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ECP EMERGING GROWTH LIMITED — Annual Report 2021
Sep 20, 2021
64817_rns_2021-09-20_476c99b2-5a70-4588-b86b-5634aeef33e8.pdf
Annual Report
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ECP Emerging Growth Limited Annual Report 2021
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Contents
| 6 | Chairman’s Report |
|---|---|
| 8 | Directors’ Report |
| 18 | Corporate Governance Statement |
| 20 | Financial Report |
| 44 | Directors’ Declaration |
| 46 | Auditor’s Independence Declaration |
| 47 | Independent Auditor’s Report |
| 52 | Shareholder Information |
| 54 | Investments |
| 56 | Corporate Directory |
ECP Emerging Growth Limited
Welcome
Financial Year End 30 June 2021
FY21 Final Dividend 2 . 7 5 cents per share Shares Traded Ex Dividend 31 August 2021
Dividend Books Close 1 September 2021
Dividend Payment 15 September 2021
Annual General Meeting The Annual General Meeting of ECP Emerging Growth Limited
Will be held at: The office of EC Pohl & Co Level 12, Corporate Centre One 2 Corporate Court Bundall QLD 4217
Thursday 18 November 2021 at 3.00pm (QLD Time)
Investing in ECP Emerging Growth Limited Investors can purchase shares in ECP Emerging Growth Limited through the Australian Securities Exchange.
ASX code: ECP
ECP Emerging Growth Limited
ABN 30 167 689 821 Registered in Australia 23 January 2014 and listed on ASX in August 2014
ECP Emerging Growth Limited Directors (from left to right): Jared Pohl, Murray d’Almeida, David Crombie AM
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1
Annual Report 2021
Highlights for 2021
Highlights for the year ending June 2021
-
The portfolio performance before fees and tax was a positive 50.5% compared to a 26.4% increase in the ASX All Ordinaries Index over the twelve-month period.
-
The Net Tangible Assets (NTA) per share increased by 29.7% after tax (on realised gains only).
-
Dividends of 4.25 cents comprising a 0.6 cent final dividend (2020), a special dividend of 1.65 cents and a 2.0 cent interim dividend (2021) were paid during the year. Dividends were fully franked and were fully attributable to LIC capital gains.
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----- Start of picture text -----
Waterfall: Net tangible assets before 220.0
unrealised gains (cents per share) +69.9 -11.7
200.0 -4.25
-10.0
-3.3
177.5
180.0
160.0
136.9
140.0
120.0
100.0
Dividends per share Cents Interim Dividend
5.00 Final Dividend
4.50 Special Dividend
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2015 2016 2017 2018 2019 2020 2021
NTA FY20 Tax NTA FY21
Portfolio
Performance Performance Fee Dividends Paid Operating Expenses
----- End of picture text -----
Waterfall: Net tangible assets before tax on unrealised gains (cents per share)
ECP Emerging Growth Limited
2
| Performance vs. The ASX All Ordinaries Index |
Year to Portfolio Return Pre Fees NTA (on Realised Gains only) ASX All Ordinaries Index |
|---|---|
| June-15 3.4% -3.6% -3.1% |
|
| June-16 24.8% 15.8% -2.6% |
|
| June-17 2.6% -5.9% 8.5% |
|
| June-18 20.0% 12.3% 9.1% |
|
| June-19 17.3% 6.3% 6.5% |
|
| June-20 22.7% 9.1% -10.4% |
|
| June-21 50.5% 29.7% 26.4% |
Major Investments June 2021
| Top10 Investments | June 21 | June 20 | |
|---|---|---|---|
| Magellan Financial Group Ltd | 8.2% | 2.8% | |
| HUB24 Limited | 6.6% | 3.8% | |
| Lovisa Holdings Ltd | 5.9% | 0.0% | |
| Altium Limited | 5.5% | 4.9% | |
| PWR Holdings Limited | 5.4% | 3.0% | |
| Domino Pizza Enterprises Ltd | 5.2% | 5.2% | |
| Pendal Group Limited | 4.6% | 3.4% | |
| ResMed Inc | 4.1% | 5.6% | |
| Corporate Travel Management | 3.9% | 3.0% | |
| Ltd | |||
| Carsales.Com Limited | 3.4% | 3.2% | |
| Total | 52.8% | 34.9% |
3
Annual Report 2021
Overview
ECP Emerging Growth Limited
Company Profile
ECP Emerging Growth Limited (the “Company”) listed on the Australian Securities Exchange (ASX) in August 2014 is a Listed Investment Company (LIC) providing investors with access to an expertly crafted quality portfolio of Australian small and mid-cap growth companies.
The portfolio is managed by ECP Asset Management Pty Ltd, which has a specialist, equities focused funds management investment team renowned for its stability, track record and sound investment process.
The Manager’s investment philosophy is built on the belief that the economics of business drives long-term investment returns. Investing in high quality businesses that have the ability to generate predictable, above average economic returns, will produce superior investment performance over the long-term.
Mission
Creating Shareholder wealth through active management of a portfolio of ASX listed small and mid-cap quality growth companies.
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ECP Emerging Growth Limited
4
Objectives
The investment objectives of ECP Emerging Growth Limited are:
-
To achieve medium to long-term capital growth and income through investing in a diversified portfolio of small and mid-cap Australian companies;
-
To preserve and enhance the NTA backing per share; and
-
To provide Company Shareholders with a fully franked dividend which, over time, will grow at a rate in excess of the rate of inflation.
Investor Benefits
The benefits for investors in ECP Emerging Growth Limited are:
-
Reduced share investment risk through a diversified investment portfolio;
-
Professional and disciplined management of an investment portfolio;
-
Fully franked dividend income and access to tax advantages of Listed Investment Company Capital Gains when available;
-
Access to a Dividend Reinvestment Plan;
-
No entry or exit charges made by the Company; and
-
— Easy access to information via the Company’s head office or website www.ecpam.com/emerging.
Investment Manager
The management of the Company’s investment portfolio is undertaken by ECP Asset Management Pty Ltd.
The Company’s portfolio of investments comprises companies whose operations cover a wide spectrum of business activities and the portfolio is constructed from the perspective of a business owner, by investing in well managed companies and not simply by tracking the index weighting of various component stocks.
Mr Jared Pohl is a Director of ECP Asset Management Pty Ltd. ECP Asset Management Pty Ltd is an authorised representative of EC Pohl & Co Pty Ltd, which holds an AFSL.
Information on the Investment Manager is available from www.ecpam.com.
Environment, Social, Governance
A business can only maintain a sustainable competitive advantage if it adequately respects all stakeholders in the business and environment in which it operates. Companies which are not engaged in sustainable practices, will not be able to generate above average economic returns throughout their lifecycle. To this end, the Manager’s investment process scrutinises companies to see if they have the appropriate, and sensible governance structures in place as well as incorporating sustainable practices into their day to day operations.
Companies that don’t meet standards of respect and integrity with regard to compensation structures, internal controls, accounting treatment, rules, relationships, systems and process throughout the organisation, are not included in the portfolio.
In keeping with this philosophy, the Manager became a signatory to the United Nations-backed Principles for Responsible Investment Initiative in 2016. At the core of these principles is compliance with an investment approach that incorporates Environment, Social and Governance (ESG) factors into the investment decision making process and requires, where appropriate, engagement with investee Boards to uphold the best possible ESG outcomes.
Information on the ESG policies of the Investment Manager are available from www.ecpam.com/responsible-investment.
There is a management fee of 1% p.a. on the portfolio net tangible assets of the Company, payable monthly. In addition, the Manager receives a performance based fee payable annually in arrears if the Company’s investments outperform an absolute return of 8%. If the Company’s net performance is less than 8%, no performance fee is payable ensuring the Manager is focused on absolute returns to Shareholders.
5
Annual Report 2021
Chairman’s Report
Dear Shareholder,
It gives me great pleasure to present the Annual Chairman’s Report of ECP Emerging Growth Limited. We have had another exceptional year, net tangible assets have grown by 29.7% after paying dividends of 4.25 cents per share (3.1% of opening NTA). This result, achieved against the backdrop of ongoing uncertainty caused by the global COVID-19 pandemic, is testament to the efforts of our Investment Manager- ECP Asset Management.
