Interim Financial Statements - Adexumadexum.com.au › wp-content › uploads › 2015 › 11 › Adexum-Capital-L… · Net cash (used in)/provided by financing activities 13,268

FINANCIAL STATEMENTS

ADEXUM CAPITAL LIMITED ABN 28 156 499 651

Adexum Capital Limited ABN 28 156 499 651

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Director’s Report Your directors present their report on the consolidated group for the financial year ended 30 June 2015.

Directors

The names of the directors in office at any time during, or since the end of, the year are:

Michael Carapiet - Chairman

Michael Triguboff – Non-Executive Director

John Murphy – Managing Director

Greg Robertson – Executive Director

Directors have been in office since the start of the financial year to the date of this report.

Review of Operations

The consolidated profit of the consolidated group for the financial year after providing for income tax amounted to

$21.958 million. This result reflects the significant fair value adjustment to the carrying value of the investment in

Enviropacific Services Pty Ltd (“EPS”).

The operations of the consolidated group in the identification, making and management of growth capital investments

commenced during the financial year following the equity fund raising. During the year the group considered in excess

of 200 potential investment opportunities, however, based on our disciplined approach to consideration of potential

investments, ultimately only one investment (EPS) was made. The Group has developed a strong pipeline of potential

investment opportunities and further investments are expected to be made in due course.

The consolidated profit before tax principally reflects the (unrealised) uplift in value in the EPS investment, while the

operating cash loss reflects the early stage of the group’s operations.

Significant Changes in the State of Affairs

Completion of the equity fundraising and commencement of investment activities were the significant changes in the

consolidated group’s state of affairs that occurred during the financial year.

Principal Activities

The principal activities of the consolidated group during the financial year were assessment of investment opportunities

and making and managing the investment in EPS.

No significant change in the nature of these activities occurred during the year.

Events Subsequent to the End of the Reporting Period

No matters or circumstances have arisen since the end of the financial year which significantly affected or may

significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the

consolidated group in future financial years.

Likely Developments and Expected Results of Operations

The Company is currently undertaking exclusive due diligence on a potential second investment. If this proves

satisfactory and a binding commitment is made to invest, a call will be made on shareholders for the remaining fifty

cents per share. Other than this potential investment, any likely developments in the operations of the consolidated

group and the expected results of those operations in future financial years have not been included in this report as the

inclusion of such information is likely to result in unreasonable prejudice to the consolidated group.

Environmental Regulation

The consolidated group’s operations are not regulated by any significant environmental regulation under a law of the

Commonwealth or of a state or territory.

Dividends

No dividends were paid or declared since the start of the financial year.


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Options

No options over issued shares or interests in the company or a controlled entity were granted during or since the end

of the financial year and there were no options outstanding at the date of this report.

No shares were issued during or since the end of the year as a result of the exercise of an option over unissued

shares or interests.

Indemnification of Officers and Auditors

The Company has provided indemnities and maintains insurance for the persons who are or have been an officer of

the consolidated group. No indemnities have been given or insurance premiums paid, during or since the end of the

financial year, for the persons who are or have been an auditor of the consolidated group

Proceedings on Behalf of Company

No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any

proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or

any part of those proceedings.

The company was not a party to any such proceedings during the year.

Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under s 307C of the Corporations Act 2001 is set out on

page 4.

This directors’ report is signed in accordance with a resolution of the Board of Directors:

Michael Carapiet

Chairman

Dated this 1st day of September 2015

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#issuehttp://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s601waa.html#interest


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HALL CHADWICK

Level 40, 2 Park Street

Sydney NSW 2000

Drew Townsend

Partner

Dated: 1 September 2015

ADEXUM CAPITAL LIMITED ACN 156 499 651

AND CONTROLLED ENTITIES

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

TO THE DIRECTORS OF ADEXUM CAPITAL LIMITED AND CONTROLLED ENTITIES

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015 there have been no contraventions of: i. the auditor independence requirements as set out in the Corporations Act 2001 in relation

to the audit; and

ii. any applicable code of professional conduct in relation to the audit.


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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015

Note Consolidated Consolidated

2015 2014

$000 $000

Revenue

2

Increase in value of Financial assets

2 39,934

Interest income 2 424 -

Expenses

Accounting and Audit fees 7 39 -

Acquisition costs of investments 2 424

Directors’ fees 2 599 -

Insurance 44 -

Legal fees 7 -

Marketing expenses 12 -

Performance provision 2 5,488

Share registry 15 -

Other expenses 9 6

Profit (Loss)before income tax 33,721 (6)

Income tax (expense)/benefit 3 (11,763) -

Pro\fit (Loss)for the period after tax 21,958 (6)

Other comprehensive income - -

Total comprehensive income for the period 21,958 (6)

Net profit attributable to:

– members of the parent entity 21,958 (6)

21,958 (6)

The accompanying notes form part of these financial statements.


