CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY ABN 35 088 731 837 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 The financial report was authorised for issue by the Directors on 30 September 2013. The Company has the power to amend and reissue the financial report.
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Company Particulars REGISTERED OFFICE: Level 42 259 George Street SYDNEY NSW 2000 DIRECTORS: Vanda R Gould John D Read Alexander D H Beard Mark Fogarty SECRETARIES: John A H Hunter Alexander D H Beard BANKERS: Westpac Banking Corporation Limited Suncorp Met-way Limited AUDITORS: HLB Mann Judd Chartered Accountants Level 19 207 Kent Street Sydney NSW 2000 SHARE REGISTRY: Gould Ralph Pty Limited Level 42 259 George Street SYDNEY NSW 2000 DOMICILE: Australia 1
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY DIRECTORS REPORT For the Year Ended 30 June 2013 The Directors present the report of CVC Sustainable Investments Limited (the Company ) and its stapled entity (the Group ) for the year ended 30 June 2013, and the Auditors report thereon. Officers The Directors and Secretaries in office at the date of this report and at any time during the year are: Vanda Russell Gould (Chairman) B Com (UNSW), M Com (UNSW) Chairman of Vita Life Sciences Limited, Cyclopharm Limited, CVC Limited, CVC Private Equity Limited and CVC Property Managers Limited as Responsible Entity for CVC Property Fund and Director of numerous private and public companies including educational establishments. John Douglas Read (Non Executive Director) B Sc (Hons) (Cant.), MBA (AGSM). Fellow of the Australian Institute of Company Directors. Director of Patrys Limited, CVC Limited, CVC Private Equity Limited and formerly Director of The Environmental Group Limited, Alexander Damien Harry Beard (Non Executive Director and Company Secretary) B Com (UNSW) Fellow of the Institute of Chartered Accountants in Australia. Member of the Australian Institute of Company Directors. Chairman of Cellnet Limited and Villa World Limited and Director of CVC Limited, Mnemon Limited (formerly Mnet Group Limited), CVC Property Managers Limited as Responsible Entity for CVC Property Fund and CVC Private Equity Limited. Formerly Director of Cyclopharm Limited and Lonestar Resources Limited (formerly Amadeus Energy Limited). Mark Fogarty (Non Executive Director) B LegS (Macq Uni), LLM (Environ Law) (Uni. of Syd), MMgT (MGSM) Admitted to Practise NSW Supreme Court Director of Asia Carbon Pacific Pty Limited. John Andrew Hunter (Company Secretary) B.Com. (ANU), MBA (MGSM) Member of the Institute of Chartered Accountants in Australia. 2
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY DIRECTORS REPORT (Cont.) For the Year Ended 30 June 2013 Directors' Meetings The number of Directors' Meetings and number of meetings attended by each of the Directors of the Group during the financial year were: Number of meetings attended Number of meetings eligible to attend Mr V R Gould 2 2 Mr J D Read 2 2 Mr A D H Beard 2 2 Mr M Fogarty 1 2 Audit Committee Meetings There were no audit committee meetings of the Company during the financial year. Principal Activity Investment in a diversified combination of established small Australian companies that offer both strong return potential and improved environmental outcomes. Operating Results The Group recorded a loss after tax of $42,785 for the year (2012: profit of $1,198,465). Dividends No dividends have been declared, paid or provided during the year ended 30 June 2013. Significant Changes in the State of Affairs of the Group There were no significant changes in the state of affairs of the group that occurred during the year not otherwise disclosed in this report or the financial statements. Review of Operations On 31 August 2012 an equal reduction of share capital of 5.5 cents per stapled security, which included 0.9 cents per share paid by CVC Sustainable Investment Limited and 4.6 cents per share paid by CVC Sustainable Investments No. 2 Limited, took place The Group received a dividend of $26,001 and a return of capital of $673,314 from Wind Corporation Australia Pty Limited during the year. During the year, a marketing campaign was finalised for the purpose of obtaining expressions of interest for the sale of the remaining portfolio of investments. This process did not identify a buyer of the remaining portfolio. The Directors continue to consider opportunities for generating liquidity events for investments. During the year, no stapled securities were issued to new investors and in accordance with the management agreement no options have been issued to CVC Managers Pty Limited. 3
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY DIRECTORS REPORT (Cont.) For the Year Ended 30 June 2013 Options over Stapled Securities CVC Managers Pty Limited, the manager of the Group, has been issued 3,183,974 options in accordance with the management agreement. The options were valued using the Black-Scholes model based on the security price at which the options are exercised. As the options do not have any vesting conditions the full value of $80,489 has been credited to the options reserve and charged as a cost of the capital raising on the date of grant. As at 30 June 2013, the following options are outstanding: Expiry date Option value Number of options Exercise price 11 December 2016 5.85 cents 28,343 16.18 cents 30 April 2017 5.80 cents 36,279 16.00 cents 31 May 2017 5.90 cents 459,746 16.36 cents 30 June 2017 5.95 cents 316,676 16.54 cents 31 July 2017 5.78 cents 168,847 15.91 cents 31 August 2017 5.79 cents 134,183 15.98 cents 30 September 2017 5.52 cents 336,301 14.97 cents 31 October 2017 5.46 cents 141,408 14.75 cents 30 November 2017 4.93 cents 736,375 12.79 cents 31 December 2017 5.49 cents 87,629 14.84 cents 31 January 2018 5.05 cents 138,115 13.22 cents 29 February 2018 5.09 cents 198,865 12.54 cents 31 March 2018 5.15 cents 61,800 12.00 cents 31 May 2018 4.91 cents 9,268 11.17 cents 30 June 2018 7.83 cents 34,091 14.63 cents 31 December 2018 4.96 cents 9,357 10.53 cents 28 February 2019 4.49 cents 42,884 10.39 cents 31 March 2019 4.75 cents 27,606 11.29 cents 30 April 2019 4.32 cents 71,977 10.13 cents 30 June 2019 4.49 cents 50,801 10.74 cents 31 July 2019 3.76 cents 20,342 9.69 cents 31 October 2019 4.68 cents 19,544 10.79 cents 28 February 2020 5.19 cents 8,555 12.56 cents 31 March 2020 4.99 cents 9,519 10.73 cents 30 April 2020 4.85 cents 9,785 10.29 cents 31 May 2020 4.99 cents 9,729 10.38 cents 31 August 2020 4.68 cents 6,217 9.41 cents 30 November 2020 4.07 cents 9,732 7.20 cents 3,183,974 Directors Interests in Shares and Options of the Group Messrs Gould, Read and Beard have an indirect interest in 10,846,336 stapled securities in the Group held by CVC Limited. Messrs Gould and Beard have an indirect interest in 6,295,220 stapled securities and 3,183,974 options in the Group held by CVC Managers Pty Limited. Mr Gould has an indirect interest in 2,300 stapled securities in the Group and Mr Beard has an indirect interest in 27,013 stapled securities in the Group. Events Subsequent to Balance Date Subsequent to year end the Group sold its investment in The Environmental Group Limited for proceeds of $34,187. Other than as set out above, there are no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. 4
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE For the Year Ended 30 June 2013 Notes 2013 2012 $ $ INCOME Interest received 73,899 157,795 Net gain on sale of equity investments 2,108 - Impairment recovery 2,122 1,470,821 Dividends received 26,001 280,000 Other income 23,774 - Total income 127,904 1,908,616 Share of net loss of associate accounted for using the equity method - (136,537) EXPENSES Audit fees 4 38,000 38,000 Director s fees - 2,752 Impairment of unlisted investment - 242,678 Impairment of related entity 24,716 66,241 Insurance 2,734 4,429 Borrowing costs - - Legal fees - 27,083 Management and consulting fees 76,758 162,059 Printing 531 1,086 Share registry 12,831 10,530 Net loss on sale of equity investments 3,501 - Other expenses 11,618 18,756 (Loss)/profit before related income tax expense (42,785) 1,198,465 Net (loss)/profit (42,785) 1,198,465 Net (loss)/profit attributable to owners of the parent 11 (47,253) 501,193 Net profit attributable to non-controlling interest 12 4,468 697,272 The above consolidated statement of financial performance should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 6
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended 30 June 2013 2013 2012 $ $ Net (loss)/profit (42,785) 1,198,465 Other comprehensive income for the year - Movements in fair values of available-for-sale financial assets recognised directly in equity 67,143 (952,259) - Movements in fair values of available-for-sale financial assets transferred to other comprehensive income on realisation (1,510) (227,413) Other comprehensive income for the year, net of tax 65,633 (1,179,672) Total comprehensive income for the year 22,848 18,793 Attributable to: Owners of the parent 26,122 (678,479) Non-controlling interest (3,274) 697,272 22,848 18,793 The above consolidated statement of comprehensive income should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 7