The Year In Review
It is remarkable to consider the current market position against the outlook from 12 months ago. Prior to July 2020 we witnessed an unprecedented market decline and hopeful recovery while countries grappled with the world-wide pandemic. The future prospects of the economy, at home and abroad, relied heavily on development and rollout of vaccines and the ongoing co-ordinated stimulus from the Government and the Federal Reserve. Health officials were nervous, businesses were defensive, consumers were cautious, we braced ourselves for an unknown future.
As the year progressed we became increasingly grateful that again Australia has proven to be “the lucky country”. Compared to many countries, Australia has had minor interruption from intermittent lockdowns (and I extend my sincere sympathy for the impact upon all those who have been subject to lockdowns of various durations), and the business environment has been positive. Job keeper and job seeker packages helped maintain employment and targeted stimulus in housing and infrastructure have assisted key areas of the economy with the additional boost as demand for mining output remained high. And, while there was a lot of speculation of what would happen as the stimulus measures were withdrawn in March 2021, the reality was trading resumed to sustainable levels and the perceived cliff-face was little more than a pot hole.
In the second half of the year equity markets witnessed a growth to value rotation. This sentiment feature has an impact on our portfolio as the investment process favours growth companies. While the performance in the second half of the year was not as strong as the first half, the full year portfolio performance result of positive 50.5% is incredibly pleasing and adds to the since inception performance which is now 19.9%, 15.4 percentage points higher than the ASX All Ordinaries Index over the same period of time.
The Market Outlook
On the 4th of August 2021, the ASX 200 closed higher than 7500 for the first time in history. While a one-off achievement does not provide any certainty for the remainder of the year it is an incredible statistic given the environment we are currently in.
Broadly as we look beyond FY2021, Australia faces a negative growth quarter in Q3 2021 and at this stage a soft start to Q4, depending on the length of lockdowns. We face continuing pandemic challenges as new strains spread and health officials provide guidance for safe management of the population. As with last year, hope is fuelled by the rollout of vaccines, however snap containment measures and decreased financial support will create pressure in highly effected areas of the economy.
ECP Emerging Growth Limited
6
Dividend
Dividend income improved on last year, increasing by $39,047 (12.8%). While this is still below historical levels, the capital growth performance of our investments has been outstanding. Due to the performance, the Board are pleased to reward our loyal Shareholders with a final dividend payment of 2.75 cents per share. This is an increase to last year’s Ordinary (0.6cps) plus Special (1.65cps) dividend of 22.2%. The Final dividend will be fully franked and is fully attributable to LIC capital gains. The attributable component can be an enormous tax benefit to Shareholders, depending on their circumstances, and we will continue to pass this on as and when the LIC gains are available.
The overall dividend declared for the FY2021 year will be 4.75 cents per share and is a 18.75% increase on the prior year.
I would like to highlight that our franking account and our retained earnings provide us with an enviable buffer to pay future dividends. We could in fact maintain the current annual dividend for the next 5 and a half years fully franked.
Investment Management Team
The ongoing performance of the Company is a direct result of the consistent and disciplined efforts of the Manager, ECP Asset Management. I wish to acknowledge and thank Dr Manny Pohl AM (Chief Investment Officer), Jared Pohl (Portfolio Manager) and the team for their dedication to the investment process and their reliable stewardship of our assets which generated such outstanding returns.
The Board
I wish to record my appreciation for my fellow Board members for their support and input throughout the past year. I would also like to pass on my thanks and gratitude to Brian Jones who resigned as Company Secretary in July 2021. Brian has supported the Company since inception in the capacity of Company Secretary and has also served as Chief Financial Officer. His contribution in terms of governance and Board support has been extremely valuable in the efficient running of the Company. We wish him all the best in his future endeavours.
In conclusion, I sincerely thank our Shareholders for their ongoing support. Long-term, supportive shareholders are the backbone of any business, they understand the operations, command management accountability and focus on longterm results, we are humbled to serve our dedicated Shareholders.
Yours sincerely,
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Murray H d’Almeida Chairman
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7
Annual Report 2021
Directors’ Report Information on Directors
Your Directors present their report on ECP Emerging Growth Limited for the financial year ended 30 June 2021.
1. Directors
The following persons were Directors of ECP Emerging Growth Limited from the beginning of the financial year until the date of this report, unless otherwise stated: Murray H d’Almeida, David C Crombie AM and Jared D Pohl.
B Jones is Alternate Director to M d’Almeida and D Crombie.
2. Information on Directors
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Murray H d’Almeida | FAICD
Experience and expertise
Director since the inception of the Company in 2014.
Over 38 years of diverse national and international business experience. Founded the Retail Food Group and developed a presence in seven overseas countries. Subsequently has maintained operating and board positions within a range of financial services, mining, commercial, academic, government and sporting businesses and organisations.
Other Current directorships
-
Chairman Global Masters Fund Limited
-
Director Triple Energy Limited
-
Deputy Chancellor Southern Cross University
-
Chairman of Board of Trustees of Currumbin Wildlife Foundation
-
Member of Gold Coast Light Rail Business Advisory Board
-
Chairman Zooz Pty Ltd
Former Listed Company directorships in last 3 years
None
Interest in Shares
10,137 ordinary shares
ECP Emerging Growth Limited
8
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David C Crombie AM | B.Econ (UQ) Non-Executive Director
Experience and expertise
Director since 2014.
Extensive business experience as founding partner in Palladium Group (formerly GRM International), with 1600 professional staff engaged on development projects in 26 countries across a range of sectors including health, education, agricultural services and capacity building for AusAid, DIFID and USAid plus multilateral and Government /private sector clients. Retired as Managing Director in 2000 and from the Board in 2019.
Currently managing agricultural and livestock projects across northern Australia.
Formerly President of the National Farmers Federation, Chairman Meat and Livestock Australia and President of Australian Rugby Union.
Other Current directorships
-
Director Alliance Aviation Services (AQZ)
-
Member of Advisory Board – QAAFI (Queensland Alliance for Agriculture and Food Innovation)
Former Listed Company directorships in last 3 years
- Director Australian Agricultural Company (AAC)
Interest in Shares
124,038 ordinary shares
9
Annual Report 2021
Directors’ Report Information on Directors
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Jared D Pohl | B.Com, B.IT, MBA Executive Director
Experience and expertise
Director since 2017.
Jared has over 16 years investment experience. Prior to co-founding ECP Asset Management in 2012, Jared was a member of the Hyperion Asset Management investment team. Additionally, Jared was seconded to Wasatch Advisors in Salt Lake City where he worked alongside their Private Market team, looking for pre-IPO investment opportunities.
Prior to financial services Jared consulted on a number of IT projects and has been involved extensively in the tech start-up space and regularly appears as a Judge/ Mentor at events and guest lectures to students on entrepreneurship.
Other Current directorships
-
Director of ECP Asset Management Pty Ltd
-
Director of sound Life Charity (Limited by Guarantee)
-
Bond University Business Faculty Advisory Council
Former Listed Company directorships in last 3 years
None
Interest in Shares
15,000 ordinary shares
ECP Emerging Growth Limited
10
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Brian Jones | B.Com, FCA Company Secretary, Alternate Director
Experience and expertise
Mr Brian Jones who was appointed Company Secretary on 23 January 2014, has had over 40 years of commercial and financial experience.
He has served as the Company Secretary and Director of listed companies in the past and on 9 November 2018, was appointed Alternate Director for Mr Murray d’Almeida and Mr David Crombie, who are Board members of ECP Emerging Growth Limited.
Other Current directorships
- Company Secretary of Global Masters Fund Limited
Former Listed Company directorships in last 3 years None
Interest in Shares
6,082 ordinary shares
Annual Report 2021
11
Directors’ Report Continued
3. Principal Activities
The principal activity of the Company is investing in securities listed on the Australian Securities Exchange.
The mission is to create Shareholder wealth through active management of a portfolio of ASX Listed quality small to mid-cap growth companies.
4. Review of Operations
The investment performance for the year was outstanding. Portfolio returns of positive 50.5% was 24.1 percentage points better than the ASX All Ordinaries which increased by 26.4%. The performance is recognised in the Statement of Profit and Loss by a year on year increase of $39,065 in dividends received, increase of $2,659,815 in unrealised portfolio gains and a $5,148,153 increase in realised gains. As shown in the Waterfall graph on page 2, the portfolio performance provides significant uplift (positive 69.9 cents per share) in the Net Tangible Assets of the Company before payment of dividends to Shareholders (4.25 cents per share), provision for performance fee (11.7 cents per share) and provision for tax (10.0 cents per share).