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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

Consolidated Consolidated

2015

2014

2014

$000 $000

ASSETS

CURRENT ASSETS

Cash and cash equivalents 8 6,928 10,397

Trade receivables and prepayments 9 30 -

TOTAL CURRENT ASSETS 6,958 10,397

NON-CURRENT ASSETS

Financial assets 4 59,954 -

Intangible assets 20 20

Deferred tax assets 12 533 -

TOTAL NON-CURRENT ASSETS 60,507 20

TOTAL ASSETS 67,465 10,417

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 11 34 1

Other financial liabilities 11 4,004 10,375

TOTAL CURRENT LIABILITIES 4,038 10,376

NON CURRENT LIABILITES

Performance provision 2(a) 5,488 -

Deferred tax liability 2(a) 11,980 -

TOTAL NON-CURRENT LIABILITIES 17,468 -

TOTAL LIABILITIES 21,506 10,376

NET ASSETS 45,959 41

EQUITY

Issued capital 13 24,009 50

Retained earnings 21,950 (9)

TOTAL EQUITY 45,959 41



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015

Company Note Ordinary Share Capital Retained Earnings Total

$000 $000 $000

Balance at 1 July 2013 50 (3) 47

Comprehensive Income (5) (5)

Transactions with owners, in their capacity as

owners, and other transfers

Share Buyback

Share Issue

(50)

50

Balance at 30 June 2014 50 (8) 42

Comprehensive income

Profit for the period 21,958 21,958

Total comprehensive income for the period

21,958 21,958

Transactions with owners, in their capacity as

owners, and other transfers

Shares issued during the period 25,139

Costs taken to issued capital, net of tax (1,180)

Total transactions with owners and other

transfers

23,959

23,959

Balance at 30 June 2015 24,009 21,950 45,959



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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED

30 JUNE 2015

Note Consolidated Consolidated

2015 2014

$000 $000

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees (721) (5)

Interest received 424 -

Net cash from (used in) operating activities 15 (297) (5)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial assets at fair value through profit and loss (16,440) -

Net cash used in investing activities (16,440) -

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 14,320 10,375

Payments relating to costs of issue of shares (1,052) -

Net cash (used in)/provided by financing activities 13,268 10,375

Net increase (decrease) in cash held (3,469) 10,370

Cash and cash equivalents at beginning of period 10,397 27

Cash and cash equivalents at end of period 8 6,928 10,397



NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2015

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Note 1: Summary of Significant Accounting Policies

Basis of Preparation

These general purpose financial statements have been prepared in accordance with requirements of the

Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting

Standard Board and International Financial Reporting Standards as issued by the International Accounting

Standards Board. The Company is a for-profit entity for financial reporting purposes under Australian Accounting

Standards.

These financial statements were authorised for issue on 1 September 2015.

Accounting Policies

Except for cash flow information, the financial statements have been prepared on an accruals basis and are

based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current

assets, financial assets and financial liabilities.

a. Principles of Consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Adexum

Capital Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent

controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its

involvement with the entity and has the ability to affect those returns through its power over the entity. A list of

the subsidiaries is provided in Note 10.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the

Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued

from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on

transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries are

changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the

Group.

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-

controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests

in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair

value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial

recognition, non-controlling interests are attributed their share of profit or loss and each component of other

comprehensive income. Non-controlling interests are shown separately within the equity section of the statement

of financial position and statement of comprehensive income.

Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving

entities or businesses under common control. The business combination will be accounted for from the date that

control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent

liabilities) assumed is recognised (subject to certain limited exceptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a

contingent consideration arrangement is also included. Subsequent to initial recognition, contingent

consideration classified as equity is not remeasured and its subsequent settlement is accounted for within

equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair

value, recognising any change to fair value in profit or loss, unless the change in value can be identified as

existing at acquisition date.

All transaction costs incurred in relation to business combinations, other than those associated with the issue of

a financial instrument, are recognised as expenses in profit or loss when incurred.

The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

Goodwill

Goodwill is carried at cost less any accumulated impairment losses.

The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds a less than 100%

interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in



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most circumstances to measure the non-controlling interest in the acquiree either at fair value (“full goodwill

method”) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets

(“proportionate interest method”). In such circumstances, the Group determines which method to adopt for each

acquisition and this is stated in the respective notes to these financial statements disclosing the business

combination.

Under the full goodwill method, the fair value of the non-controlling interests is determined using valuation

techniques which make the maximum use of market information where available. Under this method, goodwill

attributable to the non-controlling interest is recognised in the consolidated financial statements.

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is

included in investments in associates.

Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of

cash-generating units, which represent the lowest level at which goodwill is monitored but where such level is

not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount

of goodwill related to the entity sold.

Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as

equity transactions and do not affect the carrying amounts of goodwill.

b. Investments

The Company has been classified under AASB 2013-5 as an Investment Entity whose business purpose is to

invest funds solely for returns via capital appreciation and/or investment returns. As the Company is classified as

an Investment Entity, the portfolio investments have been accounted for at fair value through the profit or loss and

shown as Financial Assets in the Statement of Financial Position. The entity is exempt from consolidating

underlying investees it controls in accordance with AASB 10 Consolidated Financial Statements.

