourage long term ownership of shares by executives, which then aligns their interests with that of Milton’s predominantly long term shareholder base. Executives, other than the managing director, may participate in the Employee Share Plan (“ESP”) which provides for a bonus of up to $1,000 to be paid in the form of Milton shares (refer note 18a to the financial statements). Eligible executives are provided with life, total and permanent disablement and salary continuance insurance. The overall level of executive reward takes into account the performance of Milton over a number of years. Key performance indicators for Milton over five years are tabled on the following page. At Milton’s 2019 Annual General Meeting, shareholders supported the remuneration report for the 2019 financial year with 84.8% of the proxies in favour of the resolution to approve the report. The resolution to approve the remuneration report was passed by a show of hands at the Annual General Meeting held in October 2019. The TECP includes cash salary, company contributions to superannuation and it may include non monetary benefits such as the provision of a motor vehicle and car parking. No executive is entitled to a guaranteed bonus however the board may award a cash bonus to reward an executive’s outstanding contribution to the achievement of Milton’s objectives. The board will consider qualitative measures such as contribution to the investment process, participation in board discussions, timeliness and accuracy of reports and staff development when assessing executive performance. In determining the amount of any bonus the board has regard to quantitative measures such as underlying operating earnings per share, dividends per share and total returns relative to the market as a whole. Average cash bonus paid was 13% of TECP for 2020. The equity component of the remuneration package encourages executives to have an investment in Milton to align their interests with shareholders. The equity component is delivered through participation in the Senior Staff Share Plan (“SSSP”), which was approved by shareholders at Milton’s Annual General Meeting on 9 October 2001 (refer note 18b to the financial statements). In accordance with the terms of the SSSP, the directors determine the maximum number of shares for which the executive may apply. All SSSP shares are acquired on the market and held on behalf of the executives by the trustee of the SSSP. The price offered to the executive shall be at a discount of one cent per share to the market value of the shares. Executives are required to hold the SSSP shares for a minimum period of three years however the benefit to the executive is increased through long term ownership to the extent dividends are paid and the Milton share price appreciates. Milton provides an interest free loan to the executives to fund the acquisition of each parcel of SSSP shares. Each loan is repaid by the application of the after tax proceeds from the dividends paid on the SSSP shares. The opportunity cost to Milton of providing the loan is the notional interest. The Remuneration Committee includes this cost when it reviews each executive’s TECP. www.milton.com.au ASX: MLT 13 Remuneration Report continued Key performance indicators Profitability Underlying operating profit ($ million) (Decline) growth in underlying operating profit (%) Underlying earnings per share (cents) (Decline) growth in underlying earnings per share (%) Dividend Full year ordinary dividend (cents per share) (Decline) growth in full year ordinary dividend (%) Special dividend (cents per share) Capital Net asset backing per share pre-tax(1) at 30 June ($) (Decline) growth in net asset backing per share (%) Net assets(1) at 30 June ($ million) Total Return Ten year Total Shareholder Return (TSR) Ten year Total Portfolio Return (TPR) Ten year accumulation return of the All Ordinaries Index (XAOAI) 1 Before provision for tax on unrealised capital gains 2020 2019 2018 2017 2016 111.3 (16.7) 16.6 (17.3) 17.5 (9.8) – 4.26 (13.4) 2,863 7.2 7.1 7.8 133.6 128.8 122.0 126.4 3.7 20.1 2.4 19.4 2.1 2.5 4.92 4.0 3,292 9.7 9.6 10.0 5.6 19.6 4.7 19.0 1.6 – 4.73 4.9 3,114 6.5 6.9 6.2 (3.5) 18.7 (4.1) 18.7 0.5 – 4.51 6.9 1.1 19.5 (0.4) 18.6 1.1 – 4.22 (3.9) 2,939 2,746 4.7 4.2 3.5 5.3 5.6 4.9 14 Milton Corporation Limited Annual Report 2020 Details of remuneration Amounts of remuneration Details of the remuneration of each non-executive director of Milton Corporation Limited, the managing director and specified executives of Milton for the years ended 30 June 2019 and 2020 are set out in the following tables. Non-executive directors of Milton Corporation Limited Non- executive directors Short Term Benefits – Fees Post Employment Super- annuation Retirement Benefits paid $ $ $ Total Paid $ Retirement Provision(1) $ R.D. Millner Chairman 2020 G.L. Crampton Director K.J. Eley Director I.A. Pollard Director J.E. Jarvinen Director Total remuneration 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 140,528 137,100 56,199 54,242 76,616 74,747 70,662 68,938 73,241 71,453 417,246 406,480 13,350 13,025 24,000 24,000 7,279 7,101 6,713 6,549 6,958 6,788 58,300 57,463 – – – – – – – – – – – – 153,878 150,125 80,199 78,242 83,895 81,848 77,375 75,487 80,199 78,241 475,546 463,943 55,905 55,905 – – – – 45,000 45,000 – – 100,905 100,905 1 The directors’ retirement benefits have been capped at the balance provided at 30 June 2003 www.milton.com.au ASX: MLT 15 Remuneration Report continued Managing director and executives of Milton Corporation Limited and its subsidiaries Short Term Benefits Managing director and executives B.J. O’Dea(4) Managing Director F.G. Gooch Former MD D.N. Seneviratne CFO, secretary 2020 2019 2020 2019 2020 2019 Total remuneration 2020 2019 Salary $ 651,000 572,672 – 62,897 205,740 190,062 856,740 825,631 Post Employment Super- annuation $ Cash Bonus(1) $ 112,500 125,000 – 49,723 27,500 30,000 140,000 204,723 24,000 23,995 – 18,795 19,260 17,438 43,260 60,228 Other long term benefits(2) Share based payments(3) $ – – – 219,357 3,461 7,317 $ 68,580 42,490 – 11,291 38,616 34,180 Total $ 856,080 764,157 – 362,063 294,577 278,997 3,461 107,196 1,150,657 226,674 87,961 1,405,217 1 Represents 100% of cash bonus paid or payable which vested in the year. 2 Other long term benefits comprise changes in long service leave provisions and long service leave paid. 3 Represents the notional value of interest on loans provided to acquire Milton shares under the Senior Staff Share Plan. 4 B.J. O’Dea appointed the CEO and Managing Director on 1 August 2018 upon retirement of Mr F.G. Gooch. The relative proportions of total remuneration of above key management personnel that are fixed or related to performance are as follows: Fixed remuneration Performance-related STI Performance-related LTI 2020 2019 2020 2019 2020 2019 B.J. O’Dea F.G. Gooch D.N. Seneviratne 78.8% – 77.6% 78.1% 83.1% 77.0% 13.1% – 9.3% 16.4% 13.7% 10.8% 8.1% – 13.1% 5.5% 3.2% 12.2% There are no fixed term employment contracts between Milton and its employees. Employment may be terminated with four weeks’ notice by either Milton or the employee. There are contractual provisions for any termination payments other than for unpaid annual and long service leave. 16 Milton Corporation Limited Annual Report 2020Share based compensation, Senior Staff Share Plan equity holdings and loans The movements during the reporting period are as follows: Executives’ shareholdings in relation to the Senior Staff Share Plan – Number of shares held B.J. O’Dea Managing Director F.G. Gooch Former Managing Director D.N. Seneviratne CFO, secretary 2020 2019 2020 2019 2020 2019 Opening Balance Shares 200,000 – – 1,005,000 177,500 152,500 Received as Remuneration Shares 100,000 200,000 – – 25,000 25,000 Closing Balance Shares 300,000 200,000 – – 202,500 177,500 Loans in relation to the Senior Staff Share Plan Details regarding loans outstanding at the reporting date to specified directors and specified executives, are as follows: Opening Balance $ Net change $ Closing balance $ Highest balance in the year Notional Interest(1) $ $ B.J. O’Dea Managing Director F.G. Gooch Former Managing Director D.N. Seneviratne CFO, secretary 2020 2019 2020 2019 2020 2019 915,186 437,541 1,352,727 1,396,793 915,186 915,186 932,600 – – – 2,556,592 (2,556,592) 652,313 562,971 90,658 89,342 742,971 652,313 – – – 2,556,592 772,715 679,546 68,580 42,490 – 11,291 38,616 34,180 1 The notional interest has been included under “Share Based Payment” in the remuneration of the managing director and the executive disclosed on page 16. Notional interest is based on the applicable FBT benchmark interest rate, which for the year averaged 5.20% (2019: 5.24%). Apart from the loan balances shown above, there were no loans outstanding to key management personnel. Terms and conditions of the loans are referred to in note 18b to the financial statements. 