The portfolio activity mentioned is considered business as usual for the Investment Manager. Despite the ongoing turmoil and uncertainty generated by the COVID-19 pandemic the Manager remained diligently focused on the investment process and monitoring the investee businesses to be in the best position to generate long term future returns.
The closing position of the Company at 30 June 2021 includes Net Assets of $30,510,315 (after tax on realised and unrealised gains), a 26.1% increase on the prior year. This is after paying dividends to Shareholders of $778,517 during the period.
5. Likely developments and expected results of operations
There are no planned changes to principal activities. Any general decline in equity markets may have an adverse effect on results in future years.
The performance fee increase of $1,208,840 compared to FY2020 is directly related to the performance of the portfolio and is calculated in accordance with the Management Agreement (see note 21). Income tax payable has increased by $1,176,075 compared to FY2020 due to the high value of realised gains in the portfolio. The Investment Manager is a long-term investor and does not trade the portfolio for short term gains. The gains realised this year were in accordance with the investment strategy and can occur for a variety of reasons. The most common scenario during the last 12 months was a trigger based on the forecast internal rate of return compared to market valuation at a point in time. Where companies became highly valued compared to the forecast future earnings the portfolio was adjusted accordingly. In addition, when an investee company reaches a market value such that it enters the ASX 50 Index it will no longer be held in the portfolio in accordance with the investment mandate, as was the case with Afterpay and Xero.
ECP Emerging Growth Limited
12
6. Dividends Paid
8. Company Secretary
Brian Jones B.Com, FCA
| Type | Cents | Total | Date of |
|---|---|---|---|
| Per Share |
Amount $’000s |
Payment |
The dividends paid to Shareholders during the financial year were as follows:
| Final | 0.60 | 110 | Sep | 2020 |
|---|---|---|---|---|
| Special | 1.65 | 302 | Sep | 2020 |
| Interim | 2.00 | 366 | Mar | 2021 |
| Total | 4.25 | 778 |
Brian Jones is a Chartered Accountant. He has been Company Secretary of ECP Emerging Growth Limited since January 2014. He has over 40 years’ experience in the accounting and finance industries. Brian resigned as Company Secretary on 1 July 2021 and has been replaced by Scott Barrett effective from that date.
9. Meetings of Directors
The number of Directors’ meetings attended by each of the Directors of the Company during the financial year are:
Board Meetings
Dividends paid by the Company during the preceding year were:
| Final | 2.25 | 412 | Sep | 2019 |
|---|---|---|---|---|
| Interim | 1.75 | 321 | Mar | 2020 |
The final dividend and special dividend paid in September 2020 and the interim dividend paid in March 2021, were fully franked.
| Board Meetings | |
|---|---|
| Director M H d’Almeida |
Eligible to attend Attend |
| 4 4 |
|
| D C Crombie AM | 4 4 |
| JD Pohl | 4 4 |
In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final dividend of 2.75 cents per share ($503,746) to be paid on 15 September 2021. The dividends will be fully franked and will be fully attributable to LIC capital gains, refer to Note 14 (d).
7. Earnings per Share
2021 Cents 2020 Cents
| Based on profit after income | tax | |
|---|---|---|
| Basic earnings per share | 38.74 | 13.60 |
| Diluted earnings per share | 38.74 | 13.60 |
Based on Comprehensive Income after tax
| Basic earnings per share | 38.74 | 13.60 |
|---|---|---|
| Diluted earnings per share | 38.74 | 13.60 |
| See Note 15 of the Financial Report. |
Annual Report 2021
13
Directors’ Report Continued
10. Remuneration report (audited)
The remuneration report is set out under the following main headings:
-
A. Principles used to determine the nature and amount of remuneration
-
B. Details of remuneration
-
C. Service agreements
-
D. Share-based compensation
-
E. Related Party Transactions
-
F. Equity Instrument Disclosure relating to Key Management Personnel
(A) Principles used to determine the nature and amount of remuneration
Fees and payments to Directors reflect the demands which are made on, and the responsibilities of, the Directors.
No remuneration consultants were engaged during the year.
The per annum remuneration of the Directors remained unchanged from the previous year:
-
Chairman $45,000
-
— Other Directors $40,000
Remuneration of Directors is determined by the Board within the maximum amount of $200,000 previously approved by the Shareholders.
There is no performance based remuneration for Directors.
(B) Details of remuneration
Details of the remuneration of each Director of ECP Emerging Growth Limited and the executives of the Company are set out in the following table.
| Director | Year | Short-term Benefits Post- employment Super $ Equity Total $ |
|---|---|---|
| Fees $ Performance Fees $ Non- monetary Benefits $ Shares $ Options $ |
||
| M H d’Almeida* Non-executive Chairman |
2021 | 46,125 - - - - - 46,125 |
| 2020 | 46,125 - - - - - 46,125 |
|
| D C Crombie AM* Non-executive Director |
2021 | 41,000 - - - - - 41,000 |
| 2020 | 41,000 - - - - - 41,000 |
|
| JD Pohl* Executive Director |
2021 | 41,000 - - - - - 41,000 |
| 2020 | 41,000 - - - - - 41,000 |
|
| Total Directors Remuneration |
2021 | 128,125 - - - - - 128,125 |
| 2020 | 128,125 - - - - - 128,125 |
*Inclusive of non-claimable GST amount
ECP Emerging Growth Limited
14
(C) Service agreements
As the Company does not employ any staff, there are no employment service agreements entered into by the Company. The Company Secretary was a self-employed Contractor and the Executive Director is employed by the Investment Manager – ECP Asset Management Pty Ltd.
(D) Share-based compensation
No share-based compensation exists.
(E) Related party transactions
The following transactions occurred with other related parties:
2021 2020 $ $
Expenses paid or payable by the Company to: — A Performance Fee and Management Fee was payable in accordance with the Management Services Agreement as detailed in Note 21.
| — | A Performance Fee and Management Fee was payable in accordance with the Management Services Agreement as detailed in Note 21. |
||
|---|---|---|---|
| — | MrJD Pohl has an interest in the transaction as during the year Mr J D Pohl | ||
| was a Director of ECP Asset Management Pty Ltd. | |||
| ECP | Asset Management Pty Ltd for Performance Fee | 2,145,724 | 936,884 |
| ECP | Asset Management Pty Ltd for Management Fee | 338,691 | 258,434 |
All related party transactions are made on an arm’s length basis using industry standard terms and conditions.
(F) Equity instrument disclosure relating to Key Management Personnel
The number of shares in the Company held during the financial year by each Director of ECP Emerging Growth Limited, including their related parties is set out below. There were no shares granted during the year as compensation.
| Balance at the | Received during | Other changes | Balance at the | |
|---|---|---|---|---|
| start of the year | the year by exercise | during the year | end of the year | |
| of options | ||||
| M H d’Almeida | 10,000 | - | 137 | 10,137 |
| D Crombie AM | 120,172 | - | 3,866 | 124,038 |
| J D Pohl | 15,000 | - | - | 15,000 |
End of remuneration report (audited).
Annual Report 2021
15
Director’s Report Continued
11. Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Company during the financial year.
12. Matters subsequent to the end of the financial year
Other than the dividend declared as per Item 6, no other matter or circumstance not otherwise dealt with in the Director’s Report or Financial Report, which has arisen since the end of the year that has significantly affected, or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years.
13. Environmental issues
The Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.
14. General transactions
In addition to Director’s remuneration, the Company has a management services agreement with ECP Asset Management Pty Ltd – refer Notes 20 and 21.
17. Insurance of officers and/or auditors
During the financial year, the Company insured the Directors and Officers against certain liabilities as permitted by the Corporations Act 2001. The insurance policy prohibits disclosure of the nature of the cover, the amount of the premium, the limit of liability and other terms.
The Company has entered into an agreement for the purpose of indemnifying Directors and Officers, to the extent permitted by law, against any liability (including the costs and expenses of defending actions for an actual or alleged liability) incurred in their capacity as a Director and Officer of the Company.
The Company has not during or since the financial year indemnified or paid any insurance premiums to indemnify the auditors.
18.Proceedings on behalf of the Company
No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceeding to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001.
15. Loans
There are no loans issued to any of the Directors during or since the financial year (30 June 2020 – Nil).
16.Options
No Options have been issued during or since the financial year (30 June 2020 – Nil).
ECP Emerging Growth Limited
16
19. Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important.
There have been no amounts paid or payable to the auditors for non-audit services provided during the year.