Investments are recognised on a trade date basis and are subject to valuation on an annual basis.

Investments held at fair value through profit or loss are initially recognised at fair value, being acquisition cost.

Transaction costs related to acquisitions are excluded in the determination of fair value, and are expensed in the

period incurred.

Subsequent to initial recognition, all investments held at fair value will be reviewed at the end of each financial

period and accounted for at fair value, with changes to such values recognised in the profit or loss.

The changes in fair value recognised in profit and loss also reflect the impact of any changes in deferred tax

liabilities and the provision for future performance distributions related to movements in unrealised gains or losses

on investments.

c. Fair Value

The Company measures its assets and liabilities at fair value on either a recurring or non-recurring basis,

depending on the requirements of the applicable Accounting Standard.

Fair value is the price the Company would receive to sell an asset or would have to pay to transfer a liability in an

orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the

measurement date.

Fair value is a market-based measure, and the closest equivalent observable market pricing information is used to

determine fair value. Adjustments to market values may be made having regard to the characteristics of the

specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are

determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible,

the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e.

the market with the greatest volume and level of activity for the asset or liability) or in the absence of such a

market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market

that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability,

after taking into account transaction costs).

The fair value of liabilities and the entity’s own equity may be valued, where there is no observable market price in

relation to the transfer of such financial instruments, by reference to observable market information where such

instruments are held as assets. Where this information is not available, other valuation techniques are adopted

and, where significant, are detailed in the respective note to the financial statements.



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d. Taxation

The income tax expense for the year comprises current income tax expense and deferred tax expense.

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities /

(assets) are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during

the year as well as unused tax losses. No deferred income tax is recognised from the initial recognition of an

asset or liability, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the

asset is realised or the liability is settled and their measurement also reflects the manner in which management

expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets related to temporary differences and unused tax losses are recognised only to the extent it is

probable that future taxable profit will be available against which the benefits of such tax assets can be utilised.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that

net settlement or simultaneous settlement of the respective asset and liability will occur. Deferred tax assets and

liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and

liabilities relate to income taxes levies by the same taxation authority on either the same taxable entity or deferent

taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the

respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or

liabilities are expected to be recovered or settled.

e. Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual

provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to

either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is

classified “at fair value through profit or loss”, in which case transaction costs are recognised as expenses in profit

or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method,

or cost.

Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial

recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative

amortisation of the difference between that initial amount and the maturity amount calculated using the effective

interest method.

The effective interest method is used to allocate interest income or interest expense over the relevant period and

is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction

costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the

contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability.

Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a

consequential recognition of an income or expense item in profit or loss.

(i) Financial assets at fair value through profit or loss

Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of

short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid

an accounting mismatch or to enable performance evaluation where a company of financial assets is managed by

key management personnel on a fair value basis in accordance with a documented risk management or

investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount being

included in profit or loss.

(ii) Loan and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or

loss through the amortisation process and when the financial asset is derecognised.



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(iii) Financial liabilities

Financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses

are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

Impairment

A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective

evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact

on the estimated future cash flows of the financial asset(s).

Impairment losses are recognised in the profit or loss immediately.

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be

impaired. The assessment will include the consideration of external and internal sources of information. If such an

indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset,

to the asset’s carrying amount. Any excess of the carrying amount over its recoverable amount is recognised

immediately in the profit or loss.

Derecognition

Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is

transferred to another party whereby the entity no longer has any significant continuing involvement in the risks

and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are

discharged, cancelled or have expired. The difference between the carrying amount of the financial liability

extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-

cash assets or liabilities assumed, is recognised in profit or loss.

f. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short term

highly liquid investments with original maturities of 3 months or less.

g. Trade Receivables and prepayments

Trade receivables and prepayments include amounts due from government authorities and prepayments for

services performed in the ordinary course of business. Receivables expected to be collected (or utilised) within 12

months of the end of the reporting period are classifies as current assets.

Trade receivables and prepayments are initially recognised at fair value and subsequently measured at amortised

cost using the effective interest method, less any provision for impairment.

h. Trade and Other Payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid

at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid

within 30 days of recognition of the liability.

i. Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST

incurred is not recoverable from the Australian Taxation Office (ATO).As the entity’s business is making

investments in financial assets, supplies to the entity are generally treated as input taxed and accordingly

revenues and expenses of the entity shown in the financial statements are on a GST inclusive basis.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of

GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of

financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing

activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in

receipts from customers or payments to suppliers.

j. Interest Income

Interest revenue is recognised using the effective interest method.

k. Rounding of Amounts

The entity has applied the relief available to it under ASCI Class Order 98/100. Accordingly, amounts in the

financial statements and directors’ report have been rounded to the nearest $1,000.