17 www.milton.com.au ASX: MLTRemuneration Report continued Share holdings of key management personnel and their related parties – Number of shares held B.J. O’Dea Managing Director F.G. Gooch Former Managing Director D.N. Seneviratne CFO, secretary 2020 2019 2020 2019 2020 2019 Opening Balance Shares 252,141 50,000 – 1,310,110 178,907 153,907 Received as Remuneration Other Acquisitions Shares Shares 100,000 200,000 – – 25,000 25,000 36,251 2,141 – – – – Closing Balance Shares 388,392 252,141 – – 203,907 178,907 Signed in accordance with a resolution of the directors. R.D. MILLNER Chairman Sydney, 6 August 2020 18 Milton Corporation Limited Annual Report 2020Auditor’s Independence Declaration Auditor’s Independence Declaration to the Directors of Milton Corporation Limited ABN 18 000 041 421 I declare that to the best of my knowledge and belief, during the year ended 30 June 2020 there have been no contraventions of: i) the auditor’s independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii) APES 110 Code of Ethics for Professional Accountants (including Independence Standards). This declaration is in respect of Milton Corporation Limited and the entities it controlled during the year. S.S. Wallace Partner 6 August 2020 19 www.milton.com.au ASX: MLTMilton Corporation Foundation ABN 95 051 921 133 The Foundation was established in 1988 to support charitable organisations, particularly those which direct assistance to persons that are disadvantaged in the community. The objective is to create a vehicle with sufficient capital that can make regular meaningful donations from the earnings derived from its investments. Contributions from Milton, shareholders and others over the years have helped to grow the Foundation’s total assets at 30 June 2020 to $2.0 million. Milton Foundation’s assets can now support annual distributions of over $100,000. In 2020, a total of $120,000 was distributed to fifteen organisations, which provide much needed support for the disadvantaged in society in Australia. The Foundation has provided $2.48 million of assistance to the community since its establishment. Shareholders can support the Foundation by either: Forwarding a cheque to: The Trustees Milton Corporation Foundation PO Box R1836 Royal Exchange NSW 1225 or Direct deposit into the bank account: Account Name: Milton Corporation Foundation BSB: 082-067 Account No: 038263869 20 The Foundation is a deductible gift recipient registered with the Australian Charities and Not-for-profits Commission (ACNC) and donations of $2 or more are tax deductible. J.F. CHURCH Chairman of Trustees Sydney, 6 August 2020 Milton Corporation Limited Annual Report 2020Financial Statements Contents Financial Statements Consolidated Income Statement Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity Consolidated Statement of Cash flows Consolidated Statement of Cash flows Notes to the financial statements Key Numbers Key Numbers 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 6. Assets Assets 7. 7. 8. 8. 9. 9. Revenue Revenue Tax Tax Earnings Per Share Earnings Per Share Dividends Paid Dividends Paid Dividend Franking Account Dividend Franking Account Listed Investment Company Listed Investment Company capital gain account capital gain account Investments in equity instruments Investments in equity instruments Investment in joint venture entities Investment in joint venture entities Cash Cash 10. 10. Receivables Receivables Capital Management: Capital Management: 11. 11. 12. 12. Share Capital Share Capital Reserves Reserves 2222 2323 2424 2525 2626 3636 3636 3737 3838 3939 4141 4141 4242 4343 4545 4545 4545 4646 2727 2828 3030 3030 3131 3131 3232 3333 3434 3434 3535 3535 RiskRisk 13. 13. 14. 14. 15. 15. Critical accounting estimates, Critical accounting estimates, judgements and assumptions judgements and assumptions Management of financial risk Management of financial risk Capital risk management Capital risk management Group Structure Group Structure 16. 16. Subsidiaries Subsidiaries Other Information Other Information 17. 17. 18. 18. 19. 19. Related party transactions Related party transactions Share Based Payments Share Based Payments Auditor’s Remuneration Auditor’s Remuneration 20. 20. Parent entity disclosures Parent entity disclosures 21. 21. 22. 22. 23. 23. 24. 24. 25. 25. Summary of other accounting policies Summary of other accounting policies Cash flow information Cash flow information Contingent liabilities Contingent liabilities Events subsequent to reporting date Events subsequent to reporting date Holdings at Fair Value through Other Holdings at Fair Value through Other Comprehensive Income at 30 June 2020 Comprehensive Income at 30 June 2020 www.milton.com.au www.milton.com.au MLT ASX: MLT ASX: 2121 Consolidated Income Statement for the year ended 30 June 2020 Ordinary dividends and distributions Interest Net gains on trading portfolio Other revenue Operating Revenue Share of net profits of joint ventures – equity accounted Special dividends and distributions Income from operating activities Administration expenses Acquisition related costs of subsidiaries Profit before income tax expense Note 1a 1c 1d 8a 1b 2020 $’000 117,210 1,478 789 661 2019 $’000 138,070 2,629 169 551 120,138 141,419 888 5,761 1,504 14,115 126,787 157,038 (4,528) – (4,220) (124) 122,259 152,694 Income tax expense thereon 2a (5,302) (5,042) Profit attributable to shareholders of Milton 116,957 147,652 Basic and diluted earnings per share 3 17.45 22.19 Note 2020 Cents 2019 Cents The Consolidated Income Statement is to be read in conjunction with the Notes to the Consolidated Financial Statements. 22 Milton Corporation Limited Annual Report 2020Consolidated Statement of Comprehensive Income for the year ended 30 June 2020 Profit Other comprehensive income Items that will not be reclassified to profit and loss Revaluation of investments Provision for tax benefit (expense) on revaluation of investments Other comprehensive income, net of tax Total comprehensive income for the year attributable to the shareholders of Milton 2020 $’000 2019 $’000 116,957 147,652 (427,178) 127,171 123,000 (37,458) (300,007) 85,542 (183,050) 233,194 The Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Consolidated Financial Statements. 23 www.milton.com.au ASX: MLTConsolidated Statement of Financial Position as at 30 June 2020 Current assets Cash Receivables Prepayments Total current assets Non-current assets Investments Joint ventures – equity accounted Receivables Property, plant and equipment Deferred tax assets Total non-current assets Total assets Current liabilities Payables Current tax liabilities Provisions Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Capital profits reserve Asset revaluation reserve Retained profits Note 9 10a 7 8b 2c 2d 11 12b 12a 2020 $’000 2019 $’000 114,069 10,938 410 110,306 15,187 275 125,417 125,768 2,706,159 3,141,236 24,709 4,117 5,376 292 23,125 3,431 37 294 2,740,653 2,866,070 3,168,123 3,293,891 1,456 782 66 2,304 289,725 274 289,999 292,303 1,182 280 68 1,530 416,657 258 416,915 418,445 2,573,767 2,875,446 1,644,321 1,633,055 74,263 661,034 194,149 66,148 969,156 207,087 Total equity attributable to shareholders of Milton 2,573,767 2,875,446 The Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Consolidated Financial Statements. 24 Milton Corporation Limited Annual Report 2020Consolidated Statement of Changes in Equity for the year ended 30 June 2020 Issued capital $’000 Capital profits reserve $’000 Asset revaluation reserve Retained profits $’000 $’000 Total equity $’000 Balance at 1 July 2019 1,633,055 66,148 969,156 207,087 2,875,446 Profit Other comprehensive income Total comprehensive income Net realised gains Transactions with shareholders: Share issues Dividends paid – – – – 116,957 116,957 (300,007) – (300,007) (300,007) 116,957 (183,050) 8,115 (8,115) – – – 11,266 (129,895) (129,895) 11,266 – – – – – Balance at 30 June 2020 1,644,321 74,263 661,034 194,149 2,573,767 Issued capital $’000 Capital profits reserve $’000 Asset revaluation reserve Retained profits $’000 $’000 Total equity $’000 Balance at 1 July 2018 1,582,431 51,651 898,111 203,137 2,735,330 Profit Other comprehensive income Total comprehensive income Net realised gains Transactions with shareholders: Share issues Dividends paid – – – – 147,652 85,542 – 147,652 85,542 85,542 147,652 233,194 14,497 (14,497) 50,624 – – – – – – – – 50,624 (143,702) (143,702) – – – – – – – – Balance at 30 June 2019 1,633,055 66,148 969,156 207,087 2,875,446 The Consolidated Statement of Changes in Equity is to be read in conjunction with the Notes to the Consolidated Financial Statements. 