The Directors have considered the position and are satisfied that the provision of any non-audit services (if necessary in future) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Board is satisfied that the provision of any nonaudit services by the auditor, would not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
-
All non-audit services would be reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor; and
-
None of the services undermine the general principles relating to auditor independence as set out in APES 110, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
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A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporation Act 2001 is set out on page 46.
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Murray H d’Almeida Director 25 August 2021
Annual Report 2021
17
Corporate Governance Statement For the year ended 30 June 2021
The Directors of ECP Emerging Growth Limited are committed to excellence in corporate governance. By adopting the ASX Corporate Governance Council’s Corporate Governance Principles and incorporating industry best practice, the Company has built a framework that supports our business performance and enhances transparency and accountability which ultimately protects the interests of Shareholders.
Below is a list of the Company’s Corporate Governance Framework documents set out against the relevant ASX Governance Principles and Recommendations, the details of which are available on the Company’s Website. The full Corporate Governance Statement for the year ending 30 June 2021 is also available on the website, at ecpam.com/emerging/
ASX Governance Principles
Relevant Document/Information
| Principle 1: | Board Charter |
|---|---|
| Lay solid foundations for management and oversight | Whistleblower Policy |
| Principle 2: | Board Charter |
| Structure the Board to be effective and add value | |
| Principle 3: | Code of Conduct |
| Instil a culture of acting lawfully, ethically and responsibly | Share Trading Policy |
| Whistleblower Policy | |
| Principle 4: | Board Charter |
| Safeguard integrity in corporate reports | Code of Conduct |
| Principle 5: | Disclosure Policy |
| Make timely and balanced disclosure | |
| Principle 6: | Communications Policy |
| Respect the rights of security-holders | Privacy Policy |
| Principle 7: | Board Charter |
| Recognise and manage risk | |
| Principle 8: | Board Charter |
Principle 8:
Remunerate fairly and responsibly
The Corporate Governance Statement explains the extent to which the Company complies with the ASX Corporate Governance Principles and Recommendations including how the policies above support Corporate Governance in the Company. Under the “if not, why not” approach the Board provide explanations as to why a particular
recommendation is not appropriate to its circumstances. For clarity, the Board would like to highlight on the following page the recommendations that have not been fully adopted and the reasons behind the decision.
ECP Emerging Growth Limited
18
| ASX Governance Principles | Compliance Statement |
|---|---|
| Principle1:Lay solid foundations for management and oversight | Compliant except for 1.5: Non-Compliant. The Board |
| Recommendation1.5:Gender Diversity | seeks to develop a culture of diversity whereby a mix |
| of skills and diverse backgrounds are employed, | |
| maximizing the benefits of a collection of view-points. | |
| At this point in time and through previous recruitment | |
| processes gender diversity has not been achieved, | |
| however there is complete commitment to creating | |
| further diversity at the next opportunity. | |
| Principle 2:Structure the Board to be effective and | Compliant. Note 2.1: The Company has not established |
| add value | a formal Nomination Committee, as the Board |
| Recommendation 2.1:Establish a Nomination Committee | considers that, due to the specific scope and nature of |
| the Company’s activities, the whole Board should | |
| undertake the responsibility. | |
| Principle 3:Instil a culture of acting lawfully, ethically and | Compliant |
| responsibly | |
| Principle 4:Safeguard integrity in corporate reporting | Compliant. Note 4.1:The benefits of a separate |
| Recommendation 4.1:Establish an Audit Committee | committee were notbeing realised due to the composition of the committee and overlap with the |
| Board. The Board has reviewed the Board Charter and | |
| its processes to ensure integrity of corporate reporting | |
| is maintained. | |
| Principle 5:Make timely and balanced disclosure | Compliant |
| Principle 6:Respect the rights of security-holders | Compliant |
| Principle 7:Recognise and manage risk | Compliant. Note 7.1: The benefits of a separate |
| Recommendation 7.1:Risk Committee | committee were notbeing realised due to the |
| Recommendation 7.3:Internal audit function | composition of the committee and overlap with the |
| Board. The Board has reviewed the Board Charter and | |
| its processes to ensure risks are appropriately managed. | |
| 7.3: The Company does not have an internal audit | |
| function given the size and nature of the Company. | |
| Instead, the Board liaises closely with the Company’s | |
| external auditor to identify potential improvements to | |
| the financial risk management and internal control | |
| process. The Board also interrogates the internal | |
| compliance and external audit of the Manager. | |
| Principle 8:Remunerate fairly and responsibly | Compliant. Note 8.1: The Company does not have a |
| Recommendation 8.1:Remuneration Committee | Remuneration Committee, instead the full Board |
| Recommendation 8.3:Equity-based remuneration | develops the remuneration policy balancing the need to attract high quality Directors, establishing |
| appropriate incentives and commercial control of | |
| expenses. The establishment of a committee would | |
| not provide further efficiency to the operation of the | |
| Board given the Board size. | |
| Not-Applicable: 8.3: The Company does not have an | |
| equity-based remuneration scheme and does not | |
| intend to establish one. |
Annual Report 2021
19
ECP Emerging Growth Limited
Financial Report
Contents
-
22 Statement of Profit or Loss and Other Comprehensive Income
-
23 Statement of Financial Position 24 Statement of Changes in Equity 25 Statement of Cash Flows 26 Notes to the Financial Statements
ECP Emerging Growth Limited[Annual Report 2021]
20
This financial report covers ECP Emerging Growth Limited as an individual entity.
There are no controlled entities.
ECP Emerging Growth Limited is a company limited by shares, incorporated and domiciled in Australia. Its principal place of business is:
ECP Emerging Growth Limited Suite 5, Level 3 343 George Street Sydney NSW 2000
A description of the nature of the entity’s operations and its principal activities is included in the Operating and Financial Review.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Company. All media releases, financial reports and other information are available from the Company at the above address or from our website: ecpam.com/emerging
The financial report was authorised for issue by the Directors on 25 August 2021.
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Annual Report 2021[Annual Report 2021]
21
Statement of Profit or Loss and Other Comprehensive Income
Financial report for the year ended 30 June 2021
| Notes | 2021 | 2020 | |
|---|---|---|---|
| $ | $ | ||
| Revenue | 5 | 344,231 | 304,194 |
| Net cumulative gain on sale of financial assets at fair value | 8,725,776 | 3,577,623 | |
| Net unrealised gains on financial assets at fair value | 3,739,607 | 1,079,792 | |
| Expenses | 6 | (2,763,241) | (1,488,876) |
| Profit/(loss) before income tax | 10,046,373 | 3,472,733 | |
| Income tax expense | 7 | (2,949,651) | (981,816) |
| Net Profit/(loss) after income tax | 7,096,722 | 2,490,917 | |
| Other Comprehensive Income | |||
| Other Comprehensive Income for the year, net of tax | - | - | |
| Total Comprehensive Income/(loss) for the year | 7,096,722 | 2,490,917 | |
| Cents | Cents | ||
| Earnings per share | |||
| Basic earnings per share based on net profit/(loss) | 15 | 38.74 | 13.60 |
| Diluted earnings per share based on net profit/(loss) | 15 | 38.74 | 13.60 |
| Comprehensive earnings/(loss) per share | 15 | 38.74 | 13.60 |
The accompanying Notes form part of these Financial Statements.
[ECP Emerging Growth Limited]
22
Statement of Financial Position
Financial report for the year ended 30 June 2021
| Notes | 2021 | 2020 | |
|---|---|---|---|
| $ | $ | ||
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | 8 | 3,774,884 | 4,354,187 |
| Trade receivables and other assets | 9 | 982,209 | 81,100 |
| Total current assets | 4,757,093 | 4,435,287 | |
| Non-current assets | |||
| Financial assets at fair value through profit or loss | 10 | 32,023,749 | 22,760,007 |
| Total non-current assets | 32,023,749 | 22,760,007 | |
| Total assets | 36,780,842 | 27,195,294 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 11 | 2,440,740 | 1,003,727 |
| Current tax liabilities | 12 | 1,826,216 | 1,119,322 |
| Total current liabilities | 4,266,956 | 2,123,049 | |
| Non-current liabilities | |||
| Deferred tax liability | 12 | 2,003,571 | 880,135 |
| Total non-current liabilities | 2,003,571 | 880,135 | |
| Total liabilities | 6,270,527 | 3,003,184 | |
| Net assets | 30,510,315 | 24,192,110 | |
| Equity | |||
| Issued capital | 13 | 17,952,246 | 17,952,246 |
| Retained earnings | 12,558,069 | 6,239,864 | |
| Total equity | 30,510,315 | 24,192,110 |
The accompanying Notes form part of these Financial Statements.
