Clime Investment Management Limited2016 Annual ReportIntegrityTransparencyConviction The 2016 financial year has seen the company steady itself on its journey from a pure value-focused equity boutique into offering wider asset allocation choices to our clients.$610min gross funds under management$3.01mdividends to shareholders$4.1mcash in the bank Chairman’s Report
About Clime Investment Management
Economic Commentary
Investment Management
Report from the Board
Director’s Report
Auditor’s Independence Declaration
Corporate Governance Statement
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
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Contents
2 | C I W 2 0 1 6 A N N U A L R E P O R T
The 2016 year has been significant for a number of reasons. Headline results can be
viewed as disappointing when compared with the previous financial year, yet the bottom
line has little to do with the underlying core business of investment management.
The core business pre-
tax
from
contribution
investment management
only fell by just over 10%
fees
before performance
and abnormal items. This
was the result of challenging
investment
performance
traditional equity
in our
markets and reluctance of clients and investors
to commit additional funds to offset withdrawals
for pensions while there was such uncertainty
and market volatility. Our sales and marketing
team did an excellent job in generally matching
outflows with new funds and market movements
provided the downward pressure on the closing
funds under management in the final month of the
financial year.
StocksInValue became a wholly owned subsidiary
at the end of last financial year and we have had
the full benefit of its contribution in the 2015/16
financial year. This service plays a valuable role
in expanding our service offering to clients and
investment management prospects and will see
its offering to subscribers widened over the next
12 months.
Clime has two other non-core legs to its business.
These are investments in Clime managed funds -
called balance sheet investments and the direct
21.75% equity investment in Jasco Holdings
Limited that is equity accounted in the financial
accounts. Balance sheet investments are valued
at market value, the largest being
Clime Capital (CAM) valued at $4.58 million at
balance date. Being a listed investment company,
its value has fluctuated widely. The remaining
balance sheet investments involve initial capital
provided to establish and seed our new managed
fund offerings from time to time.
It is now the board’s view that while the non-core
investments have provided a valuable security
to underpin the development of the investment
management business it is time to transition these
assets from passive investments into capital
investment that more directly supports the growth
of our core business.
“We are confident that
all stakeholders will see
improved outcomes for the
current financial year”
Strategic planning has been a major focus for
the board and management during 2015/16. A
new business plan has been approved that sees
the orderly transition from purely a style-centric
Australian equities manager
into a broader
range of asset management services tailored
to wealth maintenance and creation to meet the
wider needs of both successful and aspirational
Australians.
Dear fellow shareholders C H A I R M A N ’ S R E P O R T | 3
Finally, I would like to thank my fellow directors
and staff for the hard work they have put in over the
past financial year – a year of great frustration in
financial markets. These people are our key asset
and invest their personal energy to deliver client
and shareholder expectations. We are confident
that the additional resources we are putting into
place will allow them to more consistently meet
and exceed expectations.
Don McLay
Chairman
from
in Jasco
investment
For this reason, we are separating our “private
equity”
the core
business and giving shareholders a more direct
and transparent interest in that holding. Jasco has
excellent management who have successfully
transitioned
importer,
wholesaler and retailer of arts and crafts of major
international stationery and arts materials with
a specialist retail niche through its Eckersley’s
arts and craft shops, and a valuable industrial
property portfolio.
the company
to an
We expect to announce in 2016/17, further
new investment supporting this broader wealth
management focus in the form of additional
professional staff to strengthen and enhance the
skills and capabilities of the existing team and
more comprehensive facilities and resources in
our branches to deliver a wider range of choices
and support for clients and prospects.
The board is pleased to announce the appointment
of Mr Anthony Golowenko as Head of Investments
from June 1, 2016. Anthony has had wide portfolio
management and asset allocation experience at
well-respected global funds manager, State Street
Global Advisors. He brings complementary skills
in portfolio construction and risk management
that will seek to enhance the reliability of returns
during this time of higher volatility and lower
interest rates.
Anthony will work closely with founder and
Executive Director John Abernethy who will
continue to focus on the strategic aspects of
financial markets and being more available to
clients. Clime will continue to be a value oriented
investment manager with a broader range of skills
and tools to protect and grow retirement savings.
We are confident that all stakeholders will see
improved outcomes for the current financial year.
While the behavior of financial markets cannot
be predicted with certainty in the short term,
shareholders will see growth in Clime’s market
penetration and the resources and ability to
convert prospects and inquiries into funds under
management or funds under advice.
4 | C I W 2 0 1 6 A N N U A L R E P O R T
Through our two main trading entities, Clime Asset
Management, our funds management business, and
StocksInValue, which provides company valuation
and research to 1,700 members across Australia,
Clime offers a range of services and products for
retail and wholesale investors.
Clime Asset Management applies a consistent
value-based approach to identify the most attractive
investment opportunities within our universe of
stocks.
We are objective based investors and seek to deliver
strong risk-adjusted total returns.
Clime’s investment objectives are aligned with our
client’s investment objectives and are centred on
helping everyday Australians achieve security in
their retirement.
At Clime our investment goals are to;
• Grow your retirement savings,
• Guard your retirement savings along the way,
and
• Generate meaningful retirement income
We don’t focus on;
• Peer group surveys,
• Traditional benchmarks,
• Short-term returns, or
• Tracking error
We seek to deliver a smooth profile of returns over
a five to seven year investment horizon and are
cognisant of the old adage that “the best way to
make money, is to not lose it in the first place”.
“Integrity, to us, means
doing what we say
and remaining
true to our beliefs”
OUR INVESTMENT GOALS
Clime seeks to deliver strong risk-adjusted total
returns. We aim to extract a solid return from the
equity market while assuming an appropriate level
of risk. A foundation of our investment approach
is that investment risk must be appropriately
compensated.
We employ an investment framework of
• Capital deployed
• At what risk
• For what likely outcome
Because none of these things will help you
achieve security in your retirement.
Over the long term we aim to achieve a higher
return than the market index with lower volatility.
About Clime Investment ManagmentClime is an independent, highly-regarded Australian fund manager specialising in value investing and focused on delivering absolute returns. We are run by a team of experienced investors, for investors. A B O U T C L I M E I N V E S T M E N T M A N A G E M E N T | 5
“Grow, Guard, Generate”
John Abernethy
Chief Investment Officer
As Clime’s Chief Investment Officer, John Abernethy has overall responsibility for funds
management. John has over 30 years experience in funds management. Prior to establishing
Clime, John’s roles included ten years at NRMA Investments as the head of equities, where he
successfully managed investment portfolios totalling $2 billion.
Richard Proctor
Chief Operating Officer
Richard has overall responsibility for the operational aspects of Clime and is the group Finance
Director. He has expertise in managing all operational functions of a business and in ensuring
that client requirements are met. He has extensive experience in managing operational teams in
large international companies.
Anthony Golowenko
Head of Investments
Anthony has 20 years portfolio investment experience and is passionate about developing
innovative solutions to meet risk/return objectives. Anthony joins Clime from State Street Global
Advisors where his most recent roles included Senior Portfolio Strategist – Asia Pacific and Head
of Active Australian Equities. He is responsible for portfolio management and risk management
outcomes.
Biju Vikraman
Group Finance Manager and Joint Company Secretary
Biju manages the reporting and financial accounting functions and is Group Compliance Officer.
He has been with Clime for more than 5 years and was appointed as Joint Company Secretary in
June 2015. Biju is an Australian and Indian Chartered Accountant with a Bachelor of Commerce
degree from the University of Mumbai. He has held senior roles with four large accounting firms
and listed entities within Australia, India and Africa.
Rob Hardy
Head of Sales and Marketing
Rob has been with Clime for more than 5 years, having previously held the position as Managing
Director of Time Life Europe/Asia Pacific. A leading member within the marketing industry for
more than 25 years, running direct marketing companies all over the world. Rob is responsible
for Clime’s brand development, client acquisition and expansion and integration of the sales
process across Australia.
6 | C I W 2 0 1 6 A N N U A L R E P O R T
Each week through various publications, Clime outlines its views on markets and factors
that affect the world’s economic position. What follows is an example of a recent post
that highlights the extraordinary period through which the world is passing.
“ The largest Central Banks
have seemingly lost control
of their policy settings while
smaller players (like Australia’s
RBA) are held hostage to
interest rate and currency
manipulation. It seems that
the G20 leaders forum (which
reached its zenith in February 2009) has lost its
ability to co-operatively address major international
issues and create the framework for growth.
Back in early 2009, the G20 came of age when it
co-ordinated a worldwide response to the GFC.
Massive fiscal stimulation and the underwriting of
major financial institutions dragged the world back
from the economic abyss and depression was
averted. However since that date, many members
of the G20 have simply maintained policies to
protect themselves from the rigours of the market
place. The clearest examples are the open-ended
quantitative easing programs that have meant
that bankrupt countries need not restructure their
economies, and cash rate settings at or below zero
that have driven long term bond yields to negative in
both Europe and Japan. Bond defaults have been
averted because governments are required to pay
hardly any interest on debt they cannot possibly
repay.
“Rather than cutting
interest and destabilising
our economic growth,
it seems logical to take
affirmative action”
Today, the G20 struggles to formulate a co-ordinated
strategy to deal with sluggish world growth,
burgeoning debt, zero interest rates and the growing
wealth divide. This continued failure will lead many
countries to initiate independent strategies focused
Economic Commentary E C O N O M I C C O M M E N T A R Y | 7
upon their own well-being. As that occurs, more
volatility in markets will occur with some economies
benefiting while others falter. Unfortunately such
policies will create even further instability.
It is our view that Australia would prosper by
taking constructive steps to mobilise the abundant
superannuation capital at its disposal. Australia
should review its open market rules as it relates to
countries that undertake interest rate and currency
manipulation, open ended quantitative easing,
covert trade barriers and significant under-payment
of their workforces. Unfair advantages take many
forms, but manipulation should not be meekly
accepted. The adjustment of cash rates, like that
undertaken recently by the RBA, simply seeks to
buy time while we wait in hope for the US Federal
Reserve to lift its interest rates.
Rather than cutting interest rates and destabilising
our economic growth, it seems logical to take
affirmative action. QE and capital controls would
either buy out or scare off foreign short term capital.
It is this short term focussed foreign capital that is
holding up the value of $A by owning the majority
of our government debt. Further, we should
encourage longer term foreign risk capital through
an adjustment to tax rates on export income.
Australia should think and act independently -
thereby respond to the US, Europe, China and
Japan which are each undertaking policies for their
sole benefit. Australia will be forced into action, but
forecasting the timing is near impossible given the
current political landscape. ”
The above was written by John Abernethy and published in
his weekly report ,“The View”, in StocksInValue in August
2016.
the
Clime manages its client’s capital with a constant
international macroeconomic
analysis of
environment which in turn drives a realistic approach
to the assessment of value – both inside and outside
of Australian markets.
The assessment of value is important because it
drives our investment process. However, the inputs
into the valuation of an asset can be affected by
many factors. These factors are observable in the
trends in or the outlook for bond yields, cash rates,
currencies, commodity prices, economic growth
and sentiment.
Clime assesses value in the context of both
the current and the forecast future investment
environment. In this way we can design portfolio
solutions that have a meaningful return focus when
measured against risk.
At Clime, we aim to deliver portfolio returns that
are driven by a sensible view of risk and a logical
expectation of return.
Clime’s success has been built on a value investing
methodology. When other fund managers were
chasing leveraged positions before the GFC, Clime
moved towards cash, because stock valuations
didn’t stack-up. After the GFC, when others reduced
equity investments, Clime had the conviction to
make investments in ‘under-valued’ stocks. This
sober, analytical approach – driven by fundamental
analysis of good quality companies – is the same
one used by the world’s most successful investor –
Warren Buffett.
At the core of this success has been a stable and
focused group of analysts. Their job has been
assisted by the strength of the StocksInValue tool,
which they themselves manage and use to make
investment decisions within their team. As such, a
subscription to StocksInValue provides clients with
the access to the valuations and analysis of one of
Australia’s best performing funds team. Subscribers
to our Professional service, gain further access to
their thinking, with more detailed reporting and long
term future forecasts of value.
You can find out more about
StocksInValue
by visiting
www.stocksinvalue.com.au
Research & Analysis with StocksInValue
8 | C I W 2 0 1 6 A N N U A L R E P O R T
Building purposeful portfolios to deliver strong risk-adjusted total returns in 2016/17.
Clime Asset Management is evolving its investment
approach. We are refining the framework for
managing our customer’s portfolios to more directly
align with their investment objectives.
Clime’s approach is inherently simple. We seek to:
• Understand our customers’ objectives
• Align our strategic objectives to those of our
customers, and
• Build purposeful portfolios to achieve these
objectives.
At Clime Asset Management our objective is to help
our clients achieve security in their retirement.
Price volatility, poor returns from leading Australian
companies, the end of the resources capital
investment boom and sustained low cash rates
requires a considered response. Outlined below are
key considerations along with Clime’s response.
First, it seems likely that the bulk of the Australian
large companies represented in the ASX 20 are
in a challenging period. They will struggle to grow
earnings due to a variety of observable factors.
Major banks will require more capital and suffer
declining margins from sustained low interest rates.
Resource companies are confronted by oversupplied
commodity markets and slow world growth. Retailers
and Telecommunications companies are engaged in
a fierce price war to hold market shares. Builders will
be trading through a construction market that has
clearly peaked.
Second, the supportive growth trends are better
represented in the middle part of the Australian
equity market. There are discernible growth trends
across inbound tourism, heath care, aged care,
retirement living, education, financial services and IT
development. Recent success stories abound in this
part of the market and the outlook remains strong.
Third, the Australian economy is transitioning from
a resources base to services base. The ultimate
success will be judged by the transitioning in
composition of Australia’s exports.
The cycle is currently transitioning from bulk
commodities, through energy and into value added
services and manufactured exports. A key support
mechanism for this transition will be a low relative
$A. The transition of exports needs substantial
assistance and a long period to transpire. This
supports our thesis that the $A will remain low for
Investment Management a sustained period and also supports a level of
international investment in the portfolio.
there
is clear evidence
Finally,
that good
investment returns can be made from committing
to investments early in their migration to public
markets. Thus the investment manager’s approach
which seeks out quality businesses, with highly
engaged management, at an attractive valuation will
be extended to the pre-IPO market.
I N V E S T M E N T M A N A G E M E N T | 9
At Clime Asset Management,
our objective is to help our
clients achieve security in
their retirement
to
response
In
the above challenges and
opportunities, we have created purposeful sub
portfolios to capture the above opportunities and
to move away from the low growth part of the
Australian equity market. In June 2016 Clime Asset
Management appointed a new Head of Investments
(Mr. Anthony Golowenko). Anthony has been
implementing a new strategy and The Board is very
encouraged by the progress in the last few months.
The following has and is occurring within Clime’s
Australian Equity Growth portfolios.
a. The Australian large capitalisation companies
are solid dividend payers. Solid dividends with
franking are valuable in generating returns
for our shareholders. Some exposure
to
Australian large caps will be maintained with
from dividends. The
returns predominately
sub-
targeted
this
from
inflation;
portfolio will be 6%
above
return
b. The middle capitalisation part of
the
Australian market will be targeted and a
portfolio built that provides capital growth
and some yield. The targeted return from
this portfolio will be 8% above inflation; and
c. The Australian smaller capitalisation companies
will be targeted and a portfolio build that will
provide strong capital growth. The investment
universe will be expanded to include pre-IPO
opportunities that are likely to float within 6
months. The targeted return from this sub-
portfolio will be 10% above inflation.
Clime Asset Management’s goal is to deliver strong
risk-adjusted total returns through the combination
of solid capital growth and consistent income.
1 0 | C I W 2 0 1 6 A N N U A L R E P O R T
I am pleased to present the results of Clime Investment Management Limited and its controlled entities
(“the Group”) for the financial year ended 30 June 2016 (FY16). The Group includes Clime Investment
Management (Clime) and the 21.75% stake in Jasco Holdings Ltd (Jasco) that is equity accounted.
The Group recorded an after-tax profit attributable to members of $1,065,330 for the year to 30 June 2016
(FY16) compared with $3,288,651 in FY15. Our online equity valuation and research tool Stocks In Value
Pty Limited operated as a wholly owned subsidiary in FY16 compared with being a 50% joint venture in
FY15. It contributed revenue of $1.15 million compared with $0.16 million in FY15.
The Board notes that the weaker performance of the Group was mainly a function of performance fees not being achieved and normal
returns from our associate, Jasco. In FY 2015 Jasco had derived exceptional results from disposal of a trading division.
Review of financial results
Below is a simple summary of the Group’s Profit and Loss to enable shareholders to distinguish between the operational investment
management business and the balance sheet investment components.
Funds Management and related activities revenue
Investment Software revenue
Administrative and Occupancy expenses – fixed in nature
Third Party Custody, Management & Funds Administration services
Operating business activities revenue less fixed admin costs
FUM growth incentives and marketing
Operating business margin
Performance fees
Balance sheet income
(Loss) / profit on asset disposal of property, plant and equipment
Income from associates
Underlying Cash profit
Termination costs
Amortisation of intangibles
2016
$
7,540,117
1,147,913
2015
$
8,322,857
160,405
(5,374,761)
(4,782,154)
(907,110)
(854,185)
2,406,159
(822,625)
2,846,923
(1,089,578)
1,583,534
1,757,345
2,401
(293,518)
826
694,764
1,988,007
(179,654)
(473,222)
831,587
24,504
(5,128)
1,923,879
4,532,188
-
(305,348)
Statutory profit before tax income
1,335,130
4,226,840
Group revenue has decreased by 6%, from $9.7 million in FY15 to $9.1 million in FY16. Investment Management fees decreased
from $7.8 million to $7.4 million on nominally lower FUM. The Group’s gross FUM was $610 million at 30 June 2016, compared
with $614 million at 30 June 2015.