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l. Critical Accounting Estimates and Judgements

The directors evaluate estimates and judgements incorporated into the financial statements based on historical

knowledge and best available current information. Estimates assume a reasonable expectation of future events

and are based on current trends and economic data, obtained both externally and within the Company. Detailed

information about each of these estimates and judgements is included in Note 19 in the financial statements.

Key estimates

(i) Fair Value Assessment

Critical judgements are made by the Group in respect of the fair values of the investment in EPS. The fair value of

the investment is reviewed regularly by management after taking into account the use of discount rates

appropriate for the Group and forecast future cash flows, using generally accepted market practices. If there is

any change in these, the fair value of the investment may differ. Major assumptions used in valuation of the

investments are disclosed in Note 19.

m. New Accounting Standards for Application in Future Periods

Accounting standards and interpretations issued by the AASB that are not yet mandatorily applicable to the

Group, together with the an assessment of the potential impact of such pronouncements on the Group when

adopted in future periods, are discussed below:

AASB 9 : Financial Instruments and associated Amending Standards (applicable to annual reporting periods

beginning on or after 1 January 2018)

The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and

includes revised requirements for the classification and measurement of financial instruments, revised recognition

and derecognition requirements for financial instruments and simplified requirements for hedge accounting:

The key changes that may affect the Group on initial application include certain simplifications to the classification

of financial assets.

This Standard is not expected to significantly impact the Company’s financial statements.

Note 2: Revenue and Profit For The Period

2015 2014

The following revenue and expense items are relevant in explaining the

financial performance for the interim period:

$000 $000

Fair value gains on financial assets at fair value through profit or loss 39,934 -

Interest Income 424 -

Acquisition Costs (424) -

Directors Fees (599) -

Performance Provision (5,488) -

(a) Fair Value Gain and related Deferred Tax Liability and Performance Provision

During the period, the investment in Enviropacific Services Pty Ltd increased as a result of revaluation of the

carrying amount to fair value. The revaluation contributed profit of $22.466 m, after allowance for deferred tax

liability and after also providing for performance distributions. As noted elsewhere, a performance amount is only

payable on actual realisation of investments.

The valuation methodology used for financial assets is outlined in the Summary of Significant Policies. In applying

this methodology in the current period, a number of market based factors were considered to establish discount

rates of 13.58% and 15.00%. The discount rate of 14.29% (being the mid-point of discount rates of 13.58% to

15.00%) was applied to the forecast future cash flows of Enviropacific Services Pty Ltd, which comprised the EPS

Board approved budget for FY 2016 and EPS management forecasts for FY 2017 and FY 2018. This discount rate

resulted in a present value of $59.954 m being adopted for fair value purposes for Adexum’s 44% interest in

Enviropacific Services Pty Ltd. This value represents the mid-point of the present values of $63.908 m and

$55.999 m respectively, determined using the 13.58% and 15.00% discount rates referred to above.

The Fair Value gain reported in these financial statements was then determined as follows:



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Note 2: Revenue and Profit For The Period

2015 2014

The following revenue and expense items are relevant in explaining the

financial performance for the interim period:

$000 $000

$ 000 $000 $000

Fair Value of Investment 59,954

Less acquisition cost (20,020)

Gross uplift 39,934

Deferred tax liability @30% (11,980)

Uplift after deferred tax 27,954 27,954

Less net other operating loss after tax (514)

Net amount for Performance calculation 27,440

Performance provision @ 20% (5,488) (5,488)

Net fair value gain 22,466

Fair Value Gain reported in consolidated

Statement of Profit and Loss 39,934

Less Performance provision (5,488)

Less Deferred tax liabilities (11,980)

Net fair value gain 22,466

Note 3: Tax Expense

2015 2014

$000 $000

a. The components of tax expense comprise:

Current tax - -

Deferred tax 11,763 -

11,763 -

b. The prima facie tax on profit from ordinary activities before income tax is

reconciled to income tax expense as follows:

Prima facie tax payable on profit from ordinary activities before income tax at

30%

10,117 -

Add: Tax Effect of

- Performance provision not deductible 1,646 -

- Non-allowable items 137 -

Less: Tax Effect of:

- Gains on unrealised investments - -

- Deductions for cost of offer taken to equity - -

- Other deductions - -

Income tax expense (credit) attributable to entity 11,763 -

c. Tax effects of items credited to equity::

Amounts credited to equity related to income tax effect of amounts recognised in equity:

Share Capital 315



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Note 4: Financial Assets

As at

30 June 2015

As at

30 June 2014

$000 $000

Enviropacific Services Pty Ltd 59,954 -

The Group acquired a 44% equity interest in Enviropacific Services Pty Ltd on 31 October 2014 at a cost of $20.020 m.

Of this amount, $16.016 m was paid at settlement and the balance of up to $4.004 m is payable based on EPS’s actual

financial performance in the period to 30 June 2015. As actual performance will exceed the hurdle for payment, this

amount will be payable in full upon completion of EPS’s 2015 audit. At 30 June 2015 this investment was restated to fair

value in accordance with the policy outlined in Notes 1, 2 and 19.