Annual Report 2021
23
Statement of Changes in Equity
Financial report for the year ended 30 June 2021
| 2020 | Note | Ordinary | Retained | Asset | Total |
|---|---|---|---|---|---|
| Shares | Earnings | Revaluation | $ | ||
| $ | $ | Reserve | |||
| $ | |||||
| Balance at 1 July 2019 | 17,952,246 | 4,481,669 | - | 22,433,915 | |
| Profit for the year | - | 2,490,917 | - | 2,490,917 | |
| Other Comprehensive Income | - | - | - | - | |
| for the year | |||||
| Total Comprehensive Income | - | 2,490,917 | - | 2,490,917 | |
| for the year | |||||
| Transactions with owners in | |||||
| their capacity as owners | |||||
| Dividends paid or provided for | 14 | - | (732,722) | - | (732,722) |
| Balance at 30 June 2020 | 17,952,246 | 6,239,864 | - | 24,192,110 | |
| 2021 | Note | Ordinary | Retained | Asset | Total |
| Shares | Earnings | Revaluation | $ | ||
| $ | $ | Reserve | |||
| $ | |||||
| Balance at 1 July 2020 | 17,952,246 | 6,239,864 | - | 24,192,110 | |
| Profit for the year | - | 7,096,722 | - | 7,096,722 | |
| Other Comprehensive Income | - | - | - | - | |
| for the year | |||||
| Total Comprehensive Income | - | 7,096,722 | - | 7,096,722 | |
| for the year | |||||
| Transactions with owners in | |||||
| their capacity as owners | |||||
| Dividends paid or provided for | 14 | - | (778,517) | - | (778,517) |
| Balance at 30 June 2021 | 17,952,246 | 12,558,069 | - | 30,510,315 |
The accompanying Notes form part of these Financial Statements.
24
ECP Emerging Growth Limited
Statement of Cash Flows
Financial report for the year ended 30 June 2021
| Notes | 2021 | 2020 | |
|---|---|---|---|
| $ | $ | ||
| Cash flows from operating activities | |||
| Dividends received | 354,384 | 258,625 | |
| Interest received | 990 | 18 | |
| Income tax (paid)/refunded | (1,119,322) | 317 | |
| Other payments (inclusive of GST) | (1,556,725) | (1,008,500) | |
| Net cash provided by/(used in) operating activities | 23 | (2,320,673) | (749,540) |
| Cash flows from investing activities | |||
| Proceeds from sale of investments | 20,458,277 | 14,861,799 | |
| Payments for investments | (17,938,391) | (12,465,360) | |
| Net cash provided by/(used in) investing activities | 2,519,886 | 2,396,439 | |
| Cash flows from financing activities | |||
| Dividends paid | (778,517) | (732,722) | |
| Net cash provided by/(used in) financing activities | (778,517) | (732,722) | |
| Net increase/(decrease) in cash and cash equivalents held | (579,303) | 914,177 | |
| Cash and cash equivalents at the beginning of the year | 4,354,187 | 3,440,010 | |
| Cash and cash equivalents at end of year | 8 | 3,774,884 | 4,354,187 |
The accompanying Notes form part of these Financial Statements.
Annual Report 2021
25
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
The functional and presentation currency of ECP Emerging Growth Limited is Australian dollars.
1. Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards and the Corporations Act 2001.
These financial statements and associated notes comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non current assets, financial assets and financial liabilities.
Significant accounting policies adopted in the preparation of these financial statements are presented below and are consistent with prior reporting periods unless otherwise stated.
2. Summary of significant
accounting policies
(a) Revenue and other income
Revenue is recognised when the amount of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and specific criteria relating to the type of revenue as noted below, has been satisfied.
Revenue is measured at the fair value of the consideration received or receivable and is presented net of returns, discounts and rebates.
All revenue is stated net of the amount of goods and services tax (GST).
Interest Revenue
Interest is recognised using the effective interest method.
Dividend Revenue
Dividends are recognised when the entity’s right to receive payment is established.
(b) Income tax
The income tax expense recognised in the statement of profit or loss and other comprehensive income comprises current income tax expense plus deferred tax expense.
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised.
Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively.
(c) Goods and Services Tax (GST)
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of GST.
The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position.
Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
ECP Emerging Growth Limited
26
(d) Cash and cash equivalents
Cash and cash equivalents comprises cash on hand, demand deposits and short term investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
(e) Financial instruments
The company holds investments in listed equities as its principle business. These investments are classified as financial assets at fair value through profit or loss.
This measurement is on the basis of two primary criteria:
-
The contractual cash flow characteristics of the financial asset; and
-
The business model for managing financial assets
Financial assets – recognition
The Company’s investments are recognised on the date that the Company commits itself to the purchase of the asset (ie trade date accounting is adopted).
Investments are measured at fair value, which is determined by quoted prices in an active market.
Financial assets – subsequent measurement
Securities held in the portfolio are revalued to market values at each reporting date. The realised and unrealised net gains or losses on the portfolio are recognised in the statement of profit or loss.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the profit or loss in other expenses.
Fair value estimation
The fair value of financial instruments traded in active markets (such as publicly traded derivatives and securities) is based on quoted market prices at the Statement of Financial Position date. The quoted market price used for financial assets held by the Company is the closing quoted price. The appropriate quoted market price for financial liabilities is the closing quoted price.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.
Loans and receivables
Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.
Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables.
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Annual Report 2021
27
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
(f) Trade and other payables
Liabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.
(g) Provisions
Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
AASB 1060 General Purpose Financial Statements
Effective date: 1 July 2021
AASB 1060 is a single standard containing all the disclosure requirements for an entity preparing General Purpose Financial Statements under Tier 2.
The introduction of AASB 1060 will not have an impact on the Company.
Provisions for dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(h) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options which vest immediately are recognised as a deduction from equity, net of any tax effects.
(i) New accounting standards and interpretations
AASB 17 Insurance Contracts
Effective date: 1 January 2023
AASB 17 replaces three standards that currently deal with insurance: definitions of insurance (AASB 4), general insurance (AASB 1023) and life insurance (AASB 1038). The concept behind the standard is to account for profit from insurance contracts in a way that considers risk associated with an insurance contract. There are three methods of accounting under the new standard, with the applicable method determined by the nature of the insurance contracts issued.
The introduction of AASB 17 will not have an impact on the Company.
The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The following section summarises those future requirements and their impact on the Company where the standard is relevant.
ECP Emerging Growth Limited
28
3. Critical accounting estimates and judgements
(a) Key estimates
There are no key assumptions or sources of estimation uncertainty that have a risk of causing material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period as investments are carried at their market value.
(b) Key judgements
The preparation of financial reports in conformity with Australian Account Standards require the use of certain critical accounting estimates. This requires the Board to exercise their judgement in the process of applying the Company’s accounting policies.
The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. In accordance with AASB 112 Income Taxes, deferred tax liabilities and deferred tax assets have been recognised for Capital Gains Tax (CGT) on the unrealised gains/losses in the investment portfolio at current tax rates.
As the Directors do not intend to dispose of the portfolio, the tax liability/benefit may not be crystallised at the amount disclosed in Note: 12. In addition, the tax liability /benefit that arises on the disposal of these securities may be impacted by changes in tax legislation relating to treatment of capital gains and the rate of taxation applicable to such gains/losses at the time of disposal.
The Company has an investment process which is anticipated will deliver medium to long term capital growth, the minimum investment period is three to five years.
The Company does not hold any securities for short term trading purposes.
4. Operating segments
Segment information
The Company operates in the investment industry. Its core business focuses on investing in Australian equities to achieve medium to long term capital growth and income.
Operating segments have been determined on the basis of reports reviewed by the Board. The full Board is considered to be the chief operating decision maker of the Company. The Board considers the business from both a product and geographic perspective and assesses performance and allocates resources on this basis. The Board considers the business to consist of just one reportable segment.