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2013 Notes 2013 2012 $ $ CURRENT ASSETS Cash and cash equivalents 16 1,361,740 5,219,088 Trade and other receivables 6 3,096 128,862 Financial assets available-for-sale 7 26,660 1,821,368 Total current assets 1,391,496 7,169,318 NON-CURRENT ASSETS Financial assets available-for-sale 7 1,062,041 - Total non-current assets 1,062,041 - TOTAL ASSETS 2,453,537 7,169,318 CURRENT LIABILITIES Trade and other payables 8 31,519 26,500 Loans and borrowings 9-699,314 Total current liabilities 31,519 725,814 TOTAL LIABILITIES 31,519 725,814 NET ASSETS 2,422,018 6,443,504 EQUITY Contributed equity 10 5,785,421 6,457,809 Accumulated losses 11 (3,772,304) (3,725,051) Other reserves 13 150,486 75,301 Total parent entity interest 2,163,603 2,808,059 Non-controlling interest 12 258,415 3,635,445 TOTAL EQUITY 2,422,018 6,443,504 The above consolidated statement of financial position should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 8
Contributed equity CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2013 Accumulated losses Market value reserve Options reserve Owners of the parent Noncontrolling interest Total $ $ $ $ $ $ $ At 1 July 2012 6,457,809 (3,725,051) (3,378) 78,679 2,808,059 3,635,445 6,443,504 Profit/(loss) for the year - (47,253) - - (47,253) 4,468 (42,785) Other comprehensive income - - 73,375-73,375 (7,742) 65,633 Total comprehensive income for the year - (47,253) 73,375-26,122 (3,274) 22,848 Transactions with owners in their capacity as owners: Return of capital (657,472) - - - (657,472) (3,360,410) (4,017,882) Transaction costs of return of capital (14,916) - - - (14,916) (14,916) (29,832) Other movements in equity: Share of associates equity based remuneration recognised in other reserves - - - 1,810 1,810 1,570 3,380 At 30 June 2013 5,785,421 (3,772,304) 69,997 80,489 2,163,603 258,415 2,422,018 The above consolidated statement of changes in equity should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 9
Contributed equity CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2013 (Continued) Accumulated losses Market value reserve Options reserve Owners of the parent Noncontrolling interest Total $ $ $ $ $ $ $ At 1 July 2011 6,457,809 (4,226,244) 1,176,294 78,679 3,486,538 2,912,443 6,398,981 Profit for the year - 501,193 - - 501,193 697,272 1,198,465 Other comprehensive income - - (1,179,672) - (1,179,672) - (1,179,672) Total comprehensive income for the year - 501,193 (1,179,672) - (678,479) 697,272 18,793 Other movements in equity: Share of associates equity based remuneration recognised in other reserves - - - - - 25,730 25,730 At 30 June 2012 6,457,809 (3,725,051) (3,378) 78,679 2,808,059 3,635,445 6,443,504 The above consolidated statement of changes in equity should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 10
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2013 Notes 2013 2012 $ $ Cash flows from operating activities Cash payments in the course of operations (136,166) (272,573) Interest received 81,714 153,833 Dividend received - 280,000 Net cash flows (used in)/provided by operating activities 16 (54,452) 161,260 Cash flows from investing activities Proceeds from sale of investments 221,044 2,658,537 Net cash flows provided by investing activities 221,044 2,658,537 Cash flows from financing activities Return of capital (4,023,940) - Proceeds from borrowing - 772,492 Repayments of borrowing - (73,178) Net cash flows (used in)/provided by financing activities (4,023,940) 699,314 Net (decrease)/increase in cash and cash equivalents held (3,857,348) 3,519,111 Cash and cash equivalents at the beginning of the financial year 5,219,088 1,699,977 Cash and cash equivalents at the end of the financial year 16 1,361,740 5,219,088 The above statement of cash flows should be read in conjunction with the notes to the financial statements set out on pages 12 to 30. 11
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies The significant policies which have been adopted in the preparation of this report are: a) Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requiresthe use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 20. b) Statement of Compliance The financial report complies with Australian Accounting Standards, which include the Australian Accounting Interpretations. The financial report also complies with International Financial Reporting Standards (IFRS). Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2013 reporting period: AASB 9 Financial Instruments was released in late 2009 and is mandatory for periods beginning on or after 1 January 2015, The Standard will require two measurement models: amortised cost and fair value. Application of the standard is not expected to have a significant impact on the financial statements. AASB 10 Consolidated Financial Statements, AAB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127 Separate Financial Statements Standards is mandatory for periods beginning on or after 1 January 2013. The new accounting policies provide more reliable and relevant information for users to assess the composition of the group and the amounts, timing and uncertainty of future cash flows and introduce a single definition of control that applies to all entities. Control exists when the investor can use its power to affect the amount of its returns. Application of the standard is not expected to have a significant impact on the financial statements. AASB 13 Fair Value Measurement was released in September 2011 and is mandatory for periods beginning on or after 1 January 2013, Application of the standard will not have a material impact on the amounts recognised in the financial statements. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 12
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) c) Basis of Consolidation Stapled Entities The consolidated financial statements comprise the financial statements of CVC Sustainable Investments Limited and the stapled entity, CVC Sustainable Investments No. 2 Limited as at 30 June from the date it was deemed that the Group had been constructed, 28 February 2007. Although CVC Sustainable Investments Limited does not have an ownership interest in CVC Sustainable Investments No. 2 Limited, in accordance with Interpretation 1002 Post-Date-of-Transition Stapling Arrangements CVC Sustainable Investments Limited has been identified as the acquirer and the parent entity for the purpose of preparing the consolidated financial statements and CVC Sustainable Investments No. 2 Limited is deemed to be the acquiree. In preparing the consolidated financial statements, all inter company balances and transactions, income and expenses and profits and losses resulting from intra-group transactions have been eliminated in full and the reporting period and accounting policies of subsidiaries are consistent with those of the parent entity. The consolidation of the stapled entity is accounted for using the purchase method of accounting which allocates the cost of the business combination to the fair value of the assets acquired and the liabilities assumed at the date of acquisition. The net assets not held by CVC Sustainable Investments Limited are identified as non-controlling interests and presented in the consolidated statement of financial position within equity, separately from the Company s equity holders equity. The profit of CVC Sustainable Investments No. 2 Limited is also separately disclosed as a non-controlling interest in the profit of the Group. Although a non-controlling interest has been identified the shareholders of CVC Sustainable Investments Limited are also the shareholders of CVC Sustainable Investments No. 2 Limited by virtue of the stapling arrangement dated 28 February 2007. Associates Associates are those entities, other than partnerships, over which the Group exercises significant influence but not control. In the consolidated financial statements investments in associates are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The Group s equity accounted share of the associates' net profit or loss is recognised in the consolidated statement of financial performance from the date significant influence commences until the date significant influence ceases. The Group s equity accounted share of movements in accumulated losses from changes in accounting policies by associates is recognised directly in consolidated accumulated losses (note 11). The Group s equity accounted share of other movements in reserves of associates is recognised directly in consolidated reserves. d) Cash and Cash Equivalents For the statement of cash flow, cash includes cash on hand and short-term deposits with an original maturity of three months or less. e) Revenue Recognition (i) Interest income Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial year. 13
