Clime Investment Management
Company Announcements
Australian Stock Exchange, Sydney
25 August 2017
Announcement of Results – Year ended 30 June 2017
Please find attached the Appendix 4E and the Annual report for the year ended 30 June 2017.
Yours’ sincerely,
Biju Vikraman
Company Secretary
Clime Investment Management Limited
Level 7, 1 Market Street Sydney NSW 2000 Australia | P O Box Q1286 Queen Victoria Building NSW 1230
ABN 37 067 185 899 P 02 8917 2100 F 02 8917 2155 W www.clime.com.au T @climeinvest
Clime Investment Management
Appendix 4E
Preliminary Final Report
Lodged with the ASX under Listing Rule 4.3A
Year Ended 30 June 2017
(Previous corresponding period – 30 June 2016)
Results for Announcement to the Market
Revenue from ordinary activities
down
5%
to
$8,672,692
Profit after tax attributable to members
up
140%
to
$2,561,130
Dividends per share
Interim dividend – FY17 (paid on 3 April 2017)
Final dividend – FY17 (proposed)
Amount per
security
1.50 cents
1.50 cents
Franked amount
per security
0.75 cents
1.50 cents
Record date for determining entitlements to the final dividend is
26 September 2017
Explanation of revenue from ordinary activities
Revenues for the period reduced to $8.67 million (FY16: $9.11 million).
FY16 Revenue
Increase in performance fees
Increase in other income
Decrease in management fees
Decrease in investment software
Decrease in interest and dividend income
FY17 Revenue
$9.11million
$0.11million
$0.12million
($0.23million)
($0.43million)
($0.01million)
$8.67million
Explanation of profit from ordinary activities after tax attributable to members
The Group generated an after-tax profit of $2.6 million for the year (FY16: profit of $1.1 million).
The primary drivers for the results are as follows:
1. Revenue as per above;
2. Net positive gains on Group’s investments by $0.57million (FY16: $0.72million loss) mainly
due to marked to market movements;
3. One-off write-back of $1.9 million deferred tax liability following the de-merger of Jasco
Holding Limited in November 2016;
4. Equity accounted profit of Nil (FY16: $0.69million); and
5.
Increase in administrative expenses by 9% to $8.23 million (FY16: $7.53million) mainly due to
redundancy costs, legal, consulting and accounting fees incurred for Jasco demerger and
various growth initiatives.
1
Clime Investment Management
Ownership
Interest
Contribution to net profit
Current
period
%
-
Previous
corresponding
period
%
21.75
Current
period
$
-
Previous
corresponding
period
$
$694,764
Associates and Joint Venture entities
Name of the entities
Jasco Holdings Limited -
Associate (see Note 1)
Note 1
On 27 October 2016 Clime shareholders approved the separation of Clime’s shareholdings in
Jasco Holdings Limited via a subsidiary company Clime Private Limited (Clime Private) and in-
specie distribution of Clime Private shares on a 1 on 1 basis by way of a capital reduction. The
demerger was to simplify Clime’s structure and to potentially unlock shareholder value.
As a result of the de-merger, the investment in associate was de-recognised during the financial
year.
Audit Status
This report is based on the Annual Report which is audited.
2
Clime Investment Management
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3
Clime Investment Management Limited2017 Annual ReportIntegrityTransparencyConviction Financial year 2017 has seen the company continue its journey from boutique fund manager to boutique wealth manager. Across a range of asset classes, Clime’s value-based approach aligns investment strategy objectives with our clients’ investment needs. $759m* in gross funds under management $2.26m cash dividends to shareholders $7.80m in-specie distribution $4.37m cash in the bank* As at 18th August 2017 Chairman’s Report
About Clime Investment Management
Managing Director’s Report
Investment Update
Report from the Board
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
2
4
6
8
10
14
29
31
75
76
82
1
Contents
2 | C I W 2 0 1 7 A N N U A L R E P O R T
It’s always satisfying to look
back on the past year and see
how far we have come in the
transition from a monoline
Australian equity manager
into a diversified service
provider supporting self-
directed and self-managing
wholesale investors. We can
all feel proud as we reflect on the
achievements and the support being
received from this under-recognised sector of
Australian wealth.