Report from the Board R E P O R T F R O M T H E B O A R D | 1 1
The Group received nominal performance fees during the year at $2,000 ($831,000 achieved in FY15). The Group did not receive
any consulting fees in the year. The $260,000 received in FY15 had been received from its associate company Stocks In Value Pty
Limited.
Group revenue from Investment Software at $1.2 million compared to $0.16 million in FY15 rose due to the company taking 100%
ownership of its subsidiary Stocks In Value Pty Ltd in June 2015.
Interest, dividend and other income increased from $338,000 to $423,000 this year. The Group’s interest income declined in line
with lower average interest rates and a lower average cash balance held. The increase in dividends from investments was primarily
due to the increase in dividend rate from the Group’s interest in Clime Capital Limited.
Administration expenses rose from $6.9 million to $7.5 million. Included in this increase are:
• Additional amortisation of software licenses and lists of $213,000 arising from the 100% ownership of StocksInValue Pty Ltd
• $180,000 of redundancy costs arising from restructuring of the business
• $70,000 of recruitment costs for the Groups new Head of Investment
• $50,000 increase in property leasing costs due to new Clime offices in Melbourne, Brisbane and Perth.
Summary of Total Equity
The Total Equity at balance date comprised the following:
Cash and Cash Equivalents
Trade and other Receivables less Payables
Listed Investments – Clime Capital Limited
Listed Investments – Other
Unlisted Investments – Managed Funds
Equity accounted investment – Jasco Holdings Limited
Other Tangible Assets and Liabilities
Net Tangible Assets
Intangibles – Goodwill and Management Contracts
Deferred tax assets
Total Equity
No. of Ordinary Shares on Issue as at 30 June
Equity per Share
Net Tangible Assets per Share
30 June 2016
$
30 June 2015
$
4,114,062
(782,600)
4,584,427
-
2,508,591
8,752,418
(3,353,817)
15,823,081
6,974,185
722,146
23,519,412
49,021,093
48.0 cents
32.3 cents
7,504,730
(635,455)
5,314,385
52,108
-
8,977,530
(4,501,812)
16,711,486
7,447,406
798,910
24,957,802
48,344,834
51.6 cents
34.6 cents
1 2 | C I W 2 0 1 6 A N N U A L R E P O R T
Operating cashflow
Operating cash flow (pre impact of financial asset transactions) was positive $2.2 million, compared to $2.6 million in FY 2015.
This was primarily a function of the following:
• An increase in cash receipts from operating activities of $964,000.
• An increase in cash payments on operating activities of $1.06 million.
• An increase in dividend income of $74,000.
• Tax paid increased by $373,000.
We deployed net cash of $2.4 million in short term financial assets, which we are holding at year end. In 2016, the company increased
its direct investments by investing $1 million in its own Income Fund and $1.5 million in Primewest Property Industrial Fund. In FY 2015
the company had reduced investments in its own funds, producing net proceeds of $1.8 million.
Thus, the net cash outflow from operating activities was $254,000, a decrease of $4.6 million in comparison with the prIor corresponding
period.
Cash reserves were applied as follows:
• Payments for acquisition of property plant & equipment of $10,000;
• Share buy-back program of $112,000; and
• Payment of dividends to shareholders of $3.01 million.
Outlook for 2017 Financial Year
The 2016 financial year has seen an acceleration in the evolution from a pure value-focused equity boutique into offering wider
asset allocation choices to our clients. To support this, we have strengthened the investment process by selective addition of
experienced senior staff and are in the process of implementing a new strategic plan to become a full service manager to meet the
wealth creation needs of Australians seeking to be self-sufficient in their retirement.
Directors and management expect 2017 to be a year of transition as the first steps for longer term strategic growth are implemented.
Focus will be on investment returns generated across all portfolios, and growing and supporting our service offering to a wider
group of investors seeking intelligent long term wealth management outcomes.
Initial signs are encouraging with good returns across all core portfolios in July and August.
Donald McLay
Chairman
C I W 2 0 1 6 A N N U A L R E P O R T | 1 3
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1 4 | C I W 2 0 1 6 A N N U A L R E P O R T
Directors’ Report
Your Directors present their report on the consolidated entity (Group), consisting of Clime Investment Management Limited and its
controlled entities for the financial year ended 30 June 2016. In order to comply with the provisions of the Corporations Act 2001,
the directors report as follows:
Directors
The following persons were directors of Clime Investment Management Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
D McLay
- Non-executive Chairman
J.B. Abernethy
- Director
N Schafer
- Independent Director
A Chant
- Independent Director
R.J.A. Proctor
- Director - resigned 21 June 2016
Information on Directors
Mr. Donald McLay BCom, CA, FFin, ACIS, AGIA
Non-executive Chairman (from 16 July 2015), Director
Experience and expertise
Mr. Donald McLay has more than 35 years’ experience within financial markets, investment banking and broad business services. He
has previously held executive roles with a number of local and overseas investment managers and investment banking organisations,
working in London, Singapore, Auckland and Sydney.
Other current directorships
Currently Mr. McLay is Chairman of Credit Corp Group Limited (ASX: CCP), appointed as a Non-Executive Director in March 2008
and Chairman on 30 June 2008. He is also Chairman of Torres Industries Pty Limited, an unlisted company engaged in investment in
transport and financial services.
Mr. McLay holds a Bachelor of Commerce degree, is a Chartered Accountant, a Chartered Secretary and a Senior Fellow of the
Financial Services Institute of Australasia.
Former directorships in last 3 years
None
Special responsibilities
Member of Remuneration Committee
Interests in shares and options
6,241,000 ordinary shares in Clime Investment Management Limited
D I R E C T O R ’ S R E P O R T | 1 5
Mr. John Abernethy BCom (Econ), LL.B
Director
Experience and expertise
Mr. John Abernethy was appointed Executive Director in 1994. Mr. Abernethy has over 30 years’ funds management experience in
Australia having been General Manager Investments of the NRMA. John holds a Bachelor of Commerce (Economics)/LLB from the
University of New South Wales.
Mr. Abernethy has been a Director of the Company for over 20 years.
Other current directorships
Mr. Abernethy is a Director of Clime Capital Limited, Jasco Holdings Limited, WAM Research Limited, WAM Active Limited, Australian
Leaders Fund Limited and Watermark Market Neutral Fund Limited.
Former directorships in last 3 years
None
Special responsibilities
None
Interests in shares and options
3,610,000 ordinary shares in Clime Investment Management Limited
Mr. Neil Schafer BApp Econ
Independent Director
Experience and expertise
Mr. Neil Schafer was appointed Non-Executive Director in 2011. Mr. Schafer has extensive experience in business leadership and
advice, funds management, and banking and holds a First Class Honour’s Degree in Applied Economics from the University of New
England.
Other current directorships
Mr. Schafer is also a director of Monte St Angelo Mercy College and principal of SPG Asia.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Board (to 16 July 2015)
Chairman of Remuneration Committee
Chairman of Audit Committee
Chairman of the Investment Sub Committee
Interests in shares and options
548,007 ordinary shares in Clime Investment Management Limited
1 6 | C I W 2 0 1 6 A N N U A L R E P O R T
Information on Directors (Cont.)
Mr. Allyn Chant BCom, CA, FFin
Independent Director
Experience and expertise
Mr. Allyn Chant was appointed as a director on 9 July 2014. Mr. Chant holds a Bachelor of Commerce degree and is a qualified
Chartered Accountant, a fellow of FINSIA and a Certified Financial Planner.
Mr. Chant has over 40 years’ experience both in Australian and overseas in auditing; financial planning and business management.
Mr. Chant was the founder of Community and Corporate Financial Services Pty Ltd (ComCorp) where he set up a network of financial
planners. Prior to establishing ComCorp, Mr. Chant has held roles with Coopers & Lybrand, MIM Holdings Limited and others.
Other current directorships
None
Former directorships in last 3 years
None
Special responsibilities
Member of Remuneration Committee
Member of Audit Committee
Interests in shares and options
883,600 ordinary shares in Clime Investment Management Limited
Company Secretaries
Mr. Richard Proctor BBS (Hons), ACA
Experience and expertise
Mr. Richard Proctor was appointed to the position of Company Secretary on 1 January 2011.
Mr. Proctor, Chief Operating Officer of the company since 2009. Mr. Proctor holds a Bachelor of Business Studies (Hons) from the
University of Brighton, UK and is a Chartered Accountant.
Mr. Proctor has over 25 years’ experience in operations and finance and has held senior roles with Readers Digest, Time Warner, Heinz
Food and Rothmans Tobacco in Australia and Europe.
Interests in shares and options
1,450,000 ordinary shares in Clime Investment Management Limited
D I R E C T O R ’ S R E P O R T | 1 7
Mr. Biju Vikraman Bcom, ACA, GradDipACG
Experience and expertise
Mr. Biju Vikraman was appointed to the position of Joint Company Secretary on 1 June 2015.
Mr. Vikraman holds a Bachelor of Commerce from the University of Mumbai, India and is an Australian and Indian Chartered Accountant.
Mr. Vikraman has over 15 years’ experience in audit and finance and has held senior roles with 4 big Accounting Firms and listed
entities within Australia, India and Africa.
Mr. Vikraman also holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia.
Interests in shares and options
115,000 ordinary shares in Clime Investment Management Limited
200,000 Options (EIS) over ordinary shares in Clime Investment Management Limited
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June
2016, and the numbers of meetings attended by each Director were:
Directors
Board of Directors
Audit Committee
Remuneration Committee
Mr. Donald McLay
Mr Neil Schafer
Mr. John Abernethy
Mr. Allyn Chant
Mr. Richard Proctor
A – Number of meetings eligible to attend
B – Number of meetings attended
A B
10 10
10 10
10 10
10 9
10 10
A B
- -
2 2
- -
2 1
2 2
A B
- -
3 3
- -
3 3
3 3
Rotation and election of Directors
In accordance with the Company’s Constitution:
• Mr. John Abernethy retires by rotation and, being eligible, offers himself for re-election.
Principal activities
The Group’s principal activity is investing in listed and unlisted securities for clients and operating under ASIC approved AFS licences
in the funds management industry.
There was no significant change in these activities during the current financial year.
Operating result
The consolidated net profit after providing for tax amounted to $1,065,330 (2015: $3,288,651).
1 8 | C I W 2 0 1 6 A N N U A L R E P O R T
Dividends paid or recommended
Dividends paid or recommended during the financial year are as follows:
Director
Board of Directors
3 cents per share franked to 100% at 30% corporate income tax rate, final ordinary dividend
paid during the year on 25 September 2015 in respect of the prior financial year (2015: 3 cents)
3 cents per share franked to 100% at 30% corporate income tax rate, interim ordinary dividend
paid during the year on 18 March 2016 in respect of the current financial year (2015: 3 cents)
Total dividends paid
2016
($)
2015
($)
1,507,345
1,501,345
1,505,945
1,501,345
3,013,290
3,002,690
Review of operations
In accordance with the relief provided by Class Order 98/2395, as issued by the Australian Securities and Investments Commission,
the Company is not required to reproduce information required in the Directors’ Report if it has been included elsewhere in the Annual
Report. As such, for a detailed Review of Operations of the Company, please refer to Report from the Board beginning on page 10.
Significant changes in state of affairs
There was no other significant change in the Group’s state of affairs during the financial year other than as disclosed in the financial
statements.
Subsequent events
A final fully franked dividend for the year ended 30 June 2016 of 3 cents per share, totalling $1,511,883 has been declared by the
directors. This provision has not been reflected in the accounts.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect
the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial
years.
Future developments
The Company will continue to pursue investment management activities – primarily investing in equities listed on the Australian and
international securities exchange.
The Company’s future performance is dependent on the performance of the Company’s investments. In turn, the performance
of these investments is impacted by company-specific and prevailing industry conditions. In addition, a range of external factors
including economic growth rate, interest rates, exchange rates and macro-economic conditions impact the overall equity market and
these investments.
As such, we do not believe it is possible or appropriate to predict the future performance of the Company’s investments nor its
mandates and therefore, the Company’s performance.
D I R E C T O R ’ S R E P O R T | 1 9
Shares under option
Unissued ordinary shares of Clime Investment Management Limited under option at the date of this report are as follows:
Nature of options
Date Options
Granted
Expiry Date
Exercise
Price
Number under
Option
Employee Incentive Scheme
22 August 2013
22 August 2016
Employee Incentive Scheme
25 October 2013
25 October 2016
Employee Incentive Scheme
19 August 2014
19 August 2017
Employee Incentive Scheme
25 February 2015
25 February 2018
Employee Incentive Scheme
11 September 2015
11 September 2018
Employee Incentive Scheme
20 July 2016
20 July 2019
$0.800
$0.829
$0.850
$0.750
$0.700
$0.630
100,000
300,000
200,000
75,000
375,000
325,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Shares issued on the exercise of options
Nil shares (2015: 750,000 shares) were issued to option holders after the end of the 2016 financial year as a result of the exercise of
options. Refer note 25 for movement of in-substance options during the year.
Environmental issues
The Group’s operations are not regulated by any significant law of the Commonwealth or of a State or Territory relating to the
environment.
Rounding off amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts in the directors’
report and in the financial report have been rounded to the nearest dollar or in certain cases to the nearest one thousand dollars (where
indicated).
2 0 | C I W 2 0 1 6 A N N U A L R E P O R T
Remuneration report - Audited
This remuneration report, which forms part of the directors’ report, sets out information about the remuneration of the directors of
Clime Investment Management Limited (“the Company”) and its other key management personnel for the financial year ended 30 June
2016. The remuneration report is set out under the following main headings:
A
B
C
D
E
F
G
Director and other key management personnel details
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Related party transactions
Additional information
A. Directors and other key management personnel
The following persons acted as directors of the Company during or since the end of the financial year.
D McLay
- Non-executive Chairman
J.B. Abernethy - Director
N Schafer
- Independent Director
A Chant
- Independent Director
R.J.A. Proctor
- Chief Operating Officer and Joint Company Secretary
Director up to 21 June 2016
Other key management personnel of the consolidated entity
There were no additional persons other than the directors and Mr. Richard Proctor in 2016 and 2015 who were considered key
management personnel under the Corporations Act 2001.
B. Principles used to determine the nature and amount of remuneration
Directors and Key Management Personnel
Remuneration packages are set at levels that are intended to attract and retain first class executives capable of managing the
Group’s diverse operations and achieving the Group’s strategic objectives. The remuneration packages of executives include a fixed
component, a performance based component and an equity based component.
The fixed portion of the package reflects the core performance of their duties. The executives may be given an incentive via a
performance based bonus (as determined by the remuneration committee) and certain executives may be entitled to commission
payments commensurate with the level of revenue they generate. Equity based remuneration can be made via the options issued to
the executives under the Employee Incentive Scheme (“EIS”).
The Remuneration Committee is responsible for making recommendations to the Board on remuneration policies and packages
applicable to the Board members and senior executives of the Group.
The Board’s remuneration policy is to ensure the remuneration package properly reflects the person’s duties, responsibilities and the
level of performance and that remuneration is competitive in attracting, retaining and motivating people of the highest quality.
D I R E C T O R ’ S R E P O R T | 2 1
Remuneration report - Audited (Cont.)
B. Principles used to determine the nature and amount of remuneration (Cont.)
Directors
Fees and payments to Directors reflect the demands which are made on, and the responsibilities of, the Directors. Remuneration
of Independent Directors are determined by the full Board within the maximum amount approved by shareholders from time to time.
The payments to Independent Directors do not include retirement benefits other than statutory superannuation. Consultation with
Independent Directors outside their duties as Directors is treated as external consultation and is subject to additional fees by consent
of the Board. The Company has a policy that independent Directors are not entitled to retirement benefits, may not participate in
performance based incentives, and may not participate in the EIS.
Directors’ Fees
The current base remuneration was last reviewed with effect from 1 January 2016. The independent Directors’ fees are inclusive of
committee fees.
Independent Directors’ fees are determined within an independent Directors’ base remuneration pool, which is periodically
recommended for approval by shareholders. The Independent Directors’ base remuneration pool currently stands at $260,000 per
annum.
Executive Directors’ remuneration
The executive remuneration framework has five components:
•
•
•
•
•
base pay and benefits;
commissions;
short-term performance incentives;
long-term incentives through participation in the Company’s EIS; and
other remuneration such as superannuation.
The combination of these comprises the executive Directors’ total remuneration.
Base pay
Structured as a total remuneration package which may be delivered as a combination of cash and prescribed non-financial benefits
at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior executives
is reviewed annually to ensure the executive’s pay is competitive with the market.
Benefits
Certain executives receive benefits which primarily include car parking allowances.
Commissions
Commissions did not form part of executive remuneration packages at any time during the year.
2 2 | C I W 2 0 1 6 A N N U A L R E P O R T
Remuneration report - Audited (Cont.)
B. Principles used to determine the nature and amount of remuneration (Cont.)
Short-term incentives (STI)
Executive Directors and Key management personnel have target short-term incentive opportunities depending on the accountabilities
of respective roles and their impact on the organisation’s performance.
The intention of the STI plan is to recognise and reward the contributions and achievements of individuals for the achievement of their
relevant key performance indicators (“KPI’s”). Such KPI’s will generally include measures relating to both the Group and the relevant
individual, and may include financial, human resources, client service, strategy and risk measures where appropriate. The measures
are chosen such that they directly align the individual’s reward to the KPI’s of the Group and to its strategy and performance.
Each year the Remuneration Committee considers the appropriate targets and key performance indicators to link the short term
incentive plan and the level of payout if targets are met. This includes setting any maximum payout under the STI plan, and minimum
levels of performance to trigger payment of the STI. The Remuneration Committee also retains the capacity to pay discretionary
bonuses subject to the executives’ respective performances during the year.