25 www.milton.com.au ASX: MLTConsolidated Statement of Cash Flows for the year ended 30 June 2020 Cash flows from operating activities Dividends and distributions received Interest received Distributions received from joint venture entities Other receipts in the course of operations Proceeds from sales of trading securities Payments for trading securities Other payments in the course of operations Income taxes paid Note 2020 $’000 2019 $’000 126,106 1,564 967 959 7,317 (6,528) (4,740) (4,549) 162,171 2,818 2,500 465 169 – (4,557) (4,637) Net cash provided by operating activities 22a 121,096 158,929 Cash flows from investing activities Proceeds from disposal of investments Proceeds from redemption of other financial assets Payments for investments in equities and trusts Payments for investments in joint ventures Payments for acquisition related costs of subsidiaries Cash on acquisition of subsidiaries Payments for property, plant and equipment Loans repaid by other entities Loans advanced to other entities 7c 276,270 1,465 (268,670) (1,663) – – (5,377) 324 (1,043) 44,168 1,153 (96,674) (2,731) (124) 5,016 (2) 3,177 (1,258) Net cash provided by (used in) investing activities 1,306 (47,275) Cash flows from financing activities Payments for share issue costs Ordinary dividends paid Net cash used in financing activities Net increase (decrease) in cash assets held Cash assets at the beginning of the year (32) (90) 4a (118,607) (133,073) (118,639) (133,163) 3,763 110,306 (21,509) 131,815 Cash assets at the end of the year 9 114,069 110,306 The Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Consolidated Financial Statements. 26 Milton Corporation Limited Annual Report 2020Notes to the Consolidated Financial Statements for the year ended 30 June 2020 Key Numbers 1. Revenue Milton’s revenue is derived from dividends, distributions, interest income, profit from joint ventures and net gains arising from the trading portfolio. a. Ordinary dividends and distributions Milton receives ordinary dividend income and trust distributions from its long term investments in companies and trusts listed on the Australian Securities Exchange. Investments held in portfolio at 30 June Investments sold during the year b. Special dividends and distributions This special investment revenue is received on an ad hoc basis and cannot be relied upon each year. Investments held in portfolio at 30 June Investments sold during the year 2020 $’000 2019 $’000 106,797 10,413 137,059 1,011 117,210 138,070 5,761 – 5,761 14,111 4 14,115 Dividends and distributions are brought to account on the dates that the securities trade ex-dividend. Demerger dividends arising from company de-consolidations are treated as a return of capital and not as a dividend. c. Interest Milton earns interest on its cash, term deposits and other liquid assets. Interest from deposits and cash 1,478 1,478 2,629 2,629 Interest on cash and term deposits is brought to account on an accruals basis. Interest on other liquid securities is recognised on the date these securities trade ex-dividend. d. Net gains from trading portfolio Net gains from trading portfolio 789 169 Trading securities are recognised initially at cost and subsequently measured at fair value. Changes in fair value are taken directly through the income statement. Dividends from trading securities are brought to account on the dates the securities trade ex-dividend. www.milton.com.au ASX: MLT 27 2. Tax This note provides analysis of Milton’s income tax expense, shows amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. The note also details the deferred tax assets and liability balances and their movements. a. Reconciliation of Income Tax Expense to prima facie tax payable Profit before income tax Prima facie income tax expense calculated at 30% on the profit before income tax expense Increase (decrease) in income tax expense due to: Tax offset for franked dividends (Over) provision in prior year Other differences Income tax expense on profit b. Tax expense composition Current tax on profits for the year (Over) provision in prior year Decrease in deferred tax assets (note 2c) Increase in deferred tax liabilities (note 2d) c. Deferred tax assets The balance comprises temporary differences attributable to: Provisions Share issue expenses Other Total deferred tax assets Movements: Balance at 1 July Credited (charged) to the income statement (Charged) to equity Balance at 30 June To be recovered within 12 months To be recovered after more than 12 months 28 2020 $’000 2019 $’000 122,259 152,694 36,678 45,808 (30,823) (40,392) (792) 239 5,302 5,857 (792) (2) 239 5,302 279 – 13 292 294 2 (4) 292 39 253 292 (804) 430 5,042 5,358 (804) 58 430 5,042 274 4 16 294 360 (58) (8) 294 42 252 294 Notes to the Consolidated Financial Statements continuedKey NumbersMilton Corporation Limited Annual Report 2020d. Deferred tax liabilities The balance comprises temporary differences attributable to: Amounts recognised directly in equity: Revaluation of investments Realised capital losses Amounts recognised in profit: Gains on scrip for scrip rollovers Income receivable which is not assessable for tax until receipt Movements: Balance at 1 July Charged to income statement (Credited) charged to other comprehensive income Balance at 30 June To be settled beyond 12 months 2020 $’000 2019 $’000 289,876 (16,529) 423,999 (23,800) 16,045 333 16,043 415 289,725 416,657 416,657 239 (127,171) 378,769 430 37,458 289,725 416,657 289,725 416,657 The income tax expense for the year is the tax payable on the current year’s taxable income based on the current income tax rate applicable for the year adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and any unused tax losses. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. Milton Corporation Limited (the parent entity) and its wholly-owned subsidiaries have formed an income tax consolidated group. Each entity in the group recognises its own current and deferred tax, except for any deferred tax assets arising from unused tax losses from subsidiaries, which are immediately assumed by the parent entity. The current tax liability of each group entity is subsequently assumed by the parent entity. There is no tax funding agreement between Milton Corporation Limited and its subsidiaries. Deferred tax balances attributable to revaluation amounts are recognised directly in equity through the asset revaluation reserve. e. Offsetting deferred tax balances: Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. Deferred tax assets from realised capital losses are offset against deferred tax liabilities from unrealised capital gains. Deferred tax liabilities have been recognised for capital gains tax on the unrealised gains in the investment portfolio at current tax rates. As Milton does not intend to dispose of the investment portfolio this tax may not be payable at the amount disclosed in Note 2d above. Any tax liability that may arise on disposal of investments is subject to tax legislation relating to the treatment of capital gains and the applicable tax rate at the time of disposal. 