Note 5: Management Expenses and Performance Provision

The Group has an internal investment management function, so that all management expenses are paid directly by the

Group, while a performance amount is payable to Adexum’s Founding Directors (together with any further executive

managers appointed over time), both as outlined below.

a. Management Expenses

The Group pays directly all expenses incurred in the conduct of the business of identifying, making and managing

its investments and in the administration of the group’s affairs, including salaries, directors’ fees, rent, travel,

investment due diligence costs, rent, share registry, insurance, audit, tax and legal fees. No separate or additional

management fee is payable.

b. Performance Provision

The Founding Directors of Adexum, and any further executive management appointed over time (the Performance

Holders), are entitled to a performance amount equal to 20% of any realised gains of Adexum provided

shareholders achieve a minimum 8% per annum pre-tax return based on Adexum’s share capital (after capital

raising costs). The performance amount is payable on preference shares held in the subsidiary of Adexum Capital

Limited through which the Group’s investments are made.

Adexum’s shareholders receive the first 8% p.a. pre-tax returns, the Performance Holders receive the next 2% p.a.

return, and any return above 10% p.a. is shares 80%/20% between Adexum’s shareholders and the Performance

Holders. However, a performance amount will only be payable on the actual realisation of investments, and will not

be paid on any positive revaluations of unrealised investments.

The minimum 8% return to investors is a notional calculation conducted once a year based on audited results to

determine if a performance amount is payable to the Performance Holders . If a performance amount is not payable,

a provision for such amount will nonetheless if recognised in the financial statements in order to match the future

commitment for such dividend to the unrealised gain on investment recognised in such financial statements.

Once a performance amount reflecting the actual result for a financial year has been calculated and paid, it is not

refundable.

No performance amount is payable for the current financial period, however a provision for a future performance

amount has been taken in the period, as outlined in Note 2(a).

Note 6: Key Management Personnel Compensation

The totals of remuneration paid to key management personnel (KMP) of the Group during the year are as follows:

2015 2014

$ 000 $ 000

Directors Fees 599 -

Total 599 -

In addition, directors’ fees totalling $112,500 were paid directly by Enviropacific Services Pty Ltd to the executive directors

for their roles as directors of that company.



Page 16 of 26

Note 7: Auditor’s Remuneration

2015 2014

Remuneration of the auditor for: $000 $000

Auditing or reviewing the financial statements – Hall Chadwick 30 -

Auditing or reviewing the financial statements – Other - 5

Taxation Services – Hall Chadwick 9 -

Taxation services - 1

39 6

Note 8: Cash and Cash equivalents

As at

30 June 2015

As at

30 June 2014

$000 $000

Cash at bank 6,928 10,398

6,928 10,398

Note 9: Trade Receivables and Prepayments

As at

30 June 2015

As at

30 June 2014

$000 $000

CURRENT

Insurance Prepayment 30 -

30 -

Note 10: Interests In Subsidiaries

Information about Principal Subsidiaries

The subsidiaries listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The

proportion of ownership interests held equals the voting rights held by Group. Each subsidiary’s principal place of business is

also its country of incorporation or registration.

Name of

Subsidiary

Principal Place of Business Ownership Interest Held

by the Group

Proportion of Non-

controlling Interests

2015 2014 2015 2014

% % % %

Adexum Pty Ltd Level 40, 2 Park Street Sydney NSW 2000 100 100 - -

Note 11: Trade and Other Payables

As at

30 June 2015

As at

30 June 2014

$000 $000

CURRENT

Trade creditors 34 1

Share Application funds - 10,375

Investment Balance payable (refer Note 4) 4,004 -

Total 4,038 10,376



Page 17 of 26

Note 12: Income Tax

Income tax expense (refer Note 3) 11,763 -

11,763 -

Balance at 1 July

2014

Charged to profit

or loss

Charged directly

to equity

Balance at 30

June 2015

$000 $000 $000 $000

Deferred tax liability

Opening balance - - - -

Tax on unrealised gains - (11,980) - (11,980)

Tax on acquisition assets on opening - - - -

Balance at 30 June 2015 - (11,980) - (11,980)

Deferred tax asset

Opening balance - - - -

Provisions - 6 - 6

Tax losses - 275 - 275

Transaction costs on equity issue - (63) 315 252

Balance at 30 June 2015 - 218 315 533

The benefits of the above temporary differences and unused tax losses will only be realised if the conditions for

deductibility set out in Note 1 occur. These amounts have no expiry date.

Note 13: Issued Capital

Movements in share capital are set out below:

No. (000) $ 000

Opening balance at1 July 2014 100 50

Ordinary shares issued during the period 50,278 25,139

Less Costs directly attributable to the issue of ordinary shares, net of tax (1,180)

Closing balance at 30 June 2015 50,378 24,009

In the period, 50,278,000 shares were issued, paid to 50 cents. Of these shares, 888,000 shares were issued in

satisfaction of selling fees and accordingly the amount of 50 cents per share was paid on 49,390,000 shares. The

amount uncalled is 50 cents per share on all 50,378,000 issued shares, being $25,189,000.