Clime Investment Management Limited Employee Incentive Scheme
Information on the Company’s Employee Incentive Scheme is set out on pages 75 to 77.
C. Details of remuneration
Amounts of remuneration
Details of the remuneration of each Director of Clime Investment Management Limited and each of the other key management
personnel of the Group for the years ended 30 June 2016 and 30 June 2015 are set out in the following tables. The commission
payments are dependent on the level of revenue generated from consulting activities, short term incentives are dependent on the
satisfaction of performance conditions as set out in the section headed Short-term incentives above, and share options do not vest
unless the relevant vesting hurdles are achieved. All other elements of remuneration are not directly related to performance.
Directors of Clime Investment Management Limited
Short-term Employee Benefits
Post-
Employment
Benefits
Share-
Based
Payments
Cash salary, fees
and commissions
Short term
incentives
Donald McLay
($)
70,208
($)
-
John Abernethy
260,274
21,461
Richard Proctor
244,257
22,831
Neil Schafer
(note a)
Allyn Chant
54,924
52,000
-
-
Total
681,663
44,292
Non-
monetary
benefits
($)
-
-
-
-
-
-
Super-
annuation
Options
Termination
Benefits
Total
($)
-
26,765
25,373
-
-
52,138
($)
($)
($)
-
-
-
-
-
-
-
-
-
-
-
-
70,208
308,500
292,461
54,924
52,000
778,093
Note a: includes $Nil (2015:$47,250) paid to Mr. N Schafer for project consultancy fees conducted, as approved by the Board of
Directors.
2016
Name
D I R E C T O R ’ S R E P O R T | 2 3
Remuneration report - Audited (Cont.)
2015
Name
Short-term Employee Benefits
Post-
Employment
Benefits
Share-
Based
Payments
Cash salary,
fees and
commissions
Short term
incentives
Non-
monetary
benefits
Super-
annuation
Options
Termination
Benefits
Total
Donald McLay
($)
16,667
($)
-
($)
-
($)
-
John Abernethy
280,879
97,433
2,729
4,121
Richard Proctor
263,736
116,152
Neil Schafer
(note a)
Allyn Chant
David Schwartz
Mark Osborn
121,250
50,602
33,333
7,628
-
-
-
-
-
-
-
-
-
12,127
-
-
-
725
Total
774,094
213,586
2,729
16,973
($)
($)
($)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,667
385,162
392,016
121,250
50,602
33,333
8,352
1,007,382
Note a: includes $47,250 (2014: $Nil) paid to Mr. N Schafer for project consultancy fees conducted, as approved by the Board
of Directors.
The relative performance of those elements of remuneration of key management personnel that are linked to performances:
Name
Donald McLay
John Abernethy
Richard Proctor
Neil Schafer
Allyn Chant
Fixed remuneration
Remuneration linked to
performance
2016
2015
2016
2015
100%
100%
-
-
93.0%
74.7%
7.0%
25.3%
92.2%
70.4%
7.8%
29.6%
100%
100%
100%
100%
-
-
-
-
2 4 | C I W 2 0 1 6 A N N U A L R E P O R T
Remuneration report - Audited (Cont.)
Short-term incentives
(2015: $213,586) short
$44,292
of the year ended 30 June 2016.
Committee. The short
term
term
incentives were paid/payable
The short term
to key management personnel
respect
incentives were paid at the discretion of the Remuneration
the financial year ended 30 June 2016.
in
incentives
therefore vested 100% during
D. Service Aggreements
Remuneration and other terms of employment for the Executive Directors and certain other senior executives are formalised in service
agreements with annual adjustments (once agreed by the remuneration committee) notified in writing. Provisions relating to the term
of agreement, periods of notice required for termination and relevant termination payments are set out below.
Mr. John Abernethy
Director
•
Term of agreement – no fixed term
• Notice period for termination by employee – 3 months
• Notice period for termination by company – 9 months
•
Payment of a termination benefit on early termination by the Company – in lieu of 9 months’ notice and other than for gross
misconduct – the company has the right to request he works 3 months’ notice period at the time of termination.
Mr. Richard Proctor
Chief Operating Officer and Joint Comany Secretary
•
Term of agreement – no fixed term
• Notice period for termination by employee – 3 months
• Notice period for termination by company – 9 months
•
Payment of a termination benefit on early termination by the Company – in lieu of 9 months’ notice and other than for gross
misconduct – the Company has the right to request he works 3 months’ notice period at the time of termination.
E. Share-Based Compensation
(i) Shares provided on exercise of remuneration options
No ordinary shares in the Company were provided as a result of the exercise of remuneration options via the ESOP during the year
(2015: nil).
D I R E C T O R ’ S R E P O R T | 2 5
Remuneration report - Audited (Cont.)
(ii) Shareholdings of directors and other key management personnel
The numbers of shares in the Company held during the year by each director of Clime Investment Management Limited and each of
the other key management personnel of the consolidated entity, including their personally-related entities, are set out below.
Name
Mr. Donald McLay
Mr. John Abernethy
Mr. Richard Proctor
Mr. Neil Schafer
Mr. Allyn Chant
Balance at
1 July 2015
No.
5,245,000
3,610,000
1,500,000
548,007
883,600
Granted as
compensation
/ Received on
exercise of
options
Other changes
during the year
Balance
as at Date
No.
-
-
-
-
-
No.
996,000
-
(50,000)
-
-
No.
6,241,000
3,610,000
1,450,000
548,007
883,600
(iii) Option holdings of directors and other key management personnel
None of the directors or key management personnel of Clime Investment Management Limited held options during the year ended
30 June 2016 and 30 June 2015.
F. Related party transactions
Clime Capital Limited
i. Mr. John Abernethy is a Director in Clime Capital Limited. The Group received $59,000 (2015: $59,000) as fees for the services
rendered by Mr. John Abernethy as chairman and Mr. Richard Proctor as Company Secretary to Clime Capital Limited. The Group
directly owns 7.47% of the fully paid ordinary shares of Clime Capital Limited as at 30 June 2016. Clime Investment Management
Limited through Clime Asset Management Pty Limited (a wholly owned subsidiary) has the indirect power to dispose 7.75% of
Clime Capital Limited’s shares held by the Investment Mangers discretionary share portfolio clients as at 30 June 2016.
ii. Clime Asset Management Pty Limited during the year received $645,020 (2015: $720,529) as management as remuneration for
managing Clime Capital Limited’s investment portfolio.
iii. All dividends paid and payable by Clime Capital Limited to its Directors and Director related entities are on the same basis as to
other shareholders.
Clime International Fund
i. Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $1,587,859 (2015: $1,792,519) as
management, performance and recoverable fees as remuneration for managing the investment portfolios on behalf of Clime
International Fund.
2 6 | C I W 2 0 1 6 A N N U A L R E P O R T
Remuneration report - Audited (Cont.)
G. Additional Information
Performance of Clime Investment Management Limited
The tables below set out the summary information regarding the economic entity’s earnings and movements in shareholder wealth for
the five years to 30 June 2016:
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend 1
Final dividend 1,2
Capital return 3
Basic EPS
Diluted EPS
30 June 2016
30 June 2015
30 June 2014
30 June 2013
30 June 2012
($)
9,114,230
1,335,130
1,065,330
$0.75
$0.65
3.0cps
3.0cps
-
2.2cps
2.1cps
($)
9,653,739
4,226,840
3,288,651
$0.80
$0.75
3.0cps
3.0cps
-
6.9cps
6.6cps
($)
8,746,240
4,397,134
3,203,014
$0.70
$0.80
2.5cps
3.0cps
8.0cps
6.8cps
6.4cps
($)
7,659,766
2,207,225
1,421,990
$0.44
$0.70
1.5cps
0.00cps
($)
5,475,497
835,297
1,007,217
$0.43
$0.44
-
2.00cps
-
2 MLC for 9 CIW
3.0cps
2.9cps
2.1cps
2.0cps
1 Fully franked dividends (franked to 100% at 30% corporate tax rate)
2 Declared after each respective balance date and not reflected in the financial statements
3 In-specie distribution of 2 ordinary Mothercare Australia Limited shares for every 9 CIW ordinary shares held.
Furthermore, during the five years to 30 June 2016, Clime Investment Management Limited bought back 2,930,623 fully paid ordinary
shares for total consideration of $1,440,897. These shares were repurchased at the prevailing market prices on the dates of the
respective transactions in accordance with the economic entity’s on-market buy-back scheme (within the 10/12 limit).
Relationship of Group performance to remuneration policies
The profitability of the Group is one of the key measures taken into consideration by the Remuneration Committee when determining
the quantum of bonuses payable under the STI plan in any given year. Other performance measures assessed by the Remuneration
Committee when determining remuneration packages for key management personnel include:
• Growth in the Group’s level of Funds Under Management (“FUM”);
• Retention and renewal rates for Funds Management clients;
•
•
Investment returns and performance generated by the Funds Management team in respect of its managed investment products;
and
Investment returns generated by the Group’s direct investments.
End of audited remuneration report
D I R E C T O R ’ S R E P O R T | 2 7
Risk and compliance control statement
Under Australian Securities Exchange (ASX) Listing Rules and the 3rd Edition of the ASX Corporate Governance Principles and
Recommendations issued by the ASX Corporate Governance Council, the Company is required to disclose in its annual report the
extent of its compliance with the ‘ASX Principles and Recommendations’.
The Directors have implemented internal control processes for identifying, evaluating and managing significant risks to the achievement
of the Company’s objectives. These internal control processes cover financial, operational and compliance risks. The Company’s
corporate governance practices are outlined in further detail in the Corporate Governance Statement, beginning on page 30 of the
Annual Report.
The Directors have received and considered the annual control certification from the Executive Director and the Chief Operating Officer
in accordance with the Principles relating to financial, operational and compliance risks. Material associates, which the Company does
not control, are not dealt with for the purposes of this statement.
Throughout the reporting period, and as at the date of signing of this annual report, the Company was in compliance with the
Principles to the extent disclosed in the Corporate Governance Statement.
Insurance of officers and auditors
During the financial year, the economic entity paid a premium for an insurance policy insuring all Directors and officers against liabilities
for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity
as Director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. In accordance
with common commercial practice, the insurance policy prohibits disclosure of the nature of the liability insured against and the
amount of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify an officer or auditor of the Company or of any of its controlled entities against a liability incurred by an officer or
auditor.
Proceedings on behalf of the Group
No person has applied for leave of Court to bring proceedings on behalf of the Group or to intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Non-audit services
The Group may decide to employ the auditor for assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Group and/or the consolidated entity are important.
Details of the amounts paid or payable to the auditor Pitcher Partners for audit and non-audit services provided during the year are
set out in note 23 of the attached Financial Statements.
The Board of Directors have considered the position and, in accordance with the advice received from the Audit Committee is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of non-audit services, as set out in note 23 of the attached
Financial Statements, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:
•
•
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
2 8 | C I W 2 0 1 6 A N N U A L R E P O R T
Auditor’s independence decleration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 29.
Signed in accordance with a resolution of the Directors.
Donald McLay
Chairman
Sydney, 19 September 2016
A U D I T O R ’ S I N D E P E N D E N C E D E C L E R A T I O N | 2 9
Auditor’s Independence Decleration
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF CLIME INVESTMENT MANAGEMENT LIMITED
ABN 37 067 185 899
In relation to the independent audit for the year ended 30 June 2016, I declare that to the best of my
knowledge and belief there have been:
(i) no contraventions of the auditor independence requirements of the Corporations Act 2001;
and
(ii) no contraventions of any applicable code of professional conduct.
This declaration is in respect of Clime Investment Management Limited and the entities it controlled
during the period.
S M WHIDDETT
Partner
PITCHER PARTNERS
Sydney
19 September 2016
An independent New South Wales Partnership. ABN 17 795 780 962.
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Liability limited by a scheme approved under Professional Standards Legislation
29
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
3 0 | C I W 2 0 1 6 A N N U A L R E P O R T
Corporate Governance
Statement
Clime Investment Management Limited (“Company”) and the Board are committed to achieving and demonstrating the highest
standards of corporate governance. In ensuring the highest standard of ethical behaviour and accountability, the Board has included
in its corporate governance policies those matters contained in the 3rd Edition of Australian Securities Exchange’s (“ASX”) Corporate
Governance Principles and Recommendations of the ASX Corporate Governance Council (‘ASX Principles and Recommendations’)
where applicable. However, the Board also recognises that full adoption of the above ASX Recommendations may not be practical
nor provide the optimal result given the particular circumstances and structure of the Company.
The Company and its controlled entities together are referred to as the Group in this statement.
A description of the Company’s main corporate governance practices is set out below. All these practices, unless otherwise stated,
were in place for the entire year.
Principle 1: Lay Solid foundations for management and oversight
The Board of Directors
The Board operates in accordance with the broad principles set out in its charter which is available from the corporate governance
section of the company website at www.clime.com.au. The charter details the Board’s composition and responsibilities.
Board members
Details of the members of the Board, their experience, expertise, qualifications and term of office are set out in the Directors’ Report
under the heading “Directors”. There are three Non-Executive Directors, of which two are deemed independent under the principles
set out below, and one Executive Director at the date of signing the Directors’ Report. The Chairman is not deemed independent due
to his indirect interest in 12.7% of issued shares in the company.
The Board seeks to ensure that:
•
•
at any point in time, its membership represents an appropriate balance between Directors with experience and knowledge of
the Group and Directors with an external or fresh perspective; and
the size of the Board is conducive to effective discussion and efficient decision-making.
The relationship between the Board and senior management is critical to the Group’s long term success. The Directors are responsible
to the shareholders for the performance of the Company in both the short and the longer term and seek to balance sometimes
competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of the shareholders and
other key stakeholders and to ensure the Group is properly managed.
Day to day management of the Group’s affairs and the implementation of corporate strategy and policy initiatives are delegated by the
Board to the Chief Operating Officer and senior executives as required.
C O R P O R A T E G O V E R N A N C E S T A T E M E N T | 3 1
Responsibilities
The responsibilities of the Board include:
• overall strategic direction and leadership of the Company;
•
•
approving and monitoring the implementation by management of the Company’s objectives and strategies;
reviewing the Company’s performance against its stated objectives, by receiving regular management reports on its business
situation, opportunities and risk profile;
• monitoring financial performance on a monthly basis in comparison with the budget;
•
•
•
•
•
•
approval of the annual and half-year financial statements and liaison with the Company’s auditors through its Audit Committee;
appointing and assessing the performance of the Executive Directors;
ensuring compliance with corporate governance principles by the Company and its officers;
ensuring adequate internal controls exist and are appropriately monitored for compliance with the Company’s regulatory
environment, which includes the Corporations Act 2001, the Listing Rules of the Australian Securities Exchange, taxation
legislation, the Trades Practices Act and its AFS licensing requirements;
establishing and ensuring compliance with ethical standards and determining the Company’s code of conduct; and
reviewing investment strategies, investment decisions and establishing executive authority limits (refer below).
Board investment authority
The Board has specific authority to review and approve investment decisions which exceed authority limits for management. Such
investment meetings are conducted concurrently with Board Meetings on matters relating to investment decisions.
The charter for the Board in respect of investment decisions is as follows:
•
•
•
•
•
•
•
review investment strategies recommended by management for the Company;
review management strategies for existing investments including provision of additional capital, acquisition and exit strategies;
authorise individual investment proposals where such investments are of an amount requiring Investment Committee approval;
set delegated investment and trading limits for management;
ensure delegated investment and trading limits are adhered to by management;
review risk / return objectives set by management on individual investments to ensure these fit with the overall Company
objectives; and
review performance of individual investments to ensure these are in accordance with established budgets.
Term of office
All Directors must retire from office no later than the third annual general meeting (AGM) following their last election. Any Directors
appointed by the Board must be duly re-elected at the next AGM.
Chairman
The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and
responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives.
The Chairman of the Board and majority of the Board are not independent directors. The Company believes that an independent
Chairman under recommendations 2.4 and 2.5 does not necessarily improve the function of the Board. The Company believes that
when the chairman is a significant driver behind the business, and is a sizable shareholder, as is the case with this Company, it adds
value to the company and all shareholders benefit.
3 2 | C I W 2 0 1 6 A N N U A L R E P O R T
Principle 1: Lay Solid foundations for management and oversight (Cont.)
Company Secretaries
The Company Secretaries are directly accountable to the Chair on all matters to do with the proper function of the Board.
Diversity
The Group’s workforce is comprised of people from diverse backgrounds with a range of skills, values and experiences. Diversity
includes, but not limited to, gender, age, ethnicity and cultural background. The Group is committed to providing an environment in
which all employees are treated with fairness and respect, and have equal access to opportunities available in the workplace.
The key element of the diversity policy of the Group is that the Group will seek the best person available for the position which will not
be influenced by gender, age, ethnicity or cultural background. In relation to the appointment of a new director, the board will seek
male and female candidates with the appropriate skills and investment/industry experience to complement the current directors.
The Group’s workforce is relatively small and the directors do not believe it is appropriate to establish formal diversity objectives in
relation to gender, age, cultural background and ethnicity at this stage as outlined in Recommendation 1.5.
Performance assessment
The Board undertakes an annual self-assessment of its collective performance, the performance of the Chairman and of its Committees.
This review is coordinated by the Chairman and is assessed against both measurable and qualitative indicators. The Board uses
surveys for the purpose of its internal Board and committee performance reviews. Those reviews are to ensure that individual directors
and the Board work effectively in meeting their responsibilities as described in the Board and Committee Charters. The Board
conducted an internal review in the 2016 financial year.