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) e) Revenue Recognition (Cont.) (ii) Dividends Revenue is recognised when the Group s right to receive payment is established. (iii) Management fees Revenue is recognised when the Group s right to receive payment is established. f) Trade and Other Payables Trade payables and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. g) Interest-Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. h) Trade and Other Receivables Receivables are recognised and carried at original invoice amount less a provision for impairment. Trade receivables are generally settled within 30 days. A provision for impairment is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. i) Investments and Other Financial Assets Financial assets are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments. The classification depends on the purpose for which the investments were acquired. When financial assets are recognised initially, they are measured at fair value plus directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, reevaluates this designation at each financial year-end. The purchase and sale of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the statement of financial performance when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Available-for-sale investments Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in the statement of financial performance. 14
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) i) Investments and Other Financial Assets (Cont.) Available-for-sale investments (Cont.) The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair value is determined using valuation techniques, such as discounted cash flow analysis or by reference to the investments underlying net assets. Where fair value cannot be reliably measured investments are measured at cost. The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in statement of financial performance is removed from equity and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments classified as available-forsale are not reversed through the statement of financial performance. j) Income Tax and Other Taxes Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities on the current period s taxable income at the tax rates enacted by the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which deductible temporary differences and the carry-forward of unused tax credit can be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of financial performance. Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except: o when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable; and o receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 15
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) j) Income Tax and Other Taxes (Cont.) Goods and Services Tax (Cont.) Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating cash flows. k) Contributed Equity Issued capital is recognised at the fair value of the consideration received by the Company. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from proceeds. l) Segment Reporting A business segment is a distinguishable component of the entity that is engaged in providing differentiated products or services. m) Impairment Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. Non-financial assets that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. 16
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 NOTE 2: PARENT COMPANY INFORMATION The salient financial information in relation to the parent company, CVC Sustainable Investments Limited, are as follows: 2013 2012 $ $ Current assets 1,117,321 2,821,309 Non-current assets 1,062,041 - Total assets 2,179,362 2,821,309 Current liabilities 15,759 13,250 Total liabilities 15,759 13,250 Net assets 2,163,603 2,808,059 Contributed equity 5,785,421 6,457,809 Accumulated losses (3,772,304) (3,725,051) Other reserves 150,486 75,301 Equity 2,163,603 2,808,059 Net (loss)/ profit after tax (47,253) 501,193 Note 3: Dividends No dividends have been declared, paid or provided by the Group for the period ended 30 June 2013. Franking credits available are: CVC Sustainable Investments Limited 365,336 354,193 CVC Sustainable Investments No. 2 Limited 233,742 234,937 599,078 589,130 17
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 4: Auditor s Remuneration The auditor of the Group is HLB Mann Judd. Amounts received or due and receivable by the auditors of the Group: 2013 2012 $ $ Audit or review of the financial report 38,000 38,000 The auditor received no other benefits. Note 5: Income Tax (a) Income tax expense Accounting (loss)/profit before income tax (42,785) 1,198,465 Income tax (benefit)/expenses at the statutory income tax rate of 25% (10,696) 299,616 Reduced PDF tax rate on net investment income 8,515 12,812 Franked dividends received (6,500) (70,000) Deferred tax not recognised 8,681 (242,428) Income tax expense reported in the statement of financial performance - - Deferred income tax at 30 June related to the following items: Deferred tax assets: - Cost of capital raising 8,464 14,251 - Provision and accrued expenses 6,018 5,794 - Unrealised loss on investments 125,787 208,536 - Carried forward losses 1,904,414 2,231,557 - Deferred tax assets not recognised (2,044,683) (2,460,138) - - Deferred tax liabilities: - Receivables - 2,310 - Deferred tax liabilities no recognised - (2,310) - - 18
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 6: Trade and Other Receivables 2013 2012 $ $ Current Security Settlement - 116,667 Receivables - 10,306 Other asset 3,096 1,889 3,096 128,862 Security Settlement This represents a settlement in relation to sale of shares in Bio Diesel Producers Limited which was settled on 28 December 2012. Receivables Receivables are non-interest bearing and are generally on 30 day terms. Note 7: Financial Assets Available-For-Sale Current Unlisted shares in other corporations - 1,227,054 Unlisted shares in related entity - 997,643 Listed shares at market value 26,660 136,182 Impairment - (539,511) 26,660 1,821,368 Non-current Unlisted shares in other corporations 1,299,581 - Unlisted shares in related entity 260,446 - Impairment (497,986) - 1,062,041-19
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 7: Financial Assets Available-For-Sale (Cont.) Unlisted shares in other corporations comprise: - 7% shareholding in Hi-Head Power valued at $806,903 (2012: $734,376); - 1% shareholding in BioPower Systems Pty Limited at a realisable value of $19,408 (2012: $19,408). Unlisted shares in related entity comprise: - 20% shareholding in Wind Corporation Australia Pty Limited at a fair value of $235,730 (2012: $931,402). The investment is not accounted for in accordance with AASB 128 Investments in Associates as one shareholder controls the remaining 80% interest so no influence is exerted on the operations of the Company. Impairment of investments Where there has been a reduction in the share price of an investment that appears to be significant or prolonged management have made an assessment as to whether impairment is required. (a) Unlisted shares in other corporations BioPower Systems Pty Limited The carrying value of BioPower Systems Pty Limited is based on an assessment of forecast earnings to determine fair value, using the most recent financial report. Hi-Head Power The value of Hi-Head Power shares has been determined with reference to the most recent capital raising completed by the company on 3 November 2011. The determination of the fair value has resulted in an impairment charge of $Nil (2012: $242,678). (b) Unlisted shares in related entity Wind Corporation Australia Pty Limited The carrying value of Wind Corporation Australia Pty Limited is based on share of the investment s Net Tangible Asset value as at 30 June 2013. The determination of the fair value has resulted in an impairment charge of $24,716 (2012: $66,241). (c) Listed shares at market value The carrying value of certain investments classified as Listed shares at market value has been determined by using the fair value approach. The closing bid-price was determined to be an appropriate indication for the fair value of the investment. 20
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 8: Trade and Other Payables Current: 2013 2012 $ $ Sundry creditors and accruals 31,519 26,500 Trade creditors and accruals are non-interest bearing and are normally settled on 30 day terms. Note 9: Loan and Borrowings Current: Loan from related entity - 699,314 The loan payable was repaid during the year via a dividend declared and paid on 30 November 2012 and the return of capital completed at 31 December 2012 by Wind Corporation Australia Pty Limited. Note 10: Contributed Equity 2013 2012 No of Shares $ No of Shares $ Ordinary shares Balance at the beginning of the year 73,052,389 6,457,809 73,052,389 6,457,809 Return of capital - (657,472) - - Transaction costs of return of capital - (14,916) - - Balance at the end of the year 73,052,389 5,785,421 73,052,389 6,457,809 On 31 August 2012 an equal reduction of share capital of 5.5 cents per stapled security, which included 0.9 cents per share paid by CVC Sustainable Investment Limited and 4.6 cents per share paid by CVC Sustainable Investments No. 2 Limited, took place. Note 11: Accumulated Losses 2013 2012 $ $ Balance at the beginning of the year (3,725,051) (4,226,244) Net (loss)/profit from operating activities (47,253) 501,193 Balance at the end of the year (3,772,304) (3,725,051) 21