Note 14: Operating Segments

The Company has one operating segment: Investments. It earns revenue from gains on revaluation of financial assets

held at fair value through profit or loss, interest income and other returns from investment. This operating segment is

based on the internal reports that are reviewed and used by the Directors in assessing performance and in determining

the allocation of resources. There is no aggregation of operating segments.

The Company invests in securities recorded as financial assets held at fair value through profit or loss.



Page 18 of 26

Note 15: Cash Flow Information

2015 2014

$000 $000

Reconciliation of Cash Flow from Operation with Profit after Income Tax

Profit after income tax 21,958 (6)

Non-cash flows in profit:

Unrealised fair value gains on financial assets at fair value through profit or loss (39,934)

Performance Provision 5,488

Acquisition costs recognised in cash flows from investing activities 424

(increase)/decrease in trade and other receivables (30)

Increase/(decrease) in trade and other payables 34

Increase/(decrease) in tax liabilities 11,763

Fixed assets written off 1

Cash flow from operating activities (297) (5)

Note 16: Contingent Liabilities

As part of the investment in Enviropacific Services Pty Ltd, the Group may invest a further $5 million into Enviropacific

Services Pty Ltd on the same terms as its initial investment, subject to certain conditions.

Note 17: Events After the End of the Period

No matter or circumstance has arisen since the end of the period that has significantly affected or may significantly

affect the operations of the Company, the result of those operations or the state of affairs of the Company in subsequent

financial years.

Note 18: Financial Risk Management

The Company’s financial instruments consist mainly of cash (cash at bank) and financial assets designated at fair value

through profit or loss, accounts receivable and payable.

The total for each category of financial instrument, measured in accordance with AASB 139: Financial Instruments:

Recognition and Measurement as detailed in the accounting policies to these financial statements are as follows:

Note 2015 2014

$000 $000

Financial assets

Cash and cash equivalents 8 6,928 10,398

Financial assets at fair value through profit or loss 4 59,954 -

Trade and other receivables 9 30 -

Total financial assets 66,912 10,398

Financial liabilities

Financial liabilities at amortised cost 11 4,038 10,376

Total financial liabilities 4,038 10,376



Page 19 of 26


Financial Risk Management Policies

The Company is exposed to a variety of financial risks as a result of its activities. These risks include market risk (price

risk), credit risk, and liquidity risk. The Company’s risk management investment policies, approved by the directors of the

responsible entity, aim to assist the Company in meeting its financial targets while minimising the potential adverse effects

of these risks on the Company’s financial performance.

Specific Financial Risk Exposures and Management

1 Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in

market prices. The Company is currently exposed to the following risks as it presently holds financial instruments measured

at fair value and short-term deposits:

i. Price Risk

The Group is exposed to equity securities price risk. This arises from investments held by the Company and classified in

the statement of financial position as financial assets at fair value through profit or loss.

The Company seeks to manage and constrain market risk by diversification of the investment portfolio across multiple

investments and through use of structural and contractual protections in its investments such as investing in preference

shares or convertible notes, requiring minority protections in investment documentation and maintaining active directorships

in all investment companies.

The portfolio is monitored and analysed by the Directors.

The Company’s net equity exposure is set out in Note 4 of the financial statements.

Sensitivity analysis

The following table illustrates sensitivities to the Company’s exposures to changes in equity valuations. The table indicates

the impact on how profit and equity values reported at the end of the reporting period would have been affected by changes

in the relevant risk variable that management consider to be reasonably possible.

Profit Equity

Period ended 30 June 2015 $000 $000

+/- 5% in equity investments 1,680 1,680

Period ended 30 June 2014

+/- 5% in equity investments Nil Nil

Any impact of movements in the fair value of equity investments recognised through profit and loss is partially

reduced by the corresponding offsetting adjustments in the related deferred tax liability and performance provision.

2 Credit Risk

Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties that

could lead to a financial loss to the Company. The Company’s objective in managing credit risk is to minimise the

credit losses incurred mainly on trade and other receivables.

Credit risk is manage by the Company through maintaining procedures that ensure, to the extent possible, that

counterparties to transactions are of sound credit worthiness. As the Company generally does not have trade

receivables, receivables are usually in the order of prepayments for particular services. The Company ensures

prepayments are only made where the counterparty is reputable and can be relied on to fulfil the service.

The Company’s maximum credit risk exposure at the end of the reporting period in relation to each class of

recognised financial assets is the Carrying amount of those assets as indicated in the statement of financial position.

None of these assets are past due or considered to be impaired.

The cash and cash equivalents are all held with one of Australia’s largest financial institutions.