The senior management performance is evaluated annually against operational and financial objectives agreed by the Board.
Details of the principles used to determine the nature and amount of remuneration paid to each director and other key management
personnel can be found in the Remuneration Report section B.
Principle 2: Structure the board to add value
Board composition
The composition of the Board is determined in accordance with the following principles:
•
•
•
•
•
the Board shall comprise not fewer than three members
the Board shall comprise a mix of Independent and Executive Directors
a Director need not be a shareholder
the Board shall comprise Directors with an appropriate range of qualifications and experience
the Chairman should preferably be Non-Executive, is elected by the full Board and is required to meet regularly with the Chief
Operating Officer
C O R P O R A T E G O V E R N A N C E S T A T E M E N T | 3 3
Principle 2: Structure the board to add value (Cont.)
During the financial year the names of each Director, their respective role, appointment date and classification were:
Name
D McLay
J B Abernethy
R A Proctor
N Schafer
A Chant
Role
Chairman
Director
Director
Director
Director
Appointed / Resigned
1 March 2015
17 November 1994
24 February 2014 / 21 June 2016
7 January 2011
9 July 2014
Classification
Non-executive*
Executive*
Executive
Independent
Independent
*Meets the ‘substantial shareholder’ definition under section 9 of the Corporations Act 2001, due to a prescribed direct, indirect and
representative shareholding interest exceeding 5% of the total issued ordinary capital of the Company.
The Board is of the opinion that the current Directors add value to the Company by virtue of their financial and other commitment and
considerable industry experience. The Board also believes that the alignment of the interests of Directors with those of shareholders
is an efficient way to ensure the protection of shareholders’ interests.
Directors’ independence
The Board has adopted specific principles in relation to Directors’ independence. These state that to be deemed independent, a
Director must be a Non-Executive and must:
• not be a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder
of the Company;
• within the last three years, not have been employed in an executive capacity by the Company or any other group member, or been
a Director after ceasing to hold any such employment;
• within the last three years not have been a principal of a material professional adviser or a material consultant to the Company or
any other group member, or an employee materially associated with the service provided;
• not be a material supplier or customer of the Company or any other group member, or an officer of or otherwise associated
directly or indirectly with a material supplier or customer;
• have no material contractual relationship with the Company or a controlled entity other than as a Director of the Group;
• not have been on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s
ability to act in the best interests of the Company; and
• be free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially
interfere with the Director’s ability to act in the best interests of the Company.
Materiality for these purposes is determined on both quantitative and qualitative bases. An amount of over 5% of annual turnover of
the Company or Group or 5% of the individual Director’s net worth is considered material for these purposes. In addition, a transaction
of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the Director’s
performance.
3 4 | C I W 2 0 1 6 A N N U A L R E P O R T
Principle 2: Structure the board to add value (Cont.)
Nomination of directors
The Chairman is responsible for reviewing the membership of the Board and the nomination of Directors to the Board. Any review
or recommendation is considered by the full Board. Appropriate expertise and experience are essential attributes for any nominee.
The Board is committed to undertaking appropriate checks before appointing a person or putting forward to shareholders a candidate
for election as a director and to providing shareholders with all material information in its possession relevant to a decision on whether
to elect or re-elect a director.
Having regard to the size of the Board and the Company, a formal Nomination Committee is deemed neither appropriate nor necessary.
Board committees
The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of
complex issues. Current committees of the Board are the Remuneration and Audit Committees. It is the Company’s policy that each
Committee is comprised entirely of Non-Executive Directors. The committee structure and membership is reviewed on at least an
annual basis. All matters determined by the committees are submitted to the full Board as recommendations for Board decisions.
Commitment
The Board considers corporate governance to be an important element of its responsibilities. As such, it meets at least six times
throughout the year and attends an annual corporate strategy workshop. Non-Executive Directors are expected to spend at least 15
days a year preparing for, and attending, Board and Committee meetings and associated activities.
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2016
and the number of meetings attended by each Director is disclosed in the Directors’ Report.
Conflict of interests
In accordance with the Board’s corporate governance practices, a Director that has a perceived or actual conflict of interest (as
determined by themselves, other Board Members or the Chairman) must declare their interest in those dealings by the Company
and take no part in decisions relating to them or the preceding discussions. In addition, the Directors should not receive any papers
pertaining to those dealings.
Independent professional advice
Directors and Board Committees have the right, in connection with their duties and responsibilities, to seek independent professional
advice at the Company’s expense. Prior written approval of the Chairman is required, but this will not be unreasonably withheld.
Induction for Directors
New directors will be familiarized with the Company by undertaking an induction program, which is arranged by the Companies
Secretaries.
C O R P O R A T E G O V E R N A N C E S T A T E M E N T | 3 5
Principle 3: Promote ethical and responsible decision making
Code of Conduct
The Company has developed a statement of values and a Code of Conduct (the Code) which has been fully endorsed by the
Board and applies to all Directors and employees. The Code is reviewed and updated as necessary to ensure it reflects the highest
standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity.
In summary, the Code requires that at all times all company personnel act with the utmost integrity, objectivity and in compliance with
the letter and spirit of both the law and Company policies. A copy of the Code is available on the Company’s website.
Trading in Company Shares or Securities
The Board of the Company has established a set of guidelines governing the trading in the Company’s shares or securities by Directors
and management. These guidelines are designed to supplement (not replace) the legislative and reporting requirements already
established for Directors under the Corporations Act 2001 and the ASX Listing Rules.
The guidelines grant authority to the Board to determine periods during which Directors and management will be prevented from
dealing in Company shares or securities as follows:
•
at any time the Board believes that the Directors or management are in possession of price sensitive information;
• during specified ‘black-out’ periods approaching the release of annual and half-year financial results, and any other Board-
imposed black-out periods that may apply from time to time;
• Directors are required to notify the Chairman of their intention to trade in the Company’s shares prior to doing so; and
•
all other employees should notify the Chief Investment officer/Portfolio Manager prior to trading in any shares.
Directors are required to notify the ASX via the Company Secretary within five business days of any dealing in the Company’s shares.
The Company’s policy for staff, Executive Directors and Non-Executive Directors is that they should not buy and sell the Company’s
shares if they are aware of any undisclosed price-sensitive information about the Company. If they are aware of such information they
may not:
•
•
•
either on behalf of themselves or anyone else, buy, sell or otherwise deal in any shares or other securities which are affected by
the information;
either on behalf of themselves or anyone else, cause or procure any other person to buy, sell or otherwise deal in those securities;
and
communicate the information to anyone else, if they know or reasonably should know that they will use the information, directly
or indirectly, for dealing in the securities.
All Directors and employees are expressly prohibited from trading in Company securities at any time where that trading amounts to
‘short-selling’. For this purpose, ‘short-selling’ amounts to disposing of securities within 3 months of their acquisition.
3 6 | C I W 2 0 1 6 A N N U A L R E P O R T
Principle 3: Promote ethical and responsible decision making (Cont.)
Trading in Other Listed Shares or Securities
The Board of the Company has established a set of guidelines governing the restrictions on Directors trading in listed shares or
securities in which the Company may have an interest, being financial, advisory, consulting or research in order to remove any
potential conflict of interest.
These guidelines are designed to supplement (not replace) the legislative and reporting requirements already established for Directors
under the Corporations Act 2001 and the ASX Listing Rules.
These guidelines include:
•
the circulation by the Company Secretary of any listed shares or securities deemed by the Chief Investment Officer to be part of
the “Restricted Securities List”;
• Directors and officers are required to notify the Chairman of any listed shares or securities which they currently own, that appear
on the most current “Restricted Securities List”;
• Directors and officers are required to notify the Chairman of any intention to trade in listed shares or securities that appear on the
most current “Restricted Securities List”; and
•
for the purposes of the guidelines, Directors’ or officers’ interests in listed shares and securities shall include direct holdings and
beneficial interests.
A copy of the trading policy is also available on the Company’s website.
The Directors are satisfied that the Group has complied with its policies on trading in the Company’s securities.
Principle 4: Safeguard integrity in financial reporting
Financial reporting
The Executive Director and the Chief Operating Officer have made the following certifications to the Board for the year ended
30 June 2016:
•
•
that the Company’s financial statements are complete and present a true and fair view, in all material respects, of the financial
condition and operational results of the Company and Group and are in accordance with relevant accounting standards; and
that the above statement is founded on a sound system of risk management, internal compliance and control and which
implements the policies adopted by the Board and that the Company’s risk management, internal compliance and control is
operating efficiently and effectively in all material respects.
Audit Committee
The Audit Committee must comprise at least two members, all of whom will be Non-Executive Directors, who are independent of
the management of the Company. The Chairman of the Committee will be appointed by the Board from time to time. Due to the
size and structure of the Board, and considering the number of Non-Executive Directors, it is not always practicable for all members
of the Committee to be independent. Members will be selected on the basis of their appropriate skills and at least one member will
be financially literate. A quorum for any meeting will be two members of which two shall be Non-Executive Directors. The Company
Secretary will attend Audit Committee meetings and keep minutes.
The Audit Committee should meet at least two times a year. Additional meetings may be convened by the Chairman or the external
auditors as they see fit. The external auditors will be asked to make presentations to the Audit Committee at least twice a year. All
meetings will be minuted.
C O R P O R A T E G O V E R N A N C E S T A T E M E N T | 3 7
The charter for the Audit Committee is summarised as follows:
•
•
•
•
•
•
•
review the Company’s financial reporting processes, internal control and management of financial, business and investment risks
(risk management);
evaluate the processes in place, including communication to and training of staff, to ensure internal control, compliance with
codes of conduct and the management of risk;
review the annual financial statements and determine whether they are complete, consistent with committee members’
understanding of the business and reflect appropriate accounting principles and satisfy themselves that any announcements and
interim financial statements contain adequate and appropriate disclosures;
review the external auditors’ proposed audit scope and approach and ensure that no unjustified restrictions or limitations have been
placed on that scope. Review the performance of the external auditors. Ensure that significant findings and recommendations
made by the external auditors are received, discussed and acted on by the management of the Company on a timely basis;
review the independence of the external auditors, taking into account the length of service and the provision of non-audit services.
Make recommendations to the Board regarding the reappointment of the external auditors;
review the provision of non-audit services by the external auditors to ensure independence; and
review the Company’s processes for ensuring compliance with laws and regulations. Be satisfied that all regulatory compliance
matters have been considered in the preparation of financial statements.
The Audit Committee currently comprises Mr. N Schafer (Chairman), Mr. A Chant and Mr. Richard Proctor. The Audit Committee
meets at least two times per year. Details of these Directors’ qualifications and attendance at Audit Committee meetings are set out
in the Directors’ Report. Committee meetings are also attended by the Chief Operating Officer and Audit Partner by invitation as and
when required.
External Auditor
The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality and independence. The
performance of the external auditor is reviewed annually. Pitcher Partners was appointed as the external auditor in November 2015.
It is Pitcher Partners policy to rotate audit engagement partners on listed companies in accordance with the Corporations Act 2001.
An analysis of fees paid to the external auditor, including a break-down of fees for non-audit services, is provided in the notes to
the financial statements. It is the policy of the external auditor to provide an annual declaration of their independence to the Audit
Committee. A copy of this declaration is included on page 29 of this Report. The external auditor is requested to attend the AGM
and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.
3 8 | C I W 2 0 1 6 A N N U A L R E P O R T
Principle 5 and 6: Make timely and balanced disclosure and respect the rights of
Shareholders
Continuous Disclosure and Shareholder Communication
The Company has policies and procedures on information disclosure that focus on continuous disclosure of any information concerning
the Company and its controlled entities that a reasonable person would expect to have a material effect on the price of the Company’s
securities. The Company also takes measures to promote communication with shareholders and to encourage effective participation
at general meetings. A summary of these policies and procedures is available on the Company’s website.
Company Secretaries are nominated as the person responsible for communications with the Australian Securities Exchange (ASX).
This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and
overseeing and co-coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.
All shareholders receive a copy of the Company’s annual and half yearly reports. In addition, the Company seeks to increase access
to its relevant information via electronic means. Recent initiatives to facilitate this include making all company announcements, media
briefings, details of Company meetings, press releases and financial reports available on the Company’s website.
The Company’s registrar, Boardroom Pty Limited, provides the option for shareholders to receive and send communications
electronically. Shareholders are encouraged to create an online account at www.clientonline.com.au.
Principle 7: Recognise and manage risk
Risk Assessment and Management
The Board, through the Audit Committee and the Board Investment and Compliance Review Committee, is responsible for ensuring
there are adequate policies in relation to risk management, compliance and internal control systems. These policies are available on
the company website. In summary, the Company policies are designed to ensure strategic, operational, legal, reputation and financial
risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Group’s business
objectives.
Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn
lines of accountability and delegation of authority. Adherence to the Code of Conduct is required at all times and the Board actively
promotes a culture of quality and integrity.
The Directors recognise that risk management is an essential element of the Company’s business planning and investment process.
Consolidated risk reviews are a key input in the Company’s annual corporate strategy workshops attended by the Board and senior
management. The identification of key business and financial risks facing the Company is required to ensure management has put in
place appropriate controls.
In addition, and as discussed above, the Board requires each major investment proposal submitted to it for decision to be accompanied
by a comprehensive risk assessment and, where required, management’s proposed mitigation strategies.
The company does not have an internal audit function. The Board and the Audit committee are sufficiently knowledgeable of the
Company’s operations to evaluate the effectiveness of risk management and internal control processes of the Group.
C O R P O R A T E G O V E R N A N C E S T A T E M E N T | 3 9
Principle 8: Remunerate fairly and responsibly
Remuneration Committee
The Remuneration Committee makes specific recommendations on remuneration packages and other terms of employment for
Executive Directors and senior management. Membership of the Committee will be reviewed annually.
The charter of the Remuneration Committee specifies that remuneration for Executive Directors and other terms of their employment
are reviewed annually by the Committee having regard to performance, relevant comparative information and, where appropriate,
independent expert advice. In addition to base salary, remuneration packages include superannuation, retirement and termination
entitlements, performance-related bonuses and fringe benefits. Non-Executive Directors are also eligible to participate in the
Company’s Employee Share Option Plan (ESOP).
Remuneration packages are set at levels that are intended to attract and retain first class executives capable of managing the Group’s
diverse operations and achieving the Company’s strategic objectives. The remuneration packages of executives are based on a three
tiered structure, comprising of a fixed component, a performance based component and an equity based component. The fixed
portion of the package reflects the core performance of their duties. The executives are given an incentive via a performance based
bonus (as determined by the Remuneration Committee). Equity based remuneration is made via the options issued to the executive
under the ESOP or EIS. The termination payments of Executive Directors and senior management have been determined in advance.
Further information on Directors’ and executives’ remuneration is set out in the Directors’ Report and in the notes to the financial
statements.
Remuneration and other terms of employment for the Executive Directors and certain other senior executives are formalised in service
agreements with annual adjustments (once agreed by the Remuneration Committee) notified in writing.
Remuneration of Non-Executive Directors is determined by the full Board within the maximum amount approved by the shareholders
from time to time. Currently the shareholders have approved a total Board base remuneration pool of $260,000 per annum. The
payments to Non-Executive Directors do not include retirement benefits other than statutory superannuation. Consultation with Non-
Executive Directors outside their duties as Directors is treated as external consultation and is subject to additional fees by consent of
the Board.
The Company has a policy that Non-Executive Directors:
•
are not entitled to retirement benefits in addition to the statutory minimum;
• may not participate in the Company’s bonus scheme or Employee Incentive Scheme; and
• may participate in the ESOP.
The Remuneration Committee currently comprises Mr. N Schafer (Chairman), Mr. A Chant and Mr. Richard Proctor. The Remuneration
Committee meets for the annual reviews of senior management as well as any other time that an executive salary is negotiated. Details
of these Directors’ attendance at Remuneration Committee meetings are set out in the Directors’ Report.