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 12: Non-controlling Interest 2013 2012 $ $ Reconciliation of non-controlling interest in stapled entities Balance at the beginning of the year 3,635,445 2,912,443 Share of net profit 4,468 697,272 Revaluation of investment (7,742) - Return of capital (3,360,410) - Transaction costs of return of capital (14,916) - Other reserves 1,570 25,730 Balance at the end of the year 258,415 3,635,445 The non-controlling interest at the end of the year comprises interests in Share capital 4,055,106 7,430,432 Accumulated losses (3,879,858) (3,884,326) Other reserve 83,167 89,339 258,415 3,635,445 The net assets not held by CVC Sustainable Investments Limited are identified as non-controlling interests. The equity of CVC Sustainable Investments No. 2 Limited is held directly by shareholders and in accordance with Interpretation 1002 Post-Date-of-Transition Stapling Arrangements the non-controlling interest represents the balance of equity held by shareholders of CVC Sustainable Investments No. 2 Limited. Note 13: Other Reserves Options Market value Total other reserve reserve reserves $ $ $ Year ended 30 June 2013: Balance at the beginning of the year 78,679 (3,378) 75,301 Change in fair value of available-for-sale assets - 74,885 74,885 Transferred to other comprehensive income on realisation - (1,510) (1,510) Share of options reserve of associated entity 1,810-1,810 Balance at the end of the year 80,489 69,997 150,486 22
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 13: Other Reserves (Cont.) Options Market value Total other reserve reserve reserves $ $ $ Year ended 30 June 2012: Balance at the beginning of the year 78,679 1,176,294 1,254,973 Change in fair value of available-for-sale assets - (952,259) (952,259) Transferred to other comprehensive income on realisation - (227,413) (227,413) Balance at the end of the year 78,679 (3,378) 75,301 Market Value Reserve The market value reserve is used to record increments and decrements in the fair value of available-forsale financial assets to the extent that they offset one another. Options Reserve The options reserve includes a share of the options reserve of equity accounted investments and is used to record the value of options issued to the investment manager, CVC Managers Pty Limited. As at 30 June 2013, the following options are outstanding: Expiry date Option value Number of options Exercise price 11 December 2016 5.85 cents 28,343 17.08 cents 30 April 2017 5.80 cents 36,279 16.90 cents 31 May 2017 5.90 cents 459,746 17.26 cents 30 June 2017 5.95 cents 316,676 17.44 cents 31 July 2017 5.78 cents 168,847 16.81 cents 31 August 2017 5.79 cents 134,183 16.88 cents 30 September 2017 5.52 cents 336,301 15.87 cents 31 October 2017 5.46 cents 141,408 15.65 cents 30 November 2017 4.93 cents 736,375 13.69 cents 31 December 2017 5.49 cents 87,629 15.74 cents 31 January 2018 5.05 cents 138,115 14.12 cents 29 February 2018 5.09 cents 198,865 13.44 cents 31 March 2018 5.15 cents 61,800 12.90 cents 31 May 2018 4.91 cents 9,268 12.07 cents 30 June 2018 7.83 cents 34,091 15.53 cents 31 December 2018 4.96 cents 9,357 11.43 cents 28 February 2019 4.49 cents 42,884 11.28 cents 31 March 2019 4.75 cents 27,606 12.19 cents 30 April 2019 4.32 cents 71,977 11.03 cents 30 June 2019 4.49 cents 50,801 11.64 cents 31 July 2019 3.76 cents 20,342 10.59 cents 31 October 2019 4.68 cents 19,544 11.69 cents 28 February 2020 5.19 cents 8,555 13.46 cents 31 March 2020 4.99 cents 9,519 11.63 cents 30 April 2020 4.85 cents 9,785 11.19 cents 31 May 2020 4.99 cents 9,729 11.28 cents 31 August 2020 4.68 cents 6,217 10.31 cents 30 November 2020 4.07 cents 9,732 8.10 cents 3,183,974 23
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 14: Financial Instruments The Group s activities expose it to a variety of financial risks: market risk (including market price risk and interest rate risk), credit risk and liquidity risk. The Group s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and price risk. The responsibility for operational risk management resides with the Board of Directors who seeks to manage the exposure of the Group. There have been no significant changes in the types of financial risks; or the Group s risk management program (including methods used to measure the risks) since the prior year. (a) Interest rate risk The Group s exposure to interest rate risks of financial assets and liabilities both recognised and unrecognised at the balance date are as follows: Notes Floating Fixed interest rate Non- Total interest rate 1 year or less 1 to 5 years interest bearing $ $ $ $ $ 2013 Financial assets Cash and cash equivalents 16 1,361,740 - - - 1,361,740 Trade and other receivables 6 - - - 3,096 3,096 Financial liabilities Trade and other payables 8 - - - 31,519 31,519 2012 Financial assets Cash and cash equivalents 16 420,809 4,798,279 - - 5,219,088 Trade and other receivables 6 - - - 128,862 128,862 Financial liabilities Trade and other payables 8 - - - 26,500 26,500 Loans and borrowings 9 - - - 699,314 699,314 24
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 14: Financial Instruments (Cont.) (a) Interest rate risk (cont.) The Company holds a significant amount of cash balances in the financial year 2013 which are exposed to movements in interest rates. To reduce the risk the Company typically deposits uncommitted cash in high interest rate accounts with financial institutions. Receivables and payables are non-interest bearing. Sensitivity At reporting date, if interest rates had been 50 basis points lower (2012: 50 basis points lower) and the other variables were held constant, then the impact of the Company would be: Decrease of 50 bp Decrease of 50 bp 2013 2012 $ $ Net loss (9,691) (15,749) Equity decrease (9,691) (15,749) (b) Market Price Risk The Group has investments in listed securities which could be adversely affected if general equity market values were to decline. The Group does not hedge its exposure to the risk of a general decline in equity market values, believing that such strategies are not cost-effective. Sensitivity Listed Securities - Current At reporting date, if equity prices had been 10% higher/(lower) while all other variables were held constant the impact of the Group would be: Increase of 10% Decrease of 10% $ $ 2013 Net profit/(loss) - - Equity increase/(decrease) 2,666 (2,666) 2012 Net profit/(loss) 13,467 (13,467) Equity increase/(decrease) 13,618 (13,618) 25
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 14: Financial Instruments (Cont.) (c) Credit Risk Exposure Credit risk refers to the loss that the Group would incur if a debtor or a counterparty fails to perform under its obligations. The carrying amounts of financial assets recognised in the statement of financial position best represent the Group s maximum exposure to credit risk at reporting date. The Group seeks to limit its exposure to credit risk by performing appropriate background investigations on counterparties before entering into arrangements with them and to obtain collateral with a value in excess of the counterparty s obligations to the Group, providing a margin of safety against loss. At reporting date, the Group s significant exposure of credit risk is: It s deposits with financial institutions, which are mitigated by the requirement that deposits are only held with institutions with an investment grade credit rating. (d) Liquidity Risk The Group manages liquidity risk by maintaining sufficient cash balances, holding liquid investments that could be realised to meet commitments. The Group continuously monitors forecast and actual cash flows and matches the maturity profiles of financial assets and liabilities. The following table details the Group s contractual liabilities: Less than 6 months 6 months to 1 year 1 to 5 years Total $ $ $ $ 2013 Trade and other payables 31,519 - - 31,519 2012 Trade and other payables 26,500 - - 26,500 Loans and borrowings 699,314 - - 699,314 26
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 14: Financial Instruments (Cont.) (e) Fair Value The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 the fair value is calculated using quoted prices in active markets. Level 2 the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset, either directly (as prices) or indirectly (derived from prices). Level 3 the fair value is estimated using inputs for the asset that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Quoted Total market price (Level 1) Year ending 30 June 2013 Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level3) $ $ $ $ Financial assets Available-for-sale investments Listed shares at market value 26,660 - - 26,660 Unlisted shares at realisable value - - 1,062,041 1,062,041 26,660-1,062,041 1,088,701 Year ending 30 June 2012 Financial assets Available-for-sale investments Listed shares at market value 136,182 - - 136,182 Unlisted shares at realisable value - - 1,685,186 1,685,186 136,182-1,685,186 1,821,368 Reconciliation of Level 3 fair value movements: 2013 2012 $ $ Balance at the beginning of the year 1,685,186 3,061,818 Capital reduction (673,314) - Disposal - (116,667) Impairment (24,716) (308,919) Gain/(losses) recognised in other comprehensive income 74,885 (951,046) Balance at the end of the year 1,062,041 1,685,186 27