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Annual Report 2021
29
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
5. Revenue and other income
| Notes | 2021 | 2020 | ||
|---|---|---|---|---|
| $ | $ | |||
| Interest received | 990 | 18 | ||
| Dividends received | 343,241 | 304,176 | ||
| 344,231 | 304,194 |
6. Other expenses
| ASX listing and other fees | 33,608 | 34,149 | ||
|---|---|---|---|---|
| Audit fees | 16 | 20,500 | 20,516 | |
| Director fees | 128,125 | 128,125 | ||
| Insurance | 23,947 | 21,601 | ||
| Share registry | 13,393 | 13,058 | ||
| Management fees | 338,691 | 258,434 | ||
| Performance fee | 2,145,724 | 936,884 | ||
| Other | 59,253 | 76,109 | ||
| 2,763,241 | 1,488,876 |
ECP Emerging Growth Limited
30
| Notes 2021 $ 2020 $ |
|
|---|---|
| 7. Income tax expense | (a) Reconciliation of income tax to accounting profit Profit/(Loss) before income tax 10,046,373 3,472,733 Prima facie tax payable on profit from ordinary activities before income tax rate at 30% (2020 – 30%) 3,013,912 1,041,820 Adds: Tax effect of: —Franking Credits 28,719 24,288 —Other 2,751 - Less: Tax effect of: —Rebateable fully franked (95,731) (80,959) dividends —Other - (3,333) |
| Income tax expense 2,949,651 981,816 |
|
| (b) The major components of tax (expense)/income i Current tax liability (1,826,216) (650,141) Deferred income tax expense: (Decrease)/increase in deferred tax assets - - Decrease/(increase) in deferred tax liabilities (1,123,435) (331,675) |
|
| Income tax (expense)/credit from continuing operations (2,949,651) (981,816) |
| (c) Amounts recognised directly in | - | - |
|---|---|---|
| Other Comprehensive Income |
Annual Report 2021
31
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
| Notes 2021 $ 2020 $ |
|
|---|---|
| 8. Cash and cash equivalents | Cash at Bank and on hand 3,774,884 4,354,187 |
| Reconciliation of cash Cash and cash equivalents reported in the Statement of Cash Flows are reconciled to the equivalent items in the Statement of Financial Position as follows: Cash at bank and on hand 3,774,884 4,354,187 |
|
| Balance as per Statement of Cash Flows 3,774,884 4,354,187 |
|
| 9. Trade receivables and other assets |
Current Trade receivables - - GST receivable 14,456 11,728 Dividends receivable 36,799 47,942 Prepayments 27,694 21,430 Other receivable 903,260 - |
| Total current trade and other receivables 982,209 81,100 |
|
| 10. Financial assets | Financial assets designated as fair value through profit or loss 19 32,023,749 22,760,007 |
| Total financial assets 32,023,749 22,760,007 |
(a) Financial assets consist of investments in listed equity securities. Fair value is determined by reference to closing bid prices on the Australian Securities Exchange.
ECP Emerging Growth Limited
32
| 2021 2020 $ $ |
|
|---|---|
| 11.Trade and other payables | Current Accounts payable and accrued expenses 2,440,740 1,003,727 Total current trade and other payables 2,440,740 1,003,727 |
Contractual cash flows from trade and other payables approximate their carrying amount. Trade and other payables are all contractually due within six months of reporting date.
| 12. Tax | Current tax payable 1,826,216 650,141 Prior year tax payable - 469,181 |
|---|---|
| Total tax payable 1,826,216 1,119,322 Recognised deferred tax assets - - Recognised deferred tax liabilities 2,003,571 880,135 |
|
| Net deferred tax liabilities adjusted for deferred tax assets 2,003,571 880,135 |
|
| (a) Deferred tax assets attributable to: — Capital raising costs - - — Accruals - - |
|
| (b) Deferred tax liabilities attributable to: — Unrealised gain on financial assets 1,993,563 871,681 — Unfranked dividend and interest receivable 10,008 8,454 |
|
| 2,003,571 880,135 |
Annual Report 2021
33
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
| 2021 $ 2020 $ |
|
|---|---|
| 13. Issued capital | (a) Share capital Ordinary shares fully paid 18,318,043 (2020: 18,318,043) 18,322,898 18,322,898 Capital raising costs (370,652) (370,652) |
| Total 17,952,246 17,952,246 |
(b) Ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At the Shareholders meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each Shareholder has one vote on a show of hands.
(c) Movements in ordinary share capital
| Date | Details | Number | Price $ |
|---|---|---|---|
| of Shares | |||
| 30 June 2019 | Balance | 18,318,043 | 18,322,898 |
| Nil Movement* | - | - | |
| 30 June 2020 | Balance | 18,318,043 | 18,322,898 |
| Nil Movement* | - | - | |
| 30 June 2021 | Balance | 18,318,043 | 18,322,898 |
* The Dividend Reinvestment Plan was facilitated through on-market purchase of shares. There were no shares issued during the period.
ECP Emerging Growth Limited
34
| The proposed final dividend for 2021 was declared after the end of the reporting period and therefore has not been provided for in the financial statements. There are no income tax consequences arising from this dividend at 30 June 2021. 2021 $ 2020 $ (a)Dividends and distributions paid The following dividends were declared and paid: Final fully franked ordinary dividend of 0.60 cents per share paid on 18 September 2020 (2020: 2.25 cents paid 13 September 2019) 109,908 412,156 Special fully franked ordinary dividend of 1.65 cents per share paid on 18 September 2020 (2020: None) 302,248 - Interim fully franked ordinary dividend of 2.0 cents per share paid on 12 March 2021 (2020: 1.75 cents paid 20 March 2020) 366,361 320,566 Total 778,517 732,722 Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the year ended 30 June 2021 and 2020 were as follows: Paid in cash 778,517 732,722 Satisfied by issue of shares - - Total 778,517 732,722 (b) Proposed Dividends Proposed Final 2021 fully franked ordinary dividend of 2.75 cents (2020: 2.25 cents) per share to be paid on 15 September 2021. 503,746 109,908 There is no proposed fully franked special dividend for 2021 (2020: 1.6 cents per share paid on 18 September 2020). - 302,248 Total Proposed Dividend 503,746 412,156 |
|
|---|---|
| 14. Dividends |
Annual Report 2021
35
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
| 2021 | 2020 | ||
|---|---|---|---|
| $ | $ | ||
| 14. Dividends | (c) Franked dividends | ||
| continued | The franking credits available for | 1,376,150 | 497,002 |
| subsequent financial years at a tax | |||
| rate of 30% |
The dividend franking account is calculated on a cash basis. It does not take into account:
(a) Franking credits that will arise from the payment of the current tax liabilities;
(b) Franking debits that will arise from the payment of dividends recognised as a liability at the year-end;
(c) Franking credits that will arise from the receipt of dividends recognised as receivables at the end of the year.
The impact on the franking credit of the dividends proposed after the end of the reporting period is to reduce it by $215,891 (2020: $176,638).
The ability to use the franking credits is dependent upon the Company’s future ability to declare dividends.
(d) Listed Investment Company capital gain account
| Balance of the Listed Investment Company | 8,195,145 | 3,552,322 |
|---|---|---|
| (LIC) capital gain account (before tax) | ||
| Balance of the Listed Investment Company | 5,736,602 | 2,486,625 |
| (LIC) capital gain account (after tax) |
Distributed capital gains may entitle certain Shareholders to a special deduction in their Tax Return as set out in the dividend statement.
LIC capital gains available for distribution are dependent on:
(i) the disposal of investment portfolio holdings which qualify for LIC capital gains; or
(ii) the receipt of LIC distribution from LIC securities held in the portfolio.
ECP Emerging Growth Limited
36
| 2021 $ 2020 $ |
|
|---|---|
| 15. Earnings per share | (a) Earnings used in the calculation of basic and diluted earnings per share. (i) (Profit/(loss) from continuing operations attributable to the owners of the Company 7,096,722 2,490,917 |
| (ii) Total Comprehensive Income/(loss) 7,096,722 2,490,917 |
|
| (b) Basic and diluted earnings per share Cents Cents (i) (Profit/(loss) from continuing operations attributable to the owners of the Company 38.74 13.60 |
|
| (ii) Total Comprehensive Income) 38.74 13.60 |
|
| (c) Weighted average number of ordinary shares used in the calculation of earnings per share 18,318,043 18,318,043 |
|
| 16. Auditor’s remuneration | Remuneration of the auditor of the Company for: Audit or reviewing the financial statements 20,500 20,516 |
| Total remuneration of auditors 20,500 20,516 |
Annual Report 2021
37
Notes to the Financial Statements
Financial report for the year ended 30 June 2021
17.Financial risk management
The Company is exposed to a variety of financial risks through its use of financial instruments.