29 www.milton.com.au ASX: MLT2. Tax (continued) Deferred tax assets relating to carried forward capital losses have been recognised based on current tax rates. Utilisation of the tax losses requires the realisation of capital gains in subsequent years and the ability to satisfy certain tests at the time the losses are recouped. The deferred tax assets related to carried forward capital losses have been offset against the related deferred tax liabilities as disclosed in Note 2d. 3. Earnings Per Share Basic earnings per share 2020 Cents 2019 Cents 17.45 22.19 $’000 $’000 Profit attributable to shareholders of the parent entity 116,957 147,652 Weighted average number of ordinary shares used in the calculation of basic earnings per share 670,366,099 665,320,270 Diluted earnings per share and basic earnings per share are the same because there are no potential dilutive ordinary shares. No. of Shares No. of Shares 4. Dividends Paid a. Recognised in the current year An ordinary final dividend of 10.4 cents per share in respect of the 2019 financial year paid on 3 September 2019 (2019: Ordinary final dividend of 10.2 cents per share paid on 4 September 2018) An ordinary interim dividend of 9.0 cents per share paid on 5 March 2020 (2019: 9.0 cents per share paid on 5 March 2019) No special dividend was paid (2019: Special dividend of 2.5 cents per share paid on 30 April 2019) Dividends paid in cash Dividends reinvested in shares 2020 $’000 2019 $’000 69,572 67,133 60,323 59,844 – 16,725 129,895 143,702 118,607 11,288 133,073 10,629 129,895 143,702 30 Notes to the Consolidated Financial Statements continuedKey NumbersMilton Corporation Limited Annual Report 2020b. Not recognised in the current year Since the end of the financial year, the directors declared an ordinary final dividend in respect of the 2020 year of 8.5 cents per share payable on 2 September 2020 (2019: ordinary final dividend of 10.4 cents per share paid on 3 September 2019) 5. Dividend Franking Account The amount of franking credits available to shareholders for the subsequent financial year, adjusted for franking credits that will arise from the payment of the current tax liability Subsequent to year end, the franking account will be reduced by the proposed final dividend to be paid on 2 September 2020 (2019: final dividend paid on 3 September 2019) 2020 $’000 2019 $’000 57,063 69,572 2020 $’000 2019 $’000 122,864 128,692 (24,455) (29,817) 98,409 98,875 The franking account balance would allow Milton to frank additional dividend payments up to an amount of $229,621,193 (2019: $230,709,861) which represents 34 cents per share (2019: 34 cents per share). 6. Listed Investment Company capital gains account Balance of the Listed Investment Company (LIC) capital gain account available to shareholders for the subsequent financial year 2020 $’000 2019 $’000 1,655 1,481 Distributed LIC capital gains may entitle certain shareholders to a special deduction in their income tax return. LIC capital gains available for distribution are dependent upon the disposal of investment portfolio holdings, which qualify for LIC capital gains and the receipt of LIC capital gain distributions. 31 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Assets 7. Investment in equity instruments Milton is predominantly a long term investor in companies and trusts listed on the Australian Securities Exchange. Investments – non-current Quoted investments – at fair value Unquoted investments – at fair value a. Included in quoted investments are: Shares in other corporations Stapled securities in other corporations b. Included in unquoted investments are: Units in trusts 2020 $’000 2019 $’000 2,705,785 3,140,850 374 386 2,706,159 3,141,236 2,476,375 229,410 2,927,525 213,325 2,705,785 3,140,850 374 386 Investments are recognised initially at cost and Milton has made an irrevocable election to present subsequent changes in fair value of equity instruments in other comprehensive income through the asset revaluation reserve after deducting a provision for the potential deferred capital gains tax liability as these investments are long term holdings of equity instruments. Listed investments are valued continuously at fair value, which is determined by the unadjusted last-sale price quoted on the Australian Securities Exchange at the measurement date. Use of unadjusted last sale price in an active market such as the Australian Securities Exchange falls within the Level 1 fair value hierarchy of measuring fair value under AASB 13. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. c. Investments disposed of during the year The disposals occurred in the normal course of Milton’s operations as a listed investment company or as a result of takeovers or mergers. Fair value at disposal date Equity investments Gains on disposal after tax Equity investments 2020 $’000 2019 $’000 276,270 44,168 8,115 14,497 When an investment is disposed, the cumulative gain or loss, net of tax thereon, is transferred from the asset revaluation reserve to the capital profits reserve as disclosed in Note 12. 32 Milton Corporation Limited Annual Report 20208. Investment in joint venture entities Milton has a long history of investing in property development joint ventures. Wholly owned subsidiaries of Milton have investments in separate joint venture entities that have non-controlling interests in three property development joint venture partnerships. a. Contribution from joint venture entities Milton has interests in the following joint venture entities: 33.33% interest in the Ellenbrook Syndicate Joint Venture contribution to operating profit before tax (2019: 33.33%) 23.33% interest in The Mews Joint Venture contribution to operating profit before tax (2019: 23.33%) 50% interest in the LWP Huntlee Syndicate No 2 Joint Venture (2019: 50%) Share of net profits of joint ventures b. Consolidated interest in the assets and liabilities of the joint venture entities Current assets Non-current assets Current liabilities Non-current liabilities Provision for diminution in value Net assets 2020 $’000 2019 $’000 1,213 1,561 85 (410) 888 12,612 19,310 (2,696) (3,974) 25,252 (543) 74 (131) 1,504 14,741 19,968 (3,333) (7,708) 23,668 (543) 24,709 23,125 Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures based on rights and obligations arising from the joint arrangement rather than the legal structure of the joint arrangement. Each joint venture partnership agreement provides that partners have rights to the net assets of the partnership. Accordingly, Milton has assessed the nature of its joint arrangements and determined that all current interests are joint ventures and thus accounted for using the ‘Equity Method’. Under the ‘Equity Method’, Milton’s investments in joint ventures are valued initially at cost and periodically adjusted for changes in value due to Milton’s share in the joint ventures’ income or losses, distributions and any call payments. 33 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Assets 8. Investment in joint venture entities (continued) c. Contingencies and capital commitments Guarantee facility by parent company Milton agreed to provide a guarantee subject to a maximum of $10 million to Bankwest to support a repayment of a principal amount on a loan payable on 30 June 2022 (or on a later agreed date) by a joint venture in which LWP Huntlee Syndicate No 2 has a 23.75% interest. This guarantee facility replaced Milton’s previous interest servicing guarantee facility of $10 million to the joint venture, which was cancelled on 8 April 2020. This facility, which is on commercial terms, is secured by a second ranking mortgage over the real property of the joint venture as well as guarantees provided by other related entities of the joint venture. As at 30 June 2020 Milton’s contingent liability amounted to $10 million (30 June 2019: $10 million on the previous interest servicing guarantee facility). Other than the above, the directors are not aware of any material contingent liabilities, contingent assets or capital commitments as at 30 June 2020. 9. Cash Cash at bank Deposits at call Term deposits 2020 $’000 6,034 38,035 70,000 2019 $’000 3,612 24,694 82,000 114,069 110,306 The weighted average interest rate for cash and deposits at call as at 30 June 2020 is 0.2% p.a. (2019: 1.4% p.a.). The weighted average interest rate of term deposits as at 30 June 2020 is 1.4% (2019: 2.1%) with an average term of 4.5 months (2019: 4.5 months). 10. Receivables a. Receivables – current Dividends receivable Interest receivable Sundry debtors b. Terms and conditions Sundry debtors are due within 30 days and no interest is charged. 2020 $’000 10,523 258 157 10,938 2019 $’000 14,822 344 21 15,187 34 Milton Corporation Limited Annual Report 2020Capital Management 11. Share capital Milton may offer shareholders the opportunity to increase their holdings by participation in the Share Purchase Plan and in the Dividend Reinvestment Plan. Milton may also increase its capital through renounceable rights issues and acquisition of investment companies with the consideration being the issue of Milton shares. All capital consists of fully paid ordinary shares which are listed on the ASX and carry one vote per share and equal rights to receive dividends. Movement in share capital No. of Shares $’000 No. of Shares 2020 2020 2019 2019 $’000 Opening balance 668,963,092 1,633,055 658,170,815 1,582,431 Acquisition of unlisted investment companies Dividend Reinvestment Plan(1) Less: Transaction costs (net of tax) – 2,363,305 – – 11,288 (22) 8,444,554 2,347,723 – 40,060 10,627 (63) Closing balance 671,326,397 1,644,321 668,963,092 1,633,055 1 Milton’s Dividend Reinvestment Plan (DRP) offers shareholders the option to reinvest all or part of their dividend in new ordinary shares. In the 2020 financial year, Milton issued 1,288,011 new shares in September 2019 and 1,075,294 new shares in March 2020 under the DRP (2019:1,188,729 issued in September 2018 and 1,158,994 issued in March 2019). 