Page 20 of 26


3 Liquidity Risk

Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise

meeting its obligations related to financial liabilities. As the Company’s major cash outflows are the purchase of

investments, the level of this is managed by the Manager. The Company also manages this risk through the following

mechanisms:

- preparing forward-looking cash flow analyses in relation to operating, investing and financing activities;

- managing credit risk related to financial assets;

- maintaining a clear exit strategy on financial assets; and

- only investing surplus cash with major financial institutions.

Note 19: Fair Value Measurement

a. Fair Value Hierarchy

AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which

categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant

to the measure can be categorised into, as follows:

Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the

entity can access at the measurement date.

Level 2 Measurements based on inputs other than quoted prices included in level 1 that are observable for the asset or

liability, either directly or indirectly.

Level 3 Measurements based on unobservable inputs for the asset or liability.

The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation

techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant

inputs required to measure fair value are observable, the asset or liability is included in level 2. If one or more significant inputs

are not based on observable market data, the asset or liability is included in Level 3.

b. Valuation Techniques

In the absence of an active market for an identical asset or liability, the Company selects and uses one or more valuation

techniques to measure the fair value of the asset or liability. The Company selects a valuation technique that is appropriate in

the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data

primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by

the Company are consistent with one or more of the following valuation approaches:

– Market approach: valuation techniques that use prices and other relevant information generated by market transactions

for identical or similar assets or liabilities.

– Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single

discounted present value.

– Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.

Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset

or liability, including assumptions about risks. When selecting a valuation technique, the Company gives priority to those

techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed

using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and

sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data

is not available and therefore are developed using the best information available about such assumptions are considered

unobservable

The Australian Private Equity and Venture Capital Association (AVCAL) has prepared the International Private Equity and

Venture Capital Guidelines (Valuation Guidelines). The Valuation Guidelines set out recommendations on the valuation of

private equity investments which are intended to represent current best practice. The Directors have referred to the Valuation

Guidelines in order to determine the "fair value" of its financial assets.



Page 21 of 26


The "fair value" of financial assets is assumed to be the price that would be received for the financial asset in an orderly

transaction between knowledgeable and willing but not anxious market participants acting at arm's length given current market

conditions at the relevant measurement date. Fair value for unquoted or illiquid investments is often estimated with reference to

the potential realisation price for the investment or underlying business if it were to be realised or sold in an orderly transaction

at the measurement date, regardless of whether an exit in the near future is anticipated and without reference to amounts

received or paid in a distressed sale.

AVCAL suggests that one or more techniques should be adopted to calculate a private equity investment based on the valuer's

opinion of which method or methods are considered most appropriate given the nature, facts and circumstances of the

particular investment. In considering the appropriateness of each technique, AVCAL suggests the economic substance of the

investment should take priority over the strict legal form.

AVCAL provides guidance on a range of valuation methodologies that are commonly used to determine the value of private

equity investments in the absence of an active market, including:

- price of recent investments;

- earnings multiples;

- revenue multiples;

- net asset values;

- discounted cash flows of the underlying assets

- discounted cash flows of the investment; and

- industry valuation benchmarks.

c. Recurring and Non-recurring Fair Value Measurement Amounts and the Level of the Fair Value Hierarchy within which

the Fair Value Measurements Are Categorised

Fair Value Measurements at 30 June 2015 Using:

Quoted Prices in

Active Markets for

Identical Assets

$000

Significant

Observable Inputs

Other than Level 1

Inputs

$000

Significant

Unobservable Inputs

$000

Description Note (Level 1) (Level 2) (Level 3)

Recurring fair value measurements

Financial assets at fair value through

profit or loss - - 59.954

- - 59,954

Fair Value Measurements at 30 June 2014 Using:

Recurring fair value measurements (Level 1) (Level 2) (Level 3)

Financial assets at fair value through

profit or loss - - -

- - -



Page 22 of 26


d. Valuation Techniques and Inputs Used to Determine Level 3 Fair Values

Fair Value at 30

June 2015

$000

Valuation Techniques Significant Unobservable Inputs

Enviropacific

Services Pty Ltd

59,999 Discounted cash flow Discount rate of 14.29% (being the mid-point of 13.58% to

15.00%) was applied to the forecast future cash flows of

Enviropacific Services Pty Ltd, which comprised the EPS

Board approved budget for FY 2016 and EPS

management forecasts for FY 2017 and FY 2018. These

discount rates resulted in present values of $63.908m and

$55.999 m, respectively for Adexum’s 44% interest in

Enviropacific Services Pty Ltd, with the mid-point of these

valuations (being $59.954 m) being adopted for fair value

purposes.