The Company’s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets. The Company does not speculate in financial assets.
The Company’s overall risk management program focuses on the volatility of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Risk governance is managed through the Board which provides direct oversight on the Company’s risk management framework and overall risk management performance.
The Board provides written principles for risk management covering investment portfolio composition. Risk is managed by the professional, disciplined management of the investment portfolio by ECP Asset Management Pty Ltd (the Manager).
The Company held the following financial instruments:
| Note | 2021 | 2020 | |
|---|---|---|---|
| $ | $ | ||
| Financial Assets | |||
| Cash and cash | 8 | 3,774,884 | 4,354,187 |
| equivalents | |||
| Receivables | 9 | 982,209 | 81,100 |
| Financial Assets | 10 | 32,023,749 | 22,760,007 |
| atfair value | |||
| Total Financial Assets | 36,780,842 | 27,195,294 | |
| Financial Liabilities | |||
| Trade and Other | 11 | 2,440,740 | 1,003,727 |
| Payables | |||
| Total Financial | 2,440,740 | 1,003,727 | |
| Liabilities |
(a) Market risk
Foreign exchange risk
The Company operates entirely within Australia and is not exposed to material foreign exchange risk.
Equity market risk
The Company is exposed to risk of market price movement through its investments in Australian listed equity securities. Equity investments held by the Company are classified on the Statement of Financial Position as Financial Assets at fair value through Profit or Loss and any movement in the listed equity securities is reflected in the Statement of Profit or Loss.
The risk to Shareholders is that adverse equity securities market movements have the potential to cause losses in Company earnings or the value of its holdings of financial instruments. The Manager’s investment strategy centres on the view that investing in proven high quality businesses with growth opportunities arising from their sustainable competitive advantage will outperform over the longerterm. Consistent with this approach, the Manager has an established risk management framework that includes procedures, policies and functions to ensure constant monitoring of the quality of the investee companies. The objective of the risk management framework is to manage and control risk exposures within acceptable parameters while optimising returns.
Equity market risk is measured as a percentage change in the value of equity instruments held in the portfolio, as compared to the total market index for the same period.
The Company’s exposure to equity market risk over the Manager’s investment horizon at the end of the reporting period is:
| 2021 | 2020 | |
|---|---|---|
| Portfolio return since inception | 19.94% | 15.39% |
| All Ordinaries Index return | 4.46% | 1.49% |
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(b) Sensitivity analysis
Increases/decreases in an equity securities price, affect the Company’s asset revaluation reserve and Other Comprehensive Income for the year. The analysis is based on the assumption that the Financial Assets at fair value through Profit or Loss had increased/decreased by 5% (2020: 5%) with all other variables held constant.
Impact on Profit or loss for the year:
2021 +/- $1,601,187 2020 +/- $1,138,000
(c) Cash flow interest rate risk
The Company is exposed to cash flow interest rate risk from holding cash and cash equivalents at variable rates. The Company does not enter into financing activities which would expose it to interest rate fluctuations on borrowed capital.
Revenue from interest forms a very minor portion of the Company’s income and therefore exposure to interest rate risk is not significant.
As at the reporting date, the Company had the following cash and cash equivalents:
30 June 2021: Balance $3,774,884 Weighted average interest rate 0.02%
30 June 2020: Balance $4,354,187 Weighted average interest rate 0.00%
(d) Relative performance risk
The Manager aims to outperform the risk-free cash rate over the long-term. However, as the portfolio consists of equity investments these will tend to be more volatile than cash, so there will likely be periods of relative under and over performance compared to the benchmark risk free rate.
Over the long-term the Manager is confident that the portfolio can achieve outperformance through an investment selection process that invests in companies that have a sound business model, display a sustainable competitive advantage and have proven quality management.
(e) Credit risk
Credit risk is the risk of a counterparty defaulting on their financial obligations resulting in a loss to the Company. The objective of the Company is to minimise credit risk exposure. Credit risk arises from cash and cash equivalents and Financial Assets at fair value Profit or Loss. Credit risk is managed by the Manager.
Credit risk arising from cash and cash equivalents is managed by only transacting with counterparties independently rated with a minimum rating of A. The providers of financial services to the Company are rated as AA by Standard and Poor’s. Credit risk on cash and cash equivalents is deemed to be low.
Credit risk arising from Financial Assets at fair value Profit or Loss relates to the risk of counterparties on the ASX defaulting on their financial obligations on transactions for Australian listed equity securities. The credit risk for these transactions is deemed to be low.
The maximum credit risk exposure of the Company at year end is the carrying value of the assets in the Statement of Financial Position.
There is no concentration of credit risk with respect to financial assets in the Statement of Financial Position.
(f) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The objective of the Company is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and distressed conditions.
Prudent liquidity risk management implies maintaining sufficient cash and marketable Australian listed equity securities.
The Manager controls liquidity risk by continuously monitoring the balance between equity securities and cash or cash equivalents and the maturity profiles of assets and liabilities to ensure this risk is minimal.
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Notes to the Financial Statements
Financial report for the year ended 30 June 2021
18. Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The capital structure of the Company consists of equity attributable to members of the Company. The Board monitors the return on capital, which is defined as net operating income divided by total Shareholders’ Equity. The Board also monitors the level of dividends to Shareholders.
The capital of the Company is invested by the Investment Manager in accordance with the investment policy established by the Board. The Company has no borrowings. It is not subject to any externally imposed capital requirements.
There were no changes in the Company’s approach to capital management during the year.
19. Fair value measurements
The Company measures the following assets and liabilities at fair value on a recurring basis after initial recognition:
- Financial Assets at Fair Value through Profit or Loss (FVTPL).
The table below shows the assigned level for each asset and liability held at fair value by the Company:
Recurring fair value measurements
| 30 June 2021 | Financial Assets FVTPL – |
|---|---|
| Listed EquitySecurities | |
| Level 1 | $32,023,749 |
| Level 2 | - |
| Level 3 | - |
| Total | $32,023,749 |
| 30 June 2020 | Financial Assets FVTPL – |
| Listed Equity Securities | |
| Level 1 | $22,760,007 |
| Level 2 | - |
| Level 3 | - |
| Total | $22,760,007 |
Fair value hierarchy
AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy as follows:
Transfers between levels of hierarchy
There were no transfers between levels of the fair value hierarchy.
Highest and best use
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
The current use of each asset measured at fair value is considered to be its highest and best use.
Level 2 – Inputs other than quoted prices included with level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs for the asset or liability.
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20. Related party transactions
Transactions with related parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.
7) providing investor relationship services; and
8) provision of office services, corporate support and information technology services support.
The agreement may be terminated if:
a) either party ceases to carry on business, or
The following transactions occurred with other related parties:
2021 2020 $ $
J D Pohl has an interest in the transaction as during the year J D Pohl was a Director and employee of ECP Asset Management Pty Ltd, the Manager.
A Performance Fee payable in 2,145,724 936,884 accordance with the Management Services Agreement as detailed in Note 21. A Management Fee of 1% per 338,691 258,434 annum is paid or payable as detailed in Note 21.
b) either party enters into liquidation voluntarily or otherwise, or
c) either party passes any resolution for voluntary winding-up, or
d) a receiver of the property of either party, or any part thereof, is appointed, or
e) the Shareholders of the Company at a general meeting called for that purpose, resolve by ordinary resolution to terminate this agreement, or
f) if the Company provides written notice to the Manager in the event of any material and substantial breach of the agreement by the Manager or if the Manager fails to remedy a breach of this agreement within 14 days following written notice of the breach.
g) if the Manager provides 3 months written notice to the Company in the event of any material and substantial breach of the agreement by the Company or if the Company fails to remedy a breach of this agreement within 14 days following written notice of the breach.
21. Management services agreement
In accordance with a Management Services Agreement approved by Shareholders, the terms of which were contained in the prospectus, the Company agreed to engage the Manager to provide primary and secondary management services, including:
1) managing the investment of the Company’s portfolio, including keeping it under review;
2) ensuring investments by the Company are only made in authorised investments;
Under the agreement the Manager will receive a management fee of 1% per annum on the portfolio net assets of the Company. In addition, a performance fee, payable annually in arrears, equal to 20% of the amount by which the Company’s net performance before tax (that is, after all costs and outlays but before the calculation of the performance fee) exceeds the Benchmark of 8% subject to a high-water mark. If the Company’s net performance in the year is less than the Benchmark, then no performance fee will be payable.