12. Reserves Nature and purpose of reserves Changes in fair value of investments are presented in other comprehensive income through the asset revaluation reserve as referred to in Note 7. Upon disposal of long-term investments, the realised gain or loss, net of any tax expense or benefit, is transferred from the asset revaluation reserve and recorded in the capital profits reserve. a. Asset revaluation reserve Opening balance Revaluation of investments net of provision for tax Net realised gains b. Capital profits reserve Opening balance Net realised gains 2020 $’000 2019 $’000 969,156 (300,007) (8,115) 898,111 85,542 (14,497) 661,034 969,156 66,148 8,115 74,263 51,651 14,497 66,148 35 www.milton.com.au ASX: MLT Notes to the Consolidated Financial Statements continued Risk This section of the notes discusses Milton’s exposure to various risks and shows how these could affect Milton’s financial position and performance. 13. Critical accounting estimates, judgements and assumptions Judgements, estimates and assumptions are required to prepare financial statements. Apart from the items mentioned below, there are no key assumptions or sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. i) Deferred tax liabilities from unrealised capital gains are offset against deferred tax assets from realised capital losses as disclosed in Note 2e. ii) Classification of joint arrangements as joint ventures as disclosed in Note 8. 14. Management of financial risk The risks associated with the financial instruments, such as investments and cash, include credit, market and liquidity risks which could affect Milton’s future financial performance. The Board has approved policies and procedures to manage these risks. The effectiveness of these policies and procedures is continually reviewed by management and annually by the Audit & Risk Committee. a. Credit risk exposures Milton’s principal credit risk exposures arise from the investment in liquid assets, such as cash, bank term deposits and income receivable. The risk that financial loss will occur because a counterparty to a financial instrument fails to discharge an obligation is known as credit risk. The credit risk on Milton’s financial assets, excluding investments, is the carrying amount of those assets. Individual bank limits have been approved by the board for the investment of cash. Income receivable comprises accrued interest and dividends and distributions which were brought to account on the date the shares or units traded ex-dividend. There are no financial instruments overdue. All financial assets and their recoverability are continuously monitored by management and reviewed by the board on a quarterly basis. 36 Milton Corporation Limited Annual Report 2020b. Market risk Market risk is the risk that changes in market prices will affect the fair value of the financial instrument. The fair value of the quoted investments is determined by the unadjusted last sale price quoted on the Australian Securities Exchange at the measurement date. Milton is exposed to market risk through the movement of the security prices of the companies and trusts in which it is invested. The market value of individual companies fluctuates daily and the fair value of the portfolio changes continuously, with this change in the fair value recognised through the asset revaluation reserve. Investments represent 94% (2019: 95%) of total assets. A 5% movement in the market value of investments in each of the companies and trusts within the portfolio would result in a 4.7% (2019: 4.8%) movement in the net assets before provision for tax on unrealised capital gains at 30 June 2020. The net asset backing before provision for tax on unrealised capital gains would move by 20 cents per share at 30 June 2020 (2019: 23 cents at 30 June 2019). Milton’s management continuously monitors the performance of the companies within its portfolio and makes portfolio recommendations which are considered by the Investment Committee. The Milton board reviews the portfolio on a quarterly basis. Milton is not directly exposed to foreign currency risk as all its investments are quoted in Australian dollars. The fair value of Milton’s other financial instruments are unlikely to be materially affected by a movement in interest rates as they generally have short dated maturities and variable interest rates. c. Liquidity risk Liquidity risk is the risk that Milton is unable to meet its financial obligations as they fall due. Milton manages liquidity risk by monitoring forecast and actual cashflows. All accounts payable are due and payable within 12 months. 15. Capital risk management The parent entity invests its equity in a diversified portfolio of assets with the objective of generating a growing income stream for distribution to shareholders in the form of fully franked dividends. The capital base is managed to ensure there are funds available for investment as opportunities arise. Capital may be increased through the issue of shares under the Share Purchase Plan and the Dividend Reinvestment Plan. Shares may also be issued through renounceable rights issues and as consideration for acquisition of other investment companies. 37 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Group Structure 16. Subsidiaries Investments in subsidiaries are carried at net asset value which approximates fair value of the controlled entities. Income from dividends is brought to account when they are declared. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. a. Basis of Consolidation The consolidated financial statements include the financial statements of Milton being the parent entity and its subsidiaries. The balances and effects of transactions between subsidiaries included in the consolidated financial statements have been eliminated in full. Where entities have come under the control of the parent entity during the year, their operating results have been included in the group from the date control was obtained. Entities cease to be consolidated from the date on which control is transferred out of the group and the consolidated financial statements include the result for the part of the reporting period during which the parent entity had control. b. Milton Corporation Limited’s subsidiaries The following subsidiaries have been included in the consolidated accounts. The parent entity and all subsidiaries are incorporated in Australia: Percentage of Interest held 85 Spring Street Properties Pty Ltd Chatham Investment Co. Pty Limited Incorporated Nominees Pty Limited Milhunt Pty Limited ACN007531240 Pty Limited Kembar Pty Limited c. Acquisition and disposal of subsidiaries 2020 % 100 100 100 100 100 – 2019 % 100 100 100 100 100 100 No acquisitions during the year. Unlisted investment company Kembar Pty Limited acquired in February 2019 was placed into voluntary liquidation during the year and deregistered in April 2020. (2019: Milton acquired 100% of the shares of two unlisted investment companies for a total consideration of 8,444,554 new Milton shares with a fair value of $40,059,629). d. Business Combinations The acquisition method of accounting has been used to account for all business combinations. The business combinations have been accounted from the date Milton attained control of the subsidiaries. The considerations transferred for the acquisitions comprise the fair values of the identifiable assets transferred and the liabilities assumed. Costs related to the acquisitions, other than those associated with the issue of equity securities, are expensed to the consolidated income statement as incurred. 