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 15: Related Parties The compensation of the key management personnel of the Group was as follows: (a) Total of the income paid or payable or otherwise made available, to all key management personnel of the Group directly or indirectly from the entity or any related party: 2013 2012 $ $ Mr P Toyne (resigned 16 September 2011) Base salary - 2,752 Superannuation - 248-3,000 The Group does not have a remuneration committee. Notwithstanding the objective is to continue the policy of paying sufficient competitive compensation to attract key management personnel with the necessary skills to manage the Group. (b) (c) No retirement allowances were paid to key management personnel of the Group. Except as detailed above, no other amount of remuneration is paid to key management personnel in connection with the management of the affairs of the Group. Directors Persons holding the positions of Directors of CVC Sustainable Investments Limited during the financial year are: V R Gould, A D H Beard, J D Read, and M Fogarty. Transactions with related parties The Group pays management fees to its investment manager calculated at 2.5% of the net assets of the company at the end of the previous financial year. Following the return of capital completed on 31 August 2012 of $4,017,882 CVC Managers Pty Limited agreed to revise the management fees based on the net assets of the Group immediately following the return of capital. During the year fees of $76,758 (2012: $159,974) were paid to CVC Managers Pty Limited. Messrs Beard and Gould were Directors of CVC Managers Pty Limited during the year. CVC Managers Pty Limited is a controlled entity of CVC Limited. The loan payable to Wind Corporation Australia Pty Limited was fully repaid during the year via dividend of $26,001 declared and paid on 30 November 2012, and the return of capital of $673,314 completed at 31 December 2012 by Wind Corporation Australia Pty Limited. 28
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 16: Notes to the Statement of Cash Flows Reconciliation of Cash For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June: 2013 2012 $ $ Cash at bank 1,361,740 5,219,088 Cash and cash equivalents 1,361,740 5,219,088 Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amount of cash and cash equivalents represents fair value. Reconciliation of net profit/(loss) after income tax to net cash from operations Net (loss)/profit (42,785) 1,198,465 Adjustments for Net loss on sale of equity investments 1,393 - Equity accounted loss - 136,537 Impairment recoveries (2,122) (1,470,821) Impairment of investments 24,716 308,919 Dividend income (26,001) - Change in operating assets and liabilities: Movements in trade and other receivables 8,959 (3,576) Movements in trade and other payables (18,612) (8,264) Cash flows (used in)/provided by operating activities (54,452 161,260 Note 17: Other Information CVC Sustainable Investments Limited was incorporated on 21st July 1999. The Group is registered and domiciled in Australia. Its registered office and principal place of business are at Level 42, 259 George Street, Sydney, NSW 2000. 29
CVC SUSTAINABLE INVESTMENTS LIMITED AND ITS STAPLED ENTITY Notes to the Financial Statements For the Year Ended 30 June 2013 Note 18: Events Occurring after Reporting Date Subsequent to year end the Group sold its investment in The Environmental Group Limited for proceeds of $34,187. Other than as set out above, there are no matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. Note 19: Stapled Entity The consolidated financial statements include CVC Sustainable Investments No. 2 Limited. On 28 February 2007 a restructure was undertaken by the Company such that the share capital was reduced by an in-specie distribution of all the fully paid ordinary shares in CVC Sustainable Investments No. 2 Limited to the shareholders in the Company. An agreement was signed that has the effect of stapling the shares of CVC Sustainable Investments Limited to CVC Sustainable Investments No. 2 Limited together, and although separate legal entities are not able to be separately traded. Although CVC Sustainable Investments Limited does not have an ownership interest in CVC Sustainable Investments No. 2 Limited, CVC Sustainable Investments Limited has been identified as the acquirer and the parent entity for the purpose of preparing the consolidated financial statements and CVC Sustainable Investments No. 2 Limited is deemed to be the acquiree. Note 20: Critical Accounting Estimates and Judgements The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) (b) Financial Assets investments An impairment has been raised against certain financial assets investments that have a carrying value of $1,088,701. The recoverable amount has been assessed in note 7. Absence of active market In calculating the fair value of The Environmental Group Limited (EGL) the Company has determined that an active market does not exist because EGL does not trade on a daily basis; each trade that is executed, is small in size and the market capitalization is small such that larger institutions do not hold significant shareholdings. However the active market in small amounts of trading does provide a guide for valuation. The share price of EGL at 30 June 2013 was 3.1 cents and the Company has determined that this is the best indicator of value for EGL. These factors have been used in determining the value at note 7. 30
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED ABN 58 123 028 026 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 The financial report was authorised for issue by the Directors on 30 September 2013. The Company has the power to amend and reissue the financial report.
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED DIRECTORS REPORT For the Year Ended 30 June 2013 The Directors present their report together with the financial report of CVC Sustainable Investments No. 2 Limited (the Company ) for the year ended 30 June 2013, and the Auditors report thereon. Officers The Directors and Secretaries in office at the date of this report and at any time during the year are: Vanda Russell Gould (Chairman) B Com (UNSW), M Com (UNSW) Fellow of the Institute of Chartered Accountants in Australia. Chairman of Vita Life Sciences Limited, Cyclopharm Limited, CVC Limited, CVC Private Equity Limited, CVC Sustainable Investments Limited and CVC Property Managers Limited as Responsible Entity for CVC Property Fund and Director of numerous private and public companies including educational establishments. John Douglas Read (Non Executive Director) B Sc (Hons) (Cant.), MBA (AGSM). Fellow of the Australian Institute of Company Directors. Director of Patrys Limited, CVC Limited, CVC Sustainable Investments Limited, CVC Private Equity Limited and formerly Director of The Environmental Group Limited. Alexander Damien Harry Beard (Non Executive Director and Company Secretary) B Com (UNSW) Fellow of the Institute of Chartered Accountants in Australia. Member of the Australian Institute of Company Directors. Chairman of Cellnet Limited and Villa World Limited and Director of CVC Limited, Mnemon Limited (formerly Mnet Group Limited), CVC Property Managers Limited as Responsible Entity for CVC Property Fund, CVC Sustainable Investments Limited and CVC Private Equity Limited. Formerly Director of Cyclopharm Limited and Lonestar Resources Limited (formerly Amadeus Energy Limited). Mark Fogarty (Non Executive Director) B LegS (Macq Uni), LLM (Environ Law) (Uni. of Syd), MMgT (MGSM) Admitted to Practise NSW Supreme Court Director of Asia Carbon Pacific Pty Limited and CVC Sustainable Investments Limited. John Andrew Hunter (Company Secretary) B.Com. (ANU), MBA (MGSM) Member of the Institute of Chartered Accountants in Australia. 2
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED DIRECTORS REPORT (Cont.) For the Year Ended 30 June 2013 Directors' Meetings The number of Directors' Meetings and number of meetings attended by each of the Directors of the Company during the financial were: Number of meetings attended Number of meetings held Mr V R Gould 2 2 Mr J D Read 2 2 Mr A D H Beard 2 2 Mr P M Fogarty 1 2 Audit Committee Meetings There were no audit committee meetings of the Company during the financial year. Principal Activity Investment in a diversified combination of established small Australian companies that offer both strong return potential and improved environmental outcomes. Operating Results The Company recorded a profit after tax of $4,468 (2012: $697,272) for the year. Dividends No dividends have been declared, paid or provided during the year ended 30 June 2013. Significant Changes in the State of Affairs of the Company There were no significant changes in the state of affairs of the Company that occurred during the year not otherwise disclosed in this report or the financial statements. Review of Operations A reduction of share capital of 4.6 cents per share was approved by shareholders at a general meeting held on 13 August 2012 and paid on 31 August 2012. This equated to a total cash payment of $3,360,410. During the year, a marketing campaign was finalised for the purpose of obtaining expressions of interest for the sale of the remaining portfolio of investments. This process did not identify a buyer of the remaining portfolio. The Directors continue to consider opportunities for generating liquidity events for investments. 3