3) complying with the investment policy of the Company;
4) identifying, evaluating and implementing the acquisition and disposal of authorised investments;
5) provide the Company with monthly investment performance reporting;
6) promoting investment in the Company by the general investment community;
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Notes to the Financial Statements Financial report for the year ended 30 June 2021
22. Key management personnel disclosures
2021 2020 $ $
The Company has no staff and therefore has no Key Management Personnel other than the Directors.
No member of Key Management Personnel held options over shares in the Company during the year.
There have been no other transactions with Key Management Personnel or their related entities other than those disclosed in Note 20.
The totals of remuneration paid to the Directors of ECP Emerging Growth Limited during the year are as follows: Short-term Employment benefits 128,125 128,125
Detailed remuneration disclosures are provided in sections (A) – (F) of the remuneration report on pages 14 and 15.
The Company’s Secretary, Brian Jones, was contracted directly during the current financial year (July 2020 – June 2021).
23. Cash flow information
Reconciliation of result for the year to cash flows from operating activities
Reconciliation of net income to net cash provided by operating activities:
| 2021 | 2020 | |
|---|---|---|
| $ | $ | |
| Profit for the year | 7,096,722 | 2,490,917 |
| Cash flows included in profit | ||
| attributable to investing activities | ||
| Net gain on sale of financial assets | (8,725,776) | (3,577,623) |
| Non-cash flows in profit | ||
| Net unrealised gain on | (3,739,607) | (1,079,792) |
| financial assets at fair value | ||
| Changes in assets and liabilities | ||
| (increase)/decrease | 2,151 | (48,927) |
| in trade and other receivables | ||
| increase/(decrease) | 1,215,508 | 484,069 |
| in trade and other payables | ||
| increase/(decrease) in | 706,894 | 650,141 |
| current tax payable | ||
| (increase)/decrease in | 1,123,435 | 331,675 |
| net deferred tax liabilities | ||
| Cash flow from operations | (2,320,673) | (749,540) |
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24. Contingencies
In the opinion of the Directors, the Company did not have any contingencies at 30 June 2021 (30 June 2020: None).
25. Events occurring after the reporting date
No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.
Subsequent to year-end on 25 August 2021, the Directors declared a final 2021 fully franked ordinary share dividend of 2.75 cents per share.
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Director’s Declaration
The Directors of the Company declare that:
a) the Financial Statements and Notes set out on pages 22 to 43 are in accordance with the Corporations Act 2001, including:
-
(i) complying with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and
-
(ii) give a true and fair view of the financial position as at 30 June 2021 and of the performance for the year ended on that date; and
in the Directors’ opinion,
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
c) the remuneration disclosures set out on pages 14 and 15 of the Directors’ Report (as part of the audited remuneration report) for the year ended 30 June 2021 comply with section 300A of the Corporations Act 2001.
The Directors have been given the declaration by the Chief Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a
resolution of the Directors and is signed for and on behalf of the Directors by:
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Murray H d’Almeida Director 25 August 2021
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Auditor’s Independence Declaration
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Independent Auditor’s Report
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Shareholder Information
ECP Emerging Growth has only one class of equity security, being Fully Paid Ordinary Shares.
The Shareholder information set out below was applicable as at 16 August 2021.
1.Twenty largest shareholders
| Shareholders | Ordinary Shares | % |
|---|---|---|
| CITICORP NOMINEES PTY LIMITED | 5,464,877 | 29.83% |
| G W HOLDINGS PTY LTD | 610,000 | 3.33% |
| MR JOHN STEVEN PAGE & MRS GILLIAN KAY PAGE | 429,769 | 2.35% |
| CARMANT PTY LTD | 322,421 | 1.76% |
| MR DAVID COOPER & MS ADRIENNE WITTEMAN | 239,416 | 1.31% |
| LIS PRIVATE PTY LTD | 231,383 | 1.26% |
| MERMON PTY LIMITED | 206,000 | 1.12% |
| ABBAWOOD NOMINEES PTY LTD | 196,980 | 1.08% |
| ROMADAK PTY LTD | 179,645 | 0.98% |
| COLE WHITEHURST PTY LTD | 167,400 | 0.91% |
| CASTLE PARTNERS PTY LTD | 159,050 | 0.87% |
| MR GRANT DAVID NEWTON & MRS KATHYRN JANE CLARK | 155,601 | 0.85% |
| MR GUILLAUME JOHANNES SWIEGERS | 154,073 | 0.84% |
| DE LEEUW HOLDINGS PTY LTD | 150,000 | 0.82% |
| MUTUAL TRUST PTY LTD | 150,000 | 0.82% |
| MAURBRU SUPER PTY LTD | 150,000 | 0.82% |
| B SMARTYPANTS PTY LTD | 150,000 | 0.82% |
| KAMILAROI INVESTMENTS PTY LTD | 150,000 | 0.82% |
| FIRTHY PTY LTD | 150,000 | 0.82% |
| GOL KOPJE INVESTMENTS PTY LTD | 146,938 | 0.80% |
| Total | 9,563,553 | 52.21% |
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2. Distribution of securities
| Distributions | Number of Shareholder |
% of shares |
|---|---|---|
| 1 to 1,000 | 39 | 0.1% |
| 1,001 to 5,000 | 80 | 1.3% |
| 5,001 to 10,000 | 63 | 2.8% |
| 10,001 to 100,000 | 208 | 38.5% |
| 100,001 and over | 28 | 57.3% |
| Total | 418 | 100% |
| Holdings of less than | 21 | - |
| a marketable parcel |
4. Voting rights
On a show of hands every Shareholder present in person or by proxy shall have one vote and upon a poll each share shall have one vote.
5. On-market buy back
There is no current on-market buy back.
3. Substantial shareholdings
The names of the Shareholders who have notified the Company of a substantial holding in accordance with section 671B of the Corporations Act 2001 are:
| Substantial Shareholder | Number of | % of Total |
|---|---|---|
| Shares | ||
| EC Pohl & Co Pty Ltd | 5,458,492 | 29.80% |
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Investments
1.Holdings of securities as at 30 June 2021
Individual investments at 30 June 2021 are listed on the following page. The list should not, however, be used to evaluate portfolio performance or to determine the net asset backing per share at other dates. Individual holdings in the portfolio may change during the course of the year.
2. Transactions and brokerage
There were 339 (2020: 252) transactions in securities during the year on which brokerage of $161,400 (2020: $86,383) was paid.
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ECP Emerging Growth Limited
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ASX Code Company Shares Market Value $ %
Ordinary shares
32,023,749.67 87.75
Cash
Cash (including dividends receivable and 4,472,860.06 12.25
unsettled trades)
Total 36,496,609.73 100.00
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Corporate Directory
ECP Emerging Growth Limited
ABN 30 167 689 821 Registered in Queensland on 23 January 2014.
Board of Directors
Murray H. d’Almeida Non-Executive Chairman
David C. Crombie AM Non-Executive Director
Jared D. Pohl Executive Director
Company Secretary
Brian E Jones
Registered office
Level 12 Corporate Centre One 2 Corporate Court Bundall QLD 4217
Toll Free: 1800 352 474 Fax: +61 (0) 2 8651 6899 Email: [email protected]
Postal address
PO Box 7536 Gold Coast Mail Centre Bundall QLD 9726
Website address
www.ecpam.com/emerging
Follow us
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/ECPEG /company/ecpeg
Investment Manager
ECP Asset Management Pty Ltd ACN 158 827 582
Suite 305, Level 3 343 George Street Sydney NSW 2000
Authorised Representative of EC Pohl & Co Pty Ltd ACN 154 399 916 AFSL 421704
Tel: +61 (0) 2 8651 6800 Fax: +61 (0) 2 8651 6899 Email: [email protected]
Share Registry
Boardroom Pty Limited
GPO Box 3993 Sydney NSW 2001
Toll Free: 1300 737 760 International: +61 (0) 2 9290 9600
Fax: +61 (0) 0 9279 0664 Email: [email protected]
Auditors
Connect National Audit Pty Ltd Level 9 Wyndham Corporate Centre 1 Corporate Court BUNDALL QLD 4217
Solicitors
McCullough Robertson Lawyers
Level 32 MLC Centre 19 Martin Place Sydney NSW 2000
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Emerging Growth Limited
ACN 167 689 821 Suite 305, Level 3 343 George Street Sydney NSW 2000 www.ecpam.com/emerging