As we shared with shareholders last year, the
plan includes:
• Building out our range of equity fund products;
• Expanding the range of investment products
and solutions across asset classes;
• Building a private wealth advisory service
under the Clime brand; and
• Developing a cost-effective Clime branded
administration service for our SMSF clients.
More details about our progress towards achieving
these goals are set out in the Managing Director’s
Report and elsewhere in the Annual Report.
Net profit after tax for the year more than doubled
to $2.56 million and this included a one-off tax
benefit of $1.94 million arising from the in-specie
distribution to shareholders of the company’s
21.75% direct stake in Jasco Holdings Limited in
November 2016.
Revenue was impacted by a number of factors,
including lower funds under management, some
fee compression and a $0.4 million drop in Stocks
in Value subscriptions. Similarly, operating
expenses were impacted by close to $0.7 million
arising from costs associated with the strategic
initiatives being expensed as incurred. The board
is comfortable that these costs are transitional
factors and the underlying trends are supporting
stronger recurrent income into the future.
A fully franked final dividend of 1.5 cents per
share is proposed, which together with the interim
dividend of 1.5 cents paid on 31 May 2017, gives
a total payout of 3 cents per share (or 59%) on
fully diluted earnings of 5.1 cents per share.
On behalf of the Board and shareholders, I wish
to thank all our employees for their ongoing
contribution and commitment to the Company.
These are the people driving the
change which will become
even more visible over the
the current
balance of
financial
year. Thank
you also to my fellow
directors and our senior
leadership team for their
disciplined leadership and
hard work in spearheading
the transition.
Profit after tax
doubled
I look forward to sharing our further progress
over the next year.
Donald McLay
Chairman
Chairman’s Report C H A I R M A N ’ S R E P O R T | 3
The Clime Smaller Companies Fund is appropriate
for wholesale investors who seek to diversify their
portfolios by increasing exposure to higher growth
businesses outside the ASX200.
The Clime Smaller Companies Fund (established
April 2017) has an investment horizon of a minimum
of 5 years. Short-term returns are therefore not
necessarily reflective of our long-term goals.
You can find out more
about the Clime Smaller
Companies Fund
by visiting
www.clime.com.au/cscf
New
Product
Established
in Arpil 2017, the Clime Smaller
Companies Fund (CSCF) seeks to deliver strong
risk-adjusted total returns by investing in a portfolio
of high quality smaller Australian companies that are
attractively priced.
The Fund aims to achieve an annual total return of
8% above the Australian Consumer Price Index (CPI)
after fees over rolling five to seven year investment
periods.
The Fund seeks to take advantage of what we
believe to be a structurally inefficient market. The
micro and small-cap segments of the market
typically have limited research coverage, reflecting
the lower commission potential on offer for traditional
brokerage business models.
lower
levels of
liquidity prevent
Concurrently,
large institutions from meaningful participation in
this market segment. The traditional institutional
asset management approach continues to focus
on benchmark-relative investing and maximising
profitability via increasing funds under management
rather than preserving high returns for clients. In
aggregate, we believe this creates the opportunity for
value-based, focused smaller company investors.
Introducing the Clime Smaller Companies Fund
4 | C I W 2 0 1 7 A N N U A L R E P O R T
The Clime Group offers a range of services and
products for wholesale and retail investors via our
three main entities - Clime Asset Management, CBG
Asset Management and StocksInValue.
Clime applies a consistent value-based approach to
identify the most attractive investment opportunities
within our universe of stocks.
GUARD
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”.
retirement.
GENERATE
We are objective-based investors
and seek to deliver strong risk-
adjusted total returns.
Clime’s investment objectives
are aligned with our clients’
investment objectives and are
centred on helping everyday
Australians achieve security in their
GROW
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.
Because none of these things will help you achieve
security in your retirement.
OUR INVESTMENT GOALS
total
from
risk-adjusted
Clime seeks to deliver strong
returns.