There were no changes during the period in the valuation techniques used by the Company to determine Level 3 fair values.

e Sensitivity Information

The relationships between the significant unobservable inputs and the fair value are as follows:

Inputs Impact on Fair Value from

Increase in Input

Impact on Fair Value from

Decrease in Input

Discount rate used (14.29%) used to

determine present value of cash flows

Increase in discount rate to 15%

would reduce fair value of

investment to $55.999m

Decrease in discount rate to 13.58%

would increase fair value of

investment to $63.908 m

There were no significant interrelationships between unobservable inputs except as indicated above.

f Reconciliation of Recurring Fair Value Measurement Amounts

(Level 3)

Financial Assets

$000

Opening balance -

Additions/purchases made during the period 20,020

Gains and losses recognised in profit or loss (before tax) 39,934

Closing balance 59,954

Note 20: Related Party Transactions

Related Parties

The Group’s main related parties are as follows:

a. Entities exercising control over the Group

Adexum Capital Limited is the ultimate parent entity of the Group. No shareholder exercises control over the Group.

b. Key management personnel

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity,

directly or indirectly, including any director (whether executive or otherwise) of that entity, is considered key

management personnel.

The key management personnel for the Group are the Founding Directors – Michael Carapiet (Non-executive

Chairman), Michael Triguboff (Non-executive director), John Murphy (Managing Director) and Greg Robertson

(Executive Director). For details of disclosures relating to key management personnel, refer to Note 6.



Page 23 of 26

Note 20: Related Party Transactions

c. Entities subject to significant influence by the Group

An entity which has the power to participate in the financial and operating policy decisions of an entity, but does not

have control over those policies, is an entity which holds significant influence. Significant influence may be gained

by share ownership, statute or agreement.

Enviropacific Services Pty Limited is an entity over which the Group exercises significant influence by holding 44%

voting power in proportion to ownership of Enviropacific Services Pty Limited’s shares, and by virtue of certain

rights held under the Enviropacific Shareholders Agreement.

d. Joint ventures accounted for under the equity method

The Group has a no interest in any joint venture arrangements.

e. Other related parties

Other related parties include close family members of key management personnel and entities that are controlled or

jointly controlled by those key management personnel, individually or collectively with their close family members.

f. Transactions with related parties

Transactions between related parties are on normal commercial terms and conditions no more favourable than

those available to other parties unless otherwise stated. The following transactions occurred with related parties.

Note Consolidated Group

2015 2014

$ 000 $ 000

Purchase of goods and services

A company associated with Michael Triguboff provided services

related to the production of the Adexum Information Memorandum 13 -

A company associated with Greg Robertson provided services related

to the development and maintenance of the Adexum web site. 6 -

Total 19 -

Note 21: Capital And Leasing Commitments

Note Consolidated Group

2015 2014

$ $

The Group did not have any financial or operating lease commitments at any time during the period.

Note 22: Company Details

The registered office and principal place of business of the company is:

Level 40

2 Park Street

Sydney NSW 2000


Page 24 of 26

DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Adexum Capital Limited, the directors of the Company declare that:

1. The financial statements and notes, as set out on pages 5 to 24, are in accordance with the Corporations Act

2001, and:

a. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial

statements, constitutes compliance with International Financial Reporting Standards (IFRS); and

b. give a true and fair view of the financial position as at 30 June 2015 and of the performance for the period

ended on that date.

2. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts

as and when they become due and payable.

Michael Carapiet

Chairman

John Murphy

Managing Director

Dated this1st day of September 2015


Page 25 of 26

ADEXUM CAPITAL LIMITED ACN 156 499 651

AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADEXUM CAPITAL LIMITED AND CONTROLLED ENTITIES

Report on the Financial Report

We have audited the accompanying financial report of Adexum Capital Limited, which

comprises the consolidated statement of financial position as at 30 June 2015, the

consolidated statement of profit or loss and other comprehensive income, the consolidated

statement of changes in equity and the consolidated statement of cash flows for the year

then ended, notes comprising a summary of significant accounting policies and other

explanatory information and the directors’ declaration of the consolidated entity comprising

the company and the entities it controlled at the year’s end.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that

gives a true and fair view in accordance with Australian Accounting Standards and the

Corporations Act 2001 and for such internal control as the directors determine is necessary

to enable the preparation of the financial report that is free from material misstatement,

whether due to fraud or error. In Note 1, the directors also state, in accordance with

Accounting Standard AASB 101: Presentation of Financial Statements, that the financial

statements comply with International Financial Reporting Standards (IFRS).

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We

conducted our audit in accordance with Australian Auditing Standards. Those standards

require that we comply with relevant ethical requirements relating to audit engagements

and plan and perform the audit to obtain reasonable assurance whether the financial report

is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial report. The procedures selected depend on the auditor’s

judgement, including the assessment of the risks of material misstatement of the financial

report, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the

financial report in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control.An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by the directors, as

well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the

Corporations Act 2001.


Page 26 of 26

Auditor’s Opinion

In our opinion:

a. the financial report of Adexum Capital Limited is in accordance with the Corporations

Act 2001, including:

i. giving a true and fair view of the entity’s financial position as at 30 June 2015

and of its performance for the year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations

Regulations 2001; and

b. the financial report also complies with International Financial Reporting Standards as

disclosed in Note 1.

HALL CHADWICK

Level 40, 2 Park Street

Sydney NSW 2000

Drew Townsend

Partner

Dated: 1 September 2015

Documents

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