38 Milton Corporation Limited Annual Report 2020Other Information 17. Related party transactions a. Directors and Key Management Personnel compensation Short-term benefits Other long-term benefits Post-employment benefits Share-based payments 2020 $’000 1,414 4 101 107 1,626 2019 $’000 1,436 227 118 88 1,869 Information regarding individual directors’ and executives’ compensation and equity instruments disclosures, as permitted by Corporations Regulations 2M.3.03, are provided in the Remuneration Report section of the Directors’ Report on pages 12 to 18. b. Shareholdings of non–executive directors and their related parties – number of shares held Non-executive directors and their related parties held 5.6% (2019: 5.6%) of the voting power of Milton as at year end. All shares acquired by non-executive directors and their related parties during the year were purchased on an arm’s length basis. Movements in the number of shares held are given below. There were no amounts outstanding from or due to any non-executive director or their related parties as at 30 June 2020. Number of shares at beginning of the year Acquired during the year Disposed of during the year Number of shares held at end of year 2020 2019 No of shares No of shares 37,397,579 40,387,579 444,516 10,000 – (3,000,000) 37,842,095 37,397,579 c. Loans to key management personnel and their related parties Details regarding loans outstanding at the reporting date to key management are as shown below. No loans were granted to related parties of any key management personnel. Balance at beginning of the year Loans advanced Loans repaid Balance at end of the year Notional interest 2020 $ 2019 $ 1,567,499 602,009 3,119,563 1,049,175 (73,810) (2,601,239) 2,095,698 1,567,499 107,196 87,961 39 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Other Information 17. Related party transactions (continued) Notional interest is based on the applicable FBT benchmark interest rate for the year which averaged 5.20% (2019: 5.24%). The loans are advanced to key management personnel in accordance with the Senior Staff Share Plan (SSSP) as disclosed in Note 18b. Loans to individual key management personnel are disclosed in the remuneration report on page 17. d. Other related party transactions All directors have entered into the Deed of Indemnity, Insurance and Access that was approved at the Annual General Meeting held on 10 October 2000. Milton has a Remuneration and Retirement Benefits Deed with Mr R.D. Millner and Dr I.A. Pollard. During the 30 June 2004 year, Milton and the directors varied the Remuneration and Retirement Benefits Deed, whereby the maximum retirement benefit payable to a non–executive director on retirement will be the provision for the director as at 30 June 2003. Apart from the details disclosed in this note no director has entered into a material contract with the parent entity or Milton since the end of the previous financial year and there were no material contracts involving directors’ interests subsisting at the end of the year. e. Loans to and from subsidiaries Loans have been made between the parent entity and wholly owned subsidiaries for capital transactions. The loans between the parent and its subsidiaries have no fixed date of repayment and are non–interest bearing. Amounts owed (to) by subsidiaries at beginning of the year Loans advanced from subsidiaries Loans advanced to subsidiaries 2020 $ 2019 $ (12,959,503) 27,034,039 (967,649) (43,002,055) 15,666,212 3,008,513 Amounts owed by (to) subsidiaries at end of the year 1,739,060 (12,959,503) 40 Milton Corporation Limited Annual Report 2020 18. Share based payments Under the Employee Share Plan, shares are acquired for employees as part of their remuneration and the cost of the shares is recorded under employment costs. Under the Senior Staff Share Plan, shares are acquired for eligible employees as part of their remuneration and held on their behalf by the trustee of the Plan. The purchase of the Plan Shares is financed by a loan from Milton. a. Employee Share Plan The Employee Share Plan (“ESP”) is available to all eligible employees to acquire ordinary shares in Milton in lieu of a cash bonus of up to $1,000 per year as part of the employee’s remuneration. The transaction and administration costs of acquiring the shares and administering the plan are paid by Milton. During the year 414 shares (2019:422 shares) were acquired by Milton on behalf of eligible employees under the ESP at a cost of $2,088 (2019: $2,084) with a total market value at 30 June 2020 of $1,693. Any shares acquired cannot be disposed of or transferred until the earlier of 3 years from the date of issue or acquisition or on the date that the employee’s employment ceases with Milton. b. Senior Staff Share Plan The Senior Staff Share Plan (“SSSP”) was approved by shareholders at Milton’s Annual General Meeting on 9 October 2001. Eligible employees are given the opportunity to apply for Plan Shares in Milton which are subscribed for or acquired and held on their behalf by the trustee of the plan. The purchase of these Plan Shares is financed by an interest–free limited recourse loan from Milton with recourse only to Plan Shares. The loan will be repaid partially from any dividends received. Milton administers the SSSP and meets the transactional and administration costs. During the year 210,000 shares (2019: 310,000 shares) were acquired by the trustee of the plan on behalf of eligible employees under the SSSP at a cost of $1,011,375 (2019: $1,445,530). The shares acquired by the trustee during the year had a market value of $858,900 at $4.09 per share as at 30 June 2020. The SSSP loan receivable balance from eligible employees as at 30 June 2020 was $4,117,515 (2019: $3,430,474). Any shares acquired are held in the name of the trustee and classified as Restricted Shares which cannot become Unrestricted Shares until the earlier of 3 years from the date of issue to the trustee or acquisition by the trustee or on the date that the employee’s employment ceases with Milton. The trustee may transfer Unrestricted Shares to the participant provided that any outstanding loan has been repaid in full. 19. Auditors Remuneration Auditors of the company Audit and review services Related practice of the auditor Agreed upon procedures Other services 2020 $’000 2019 $’000 119 – 7 126 115 43 9 167 41 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Other Information 20. Parent entity disclosures In accordance with the Corporations Amendment (Corporate Reporting Reform) Act 2010 and the Corporations Act 2001 the following summarised parent entity information is set out below. As at 30 June 2020, and throughout, the financial year ended 30 June 2020 the parent entity was Milton Corporation Limited. Profit of the parent entity Profit for the year Total comprehensive income for the year Financial position of the parent entity as at 30 June Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Total equity of the parent entity comprising Issued capital Capital profits reserves Asset revaluation reserve Retained profits 2020 $’000 2019 $’000 116,252 (183,050) 146,560 232,741 125,394 2,743,474 126,015 3,183,538 2,868,868 3,309,553 (2,580) (292,521) (1,251) (432,856) (295,101) (434,107) 2,573,767 2,875,446 1,644,321 82,848 716,713 129,885 1,633,055 74,733 1,024,131 143,527 Total equity attributable to shareholders of the parent entity 2,573,767 2,875,446 42 Milton Corporation Limited Annual Report 202021. Summary of other accounting policies a. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian accounting interpretations, other authoritative pronouncements of the Australian Accounting Standards Board, the Corporations Act 2001 and complies with International Financial Reporting Standards (IFRS). Accounting policies adopted in the preparation of these financial statements have been consistently applied to all the years presented, unless otherwise stated. The financial statements include the consolidated entity (“Milton”) consisting of Milton Corporation Limited and its subsidiaries. Milton is a ‘for–profit’ entity. These financial statements have been prepared on an accruals basis and are based on the historical cost basis except as modified by the revaluation of certain financial assets and liabilities measured at fair value. New and amended standards adopted: AASB 16 Leases is applicable to annual reporting periods beginning on or after 1 January 2019 and replaces AASB 117 Leases. For lessees it will eliminate the classifications of operating leases and finance leases. This does not have a material impact on the financial statements of Milton. There are no other new standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2019 that have a material impact on the amounts recognised in the prior periods or will affect the current or future periods. New and amended standards not adopted: New standards, amendments to standards and interpretations that are effective for annual periods beginning on or after 1 Jan 2020 have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of Milton. b. Rounding of amounts Unless otherwise stated under the option available in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000). c. Operating segments The consolidated entity operates in Australia and engages in investment as its principal activity. As such Milton considers the business to have a single operating segment. 