We aim to extract a solid
the equity
return
market while assuming
an appropriate
level of
risk. A foundation of our
is
investment approach
that investment risk must be
appropriately compensated.
We employ an investment framework of:
• Capital deployed,
• At what risk,
• For what likely outcome.
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
The Executive Team
John Abernethy
Managing Director
Rob Hardy
Chief Operating Officer
Anthony Golowenko
Head of Investments
John is the founder of Clime
Investment
Management
(ex Loftus Capital
Limited
Partners).
across
John has over 30 years of
funds
experience
corporate
management,
advice and public company
directorships.
roles
included
to establishing Clime
Prior
the
John’s
Head of Equities at NRMA
Investments and an Executive
Director for a highly successful
investment advisory group.
Rob has been with Clime for
more than 6 years, having
previously held the position as
Managing Director of Time Life
Europe/ Asia Pacific. A leading
member within the marketing
industry
than 25
for more
years, running direct marketing
companies all over the world.
Rob is responsible for all day
to day operations, together
with Sales and Marketing at
Clime and together with John
is responsible for driving the
strategic development of the
business.
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.
is
responsible
Anthony
for
portfolio management and risk
management outcomes.
a
holds
John
(Economics) LLB
University of NSW.
B.Com
the
from
Biju Vikraman
Group Finance Manager
and Company Secretary
Biju has been with Clime
for more than 5 years and
was appointed as Company
Secretary in June 2015.
Biju is an Australian and Indian
Chartered Accountant with a
Bachelor of Commerce degree
from the University of Mumbai.
Biju has held senior roles with
big 4 accounting firms and
listed entities within Australia,
India and Africa.
Biju manages
finance,
compliance funtions.
reporting
the Group’s
and
INTEGRITY
TRANSPARENCY
CONVICTION
Doing the best by our clients &
In everything we do.
Courage in our convictions.
doing what we say we will do.
6 | C I W 2 0 1 7 A N N U A L R E P O R T
“Integrity, Transparency and Conviction”
I’m very pleased to share with you
this update of the business
in which you have a part
ownership and outline its
strategic plan and how it is
being implemented.
FY17,
to build out
During
continued
Clime
its
portfolio of services to its target
market. Our market can be broadly defined as the
wholesale self-directed investor market. Clime’s
customers are drawn from those investors that
manage their own superannuation or retirement
funds. They are predominantly in pension stage or
late accumulation stage.
Clime’s customer base is readily identifiable. The self-
directed or self-managed superannuation market
has an estimated $600 billion of assets. These
assets represent approximately 30% of the assets
inside Australia’s total superannuation system. The
beneficiaries of these funds represent less than 4%
of the total Australian population.
By defining our customer base, we can fine tune our
products and services to better meet our clients’
needs. These products and services encompass
valuation
tools, discrete multi-asset portfolios,
managed funds, individually managed accounts,
administration and advisory services. To develop
our market and gain recognition of the Clime
brand, we have for some time utilised sophisticated
marketing systems. Today we have approximately
40,000 people receiving our investment newsletters.
Our brand is commonly associated with thought
leadership, education and value based investment
services that are delivered to the market place with
“integrity, transparency and conviction”.
Looking out, we believe that our focus on education
and the transparency of our business will allow us to
partner and support the endeavours of independent
advisors focused in both the retail and wholesale
investor space. Australia has a large superannuation
market which we believe naturally supports strategic
alliances.
During the second half of FY17, Clime has moved
quickly along the path of our business plan after many
months of research and negotiation. The strategic
acquisition of CBG Asset Management Limited (CBG)
in July 2017 is an important building block in expanding
our equities management capability.
Earlier in the year, we announced a strategic alliance
with an independent national financial advisory dealer
group. Following this we established “Clime Private
Wealth” and successfully trialled a holistic advisory
service in Brisbane. We intend to officially open our
Brisbane office in early FY18 and open Clime Private
Wealth offices in major cities across Australia over the
next 18 months.