C I W 2 0 1 6 A N N U A L R E P O R T | 4 0
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FINANCIAL STATEMENTS
Contents
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Page
42
43
44
45
46
86
88
90
4 2 | C I W 2 0 1 6 A N N U A L R E P O R T
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2016
Director
Revenue
Board of Directors
Notes
2016
($)
2015
($)
Net realised and unrealised (losses) on financial assets at fair value through
profit or loss
Occupancy expenses
Administrative expenses
5
9,114,230
9,653,739
(717,317)
(314,386)
(231,101)
(159,122)
(7,526,272)
(6,872,143)
Share of profit of associate and joint venture
13(c)
694,764
1,923,879
Profit/(loss) on disposal of property, plant and equipment
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income, net of income tax
Net movement in other reserves
Other comprehensive income for the year, net of tax
6
8(a)
22(a)
826
1,335,130
(269,800)
1,065,330
(5,127)
4,226,840
(938,189)
3,288,651
58,464
58,464
84,042
84,042
Total comprehensive income for the year
1,123,794
3,372,693
Profit attributable to members of Clime Investment Management
Limited
Total comprehensive income attributable to members of Clime
Investment Management Limited
1,065,330
3,288,651
1,123,794
3,372,693
Earnings per share
Basic - cents per share
Diluted - cents per share
24(a)
24(b)
2.2
2.1
6.9
6.6
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
F I N A N C I A L S T A T E M E N T S | 4 3
Consolidated Statement of Financial Position
As at 30 June 2016
Director
Board of Directors
Notes
2016
($)
2015
($)
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Financial assets at fair value through profit or loss
Current tax assets
Total Current Assets
Non-Current Assets
Investments accounted for using the equity method
Property, plant and equipment
Deferred tax assets
Intangible assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Unearned revenue
Current tax liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued Capital
Reserves
Retained earnings
Total Equity
7(a)
4,114,062
10
11
12
13
15
16
17
18
19
20
386,578
138,163
7,504,730
1,313,959
124,014
7,093,018
5,366,494
74,994
-
11,806,815
14,309,197
8,752,418
8,977,530
90,360
722,147
146,143
798,910
6,974,185
7,447,408
16,539,110
17,369,991
28,345,925
31,679,188
1,244,171
1,028,900
-
209,556
1,949,417
1,508,912
551,336
235,433
2,482,627
4,245,098
2,343,886
2,343,886
2,476,288
2,476,288
4,826,513
6,721,386
23,519,412
24,957,802
21
22(a)
22(b)
21,860,316
21,377,217
234,318
207,847
1,424,778
3,372,738
23,519,412
24,957,802
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
4 4 | C I W 2 0 1 6 A N N U A L R E P O R T
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Consolidated
Issued
capital
Share-based
payments
reserve
Other
Reserves
Retained
earnings
Total
Balance as at 1 July 2014
20,701,542
175,166
Notes
($)
($)
Profit for the year
Other comprehensive income for the
year net of tax
Total comprehensive income for
the year net of tax
-
-
-
-
-
-
Transactions with equity holders in their capacity as equity holders:
- Recognition of share-based
payments
- Transfer of loan repayment to issued
capital on completion of EIS loan term
- Transfer from share-based payments
reserve to issued capital on
completion of EIS loan term
25(b)
-
73,939
21(b)
550,375
-
21(b)
125,300
(125,300)
- Dividends paid or provided for
9(a)
-
-
($)
-
-
($)
($)
3,086,777
23,963,485
3,228,651
3,288,651
84,042
-
84,042
84,042
3,228,651
3,372,693
-
-
-
-
-
-
-
73,939
550,375
-
(3,002,690)
(3,002,690)
Balance as at 30 June 2015
21,377,217
123,805
84,042
3,372,738
24,957,802
-
-
-
-
Profit for the year
Other comprehensive income for the
year net of tax
Total comprehensive income for the
year net of tax
-
-
-
Transactions with equity holders in their capacity as equity holders:
- On-market buy-back including
transaction costs
- Recognition of share-based
payments
- Transfer of loan repayment to
issued capital on completion
of EIS loan term
21(b)
(112,101)
25(b)
-
64,007
21(b)
499,200
-
- Transfer from share-based payments
reserve to issued capital on completion
of EIS loan term
- Dividends paid or provided for
21(b)
9(a)
96,000
(96,000)
-
-
-
1,065,330
1,065,330
58,464
-
58,464
58,464
1,065,330
1,123,794
-
-
-
-
-
-
-
-
-
(112,101)
64,007
499,200
-
(3,013,290)
(3,013,290)
Balance as at 30 June 2016
21,860,316
91,812
142,506
1,424,778
23,519,412
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cashflows
For the year ended 30 June 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Fees received in the course of operations
Expense payments in the course of operations
Dividends received from associate
Other dividends received
Interest received
Income taxes paid
Proceeds from disposal of financial assets at fair value through profit or loss
Payments for financial assets at fair value through profit or loss
F I N A N C I A L S T A T E M E N T S | 4 5
Notes
2016
($)
2015
($)
10,091,432
9,127,403
(8,352,340)
(7,291,510)
1,003,396
304,876
118,923
(976,824)
2,189,463
943,241
291,031
127,335
(603,246)
2,594,254
228,811
2,186,411
(2,672,753)
(427,204)
(2,443,942)
1,759,207
Net cash (used in) / provided by operating activities
7(b)
(254,479)
4,353,461
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment
Acquisition of subsidiaries net of cash acquired
Payments for property, plant and equipment
1,999
1,004,872
-
(12,797)
328,564
(64,101)
Net cash (used in) / provided by investing activities
(10,798)
1,269,335
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for shares bought back (including transaction costs)
Dividends paid to company’s shareholders
(112,101)
-
(3,013,290)
(3,002,690)
Net cash used in financing activities
(3,125,391)
(3,002,690)
Net (decrease) / increase in cash and cash equivalents
(3,390,668)
2,620,106
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
7(a)
7,504,730
4,114,062
4,884,624
7,504,730
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
4 6 | C I W 2 0 1 6 A N N U A L R E P O R T
Notes for the Financial Statements
for the year ended 30 June 2016
1. Corporate information
Clime Investment Management Limited (the Company) is a limited company incorporated in Australia. The addresses of its
registered office and principal place of business is Level 7, 1 Market Street, Sydney NSW 2000, Australia. The principal activities
of the Company and its subsidiaries (the Group) are described in the Director’s Report.
The financial statements of Clime Investment Management Limited for the year ended 30 June 2016 were authorised for issue
in accordance with a resolution of the directors on 19 September 2016 and covers the consolidated entity consisting of Clime
Investment Management Limited and its subsidiaries as required by the Corporations Act 2001.
2. Summary of significant accounting policies
The financial statements include the consolidated entity consisting of Clime Investment Management Limited and its subsidiaries.
Clime Investment Management Limited is a publicly listed company, incorporated and domiciled in Australia.
These financial statements are general purpose financial statements which have been prepared in accordance with Corporations
Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.
The financial statements comprise the consolidated financial statements of the Group. For the purpose of preparing the consolidated
financial statements, The Group is a for-profit entity.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that
the financial statements and notes of Group comply with International Financial Reporting Standards (‘IFRS’).
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
The consolidated financial statements have been prepared on the basis of the historical cost convention, as modified by the
revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through
profit or loss at the end of each reporting period and certain classes of property, plant and equipment.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. All amounts are
presented in Australian dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the Group takes in to account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset or liability at measurement date.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed in note 3.
F I N A N C I A L S T A T E M E N T S | 4 7
2. Summary of significant accounting policies (Cont.)
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured
entities) controlled by the Company and its subsidiaries. Clime Investment Management Limited and its subsidiaries together
are referred to in these financial statements as the “Group” or the “Consolidated Entity”. Control is achieved when the Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial
and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect
of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group
(refer to note 2(f)).
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group companies are eliminated in full on consolidation. Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Group’s accounting policies.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive
income and statement of financial position respectively.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights and the power to participate in the financial and operating policy decisions of the
entity. Investments in associates are accounted in the consolidated financial statements using the equity method of accounting,
after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment
loss) identified on acquisition (refer to note 13).
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit or loss, and its share of post-
acquisition movements in reserves is recognised in the statement of changes in equity. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment. Dividends received or receivable from associates in the consolidated
financial statements reduce the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
4 8 | C I W 2 0 1 6 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(c) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are stated net of
the amounts of goods and services tax paid. Revenue is recognised for the major business activities as follows:
(i) Dividend income (excluding dividends received from associates)
Dividend income is recorded in the profit or loss on an accrual basis when the Group obtains control of the right to receive the
dividend.
(ii) Services income
Fees and commissions that relate to specific transactions or events are recognised as revenue in the period that the services are
provided. When they are charged for services provided over a period, they are recognised as revenue on an accrual basis as the
services are provided.
(iii) Investment education and software
The Group operates and distributes the online, web-based equity valuation tool, Stocks in Value. Client subscriptions comprise both
online access to the valuation tool as well as access to member training and education services over the period of subscription.
Revenue received in respect of client subscriptions is recognised on an accrual basis and amortised over the period of the
subscription.
(iv) Interest income
Interest income is recorded in the profit or loss when earned on an accrual basis using the effective interest method. The effective
interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the
expected life of the financial asset.
(d) Income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the notional
income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.
An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred
tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and for unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income and equity are also
recognised directly in other comprehensive income and equity, respectively.
Clime Investment Management Limited and its wholly owned subsidiaries have implemented the tax consolidation legislation for
the whole of the financial year. Clime Investment Management Limited is the head entity in the tax consolidated group. These
entities are taxed as a single entity.
F I N A N C I A L S T A T E M E N T S | 4 9
2. Summary of significant accounting policies (Cont.)
(e) Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and
the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in
other long term payables. Each lease payment is allocated between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The interest element of the finance cost is charged to the profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property,
plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss
on a straight-line basis over the period of the lease.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset consumed. Contingent
rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(f) Business combinations
The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless
of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued
or liabilities incurred or assumed at the date of exchange. Where equity instruments are issued in an acquisition, the value of the
instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that
the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods
provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly
in equity. Acquisition-related costs are recognised in profit or loss as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition
over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill (refer to note 2(m)). If the cost
of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit
or loss, but only after a reassessment of the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their net
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
(g) Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed 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. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units).
5 0 | C I W 2 0 1 6 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(h) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, if any, are shown within borrowings in
current liabilities on the statement of financial position.
(i) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for doubtful
debts and have a repayment terms between 30 and 90 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
An allowance for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the allowance is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the
allowance is recognised in the profit or loss.
(j) Investments and other financial assets
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at initial recognition.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on
initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or
if so designated by management. The policy of management is to designate a financial asset if there exists the possibility it will be
sold in the short term and the asset is subject to frequent changes in fair value. Derivatives are also classified as held for trading
unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or
are expected to be realised within 12 months of the reporting date.
The Group’s listed trading investments and its unlisted investments (excluding equity accounted investments) are classified as
financial assets at fair value through profit or loss.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable.
They are included in current assets, except for those with maturities greater than 12 months after the balance date which are
classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold to maturity. Loans and receivables and held-to-maturity
investments are carried at amortised cost using the effective interest method.
F I N A N C I A L S T A T E M E N T S | 5 1
2. Summary of significant accounting policies (Cont.)
(j) Investments and other financial assets (Cont.)
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated
in this category or not classified in any of the other categories. They are included in non-current assets unless management
intends to dispose of the investment within 12 months of the reporting date.
Purchases and sales of investments are recognised on the trade date – the date on which the Group commits to purchase or sell
the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.
Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit
or loss’ category are included in the profit or loss in the period in which they arise. Unrealised gains and losses arising from
changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity in the available-for-sale
investments revaluation reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments are included in the profit or loss as gains and losses from investment securities.
The fair values of quoted investments are determined by reference to their quoted market price, as quoted on its primary stock
exchange on the day of valuation, or an alternative basis if deemed more appropriate. Given the size and nature of the Group’s
listed investments, however, the closing bid price may not always be the most appropriate basis for determining fair value. The
Directors will consider the valuations of each of the Group’s listed investments in accordance with this accounting policy at each
reporting date.
The Group assesses at each balance 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 in determining whether the security is 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 profit or loss – is removed from equity and recognised in
profit or loss. Impairment losses recognised in profit or loss on equity instruments classified as available-for-sale investments are
not reversed through the profit or loss.
(k) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted
market prices at the reporting date. Refer to note 2(j) for further information.
The fair value of financial instruments that are not traded in an active market (for example, unlisted securities) is determined
using alternative valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market
conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term
debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the
remaining financial instruments.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at
the current market interest rate that is available to the Group for similar financial instruments.
5 2 | C I W 2 0 1 6 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(l) Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.
Depreciation of assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual
values, over their estimated useful lives, as follows:
• Plant and equipment
3-20 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 2(g)).
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in profit or loss.
When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to
retained earnings.
(m) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in investments in associates.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or group of cash-
generating units) that is expected to benefit from the synergies of the combination.
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, or more
frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit. Any impairment loss for the goodwill is recognized directly in profit or loss
in the consolidated statement of profit or loss and other comprehensive income. An impairment loss recognised for goodwill is not
reversed in subsequent periods. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
(ii) Intangible assets acquired separately
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful
life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis.
F I N A N C I A L S T A T E M E N T S | 5 3
2. Summary of significant accounting policies (Cont.)
(m) Intangible assets (Cont.)
(iii) Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair
value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
(iv) Investment Management contracts and relationships
Investment Management contracts have a finite useful life and are carried at cost less accumulated amortisation and impairment
losses. Amortisation is calculated using the straight line method to allocate the cost of investment management contracts over
their estimated useful lives (which vary from 10 to 15 years). Investment Management contracts are tested for impairment annually.
(v) Software licence, customer relationship and customer list
Software licence, customer relationships and customer lists have a finite useful life and are carried at cost less accumulated
amortisation and impairment losses. Amortisation is calculated using the straight line method to allocate the software licence,
customer relationship and customer list over their useful life of 3 to 10 years. Software license, customer relationship and
customer list are tested for impairment annually.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. They are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.
(o) Employee benefits
(i) Wages and salaries, annual leave and long service leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled wholly within 12
months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are
measured at the amounts expected to be paid when the liabilities are settled. Liabilities recognised in respect of long service leave
are measured as the present value of the estimate future cash outflows to be made by the Group in respect of services provided
by employees up to the reporting date.
(ii) Bonus plans
A liability for employment benefits in the form of bonus plans is recognised when there is no realistic alternative but to settle the
liability and at least one of the following conditions is met:
there are formal terms in the plan for determining the amount of the benefit;
the amounts to be paid are determined before the time of completion of the financial statements; or
•
•
• past practice gives clear evidence of the amount of the obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid
when they are settled.
5 4 | C I W 2 0 1 6 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(o) Employee benefits (Cont.)
(iii) Superannuation
Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred.
(iv) Employee benefit on-costs
Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the
employee benefits to which they relate are recognised as liabilities.
(v) Share-based payments
Share-based compensation benefits are provided to employees via the Clime Investment Management Limited Employee Incentive
Scheme.
Employee Incentive Scheme (EIS)
The Clime Investment Management Limited Employee Incentive Scheme (EIS) was approved by shareholders at the Company’s
Annual General Meeting held in October 2007.
The EIS provides an opportunity for eligible employees, as determined by the Board from time to time, to purchase shares in
the Company via the provision of an interest-free, non-recourse loan. Shares issued in accordance with the EIS are subject to
certain restrictions for the duration of the loan, including continued employment with the Company and share transfer locks. Upon
the expiration of the loan term, and the repayment of the outstanding loan balance by relevant employees, the shares become
unconditional. Due to certain aspects of the EIS - specifically the share transfer locks and non-recourse nature of the loans - the
Company is required to classify shares issued under the EIS as ‘in-substance options’ in accordance with AASB 2 Share-based
Payment.
As such, the underlying instruments, consisting of the outstanding employee loans and the issued fully paid ordinary shares,
are not recognised in the financial statements. Instead, the fair value of the ‘in-substance options’ granted is recognised as an
employee benefit expense with a corresponding increase in the share-based payments reserve. The fair value is measured at
grant date and recognised on a straight-line basis over the term of the loans.
The fair value of the ‘in-substance options’ at grant date is determined using a binomial distribution to statistically estimate the
value of the benefits granted. The valuation model takes into account the share issue price, the term of the loan, the current price
and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the loan.
In order to recognise the impact of employee departures and the resultant early termination of their respective loan agreements,
at each balance date the Company revises its estimate of the number of shares that may ultimately become unconditional. The
employee benefit expense recognised each period takes into account the most recent estimate.
Following the expiration of the term of the loan, any repayment received from employees in respect of the amortised loan balance
is recognised in contributed equity in the statement of financial position. The balance of the share-based payments reserve relating
to those shares is also transferred to contributed equity.
To the extent that an employee chooses not to repay the amortised loan balance at the completion of the loan term (i.e. where the
value of the shares is less than the amortised loan balance), then the Company will buy back those shares and the balance of the
share-based payments reserve relating to those shares is transferred to a lapsed option reserve.
It should be noted that the application of this accounting policy will result in differences between the number of shares on issue as
disclosed in the Group’s statutory reports, and the number of shares on issue as advised to the Australian Securities Exchange.
F I N A N C I A L S T A T E M E N T S | 5 5
2. Summary of significant accounting policies (Cont.)
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where
the effect of the time value of money is material).
(q) Financial liabilities and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the
contractual agreement.
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase consideration.
Repurchase of Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities are classified as ‘other financial liabilities’. Other financial liabilities, including borrowings are initially measured
at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised costs using the effective
interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
(r) Dividends
A liability is recorded for the amount of any dividend declared on or before the end of the period but not distributed at reporting
date.
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the period,
adjusted for bonus elements in ordinary shares issued during the period.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to potential dilutive ordinary shares.
5 6 | C I W 2 0 1 6 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(t) Goods and service tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing
and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.
(u) New accounting standards and interpretations for application in future periods
The AASB has issued certain new and amended Accounting Standards and Interpretations that are not mandatory for 30 June
2016 reporting period and hence have not been early adopted by the Group. The Group’s assessment of the new and amended
pronouncements that are relevant to the Group but applicable in future reporting periods is set out below:
(i) AASB 9: Financial Instruments and its consequential amendments
This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2018.
This standard introduces new classification and measurement models for financial assets, using a single approach to determine
whether a financial asset is measured at amortised cost or fair value. The accounting for financial liabilities continues to be
classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating
to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch.
Chapter 6 ‘Hedge Accounting’ supersedes the general hedge accounting requirements in AASB 139 and provides a new simpler
approach to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when
hedging financial and non-financial risks.
The consolidated entity will adopt this standard and the amendments from 1 January 2018 but the impact of its adoption is yet to
be assessed by the consolidated entity.
(ii) AASB 2014-4 Amendments to Australian Accounting Standards - Clarification of Acceptable Methods of Depreciation
and Amortisation
These amendments are applicable to annual reporting periods beginning on or after 1 January 2016. AASB 2014-4 amends
AASB 116 and AASB 138 to clarify that depreciation and amortisation should be based on the expected pattern of consumption
of an asset, that the use of revenue based methods to calculate depreciation is not appropriate, and that there is a rebuttable
presumption that revenue is an inappropriate basis for measuring the consumption of the economic benefit embodied in an
intangible asset.
The adoption of these amendments from 1 January 2016 will not have a material impact on the consolidated entity.
(iii) AASB 15 Revenue from Contracts with Customers
This standard is expected to be applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides
a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be
identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the
time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis
of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist;
and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense
rather than adjusted to revenue.