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED DIRECTORS REPORT (Cont.) For the Year Ended 30 June 2013 Share Options over Ordinary Shares CVC Managers Pty Limited, the manager of the Company, has been issued 3,183,974 options in accordance with the management agreement. The options were valued using the Black-Scholes model based on the security price at which the options are exercised. As the options do not have any vesting conditions the full value of $90,909 has been credited to the share options reserve and charged as a costs of the capital raising on the date of grant in the Company. As at 30 June 2013, the following options are outstanding: Expiry date Option value Number of options Exercise price 11 December 2016 5.85 cents 28,343 16.18 cents 30 April 2017 5.80 cents 36,279 16.00 cents 31 May 2017 5.90 cents 459,746 16.36 cents 30 June 2017 5.95 cents 316,676 16.54 cents 31 July 2017 5.78 cents 168,847 15.91 cents 31 August 2017 5.79 cents 134,183 15.98 cents 30 September 2017 5.52 cents 336,301 14.97 cents 31 October 2017 5.46 cents 141,408 14.75 cents 30 November 2017 4.93 cents 736,375 12.79 cents 31 December 2017 5.49 cents 87,629 14.84 cents 31 January 2018 5.05 cents 138,115 13.22 cents 29 February 2018 5.09 cents 198,865 12.54 cents 31 March 2018 5.15 cents 61,800 12.00 cents 31 May 2018 4.91 cents 9,268 11.17 cents 30 June 2018 7.83 cents 34,091 14.63 cents 31 December 2018 4.96 cents 9,357 10.53 cents 28 February 2019 4.49 cents 42,884 10.39 cents 31 March 2019 4.75 cents 27,606 11.29 cents 30 April 2019 4.32 cents 71,977 10.13 cents 30 June 2019 4.49 cents 50,801 10.74 cents 31 July 2019 3.76 cents 20,342 9.69 cents 31 October 2019 4.68 cents 19,544 10.79 cents 28 February 2020 5.19 cents 8,555 12.56 cents 31 March 2020 4.99 cents 9,519 10.73 cents 30 April 2020 4.85 cents 9,785 10.29 cents 31 May 2020 4.99 cents 9,729 10.38 cents 31 August 2020 4.68 cents 6,217 9.41 cents 30 November 2020 4.07 cents 9,732 7.20 cents 3,183,974 Directors Interests in Shares and Options of the Company Messrs Gould, Read and Beard have an indirect interest in 10,846,336 shares in the Company held by CVC Limited. Messrs Gould and Beard have an indirect interest in 6,295,220 shares and 3,183,974 options in the Company held by CVC Managers Pty Limited. Mr Gould has an indirect interest in 2,300 shares in the Company, and Mr Beard has an indirect interest in 27,013 shares in the Company. Events Subsequent to Balance Date Subsequent to year end the Company sold its investment in The Environmental Group Limited for proceeds of $34,187. Other than as set out above there are no matters or circumstances that 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. 4
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year Ended 30 June 2013 Notes 2013 2012 $ $ INCOME Interest received 47,287 129,476 Impairment recovery - 815,916 Other income 11,887 - Total income 59,174 945,392 Share of net loss of associate accounted for using the equity method - (126,948) EXPENSES Audit fees 3 19,000 19,000 Director s fees - 1,376 Insurance 1,367 2,214 Legal fees - 11,887 Management and consulting fees 20,568 72,811 Printing 265 543 Share registry 6,415 5,265 Realised loss on sale of equity investment 1,692 - Other expenses 5,399 8,076 Profit before related income tax expense 4,468 697,272 Net profit 10 4,468 697,272 OTHER COMPREHENSIVE INCOME Movements in fair values of available-for-sale financial assets directly in equity (7,742) - Other comprehensive income for the period, net of tax (7,742) - Total comprehensive income for the period (3,274) 697,272 The above statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the financial statements set out on pages 10 to 23. 6
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED STATEMENT OF FINANCIAL POSITION as at 30 June 2013 Notes 2013 2012 $ $ CURRENT ASSETS Cash and cash equivalents 14 246,701 4,280,997 Trade and other receivables 5 814 8,808 Financial assets available for sale 6 26,660 - Total current assets 274,175 4,289,805 NON-CURRENT ASSETS Financial assets available for sale 6-58,203 Total non-current assets - 58,203 TOTAL ASSETS 274,175 4,348,008 CURRENT LIABILITIES Trade and other payables 7 15,760 13,249 Loans payable 8-699,314 Total current liabilities 15,760 712,563 TOTAL LIABILITIES 15,760 712,563 NET ASSETS 258,415 3,635,445 EQUITY Contributed equity 9 4,055,106 7,430,432 Accumulated losses 10 (3,879,858) (3,884,326) Other reserves 11 83,167 89,339 TOTAL EQUITY 258,415 3,635,445 The above statement of financial position should be read in conjunction with the notes to the financial statements set out on pages 10 to 23. 7
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2013 Contributed Accumulated Market value Options Total equity losses reserve reserve $ $ $ $ $ At 1 July 2012 7,430,432 (3,884,326) - 89,339 3,635,445 Profit for the year - 4,468 - - 4,468 Other comprehensive income - - (7,742) - (7,742) Total comprehensive income for the year - 4,468 (7,742) - (3,274) Transactions with shareholders: Return of capital (3,360,410) - - - (3,360,410) Transaction costs of return of capital (14,916) - - - (14,916) Other movements in equity: Share of associates equity based remuneration recognised in other reserves - - - 1,570 1,570 At 30 June 2013 4,055,106 (3,879,858) (7,742) 90,909 258,415 At 1 July 2011 7,430,432 (4,581,598) - 63,609 2,912,443 Profit for the year - 697,272 - - 697,272 Total comprehensive income for the year - 697,272 - - 697,272 Other movements in equity: Share of associates equity based remuneration recognised in other reserves - - - 25,730 25,730 At 30 June 2012 7,430,432 (3,884,326) - 89,339 3,635,445 The above statement of changes in equity should be read in conjunction with the notes to the financial statements set out on pages 10 to 23. 8
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2013 Notes 2013 2012 $ $ Cash flows from operating activities Cash payments in the course of operations (49,646) (118,629) Interest received 54,422 126,192 Net cash flows provided by operating activities 14 4,776 7,563 Cash flows from investing activities Proceeds from sale of investments 23,681 1,668,769 Loans repaid - 270,191 Loans provided - (60,000) Net cash flows provided by investing activities 23,681 1,878,960 Cash flows from financing activities Return of capital (3,363,439) - Proceeds from borrowing - 772,492 Repayment of borrowings (699,314) (73,178) Net cash flows (used in)/provided by financing activities (4,062,753) 699,314 Net (decrease)/increase in cash and cash equivalents held (4,034,296) 2,585,837 Cash and cash equivalents at the beginning of the financial year 4,280,997 1,695,160 Cash and cash equivalents at the end of the financial year 14 246,701 4,280,997 The above statement of cash flows should be read in conjunction with the notes to the financial statements set out on pages 10 to 23. 9
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies The significant policies which have been adopted in the preparation of this report are: a) Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 17. b) Statement of Compliance The financial report complies with Australian Accounting Standards, which include the Australian Accounting Interpretations. The financial report also complies with International Financial Reporting Standards (IFRS). Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2013 reporting period: AASB 9 Financial Instruments was released in late 2009 and is mandatory for periods beginning on or after 1 January 2015, The Standards will require two measurement models: amortised cost and fair value. Application of the standard is not expected to have a significant impact on the financial statements. AASB 13 Fair Value Measurement was released in September 2011 and is mandatory for periods beginning on or after 1 January 2013 with early adoption permitted. It explains how to measure fair value and aims to enhance fair value disclosures. Application of the standard is not expected to have a significant impact on the financial statements. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 10
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) c) Cash and Cash Equivalents For the statement of cash flows, cash includes cash on hand and short-term deposits with an original maturity of three months or less. d) Revenue Recognition (i) Interest income Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant year using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial year. (ii) Dividends Revenue is recognised when the Company s right to receive payment is established. e) Trade and Other Payables Trade payables and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. f) Interest-Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. g) Trade and Other Receivables Receivables are recognised and carried at original invoice amount less a provision of impairment. Trade receivables are generally settled within 30 days. A provision for impairment is made when there is objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identified. h) Investments and Other Financial Assets Financial assets are classified as either financial assets at fair value through comprehensive income, loans and receivables, held-to-maturity investments, or available-for-sale investments. The classification depends on the purpose for which the investments were acquired. When financial assets are recognised initially, they are measured at fair value plus directly attributable transaction costs. The Company determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. The purchase and sale of financial assets are recognised on the trade date i.e. the date that the Company commits to purchase the asset. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in statement of profit or loss and other comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 11