During FY17, we extended our in-house equities
management capabilities and developed capability
and functionality to manage a range of “separately
managed accounts”. In coming months, the CBG
management team will support Clime to move into
fast growing separately managed accounts
the
(SMA) area. Importantly, we believe the transparency
of our equity valuation process, presented by our
“stocksinvalue” website, will create a unique offering
to the Australian market.
More recently, we established a
jointly owned
corporate entity with an established self-managed
superannuation administrator. “Clime Super” will
provide SMSF administration services to our direct
clients and the broader market.
All of the above has been achieved in an investment
environment that, broadly speaking, has not been
particularly supportive of Australian equities. This
reinforces another strategic initiative that has been
implemented over the last few years, namely the
Managing Director’s Report
M A N A G I N G D I R E C T O R ’ S R E P O R T | 7
extension of our investment solutions into Australian listed securities, direct property
and international equities. In doing so, we have been able to offer our clients a
balanced investment approach designed to align with their investment needs.
DID YOU KNOW?
In conclusion, I want to thank the Clime staff for their support in building
out the range of Clime services and particularly to our team members who
produce top shelf investment analysis for our extended readership base.
Yours sincerely
John Abernethy
Managing Director
During FY17, over 8,000
investors registered to attend
150 educational investor
briefings hosted
by Clime
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.
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 access to the valuations and analysis of
one of Australia’s best performing funds teams.
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 7 A N N U A L R E P O R T
It has been a busy twelve
months within
the Clime
investment team. In June
of 2016, Clime Asset
Management
evolved
its
investment approach
to more directly align our
strategy objectives with those
of our customers.
Through consistent effort across the investment
team, sound progress has been made in this
endeavour and is starting to become evident in
portfolio outcomes. While individual account results
may vary, for the 2016/2017 financial year the
representative Australian Growth model portfolio
(return objective is CPI + 6% p.a.), representative
Australian Income model portfolio (return objective is
RBA cash rate + 3% p.a. and keep pace with CPI),
Clime International Fund (AUD return objective is CPI
+ 8% p.a.), and for the established direct property
funds (return objective [from income] of 7-8% p.a.)
have achieved their after-fee objectives and are
building a solid foundation to deliver consistent long-
term results .
investment
landscape continues
to be
The
dominated by central bank policy deliberations.
Despite much discussion and some progress by
the US Federal Reserve, we remain of the view
that ‘overly accommodative central bank policy,
sustained for too long a period, has markedly
inflated asset prices”.
The cumulative effect has been to distort the
efficient allocation of capital and bring a distinct
‘speculative tone’ to global financial markets. We
believe the unwinding of coordinated stimulus
measures will be a carefully managed and likely
tedious process. Abundant (virtually free) capital
has sustained loss making and marginally profitable
companies, a number of which have now developed
extraordinary, disruptive technologies. We believe
disruptive technologies will create an enduring era
of low prices of consumer products and services
which, as a result, will see persistent slow wages
growth and subdued consumer confidence. We
believe this will create both long lasting challenges
and selective opportunities in the future. We see the
paring back of overly stimulatory policy measures as
being conducive to more efficient capital allocation
decisions, something we believe will be beneficial
for all investors.
Globally, investor optimism continues to buoy
international equities. While the effectiveness of the
Trump administration remains to be seen, the outlook
for company earnings in the US and more broadly
across the globe continues to improve. There are
clearer economic signs of growing resilience in the
US recovery and an improving outlook in Europe.
We believe valuations remain full, opportunities may
be fleeting, future returns are more subdued and
(despite investor complacency) embedded financial
risks are elevated. Currency markets are not
immune from speculation. Recent USD weakness
Investment Update and the RBA’s poorly managed ‘contextualisation’
of the theoretical neutral interest rate setting has
seen a surge in the AUDUSD beyond 80c. We see
the AUDUSD easing lower over 2H2017.
Locally, the clear challenges presented by the
growing divide between the actual cost of living
and what continues to be an uninspiring outlook for
wage growth, and hence discretionary spending, are
becoming more apparent in the Australian economy.