F I N A N C I A L S T A T E M E N T S | 5 7
2. Summary of significant accounting policies (Cont.)
(u) New accounting standards and interpretations for application in future periods (Cont.)
For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the
performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers.
For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much
revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity’s
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the
entity’s performance and the customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any
assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from
1 January 2017 but the impact of its adoption is yet to be assessed by the consolidated entity.
(iv) AASB 16 ‘Leases’
ASAB 16 provides a comprehensive model for the identification of leases arrangements and their treatment in the financial
statements of both lessees and lessors.
The accounting model for lessees will require lessees to recognize all leases on balance sheet, except for short-term leases and
leases of low value assets.
AASB 16 applies to annual periods beginning on or after 1 January 2019. The directors anticipate that the adoption of AASB 16
in the future may have a material impact on the amounts reported and disclosures made in the Group’s consolidated financial
statements. However it is not practicable to provide a reasonable estimate of the effect of AASB 16 until the Group performs a
detailed review.
(v) AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure initiative: Amendments to AASB 101’
The amendments to AASB 101 give some guidance on how to apply the concept of materiality in practice. The amendments apply
to annual periods beginning on or after 1 January 2016. The directors do not anticipate that the application of these amendments
to AASB 101 will have a material impact on the Group’s consolidated financial statements.
3. Critical accounting estimates and assumptions
Critical accounting estimates and assumptions
In the application of the Group’s accounting policies, which are described in note 2, the directors of the Company are required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if
the revision affects both the current and future periods.
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.
5 8 | C I W 2 0 1 6 A N N U A L R E P O R T
3. Critical accounting estimates and assumptions (Cont.)
Critical accounting estimates and assumptions (Cont.)
Estimated impairment of goodwill, investment management contracts, software licences and customer relationships
The Group tests annually whether goodwill, investment management contracts, software licenses and customer relationships
have suffered any impairment, in accordance with the accounting policy stated in note 2(m). The recoverable amounts of cash-
generating units have been determined based on fair value less costs to sell. The fair values of cash-generating units have
been determined in accordance with the Directors’ assessments of their values based on arms’ length transactions between
knowledgeable and willing parties on the basis of the best information available. In determining these amounts, the Directors have
considered the outcomes of recent transactions for similar assets and businesses.
The Directors’ assessments of the fair values of cash-generating units are subject to an element of subjectivity concerning the
selection of appropriate benchmarks and transactions. A material adverse change in one or more of the underlying variables
applied in the estimates of fair values, therefore, may impact their recoverable amounts and result in alternative outcomes for the
purposes of impairment testing.
4. Financial risk management
The Group’s activities expose it to various direct and indirect financial risks, including market risk, interest rate risk, credit risk,
liquidity risk and fair values.
Risk management is carried out by senior management under policies and strategies approved by the Board and Audit Committee.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
(a) Market risk
The Group’s activities expose it primarily to other price risks (see (i) below) and interest rates (see (ii) below). Unfavourable
economic conditions both domestically and globally can have a significant impact on the investment returns of the investments
and investment portfolios.
(i) Other price risk
The Group’s activities expose it primarily to equity securities price risk. This arises from the following:
•
• Exposure to adverse movements in equity prices which may have negative flow-on effects to the revenue derived from the
Investments held by the Group as direct investments; and
management of clients’ investment portfolios.
The Group seeks to reduce market risk by adhering to the prudent investment guidelines of its Investment Committee. These
guidelines include ensuring that the Group is not overly exposed to any one security and/or sector of the market, and must operate
within set parameters.
Price Risk Sensitivity Analysis
The table below summarises the pre-tax impact of both a general fall and general increase in market prices by 5% at the end of the
reporting period. The analysis is based on the assumption that the movements are spread equally over all assets in the investment
and trading portfolios.
Director
30 June 2016
30 June 2015
5% Increase in
Market Prices
5% Decrease in
Market Prices
5% Increase in
Market Prices
5% Decrease in
Market Prices
Impact on profit (pre-tax)
$1,125,097
($1,125,097)
$1,098,208
($1,098,208)
The Group’s sensitivity to equity prices has not changed significantly from the prior year.
F I N A N C I A L S T A T E M E N T S | 5 9
4. Financial risk management (Cont.)
(a) Market risk (Cont.)
(ii) Interest rate risk management
The Group is exposed to interest rate risk because at balance date, the Group has a significant proportion of its assets held in
interest-bearing bank accounts and deposits at call. As such, the Group’s revenues and assets are subject to interest-rate risk to
the extent that the cash rate falls over any given period. Given that the Group does not have – nor has it ever had - any material
interest-bearing borrowings/liabilities at balance date, the Board and management do not consider it necessary to hedge the
Group’s exposure to interest rate risk.
Interest Rate Risk Sensitivity Analysis
The table below summarises the pre-tax impact on the Group’s profits due to both a decrease and increase in interest rates by 100
basis points (one percentage point) at the end of the reporting period. The analysis is based on the assumption that the change is
based on the weighted average rate of interest on cash at bank and cash on deposit for the year (2.20% weighted average interest
rate in 2016 and 2.25% weighted average interest rate in 2015).
Director
30 June 2016
30 June 2015
100 bps Increase in
Interest Rate
100 bps Decrease
in Interest Rate
100 bps Increase in
Interest Rate
100 bps Decrease
in Interest Rate
Impact on profit (pre-tax)
$54,135
($54,135)
$56,669
($56,669)
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has adopted a policy of dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from
defaults.
(i) Cash and cash equivalents
The maximum credit risk of the Group in relation to cash and cash equivalents is the carrying amount and any accrued unpaid
interest. The average weighted maturity of the cash portfolio at any given time is no greater than 90 days. The credit quality of
material deposits of cash and cash equivalents can be assessed by reference to external credit ratings.
Director
Cash at bank and short-term bank deposits
A-1+
A-1
(ii) Trade and sundry receivables
2016
($)
2015
($)
1,993,194
2,120,868
5,436,541
2,068,189
The maximum credit risk of the Group in relation to trade and sundry receivables is their carrying amounts. This risk is largely
mitigated by automated systems in place which support collectability of debts on a timely basis.
6 0 | C I W 2 0 1 6 A N N U A L R E P O R T
4. Financial risk management (Cont.)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the ability to close-out market
positions. The Group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual
cash flows, and by matching the maturity profiles of financial assets and liabilities. The Group’s management and its Board actively
review the liquidity position on a regular basis to ensure the Group is always in a position to meet its debts and commitments on
a timely basis.
(i) Maturities of financial assets and liabilities
The following table details the Group’s remaining contractual maturity for its non-derivative financial assets and liabilities. The table
has been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
is liable to meet its obligations. The table includes both interests (where applicable) and principal cash flows. The contractual
maturity is based on the earliest date on which the Group may be required to pay.
Maturity analysis – Group
2016
Carrying
amount
Contractual
cash flows
Less than 6
months
6 – 12
months
1-3
years
Financial liabilities
Trade and other payables
Total financial liabilities
Financial assets
$
1,000,442
1,000,442
$
1,000,442
1,000,442
$
1,000,442
1,000,442
Trade and other receivables – current
Total financial assets
386,578
386,578
386,578
386,578
386,578
386,578
$
-
-
-
-
$
-
-
-
-
Maturity analysis – Group
2015
Carrying
amount
Contractual
cash flows
Less than 6
months
6 – 12
months
1-3
years
Financial liabilities
Trade and other payables
Total financial liabilities
Financial assets
Trade and other receivables – current
Total financial assets
$
1,604,896
1,604,896
1,313,959
1,313,959
$
1,604,896
1,604,896
1,313,959
1,313,959
$
1,604,896
1,604,896
1,313,959
1,313,959
$
-
-
-
-
$
-
-
-
-
Trade and sundry creditors are non-interest bearing, unsecured and generally payable within 30 days from the date of service /
supply.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
F I N A N C I A L S T A T E M E N T S | 6 1
4. Financial risk management (Cont.)
(d) Fair value risk
(i) Fair value measurements recognised in the consolidated statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the assets or liability that
are not based on observable market data (unobservable inputs).
All financial instruments that are measured subsequent to initial recognition at fair value comprise financial assets at fair value
through profit or loss.
At 30 June 2016
Financial assets at fair value through profit or loss
- Listed equities
- Listed preference shares
- Unlisted funds
At 30 June 2015
Financial assets at fair value through profit or loss
- Listed equities
- Listed preference shares
- Unlisted funds
Level 1
Level 2
Level 3
($)
($)
($)
Total
($)
4,581,236
3,191
-
-
-
2,508,591
4,584,427
2,508,591
-
-
-
-
4,581,236
3,191
2,508,591
7,093,018
Level 1
Level 2
Level 3
($)
($)
($)
Total
($)
5,241,090
117,200
8,204
5,366,494
-
-
-
-
-
-
-
-
5,241,090
117,200
8,204
5,366,494
6 2 | C I W 2 0 1 6 A N N U A L R E P O R T
4. Financial risk management (Cont.)
(d) Fair value risk (Cont.)
(ii) Valuation technique
Listed Investment in equity and preference securities and managed funds
When fair values of publicly traded equities and preference securities and managed funds are based on quoted market prices in
an active market, the instruments are included within Level 1 of the hierarchy. The Group values these investments at closing
prices at year end.
Unlisted managed funds
The Group invests in managed funds, which are not quoted in an active market. The Group considers the valuation techniques
and inputs used in valuing these funds as part of its due diligence prior to investing, to ensure they are reasonable and appropriate
and therefore the Net Asset Value (NAV) of these funds may be used as an input into measure their fair value. In measuring this fair
value, consideration is also paid to any transactions in the shares of the fund. Depending on the nature and level of adjustments
needed to the NAV and the level of trading in the fund, the Group classified these funds as Level 2.
Unlisted equity investments
The Group invested in a public unlisted company which are not quoted in an active market. Transactions in such investments do
not occur on a regular basis. The Group used a combination of NAV method based on the value of the assets of the business less
its liabilities adjusted for fair value and market based valuation technique for valuing these positions. The Group classifies the fair
value of these investments as Level 3.
5. Revenue
Management fees and commissions
Performance fees
Consulting fees
Director fees
Dividends received
Interest received
Investment software and education
Other income
Total revenue
See note 26(a) for an analysis of revenue by major products and services
2016
$
2015
$
7,440,834
7,829,091
2,401
-
75,000
304,876
118,923
1,147,913
24,283
9,114,230
831,587
206,000
70,000
211,555
127,335
160,405
217,766
9,653,739
F I N A N C I A L S T A T E M E N T S | 6 3
6. Expenses
Profit before income tax includes the following specific expenses:
Employee benefits expense (excluding superannuation)
4,089,980
3,998,389
2016
$
2015
$
Defined contribution superannuation expense
Share-based payment expense recognised
Rental expense relating to operating leases
- Minimum lease payments
Depreciation of plant and equipment
Amortisation of investment management contracts
Amortisation of software licences, customer relationships and customer lists
7. Statement of Cashflows
(a) Reconciliation of cash
For the purposes of the statement of financial position and statement
of cash flows, cash and cash equivalents comprise:
Cash and bank balances
281,706
64,007
205,799
67,408
260,348
212,875
257,766
73,939
144,110
67,248
305,348
-
2016
$
2015
$
4,114,062
4,114,062
7,504,730
7,504,730
Cash at bank is interest bearing. Cash at bank and deposits at call bear floating interest rates between 1.9 and 2.3% (2015: 1.9
and 2.4%).
Cash and bank balances above includes deposits of $256,700 (2015: 256,591) that has been pledged as security for the currently
occupied office space in Sydney.
(b) Reconciliation of profit for the year to net cash flows
from operating activities:
Profit for the year
Depreciation and amortisation
(Gain)/loss on disposal of Property, plant and equipment
Non-cash employee benefits expense
Share of (profit) of associate and joint venture
Dividends received from associate
Change in operating assets and liabilities
Trade and sundry debtors and other assets
Financial assets at fair value through profit or loss
Trade and sundry creditors
Current tax liability
Deferred tax assets and liabilities
Provisions and other non-current operating liabilities
Net cash (used in) / provided by operating activities
2016
$
1,065,330
540,631
(826)
64,007
(694,764)
1,003,396
913,231
(1,726,524)
(686,059)
(626,330)
(80,694)
(25,877)
(254,479)
2015
$
3,288,651
372,596
5,127
73,939
(1,923,879)
943,241
(873,489)
2,073,593
22,236
315,176
19,767
36,503
4,353,461
6 4 | C I W 2 0 1 6 A N N U A L R E P O R T
8. Income tax expense
(a) Income tax expenses
Current tax expense
Deferred tax expense
Deferred income tax expense included in income tax expense comprises:
Decrease / (increase) in deferred tax assets (note 16)
(Decrease) / increase in deferred tax liabilities (note 20)
2016
$
359,495
(89,695)
269,800
67,763
(157,458)
(89,695)
2015
$
918,421
19,768
938,189
(17,748)
37,516
19,768
(b) Numerical reconciliation of income tax expense to
prima facie tax payable
Profit before income tax expense
2016
$
2015
$
1,335,130
4,226,840
Tax at the Australian tax rate of 30% (2015: 30%)
400,539
1,268,052
Tax effect of amounts which are not deductible / (taxable) in
calculating taxable income:
Amortisation of intangibles
EIS expense
Dividends received
Sundry items
Under provision of prior year tax
Income tax expense
9. Dividends
128,213
19,202
(424,893)
3,590
126,651
143,149
269,800
91,604
22,182
(475,152)
2,965
909,651
28,538
938,189
(a) Dividends provided for or paid during the year
Final dividend in respect of the previous financial year – 3 cents per share fully
franked (2015: 3 cents per share fully franked)
Interim dividend in respect of the current financial year – 3 cents per share fully
franked (2015: 3 cents per share fully franked)
2016
$
2015
$
1,507,345
1,501,345
1,505,945
1,501,345
3,013,290
3,002,690
Franked Portion
3,013,290
3,002,690
(b) Dividends not recognised at year end
Proposed fully franked dividend – 3 cents per share (2015: 3 cents)
1,511,883
1,501,345
F I N A N C I A L S T A T E M E N T S | 6 5
9. Dividends (Cont.)
(c) Franking account balance
Amount of franking credits available for subsequent financial years are:
Franking account balance brought forward
Franking credits arising from income tax paid
Franking credits from dividends received from other corporations
Franking debits from payment of dividends
Balance of franking account at year end adjusted
2016
$
2015
$
2,998
996,624
606,989
(1,291,410)
315,201
20,135
590,944
678,786
(1,286,867)
2,998
Impact on franking account of proposed dividend not recognised at year end
647,950
643,434
10. Trade and other receivables - Current
Trade receivables (note a)
Other receivables
2016
$
300,212
86,366
386,578
2015
$
1,246,316
67,643
1,313,959
a. Trade receivables are non-interest bearing and are generally subject to 30 day terms.
b. The Group did not have any significant credit risk exposure to any single counterparty or any group of counterparties having
similar characteristics.
c. Financial assets that are neither past due nor impaired
Trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of the respective
clients, it is expected that these amounts will be received when due. The receivables primarily relate to management fees
receivable which are considered low risk.
d. Fair value
The carrying amounts of trade and other receivables are considered to represent a reasonable approximation of their fair values.
11. Other current assets
Payments
2016
$
138,163
2015
$
124,014
6 6 | C I W 2 0 1 6 A N N U A L R E P O R T
12. Financial assets at fair value through profit or loss
CURRENT
Investments comprise:
Shares in other corporations listed on a prescribed stock exchange
Investment in unlisted, unregistered managed investment scheme
13. Investments accounted for using the equity method
Investment in associate
(a) Carrying amounts
Information relating to associate is set out below.
2016
$
4,584,427
2,508,591
7,093,018
2015
$
5,366,494
-
5,366,494
2016
$
2015
$
8,752,418
8,977,530
Name of companies
Principal activity
2016
%
2015
%
2016
$
2015
$
Carrying amounts
Unlisted
JASCO Holdings Ltd
(Associate) (i)
The above associate is incorporated in Australia
(i) Jasco Holdings Limited
Importing and
distribution
21.75
21.75
8,752,418
8,977,530
At 30 June 2016
As at 30 June 2016, the Group has accounted for 21.75% (2015: 21.75%) investment in Jasco as an investment in associate, at
a carrying value of $8,752,418 (2015: $8,977,530).
(b) Movements of carrying amounts
Carrying amount at the beginning of the financial year
Share of profit after income tax
Share of increase in reserves
Dividends received/receivable
Dividends reinvested
Carrying amount at the end of the financial year
Associates
Net profit of Associate before income tax
Income tax (expenses) / benefit
Profit after income tax
2016
$
8,977,530
694,764
83,520
(1,129,109)
125,713
8,752,418
953,154
(258,390)
694,764
2015
$
7,876,831
1,923,879
120,061
(1,295,543)
352,302
8,977,530
1,002,240
921,639
1,923,879
F I N A N C I A L S T A T E M E N T S | 6 7
13. Investments accounted for using the equity method (Cont.)
(c) Reconciliation to share of net profits of associate accounted using the equity method
Share of net profit of Associate
(d) Summarised financial information of associate
2016
$
694,764
2015
$
1,923,879
Summarised financial information in respect of the Group’s associate is set out below. The summarised financial information below
represents amounts shown in the associate’s financial statements prepared in accordance with AASBs adjusted by the Group for
equity accounting purposes.
Group’s share of
Assets
$
Liabilities
$
Revenues
$
Profit after tax
$
2016
Jasco Holdings Limited
12,844,245
4,091,828
10,358,003
694,764
2015
Jasco Holdings Limited
12,594,120
3,616,590
8,886,180
1,923,879
14. Investments in subsidiaries
(a) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 2(b).