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) h) Investments and Other Financial Assets (Cont.) Available-for-sale investments Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in statement of profit or loss and other comprehensive income. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair value is determined using valuation techniques, such as discounted cash flow analysis or by reference to the investments underlying net assets. Where fair value cannot be reliably measured investments are measured at cost. The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in statement of profit or loss and other comprehensive income is removed from equity and recognised in the statement of profit or loss and other comprehensive income. Impairment losses recognised in the statement of profit or loss and other comprehensive income on equity instruments classified as available-for-sale are not reversed through the statement of profit or loss and other comprehensive income. i) Income Tax and Other Taxes Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities on the current year s taxable income at the tax rates enacted by the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which deductible temporary differences and the carry-forward of unused tax credit can be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Income taxes relating to items recognised directly in equity are recognised in equity and not in statement of profit or loss and other comprehensive income. 12
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 1: Statement of Accounting Policies (Cont.) i) Income Tax and Other Taxes (Cont.) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except: o when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable; and o receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating cash flows. j) Contributed Equity Issued capital is recognised at the fair value of the consideration received by the Company. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from proceeds. k) Segment Reporting A business segment is a distinguishable component of the entity that is engaged in providing differentiated products or services. l) Impairment Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. Non-financial assets that suffered impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. m) Associates Associates are those entities, other than partnerships, over which the Company exercises significant influence but not control. In the financial statements investments in associates are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The Company s equity accounted share of the associates' net profit or loss is recognised in the statement of profit or loss and other comprehensive income from the date significant influence commences until the date significant influence ceases. The Company s equity accounted share of movements in accumulated losses from changes in accounting policies by associates is recognised directly in accumulated losses (note 10). The Company s equity accounted share of other movements in reserves of associates is recognised directly in reserves. 13
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 2: Dividends No dividends have been declared, paid or provided in the year ended 30 June 2013. Franking credits available is $233,742 (2012: $234,937). Note 3: Auditors Remuneration 2013 2012 $ $ The auditor of the Company is HLB Mann Judd. The auditor received no other benefits. Amounts received or due and receivable by the auditor of the Company: Auditing or reviewing the financial report 19,000 19,000 Note 4: Income Tax (a) Income tax benefit Accounting profit before income tax 4,468 697,272 Income tax benefit at the statutory income tax rate of 30% 1,340 209,182 Deferred tax not recognised (1,340) (209,182) Income tax expense reported in the statement of profit or loss and other comprehensive income - - (b) Deferred income tax Deferred income tax at 30 June related to the following items: Deferred tax assets: - Costs of capital raising 5,905 9,921 - Provision and accrued expenses 4,012 3,863 - Unrealised loss on investments 51,653 61,530 - Carried forward losses 1,308,588 1,710,362 - Deferred tax assets not recognised (1,370,158) (1,785,676) - - 14
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 5: Trade and Other Receivables 2013 2012 $ $ Current Receivables - 7,864 Other assets 814 944 814 8,808 Receivables Receivables are non-interest bearing and are generally on 30 day terms. Note 6: Financial Assets Available-For-Sale Current Listed shares at market value 26,660 - Non-current Listed shares at market value - 58,203 (a) Listed shares at market value The carrying value of certain investments classified as Listed shares at market value has been determined by using the fair value approach. The closing bid-price was determined to be an appropriate indication for the fair value of the investment. Note 7: Trade and Other Payables Current Sundry creditors and accruals 15,760 13,249 Sundry creditors and accruals are non-interest bearing and are normally settled on 30 day terms. Note 8: Loans Payable Current: Loan payable related entity - 699,314 The loan payable was repaid during the period via a dividend declared and paid on 30 November 2012 and the return of capital completed at 31 December 2012 by Wind Corporation Australia Pty Limited. 15
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 9: Contributed Equity Ordinary shares Balance at the beginning of the year 2013 2012 No of Shares $ No of Shares $ 73,052,389 7,430,432 73,052,389 7,430,432 Return of capital - (3,360,410) - - Transaction costs of return of capital - (14,916) - - Balance at the end of the year 73,052,389 4,055,106 73,052,389 7,430,432 A reduction of share capital of 4.6 cents per share was approved by shareholders at a general meeting held on 13 August 2012 and paid on 31 August 2012. Note 10: Accumulated Losses 2013 2012 $ $ Balance at the beginning of the year (3,884,326) (4,581,598) Net profit from operating activities 4,468 697,272 Balance at the end of the year (3,879,858) (3,884,326) Note 11: Other Reserves Year ended 30 June 2013: Share options Market value Total other reserve reserve reserves $ $ $ Balance at the beginning of the year 89,339-89,339 Decrease in fair value of available-for-sale investments - (7,742) (7,742) Share of options reserve of associated entity 1,570-1,570 Balance at the end of the year 90,909 (7,742) 83,167 Year ended 30 June 2012: Balance at the beginning of the year 63,609-63,609 Share of options reserve of associated entity 25,730-25,730 Balance at the end of the year 89,339-89,339 Market Value Reserve The market value reserve is used to record increments and decrements in the fair value of available-forsale financial assets to the extent that they offset one another. 16
Note 11: Other Reserves (Cont.) CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Share Options Reserve The share option reserve includes a share of the options reserve of equity accounted investments and is used to record the value of options issued to the investment manager, CVC Managers Pty Limited. As at 30 June 2013, the following options are outstanding: Expiry date Option value Number of options Exercise price 11 December 2016 5.85 cents 28,343 17.08 cents 30 April 2017 5.80 cents 36,279 16.90 cents 31 May 2017 5.90 cents 459,746 17.26 cents 30 June 2017 5.95 cents 316,676 17.44 cents 31 July 2017 5.78 cents 168,847 16.81 cents 31 August 2017 5.79 cents 134,183 16.88 cents 30 September 2017 5.52 cents 336,301 15.87 cents 31 October 2017 5.46 cents 141,408 15.65 cents 30 November 2017 4.93 cents 736,375 13.69 cents 31 December 2017 5.49 cents 87,629 15.74 cents 31 January 2018 5.05 cents 138,115 14.12 cents 29 February 2018 5.09 cents 198,865 13.44 cents 31 March 2018 5.15 cents 61,800 12.90 cents 31 May 2018 4.91 cents 9,268 12.07 cents 30 June 2018 7.83 cents 34,091 15.53 cents 31 December 2018 4.96 cents 9,357 11.43 cents 28 February 2019 4.49 cents 42,884 11.28 cents 31 March 2019 4.75 cents 27,606 12.19 cents 30 April 2019 4.32 cents 71,977 11.03 cents 30 June 2019 4.49 cents 50,801 11.64 cents 31 July 2019 3.76 cents 20,342 10.59 cents 31 October 2019 4.68 cents 19,544 11.69 cents 28 February 2020 5.19 cents 8,555 13.46 cents 31 March 2020 4.99 cents 9,519 11.63 cents 30 April 2020 4.85 cents 9,785 11.19 cents 31 May 2020 4.99 cents 9,729 11.28 cents 31 August 2020 4.68 cents 6,217 10.31 cents 30 November 2020 4.07 cents 9,732 8.10 cents 3,183,974 Note 12: Financial Instruments The Company s activities expose it to a variety of financial risks: market risk (including market price risk and interest rate risk), credit risk and liquidity risk. The Company s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and price risk. The responsibility for operational risk management resides with the Board of Directors who seeks to manage the exposure of the Company. There have been no significant changes in the types of financial risks; or the Company s risk management program (including methods used to measure the risks) since the prior year. 17