43 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Other Information 21. Summary of other accounting policies (continued) d. Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying value or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Milton consolidated group, and that the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the reporting period in which they are incurred. The depreciable amount of all fixed assets including building, but excluding freehold land, is depreciated commencing from the time the asset is held ready for use. Depreciating is calculated on straight line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Building 40 years Plant and equipment 2–15 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year-end. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its recoverable amount. Gains and losses on disposals determined by comparing proceeds with carrying amounts are included in the income statement. 44 Milton Corporation Limited Annual Report 202022. Cash flow information a. Reconciliation of net profit to net cash provided by operating activities Net profit Share of net profits of joint ventures – equity accounted Distributions received from joint venture entities Acquisition related costs of subsidiaries Depreciation of non-current assets Decrease (Increase) in receivables (Decrease) increase in payables and provisions Increase in income taxes payable Increase (decrease) in provisions 2020 $’000 2019 $’000 116,957 (888) 967 – 37 3,522 (274) 753 22 147,652 (1,504) 2,500 124 35 10,176 (287) 405 (172) Net cash provided by operating activities 121,096 158,929 b. Non–cash financing and investing activities No material non-cash investing activities were carried out during the year ended 30 June 2020 (2019: Milton acquired two unlisted investment companies through the issue of 8,444,554 new Milton shares with a total fair value of $40,059,629). 23. Contingent liabilities Apart from the contingent liability relating to the interest servicing guarantee facility of $10 million provided on behalf of LWP Huntlee Syndicate No.2 joint venture as disclosed in Note 8c, the directors are not aware of any other material contingent liabilities. 24. Events subsequent to reporting date Since the end of the financial year, the directors declared a fully franked ordinary final dividend of 8.5 cents per share payable on 2 September 2020. This financial report was authorised for issue in accordance with a resolution of directors on 6 August 2020. The directors have the power to amend and reissue the financial statements. 45 www.milton.com.au ASX: MLTNotes to the Consolidated Financial Statements continued Holdings 25. Holdings at Fair Value through Other Comprehensive Income at 30 June 2020 The following holdings are valued at fair value through Other Comprehensive Income. Investments in equity instruments Adelaide Brighton Ltd. AGL Energy Ltd. ALS Ltd. Altium Ltd. Amcor PLC Ampol Ltd. A.P. Eagers Ltd. APA Group ARB Corporation Ltd. Argo Investments Ltd. ASX Ltd. AUB Group Ltd. Australia & New Zealand Banking Group Ltd. Australian Foundation Investment Company Ltd. Auswide Bank Ltd. Automotive Holdings Group Ltd. Bank of Queensland Ltd. Bendigo & Adelaide Bank Ltd. BHP Group Ltd. BKI Investment Company Ltd. Blackmores Ltd. Boral Ltd. Brambles Ltd. Brickworks Ltd. Carlton Investments Ltd. Carsales.com Ltd. Charter Hall Group Charter Hall Long WALE REIT CIMIC Group Ltd. Cleanaway Waste Management Coca–Cola Amatil Ltd. Cochlear Ltd. Coles Group Ltd. Commonwealth Bank of Australia Computershare Ltd. CSL Ltd. Diversified United Investment Ltd. Dulux Group Ltd. EQT Holdings Ltd. Event Hospitality & Entertainment Ltd. Finbar Group Ltd. Flight Centre Travel Group Ltd. 2020 Market value $’000 – 60,871 39,881 10,345 35,237 11,552 45,873 23,126 16,354 13,523 46,871 19,007 – 2,865 – – – – 173,903 1,695 – – 15,565 51,203 8,195 21,235 24,768 21,751 20,399 24,750 9,193 6,386 49,405 218,011 – 172,544 552 – 14,700 8,502 2,550 – Holding Shares 2,978,554 3,570,141 6,079,431 178,500 1,566,512 394,000 5,833,107 2,077,766 911,065 1,880,841 548,965 1,292,991 3,452,751 922,398 228,557 3,466,366 7,306,078 5,709,708 4,098,921 1,223,866 368,664 2,089,293 1,431,966 3,234,567 356,778 1,042,000 2,126,000 3,364,212 791,239 5,500,000 1,061,584 33,800 2,877,375 3,140,470 23,000 601,198 130,607 1,655,184 500,697 1,010,921 3,642,464 80,300 2019 Market value $’000 12,033 71,439 44,623 6,105 25,362 9,752 57,164 22,440 16,581 15,272 45,218 13,499 97,402 5,765 1,172 9,706 69,627 66,118 168,712 1,921 33,147 10,697 18,444 52,691 11,274 14,098 23,025 16,855 35,424 12,815 10,849 6,991 38,413 259,968 373 129,258 569 15,426 14,821 12,637 3,060 3,336 Holding Shares – 3,570,141 6,079,431 318,500 2,433,512 394,000 6,795,986 2,077,766 911,065 1,880,841 548,965 1,292,991 – 470,513 – – – – 4,854,921 1,223,866 – – 1,431,966 3,234,567 356,778 1,197,000 2,556,000 5,082,095 845,739 11,250,000 1,061,584 33,800 2,877,375 3,140,470 – 601,198 130,607 – 593,954 1,010,921 3,642,464 – 46 Milton Corporation Limited Annual Report 2020 Investments in equity instruments Goodman Group Gresham Private Equity Co–Investment Fund Insurance Australia Group Ltd. Incitec Pivot Ltd. InvoCare Ltd. IOOF Holdings Ltd. Janus Henderson Group PLC Johns Lyng Group Ltd. Lendlease Group Lindsay Australia Ltd. Link Administration Holdings Ltd. Macquarie Group Ltd. McMillan Shakespeare Ltd. Magellan Financial Group Ltd. National Australia Bank Ltd. New Hope Corporation Ltd. Orica Ltd. Origin Energy Ltd. Pendal Group Ltd. Perpetual Ltd. Premier Investments Ltd. Pro Medicus Limited QBE Insurance Group Ltd. Qube Holdings Ltd. Ramsay Health Care Ltd. REA Group Ltd. Reece Ltd. Regis Healthcare Ltd. Rio Tinto Ltd. Scentre Group Schaffer Corporation Ltd. Sims Ltd. Sonic Healthcare Ltd. Stockland Group Suncorp Group Ltd. Sydney Airport Tank Stream Ventures Technology One Ltd. Telstra Corporation Ltd. TPG Telecom Ltd. Transurban Group Ltd. Treasury Wine Estates Ltd. Tuas Limited Washington H. Soul Pattinson & Company Ltd. Wesfarmers Ltd. Westpac Banking Corporation Whitefield Ltd. Woodside Petroleum Ltd. Woolworths Group Ltd. 2020 Market value $’000 25,102 – 34,775 – 21,494 12,669 – 4,583 12,030 4,670 – Holding Shares 1,690,376 – 6,026,948 – 2,050,914 2,575,014 – 1,950,000 972,539 13,341,599 – 1,625,990 192,842 803,532 25,000 4,868,831 – – 1,580,301 2,116,643 1,231,982 590,321 75,000 789,375 7,538,951 225,283 92,309 1,231,657 – 669,120 5,589,474 68,999 452,368 940,707 3,844,940 3,218,120 4,874,629 50,341 1,855,000 15,236,961 3,148,725 5,815,153 1,206,363 1,574,363 9,174,640 2,877,375 9,985,458 – 1,288,838 2,936,973 7,296 1,450 88,710 – – 9,229 12,636 36,553 10,183 1,985 6,994 21,938 14,986 9,958 11,319 – 65,547 12,129 911 3,587 28,626 12,727 29,703 27,639 375 16,305 47,692 28,024 82,168 12,643 1,063 179,181 128,993 179,239 – 27,903 109,490 2,706,159 Holding Shares 1,475,376 100,000 5,896,948 1,663,689 1,950,914 2,009,086 229,500 – 972,539 13,341,599 27,907 744,490 662,538 – 4,868,831 1,290,107 188,987 190,301 1,546,643 1,231,982 590,321 – 1,949,375 6,113,243 225,283 8,769 1,167,950 1,856,076 669,120 5,079,474 68,999 452,368 710,707 3,844,940 3,314,232 3,184,629 50,341 1,515,000 15,236,961 3,148,725 4,592,153 1,206,363 – 9,174,640 2,877,375 10,545,458 149,373 1,288,838 2,936,973 2019 Market value $’000 22,175 23 48,709 5,673 31,195 10,387 6,952 – 12,643 4,603 140 93,352 8,090 – 130,095 3,496 3,831 1,391 11,058 52,039 8,955 – 23,061 18,585 16,274 842 11,399 4,881 69,428 19,505 941 4,913 19,260 16,033 44,643 25,605 363 11,938 58,662 20,278 67,688 17,999 – 201,750 104,046 299,069 726 46,862 97,596 3,141,236 www.milton.com.au ASX: MLT 47 Directors’ Declaration for the year ended 30 June 2020 1. In the opinion of the directors of Milton Corporation Limited: (a) the consolidated financial statements and notes that are set out on pages 21 to 47 and the Remuneration report, that is set out on pages 12 to 18 in the Directors’ report are in accordance with the Corporations Act 2001, including: (i) giving a true view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date; (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; (iii) complying with International Accounting Standards as issued by the International Accounting Standards Board as described in Note 21a to the financial statements; and (b) there are reasonable grounds to believe that Milton Corporation Limited will be able to pay its debts as and when they become due and payable. 