Name of entity
Clime Asset Management Pty Ltd
Clime Investors Education Pty Ltd
Stocks In Value Pty Ltd
Country of
incorporation
Australia
Australia
Australia
Class of shares
Fully Paid Ordinary
Fully Paid Ordinary
Fully Paid Ordinary
* The proportion of ownership interest is equal to the proportion of voting power held.
Equity holding *
2016
%
100
100
100
2015
%
100
100
100
6 8 | C I W 2 0 1 6 A N N U A L R E P O R T
15. Property, plant and equipment
Plant and equipment - at cost
Accumulated depreciation and impairment
Written down value of property, plant and equipment
Reconciliation
a) Plant and equipment
Carrying value at beginning
Additions during the year
Acquisition through business combination
Disposals during the year
Depreciation charge for the year
Depreciation on disposals
Carrying amount at end
16. Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits
Accrued expenses
Financial assets at fair value through profit or loss
Acquisition of subsidiary
Available for sale and equity accounted investments
Realised tax losses carried forward – capital
Deferred tax assets
Movements
Opening balance at 1 July
Acquisition of subsidiary
Credited/(charged) to profit or loss (note 8)
Closing balance at 30 June
2016
$
428,756
(338,396)
90,360
2015
$
418,070
(271,927)
146,143
146,143
12,798
-
(2,112)
(67,408)
939
90,360
2016
$
62,867
22,199
136,065
-
-
501,016
722,147
789,910
-
(67,763)
722,147
144,350
64,100
4,941
(4,028)
(67,248)
4,028
146,143
2015
$
70,630
22,294
-
11,581
135,000
559,405
798,910
769,581
11,581
17,748
798,910
17. Intangible assets
Goodwill at cost
Investment management contracts and relationships:
At cost
Accumulated amortisation
Software licences:
At cost
Accumulated amortisation
Customer relationship and customer list:
At cost
Accumulated amortisation
F I N A N C I A L S T A T E M E N T S | 6 9
2016
$
2015
$
3,351,564
3,351,564
4,790,000
(2,180,826)
2,609,174
576,300
(61,845)
514,455
650,022
(151,030)
498,992
4,790,000
(1,920,478)
2,869,522
576,300
-
576,300
650,022
-
650,022
Closing balance at 30 June
6,974,185
7,447,408
(a) Reconciliations
2016 Consolidated
Goodwill
Investment
management
contracts &
relationships
Software
licences
Customer
relationships &
customer lists
Total
($)
($)
($)
($)
($)
Carrying amount at beginning of year
3,351,564
2,869,521
576,300
650,023
7,447,408
Acquisitions through business combination
Amortisation expense1
Carrying amount at end of year
-
-
3,351,564
-
(260,348)
2,609,173
-
(61,845)
514,455
-
-
(151,030)
(473,223)
498,993
6,974,185
2015 Consolidated
Goodwill
Investment
management
contracts &
relationships
Software
licences
Customer
relationships
& customer
lists
Total
Carrying amount at beginning of year
Acquisitions through business combination
Amortisation expense1
Carrying amount at end of year
($)
3,026,564
325,000
-
3,351,564
($)
3,174,869
($)
-
($)
-
($)
6,201,433
-
576,300
650,023
1,551,323
(305,348)
2,869,521
-
576,300
-
(305,348)
650,023
7,447,408
1 Amortisation of $473,223 (2015: $305,348) is included in the consolidated statement of profit or loss and other comprehensive
income.
7 0 | C I W 2 0 1 6 A N N U A L R E P O R T
17. Intangible assets (Cont.)
(b) Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated to the applicable cash-generating unit for impairment
testing. Each cash-generating unit represents a business operation of the Group.
Cash-generating unit
2016 - Consolidated
Funds
Management
Investment
Software and
Education
($)
($)
Total
($)
Balance at the beginning of the year
3,026,564
325,000
3,351,564
Movements during the year
Balance at end of year
2015 - Consolidated
-
-
-
3,026,564
325,000
3,351,564
Balance at the beginning of the year
3,026,564
-
3,026,564
Amounts recognised from business combinations occurring
during the year (note 27)
-
325,000
325,000
Balance at end of year
3,026,564
325,000
3,351,564
The recoverable amounts of all cash generating units have been determined based on fair value less costs to sell. The fair values
of cash generating units have been determined in accordance with the Directors’ assessments of their values based on arms’
length transactions between knowledgeable and willing parties on the basis of the best information available. In determining these
amounts, the Directors have considered the outcomes of recent transactions for similar assets and businesses.
18. Trade and other payables
Unsecured:
Trade payables
Accruals
Other payables
19. Provisions
Employee benefits
2016
$
435,859
548,557
259,755
1,244,171
2015
$
494,433
1,102,716
352,268
1,949,417
2016
$
209,556
2015
$
235,433
The provision for employee benefits represents annual leave and vested long service leave entitlements accrued.
20. Deferred tax liabilities
The balance comprises temporary differences attributable to:
Available for sale and equity accounted investments
Sundry items
Deferred tax liabilities
Movements
Opening balance at 1 July
Charged to the profit or loss (note 8)
Charged / (debited) directly to equity (note 22)
Closing balance at 30 June
21. Issued capital
F I N A N C I A L S T A T E M E N T S | 7 1
2016
$
2,264,063
79,823
2,343,886
2,476,288
(157,458)
25,056
2,343,886
2015
$
2,369,310
106,978
2,476,288
2,402,753
37,516
36,018
2,476,288
(a) Share Capital
Parent Equity
Parent Equity
Ordinary shares
Fully paid
Notes
2016
Shares
2015
Shares
2016
$
2015
$
(b),(d)
49,021,093
48,344,834
21,860,316
21,377,217
1 Note that the number of shares on issue above will differ from the number of shares on issue as notified to the Australian
Securities and Investments Commission and the Australian Securities Exchange. This is due to the application of AASB 2 Share-
based Payment which treats the shares issued under the Employee Incentive Scheme as ‘in-substance options’ for statutory
reporting purposes. Refer to note 2(o)(v) for further information.
(b) Movements in ordinary share capital
Dates
Details
30 June 2014
Balance
Various
Various
Transfer of loan repayment to issued capital on
completion of EIS loan term
Transfer from share-based payments reserve to
issued capital on completion of EIS loan term
30 June 2015
Balance
Various
Various
Transfer of loan repayment to issued capital on
completion of EIS loan term
Transfer from share-based payments reserve to
issued capital on completion of EIS loan term
Notes
Number of
shares
$
46,944,834
20,701,542
1,400,000
550,375
-
125,300
48,344,834
21,377,217
850,000
499,200
-
96,000
July 2015 to June 2016
Shares bought back on-market and cancelled
(d)
(173,741)
(111,961)
July 2015 to June 2016
Transaction costs arising from on-market buy-back
-
(140)
30 June 2016
Balance
49,021,093
21,860,316
7 2 | C I W 2 0 1 6 A N N U A L R E P O R T
21. Issued capital (Cont.)
(c) Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and
creditors and are fully entitled to any proceeds of liquidation.
(d) On-market share buy-back
2016
During the financial year ended 30 June 2016, Clime Investment Management Limited, in accordance with its on-market share
buy-back scheme, bought back 173,741 shares. The number of shares bought back and cancelled was within the ‘10/12 limit’
imposed by s257B of the Corporations Act 2001, and as such, shareholder approval was not required. The shares were acquired
at an average price of 64.52 cents per share. The total cost of $112,101, including $140 of transaction costs, was deducted from
contributed equity. The shares bought back in the current year were cancelled immediately.
2015
During the financial year ended 30 June 2015, Clime Investment Management Limited did not buy-back any shares in accordance
with its on-market buy-back scheme.
(e) Employee Incentive Scheme (“EIS”)
As at 30 June 2016, there are 1,050,000 (2015: 1,700,000) EIS ‘in-substance’ options on issue. Share options granted under the
Company’s employee incentive scheme carry no rights to dividends and no voting rights. Refer to note 25(a) for a schedule of the
movements in EIS options on issue during the year.
(f) Capital Risk Management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can
continue to provide returns for shareholders, to maintain an optimal capital structure and to minimise the cost of capital. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid, return capital to shareholders, issue
new shares from time to time or buy back its own shares.
The Group’s strategy is unchanged from 2015.
22. Reserves and retained profits
(a) Reserves
Share-based payments reserve
Other reserves
Movements
Share-based payments reserve
Balance 1 July
Share-based payment expense recognised
Transfer to issued capital on completion of EIS loan term
Balance 30 June
Other reserves
Balance 1 July
Movements during the year
Deferred tax liability
Balance 30 June
(b) Retained earnings
Movements in retained profits were as follows:
Balance 1 July
Net profit for the year
Dividends (note 9)
Balance 30 June
(c) Nature and purpose of reserves
F I N A N C I A L S T A T E M E N T S | 7 3
2016
$
91,812
142,506
234,318
123,805
64,007
(96,000)
91,812
84,042
83,520
(25,056)
142,506
2015
$
123,805
84,042
207,847
175,166
73,939
(125,300)
123,805
-
120,060
(36,018)
84,042
2016
$
2015
$
3,372,738
1,065,330
(3,013,290)
1,424,778
3,086,777
3,288,651
(3,002,690)
3,372,738
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued to employees but not exercised.
Other reserves
Group’s share of various reserves from equity accounted associate, including foreign currency translation reserves.
7 4 | C I W 2 0 1 6 A N N U A L R E P O R T
23. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices
and non-related audit firms:
Audit and review of financial statements
- Pitcher Partners / Moore Stephens Sydney
77,207
67,920
Taxation matters
- Pitcher Partners / Moore Stephens Sydney
19,610
96,817
18,425
86,345
2016
$
2015
$
It is the Group’s policy to employ Pitcher Partners or its related practices, on assignments additional to their statutory audit duties
where Pitcher Partners expertise and experience within the Group is considered.
24. Earnings per share
(a) Basic earnings per share
Profit attributable to the ordinary equity holders of the Group
(b) Diluted earnings per shared
Profit attributable to the ordinary equity holders of the Group
2016
Cents
2015
Cents
2.2
2.1
6.9
6.6
2016
2015
(c) Reconciliations of earnings used in calculating
earnings per share
Basic and diluted earnings per share
Profit for the year attributable to owners of the Group
$1,065,330
$3,288,650
Profit attributable to the ordinary equity holders of the Group used in
calculating basic and diluted earnings per share
$1,065,330
$3,288,650
24. Earnings per share (Cont.)
(d) Weighted average number of shares used as the
denominator
Weighted average number of ordinary shares used in calculation of basic
earnings per share
Weighted average number of ordinary shares used in the calculation of
diluted earnings per share
(e) Reconciliations of weighted average number of
shares:
Weighted average number of ordinary shares used in the calculation of
basic earnings per share
Shares deemed to be issued for no consideration in respect of
- Employee incentive scheme
Weighted average number of ordinary shares used in the calculation of
diluted earnings per share
F I N A N C I A L S T A T E M E N T S | 7 5
2016
Number
2015
Number
49,122,496
47,885,176
50,172,496
49,585,176
49,122,496
47,885,176
1,050,000
1,700,000
50,172,496
49,585,176
(f) Options issued under Employee Incentive Scheme
Options granted under the Employee Incentive Scheme are considered to be dilutive and have been included in the determination
of diluted earnings per share. These options have not been included in the determination of basic earnings per share.
25. Share-based payments
(a) Employee Incentive Scheme (EIS)
The Clime Investment Management Limited Employee Incentive Scheme (“EIS”) was approved by shareholders at the Company’s
Annual General Meeting held on 25 October 2007.
The EIS provides an opportunity for eligible employees, as determined by the Board from time to time, to purchase shares in
the Company via the provision of an interest-free, non-recourse loan. Shares issued in accordance with the EIS are subject to
certain restrictions for the duration of the loan, including continued employment with the Company and share transfer locks. Upon
the expiration of the loan term, and the repayment of the outstanding loan balance by relevant employees, the shares become
unconditional. Shares issued under the EIS rank equally with other fully paid ordinary shares.
Due to certain aspects of the EIS - specifically the share transfer locks and non-recourse nature of the loans - the Company is
required to classify shares issued under the EIS as ‘in-substance options’ in accordance with AASB 2 Share-based Payment. It
should be noted that the application of this accounting policy will therefore result in differences between the number of shares on
issue as disclosed in the Company’s statutory reports, and the number of shares on issue as advised to the Australian Securities
Exchange.
7 6 | C I W 2 0 1 6 A N N U A L R E P O R T
25. Share-based payments (Cont.)
(a) Employee Incentive Scheme (EIS) (Cont.)
During the current financial year none of the directors or key management personnel participated in the Employee Incentive
Scheme.
Set out below is a summary of in-substance options granted under the plan:
Grant Date
Vesting Date
Exercise
Price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Transferred/
Forfeited
during the
year
Balance at
the end of the
year
Vested and
exercisable
at end of the
year
2016
19/04/2012
19/04/2015
15/12/2012
15/12/2015
21/02/2013
21/02/2016
22/08/2013
22/08/2016
23/10/2013
22/10/2016
25/10/2013
25/10/2016
19/08/2014
19/08/2017
25/02/2015
25/02/2018
11/09/2015
11/09/2018
Total
$0.420
$0.500
$0.660
$0.800
$0.815
$0.829
$0.850
$0.750
$0.700
Number
Number
Number
Number
Number
Number
250,000
200,000
200,000
100,000
200,000
375,000
300,000
75,000
-
-
-
-
-
-
-
-
-
200,000
(250,000)
(200,000)
(200,000)
-
(200,000)
-
-
-
-
-
-
-
-
-
(75,000)
(100,000)
-
175,000
-
-
-
100,000
-
300,000
200,000
75,000
375,000
1,700,000
200,000
(850,000)
-
1,050,000
-
-
-
-
-
-
-
-
-
-
Weighted average exercise price
$0.779
Grant Date
Vesting Date
Exercise
Price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Transferred/
Forfeited
during the
year
Balance at
the end of the
year
Vested and
exercisable
at end of the
year
2015
18/07/2011
18/07/2014
09/08/2011
08/08/2014
03/01/2012
03/01/2015
16/04/2012
16/04/2015
19/04/2012
19/04/2015
04/12/2012
04/12/2015
15/12/2012
15/12/2015
21/02/2012
21/02/2016
22/08/2013
22/08/2016
23/10/2013
23/10/2016
25/10/2013
25/10/2016
19/08/2014
19/08/2017
25/02/2015
25/02/2018
Total
$0.380
$0.380
$0.370
$0.395
$0.420
$0.480
$0.500
$0.660
$0.800
$0.815
$0.829
$0.850
$0.750
Number
Number
Number
Number
Number
Number
450,000
350,000
100,000
300,000
325,000
200,000
200,000
200,000
100,000
200,000
375,000
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
-
(450,000)
(350,000)
(100,000)
(300,000)
(75,000)
(125,000)
-
-
-
-
-
-
-
-
-
-
-
-
(75,000)
-
-
-
-
-
-
75,000
-
-
-
-
-
-
-
-
250,000
250,000
-
200,000
200,000
100,000
200,000
375,000
300,000
75,000
-
-
-
-
-
-
-
-
2,800,000
300,000
(1,400,000)
-
1,700,000
250,000
Weighted average exercise price
$0.756
F I N A N C I A L S T A T E M E N T S | 7 7
25. Share-based payments (Cont.)
(a) Employee Incentive Scheme (EIS) (Cont.)
The weighted average contractual life of in-substance options outstanding at the end of the period was 1.17 years (2015 – 1.41
years).
The assessed fair value at grant date of in-substance options granted to the individuals is allocated equally over the period from
grant date to vesting date. Fair values at grant date are determined by using a binomial distribution model to statistically estimate
the future probability of the in-substance options vesting and the amounts that these in-substance options would be worth. The
valuation was performed as at the grant date of each in-substance option issued.
The model inputs for in-substance options granted during the year ended 30 June 2016 included:
•
in-substance options are granted via an interest-free, non-recourse loan and vest based on the terms discussed above. In-
substance options become unconditional on the date of their vesting following the repayment of the outstanding loan balance;
• exercise price: The forecast outstanding loan principal at the expiration of the loan term is equivalent to the exercise price
variable in a standard option valuation. The forecast outstanding loan principal is $0.78 per share (for in-substance options
issued with a three year term);
vesting date: 3 years from the grant date;
•
• expected price volatility of the Company’s shares: between 30% and 35%;
•
• discount rate: 14%.
risk-free interest rate: 2.75%; and
The resulting fair values per in-substance option are:
Number of
Options
100,000
300,000
200,000
75,000
375,000
Grant Date
Exercise Price
Value per option
at grant date
22 August 2013
25 October 2013
19 August 2014
25 February 2015
11 September 2015
$0.800
$0.829
$0.850
$0.750
$0.700
$0.140
$0.140
$0.140
$0.134
$0.121
Vesting Date
22 August 2016
25 October 2016
19 August 2017
25 February 2018
11 September 2018
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of the employee benefit
expense were as follows:
Option expense - Employee Incentive Scheme
2016
$
64,007
64,007
2015
$
73,939
73,939
7 8 | C I W 2 0 1 6 A N N U A L R E P O R T
26. Segment information
(a) Description of segments
Our internal reporting system produces reports in which business activities are presented in a variety of ways. Based on these
reports, the Executive Directors, whom are responsible for assessing the performance of various components of the business and
making resource allocation decisions as our Chief Operating Decision Makers (CODM), evaluate business activities in a number of
different ways. The Group’s reportable segments under AASB 8 are as follows:
• Funds management
•
Investment software
• Direct investments
Funds Management
The Group’s Funds Management business, Clime Asset Management Pty Ltd is based in Sydney. This business generates
operating revenue (investment management and performance fees) as remuneration for managing the investment portfolios of
individuals and corporations.