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 12: Financial Instruments (Cont.) (a) Interest rate risk The Company s exposure to interest rate risks of financial assets and liabilities both recognised and unrecognised at the reporting date are as follows: Notes Floating Fixed interest rate Non- Total interest rate 1 year or less 1 to 5 years interest bearing $ $ $ $ $ 2013 Financial assets Cash and cash equivalents 14 246,701 - - - 246,701 Trade and other receivables 5 - - - 814 814 Financial liabilities Trade and other payables 7 - - - 15,760 15,760 2012 Financial assets Cash and cash equivalents 14 185,364 4,095,633 - - 4,280,997 Trade and other receivables 5 - - - 8,808 8,808 Financial liabilities Trade and other payables 7 - - - 13,249 13,249 Loans payables 8 - - - 699,314 699,314 The Company holds a significant amount of cash balances which are exposed to movements in interest rates. To reduce the risk the Company typically deposits uncommitted cash in high interest rate accounts with financial institutions. Receivables and payables are non-interest bearing. Sensitivity At reporting date, if interest rates had been 50 basis points lower/(2012: 50 basis points lower) and the other variables were held constant, then the impact of the Company would be: Decrease of 50 bp Decrease of 50 bp 2013 2012 $ $ Net loss (5,693) (12,446) Equity decrease (5,693) (12,446) 18
Note 12: Financial Instruments (Cont.) (b) Market Price Risk CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 The Company has investments in listed securities which could be adversely affected if general equity market values were to decline. The Company does not hedge its exposure to the risk of a general decline in equity market values, believing that such strategies are not cost-effective. Sensitivity At reporting date, if equity prices had been 10% higher/(lower) while all other variables were held constant the impact of the Company would be: Increase of 10% Decrease of 10% $ $ 2013 Net profit/(loss) - - Equity increase/(decrease) 2,666 (2,666) 2012 Net profit/(loss) 5,820 (5,820) Equity increase/(decrease) 5,820 (5,820) (c) Credit Risk Exposure Credit risk refers to the loss that the Company would incur if a debtor or a counterparty fails to perform under its obligations. The carrying amounts of financial assets recognised in the statement of financial position best represent the Company s maximum exposure to credit risk at reporting date. The Company seeks to limit its exposure to credit risk by performing appropriate background investigations on counterparties before entering into arrangements with them. At reporting date, the Company s significant exposure of credit risk is its deposits with financial institutions, which is mitigated by the requirement that deposits are only held with institutions with an investment grade credit rating. (d) Liquidity Risk The Company manages liquidity risk by maintaining sufficient cash balances, holding liquid investments that could be realised to meet commitments. The Company continuously monitors forecast and actual cash flows and matches the maturity profiles of financial assets and liabilities. The following table details the Company s expected maturity for its contractual liabilities: Less than 6 months 6 months to 1 to 5 years Total 1 year $ $ $ $ 2013 Trade and other payables 15,760 - - 15,760 2012 Trade and other payables 13,249 - - 13,249 Loans payable 699,314 - - 699,314 19
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 12: Financial Instruments (Cont.) (e) Fair Value of Financial Assets and Liabilities The Company uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 the fair value is calculated using quoted prices in active markets. Level 2 the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset, either directly (as prices) or indirectly (derived from prices). Level 3 the fair value is estimated using inputs for the asset that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Year ended 30 June 2013 Quoted market price (Level 1) Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level 3) Total $ $ $ $ Financial assets Available-for-sale investments Listed shares at market value 26,660 - - 26,660 Year ended 30 June 2012 Financial assets Available-for-sale investments Listed shares at market value 58,203 - - 58,203 20
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 13: Related Parties The compensation of the key management personnel of the Company was as follows: (a) Total of the income paid or payable or otherwise made available, to all key management personnel of the Company directly or indirectly from the entity or any related party: 2013 2012 $ $ Mr P Toyne (resigned 16 September 2011) Base salary - 1,376 Superannuation - 124-1,500 The Company does not have a remuneration committee. Notwithstanding the objective is to continue the policy of paying sufficient competitive compensation to attract key management personnel with the necessary skills to manage the Company. (b) (c) No retirement allowances were paid to key management personnel of the Company. Except as detailed above, no other amount of remuneration is paid to key management personnel in connection with the management of the affairs of the Company. Directors Persons holding the positions of Directors of CVC Sustainable Investments No. 2 Limited during the financial year are: V R Gould, A D H Beard, J D Read and M Fogarty. Transactions with related parties The Company pays management fees to its investment manager calculated at 2.5% of the net assets of the Company as at the end of the previous financial year. Following the return of capital completed on 31 August 2012 of $3,360,410 CVC Managers Pty Limited agreed to revise the management fees based on the net assets of the Company immediately following the return of capital. During the year fees of $20,568 (2012: $72,811) were paid to CVC Managers Pty Limited. Messrs Beard and Gould were Directors of CVC Managers Pty Limited during the year. CVC Managers Pty Limited is a controlled entity of CVC Limited. The loan payable to Wind Corporation Australia Pty Limited was fully repaid during the year via dividend of $26,001 declared and paid on 30 November 2012, and the return of capital of $673,313 completed at 31 December 2012. 21
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 14: Notes to the Statement of Cash Flows Reconciliation of Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June 2013: 2013 2012 $ $ Cash at bank 246,701 4,280,997 Cash and cash equivalents 246,701 4,280,997 Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amount of cash and cash equivalents represents fair value. Reconciliation of net profit after income tax to net cash from operations Net profit 4,468 697,272 Adjustments for Net loss on sale of equity investment 1,692 - Equity accounted loss - 126,948 Impairment recoveries - (815,916) Change in operating assets and liabilities: Movements in trade and other receivables 7,706 (3,091) Movements in trade and other payables (9,090) 2,273 Movements in sundry creditors and accruals - 77 Cash flows provided by operating activities 4,776 7,563 22
CVC SUSTAINABLE INVESTMENTS NO. 2 LIMITED Notes to the Financial Statements (Cont.) For the Year Ended 30 June 2013 Note 15: Other Information The Company was incorporated on 7 th December 2006. The Company is registered and domiciled in Australia. Its registered office and principal place of business are at Level 42, 259 George Street, Sydney, NSW 2000. Note 16: Events Occurring after Reporting Date Subsequent to year end the Company sold its investment in The Environmental Group Limited for proceeds of $34,187. Other than as set out above there are no other matters or circumstances that 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. Note 17: Critical Accounting Estimates and Judgements The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) (b) Available-for-sale investments An impairment recovery has been raised against certain available-for-sale investments that have a carrying value of $26,660. The recoverable amount has been assessed in note 6. Absence of active market In calculating the fair value of The Environmental Group Limited (EGL) the Company has determined that an active market does not exist because EGL does not trade on a daily basis; each trade that is executed, is small in size and the market capitalization is small such that larger institutions do not hold significant shareholdings. However the active market in small amounts of trading does provide a guide for valuation. The share price of EGL at 30 June 2013 was 3.1 cents and the Company has determined that this is the best indicator of value for EGL. These factors have been used in determining the value at note 6. 23