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2020. Signed in accordance with a resolution of the directors. R. D. MILLNER Chairman Sydney, 6 August 2020 48 Milton Corporation Limited Annual Report 2020Independent Auditor’s Report Independent Auditor’s Report to the Members of Milton Corporation Limited ABN 18 000 041 421 Report on the Audit of the Financial Report Opinion We have audited the financial report of Milton Corporation Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended; and 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 the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the Directors of the Company, would be in the same terms if given to the Directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 49 www.milton.com.au ASX: MLTIndependent Auditor’s Report continued Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the matter Existence and Valuation of investments in equity instruments and related movement in reserves Refer to Note 2(d): Deferred tax liabilities, Note 7: Investments in equity instruments and Note 12: Reserves At 30 June 2020, the Group’s statement of financial position includes investments in equity instruments of $2,706,159,000, an asset revaluation reserve of $661,034,000 and a deferred tax liability recognised in relation thereto of $289,725,000. Listed investments are valued continuously at fair value, which is determined by the unadjusted last-sale price quoted on the Australian Securities Exchange. Changes in fair value of equity instruments are recognised in other comprehensive income through the asset revaluation reserve after deducting a provision for the potential deferred capital gains tax liability, as investments are long term holdings of equity instruments. Given the significance of the balances, the key audit matter for us was whether the Group has accurately recorded the above balances and the movement in the past 12 months and has ownership of the investments at year end. Our procedures included, amongst others: a Documenting our understanding of management’s processes and relevant controls; a Tested relevant controls relating to the portfolio revaluation are performed regularly by management; a Confirming the recording and ownership of a sample of investments and transactions during the year by agreeing the SRN/HIN numbers to share registry holding statements online and to the books and records of the Group; a a a Analysing and testing the movement in investments; Testing management’s calculation of the revaluation of investments and the corresponding deferred income tax effect; and Assessed the adequacy of disclosures in the financial report. Other Information The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 50 Milton Corporation Limited Annual Report 2020Responsibilities of the Directors for the Financial Report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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: a 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. a Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. a Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. a Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. a 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. a Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 51 www.milton.com.au ASX: MLTIndependent Auditor’s Report continued From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 18 of the Directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Milton Corporation Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. S.S. Wallace Partner 6 August 2020 PITCHER PARTNERS Sydney 52 Milton Corporation Limited Annual Report 2020Corporate Directory Milton Corporation Limited Directors R. D. MILLNER Chairman G. L. CRAMPTON K. J. ELEY J. E. JARVINEN I. A. POLLARD Management B. J. O’DEA CEO and Managing Director D.N. SENEVIRATNE CFO and Secretary Registered Office & Principal Place of Business Level 4, 50 Pitt Street Sydney NSW 2000 Phone: Fax: Email: Website: www.milton.com.au (02) 8006 5357 (02) 9251 7033 general@milton.com.au Auditors Pitcher Partners Level 16, Tower 2 201 Sussex Street Sydney NSW 2000 Website: www.pitcher.com.au Share Registry Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 (02) 8280 7111 (02) 9261 8489 Phone: Fax: Toll free: 1800 641 024 Email: milton@linkmarketservices.com.au Website: www.linkmarketservices.com.au 53 www.milton.com.au ASX: MLTASX Information ASX Code: MLT Top 20 shareholders as at 30 June 2020 Name Washington H Soul Pattinson & Company Limited Higlett Pty Ltd Argo Investments Limited HSBC Custody Nominees (Australia) Limited Australian Foundation Investment Company Limited Bortre Pty Limited Danwer Investments Pty Ltd Griffinna Pty Ltd J S Millner Holdings Pty Ltd Macdawley Proprietary Limited JBF Holdings Pty Ltd Hexham Holdings Pty Limited Millane Pty Limited T N Phillips Investments Pty Ltd Jamama Nominees Pty Limited A V L Investments Proprietary Limited John E Gill Trading Pty Ltd Chickenfeed Pty Ltd David Burns Pty Limited Isomet Pty Ltd Djaldar Pty Ltd Shares Held 22,216,178 21,000,000 15,969,198 15,922,175 9,775,918 6,079,504 6,079,504 5,730,383 3,843,514 3,479,615 3,440,466 3,280,079 3,165,269 3,087,381 3,031,214 2,979,080 2,814,074 2,809,614 2,724,955 2,683,615 2,545,000 % 3.31 3.13 2.38 2.37 1.46 0.91 0.91 0.85 0.57 0.52 0.51 0.49 0.47 0.46 0.45 0.44 0.42 0.42 0.41 0.40 0.38 On 30 June 2020, there were 29,514 holders of ordinary shares in the capital of Milton. Holders of ordinary shares are entitled to one vote per share. Number of shares held Number of shareholders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over The number of holders of less than a marketable parcel of $500 (122 shares) Other Information Milton is taxed as a public company. There is no current on-market buy-back. The total number of transactions in securities undertaken by Milton was 266 and the total brokerage paid or accrued was $796,603. 54 4,827 8,456 5,716 9,821 694 862 Milton Corporation Limited Annual Report 2020Share Issues History Share Purchase Plan history Acquisition of unlisted companies Date 10.11.1999 13.11.2000 13.11.2001 08.11.2002 31.10.2003 29.10.2004 21.10.2005 16.10.2006 19.10.2007 03.10.2008 09.10.2009 30.09.2013 22.10.2013 01.10.2014 02.10.2015 Issue price per share $ 8.75 8.86 10.79 11.70 13.21 14.10 17.11 19.60 22.48 17.85 16.08 19.12 5 for 1 share split 4.45 4.18 Dividend Reinvestment Plans Date 04.03.2014 03.09.2014 03.03.2015 03.09.2015 03.03.2016 02.09.2016 02.03.2017 05.09.2017 01.03.2018 04.09.2018 05.03.2019 03.09.2019 05.03.2020 Shares issued 187,207 698,365 712,273 998,879 921,511 1,086,782 953,908 1,113,757 978,655 1,188,729 1,158,994 1,288,011 1,075,294 Price $ 4.27 4.55 4.56 4.39 4.19 4.28 4.34 4.44 4.59 4.66 4.39 4.64 4.94 Acquisition of listed investment companies Date Company 31.12.2001 16.12.2010 Cambooya Investments Limited Choiseul Investments Limited Date 21.06.2002 31.12.2002 11.03.2004 01.04.2004 17.08.2006 23.08.2006 28.08.2006 21.09.2006 10.11.2006 23.03.2007 14.05.2007 20.06.2007 24.09.2007 19.02.2009 26.02.2010 26.02.2010 20.08.2010 21.02.2013 24.02.2014 22.08.2017 17.08.2018 28.02.2019 Share Split Shares issued 2,287,200 1,739,112 2,742,777 496,809 1,000,322 1,476,254 382,404 278,103 1,888,353 1,895,976 2,424,582 252,477 1,223,252 3,555,958 1,016,370 3,116,341 2,446,521 521,464 3,280,382 4,114,776 5,575,148 2,869,406 Date Ratio Notes 22.10.2013 Five shares for one The number of shares issued prior to this date have not been adjusted for the share split. A full list of issues to shareholders since commencement of Capital Gains Tax in September 1985 can be found on the company’s website at www.milton.com.au Shares issued 8,273,505 23,803,854 55 www.milton.com.au ASX: MLTAn Australian Listed Investment Company since 1958 ABN: 18 000 041 421 ABN: 18 000 041 421 Level 4, 50 Pitt Street, Sydney NSW 2000 Level 4, 50 Pitt Street, Sydney NSW 2000 T: (02) 8006 5357 F: (02) 9251 7033 E: general@milton.com.au T: (02) 8006 5357 F: (02) 9251 7033 E: general@milton.com.au www.milton.com.au www.milton.com.au 

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