Investment Software
Consulting revenue is generated from the provision of investment research analysis to institutional clients, and wealth structuring
and taxation advice to high net worth private clients. Revenue generated from external subscriptions to the Group’s proprietary
web-based investment software, Stocks In Value Pty Limited, is also included within this division.
Direct Investments
Includes revenue generated by the Group’s direct investments in listed and unlisted securities and managed investment schemes.
A significant proportion of the Group’s direct investments are ‘self-managed’ and include material investments in the ASX listed
company Clime Capital Limited.
There have been no changes in basis of segmentation or basis of segmental profit or loss since the previous financial report.
(b) Reportable Segments
2016
Funds
Management
Investment
Software
Direct
Investments
Inter Segment
/ unallocated
Consolidated
($)
($)
Segment revenue
Sales to external customers
7,443,517
1,147,913
Share of profits from
investments in associate
Investment income
-
-
-
-
Total segment revenue
7,443,517
1,147,913
($)
-
694,764
(293,517)
401,247
Net group result
Net group result before tax
1,946,832
81,598
401,247
(1,094,547)
($)
($)
99,000
8,690,430
-
-
99,000
694,764
(293,517)
9,091,677
1,335,130
(269,800)
1,065,330
311,756
106,660
-
122,215
540,631
Income tax expense
Profit for the year
Depreciation and
amortisation expense
F I N A N C I A L S T A T E M E N T S | 7 9
26. Segment information (Cont.)
(b) Reportable Segments (Cont.)
2015
Funds
Management
Investment
Software
Direct
Investments
Inter Segment
/ unallocated
Consolidated
Segment revenue
Sales to external customers
9,050,444
160,405
($)
($)
($)
-
Share of profits from
investments in associate
Investment income
-
-
-
-
1,923,879
24,504
($)
($)
104,000
9,314,849
-
-
1,923,879
24,504
Total segment revenue
9,050,444
160,405
1,948,383
104,000
11,263,232
Net group result
Net group result before tax
3,189,935
160,405
1,948,383
(1,071,883)
4,226,840
(938,189)
3,288,651
359,146
-
-
13,450
372,596
Income tax expense
Profit for the year
Depreciation and
amortisation expense
(c) Segment assets and liabilities
Information about the segment assets and liabilities are not regularly reviewed by the CODM. As a result information relating to
segment assets and liabilities are not presented.
(d) Information about major customers
Included in revenues arising from the funds management business of $7.44 million (2015: $9.05 million) (see 26 (b) above) are
revenues of approximately $1.7 million (2015: $0.8 million) which arose from sales to the Group’s largest customer.
27. Acquisition of subsidiary
Stocks In Value Pty Limited is an online equity valuation and research tool. The tool provides self-directed investors with the same
insights and conclusions on stocks that institutional investors benefit from, at a low cost as a subscription service.
During the previous financial year (as at 30 June 2015), the Group entered into an agreement to acquire the remaining 50% of
Stocks In Value Pty Limited (Stocks In Value) from Eureka Report Pty Limited (Eureka). The 50:50 joint venture has been dissolved
and is replaced by an agreement to provide each other with continuing support and service on a commercial basis. From 30 June
2015, the Group has consolidated 100% of Stocks In Value as a subsidiary, as it gained control on this date in accordance with
AASB 10 Consolidated Financial Statements.
8 0 | C I W 2 0 1 6 A N N U A L R E P O R T
27. Acquisition of subsidiary (Cont.)
(a) Consideration transferred
Under the terms of the agreement, the Group transferred $1 to Eureka to acquire the remaining 50% interest.
Acquisition-related costs amounting to $2,883 has been excluded from the consideration transferred and have been recognised
as an expense in profit or loss in the previous financial year
.
(b) Asset acquired and liabilites assumed
The fair values of the identifiable assets and liabilities of Stocks in Value as at the date of acquisition were:
Current assets
Cash and cash equivalents
Trade and other receivables
Non-current assets
Plant and equipment
Intangible assets
Deferred tax assets
Current liabilities
Trade and other payables
Unearned revenue
Total identifiable net assets at fair value
(c) Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Purchase consideration transferred
Pre-existing liabilities
Fair value of identifiable net assets assumed (as above)
Goodwill arising on acquisition
2015
$
328,565
87,042
4,941
1,226,322
11,581
(212,084)
(1,446,366)
1
2015
$
1
325,000
(1)
325,000
Goodwill of $325,000 comprises the value of expected synergies, revenue growth, future market/product offering and the
assembled workforce arising from the acquisition. These benefits are not recognised separately from goodwill because they do
not meet the recognition criteria for identifiable intangible assets. None of the goodwill recognised is expected to be deductible
for income tax purposes.
(d) Net cash inflow on acquisition
Consideration paid in cash
Cash and cash equivalent balances acquired with the subsidiary
2015
$
(1)
328,565
328,564
F I N A N C I A L S T A T E M E N T S | 8 1
28. Subsequent events
A final fully franked dividend for the year ended 30 June 2016 of 3 cents per share, totalling $1,511,883 has been declared by the
directors. This provision has not been reflected in the accounts.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly
affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future
financial years.
29. Contingent liabilities, contingent assets and commitments
The Group has no material contingent liabilities or contingent assets as at 30 June 2016 (2015: Nil)
COMMITMENTS FOR EXPENDITURE
Capital expenditure commitments
The Group has no material capital expenditure commitments to acquire property, plant and equipment as at 30 June 2016 (2015:
Nil)
Operating lease commitments
Towards the end of the 2014 financial year, the Company entered into an operating lease agreement for office premises for a
period of 5 years, terminating on 31 August 2019. The expenditure commitments with respect to rent payable under the lease
agreement are as follows.
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2016
$
230,595
400,252
-
630,847
2015
$
175,190
585,105
-
760,295
8 2 | C I W 2 0 1 6 A N N U A L R E P O R T
30. Key management personnel disclosures
(a) Remuneration of Directors and Other Key Management Personnel
A summary of the remuneration of Directors and other key management personnel for the current and previous financial year is
set out below:
Short-term
Employee
Benefits
Post-
Employment
Benefits
Share-
Based
Payments
Termination
Benefits
Total
($)
($)
($)
($)
($)
725,955
52,138
990,409
16,973
-
-
-
-
778,093
1,007,382
2016
Remuneration of Directors and other
key management personnel
2015
Remuneration of Directors and other
key management personnel
Further information regarding the identity of key management personnel and their compensation can be found in the Audited
Remuneration Report contained in the directors’ report on pages 20 to 26 of this annual report.
(b) Equity instrument disclosures relating to directors and other key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions
of the options, can be found in section C of the remuneration report on pages 22 to 24.
(ii) Option holdings
There were no options over ordinary shares in the company held during the financial year by each director of Clime Investment
Management Limited and other key management personnel of the consolidated entity, including their personally-related entities
(iii) Share holdings
The numbers of shares in the Company held during the year by each director of Clime Investment Management Limited and other
key management personnel of the consolidated entity, including their personally-related entities, are set out below.
Directors of Clime Investment Management Limited Ordinary shares
Name
2016
Mr. Donald McLay
Mr. John Abernethy
Mr. Richard Proctor
Mr. Neil Schafer
Mr. Allyn Chant
Balance at the
start of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the
end of the year
Nos.
5,245,000
3,610,000
1,500,000
548,007
883,600
Nos.
-
-
-
-
-
Nos.
996,000
-
(50,000)
-
-
Nos.
6,241,000
3,610,000
1,450,000
548,007
883,600
F I N A N C I A L S T A T E M E N T S | 8 3
30. Key management personnel disclosures (Cont.)
(b) Equity instrument disclosures relating to directors and other key management personnel
(Cont.)
Name
2015
Mr. Donald McLay
Mr. John Abernethy
Mr. Richard Proctor
Mr. Neil Schafer
Mr. Allyn Chant
Mr. Mark Osborn
Mr. David Schwartz
Balance at the
start of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the
end of the year
Nos.
-
3,610,000
1,028,659
548,007
-
388,000
2,615,653
Nos.
-
-
450,000
-
-
-
-
Nos.
5,245,000
-
21,341
-
883,600
(388,000)
(2,615,653)
Nos.
5,245,000
3,610,000
1,500,000
548,007
883,600
-
-
(c) Loans to directors and other key management personnel
There were no loans to key management personnel in place during the year in accordance with shares issued under the Employee
Incentive Scheme (refer note 25(a)).
There were no other loans made to directors of Clime Investment Management Limited or the other key management personnel
of the consolidated entity, including their personally related entities, at any stage during the financial year.
As described in note 25(a), notional non-recourse loans exist in relation to “in substance” options issued under the Employee
Incentive Scheme. During the current financial year none of the directors or key management personnel participated in the
Employee Incentive Scheme.
31. Related party transactions
Balances and transactions between the Company and its controlled entities which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties
are disclosed below.
All transactions with related entities were made on normal commercial terms and conditions no more favourable than transactions
with other parties unless otherwise stated.
(a) Parent Entity
The parent entity (and ultimate parent entity) within the Group is Clime Investment Management Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 14.
8 4 | C I W 2 0 1 6 A N N U A L R E P O R T
31. Related party transactions (Cont.)
(c) Associate
Interest in associate are set out in note 13.
(d) Key Management Personnel
Disclosures relating to key management personnel are set out in note 30.
(e) Other related party transactions
Clime Capital Limited
i. Mr. John Abernethy is a Director in Clime Capital Limited. The Group received $59,000 (2015: $59,000) as fees for the services
rendered by Mr. John Abernethy as chairman and Mr. Richard Proctor as Company Secretary to Clime Capital Limited. The
Group directly owns 7.47% of the fully paid ordinary shares of Clime Capital Limited as at 30 June 2016. Clime Investment
Management Limited through Clime Asset Management Pty Limited (a wholly owned subsidiary) has the indirect power to dispose
7.75% of Clime Capital Limited’s shares held by the Investment Mangers discretionary share portfolio clients as at 30 June 2016.
ii. Clime Asset Management Pty Limited during the year received $645,020 (2015: $720,529) as management as remuneration for
managing Clime Capital Limited’s investment portfolio.
iii. All dividends paid and payable by Clime Capital Limited to its Directors and Director related entities are on the same basis as to
other shareholders.
Clime International Fund
i. Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $1,587,859 (2015: $1,792,519) as
management, performance and recoverable fees as remuneration for managing the investment portfolios on behalf of Clime
International Fund.
F I N A N C I A L S T A T E M E N T S | 8 5
32. Parent entity disclosures
The following information relates to the parent entity Clime Investment Management Limited. The information presented has been
prepared using accounting policies that are consistent with those presented in note 2.
(a) Financial Position
2016
$
2015
$
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Profit reserve
Accumulated losses
Share-based payments
Total Equity
(b) Financial Performance
Profit / (loss) for the year
Other comprehensive income
Total comprehensive profit / (loss)
(c) Assets classified as held for sale
The parent entity holds no assets classified as held for sale.
(d) Guarantees entered into by the Parent Company
7,050,638
20,172,131
27,222,769
10,508,267
1,284,185
11,792,452
15,430,317
21,860,316
17,482,622
(24,004,434)
91,812
15,430,317
7,729,169
18,046,516
25,775,685
26,837,454
1,441,643
28,279,097
(2,503,412)
21,377,217
-
(24,004,434)
123,805
(2,503,412)
24,495,912
58,464
20,554,376
(2,043,076)
16,417
(2,026,659)
The parent company provides cash backed guarantees for the operating lease agreement of office premises. During the year
these guarantees amounted to $255,486 (2015: $255,486).
(e) Commitments for the acquisition of property, plant and equipment by the parent entity
The parent entity has a commitment of nil (2015: nil) for the acquisition of property, plant and equipment and $630,847 (2015:
$760,295) for the operating lease commitments.
8 6 | D I R E C T O R S ’ D E C L E R A T I O N
The Directors declare that:
a.
b.
c.
in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with Accounting Standards, and giving a true and fair view of the financial position and
performance of the Group;
in the director’s opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable;
in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards,
as stated in Note 2 to the financial statements;
d.
the directors have been given the declarations required by section 295A of the Corporations Act 2001; and
e.
the remuneration disclosures contained in the Remuneration Report comply with S300A of the Corporations Act 2001.
Signed in accordance with a resolution of the Board of Directors made pursuant to S295(5) of the Corporations Act 2001
on behalf of the Directors by:
Donald McLay
Chairman
Date: 19 September 2016
C I W 2 0 1 6 A N N U A L R E P O R T | 8 7
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Independent Auditor’s Report to the Members
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CLIME INVESTMENT MANAGEMENT LIMITED
ABN 37 067 185 899
Report on the Financial Report
We have audited the accompanying financial report of Clime Investment Management Limited and
its Controlled Entities (the consolidated entity), which comprises the consolidated statement of
financial position as at 30 June 2016, 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 or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of Clime Investment Management Limited are responsible for the preparation of the
financial report that gives a true and fair view in accordance with Australian Accounting Standards
(including the Australian Accounting Interpretations) 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 2, the
directors also state that, 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 controls relevant to the
entity’s preparation of the financial report that gives a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
An audit also includes evaluating the
opinion on the effectiveness of the entity’s internal controls.
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.
An independent New South Wales Partnership. ABN 17 795 780 962.
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
88
I N D E P E N D E N T A U D I T O R ’ S R E P O R T | 8 9
Independent Auditor’s Report to the Members
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CLIME INVESTMENT MANAGEMENT LIMITED
ABN 37 067 185 899
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Opinion
In our opinion:
a)
the financial report of Clime Investment Management Limited and its Controlled Entities is in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June
2016 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 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 20 to 26 of the directors’ report for the
year ended 30 June 2016. The directors of Clime Investment Management Limited are responsible
for the preparation and presentation of the Remuneration Report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Clime Investment Management Limited for the year
ended 30 June 2016, complies with section 300A of the Corporations Act 2001.
S M WHIDDETT
Partner
19 September 2016
PITCHER PARTNERS
Sydney
89
9 0 | C I W 2 0 1 6 A N N U A L R E P O R T
Shareholder information
The shareholder information set out below was applicable as at 8 September 2016.
A. Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
Ordinary Shares
Number of holders
1
1,001
5,001
10,001
100,001
-
-
-
-
1,000
5,000
10,000
100,000
and over
30
173
104
274
53
634
B. Equity Security Holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
RBC Investor Services Australia Pty Limited
Torres Industries Pty Limited
Double Pty Ltd
Mr David Schwartz
Healthy Wealth Pty Ltd
Capital Property Corporation Pty Limited
Clodene Pty Ltd
Robansheil Pty Limited
Allingham Holdings Pty Ltd
Fd Management Pty Ltd
Ruminator Pty Ltd
Di Iulio Homes Pty Limited
J P Morgan Nominees Australia Limited
Barrob Bondi Pty Ltd
Mr Neil Edward Schafer & Mrs Molly Clark Schafer
Mr Robert Archer Black
Arcelia Pty Ltd
Mr Philip Leslie Bish
Tampaul Pty Ltd
John E Gill Trading Pty Ltd
Ordinary Shares
No. of Shares
Percentage of
issued shares
10,293,866
6,241,000
3,610,000
2,612,153
1,450,000
1,241,122
1,214,121
1,130,446
1,053,573
883,600
871,419
850,000
622,358
561,066
548,007
500,000
485,334
420,000
400,000
300,298
20.999
12.731
7.364
5.329
2.958
2.532
2.477
2.306
2.149
1.802
1.778
1.734
1.270
1.145
1.118
1.020
0.990
0.857
0.816
0.613
35,288,363
71.986
S H A R E H O L D E R I N F O R M A T I O N | 9 1
B. Equity Security Holders (Cont.)
Ordinary Shares
Quoted equity securities issued under Employee Incentive
scheme not yet vested
No. of Shares
Percentage of
issued shares
Shares issued under the Employee Incentive Scheme to take up ordinary
shares
1,375,000
12
C. Substantial Holders
Substantial holders in the company are set out below:
Ordinary Shares
Wilson Management Group
Torres Industries Pty Ltd
Mr. John Abernethy
Mr David Schwartz
D. Voting Rights
Number held
Percentage
10,293,866
6,241,000
3,610,000
2,612,153
20.999
12.731
7.364
5.329
Subject to any restrictions from time to time affecting any class of shares, on a show of hands every member present in person
shall have one vote and upon a poll every member present or by proxy or attorney shall have one vote for each share held.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders
and creditors and are fully entitled to any proceeds of liquidation.
E. Other Information
Annual General Meeting
The Annual General Meeting of Clime Investment Management Limited is expected to be held on 27 October 2016.
Stock Exchange Listing
The shares of the Company are listed on the Australian Securities Exchange Limited. Quotation has been granted for all the
ordinary shares of the company on all member exchanges of the Australian Securities Exchange Limited. The home exchange is
Sydney.
On-Market Buyback Scheme
As at 23 August 2016 an on-market buy-back scheme existed and continues to be in operation as at the date of this report.
Contact Details
The names of the Company Secretaries are Mr. Richard Proctor and Mr. Biju Vikraman.
The address of the registered office and principal place of business in Australia is:
Level 7
1 Market Street
Sydney NSW 2000
Telephone: (02) 8917 2100
C I W 2 0 1 6 A N N U A L R E P O R T | 9 2
This page is intentionally left blank Clime Investment Management Limited ABN 37 067 185 899 | ACN 067 185 899Level 7, 1 Market Street Sydney NSW 2000 AustraliaPO Box Q1286 Queen Victoria BuildingNSW 1230 Australia+61 2 8917 2100info@clime.com.auwww.clime.com.au+61 2 8917 2155