The challenges are magnified by Australia’s record
indebtedness. Particularly
level of household
amongst large cap equities, the majority of future
growth is forecast to be delivered via resources,
which have historically provided a highly variable
return profile. We maintain our stance on large
caps being primarily utilised to deliver solid franked
dividends within the portfolio. Despite broader
domestic headwinds, we believe
investment
opportunities exist, and generally speaking at this
time, we see these as more likely to be apparent in
the mid and small-cap market segments.
Beyond those companies able to exploit market
gaps created by disruptive technology, ASX-listed
businesses positioned towards structural growth
industries such as inbound tourism, the ageing
population (selective health care and seniors living),
education (international tertiary students / student
accommodation, child care), funds management
and quality food production will continue to be
sought after. As value investors, we need to ensure
that we pay an appropriate price for these structural
growth opportunities.
April saw the launch of Clime’s latest investment
offering,
the Clime Smaller Companies Fund
(CSCF). While a new wholesale fund, the CSCF is
managed in line with Clime’s existing investment
framework, though exclusively applied to a subset
of companies outside the ASX200 universe. The
Fund seeks to achieve an annual total return of 8%
above the Australian Consumer Price Index (CPI)
over rolling five to seven year investment periods
after management fees.
Despite some turbulence in longer bond yields
and interest rate sensitive securities, as previously
described we believe the process of unwinding of
coordinated stimulus measures will be both carefully
managed and tedious. At this time, we see limited
appeal in traditional sovereign fixed interest and our
I N V E S T M E N T U P D A T E | 9
Clime International Fund has
Over the past three years^, the
DID YOU KNOW?
Income strategies favour
a balanced allocation
equities,
across
&
infrastructure
utilities,
REITS,
income & preferred
and
securities
corporate
quality
debt. We continue
to see high quality
direct property, that is
actively managed, and
consistently delivers regular
income over a medium-term investment horizon as
having a role to play in setting a solid foundation of
income to build out a purposeful asset allocation.
delivered a total return of
10.0% p.a.
Clime’s investment objectives are aligned with our
clients’ objectives, and seek to consistently deliver
strong risk-adjusted total returns. We believe this
ultimately comes down to providing security in your
investment journey. This is reinforced in the Grow,
Guard, Generate mantra of Clime’s investment
approach:
• Grow your invested capital,
• Guard it along the way, and
• Generate meaningful income.
I thank you for your continuing interest in and support
of Clime.
Yours sincerely
Anthony Golowenko
Head of Investments
^ As at 31 July 2017, after fees (Wholesale Units). Fund inception
4th March 2014 (Wholesale Units). Past performance is not a
guarantee of future returns.
1 0 | C I W 2 0 1 7 A N N U A L R E P O R T
Report from the Board
I am pleased to present the
results of Clime Investment
Management Limited and
its controlled entities (“the
Group” or “Clime”) for the
financial year ended 30
June 2017 (FY17).
Interest, dividend and other income marginally
decreased from $423,000 to $416,000 this year.
The Group’s interest income declined in line with
lower average interest rates and lower average
cash balance held. The decrease in interest income
was partially offset by increase in distributions from
various unlisted investments held by the Group
during the year.
Following the demerger of
Clime Private Limited in October
2016, the Group’s 21.75% stake in Jasco Holdings
Ltd (Jasco) that was equity accounted previously
has been excluded from the Group consolidation
since that date.
The Group recorded an after-tax profit attributable
to members of $2,561,130 for FY17 compared with
$1,065,330 in FY16.
Group revenue decreased by 5%, from $9.1
million in FY16 to $8.7 million in FY17. Investment
management fees decreased from $7.5 million
to $7.4 million on nominally lower funds under
management (FUM). The Group’s gross FUM was
$584 million as at 30 June 2017, compared with
$610 million as at 30 June 2016.
The Group received improved performance fees
during the year at $115,887 (FY16: $2,401) while
revenue from investment software was $0.7 million
compared to $1.1 million in FY16 due to softer sales
in Stocks In Value Pty Ltd.
Administration expenses rose from $7.5 million to
$8.2 million. Included in this increase are:
• $347,000 of redundancy costs arising from
restructuring of the business;
• $188,000 of consultancy fees paid to Amigo
Consulting Pty Limited; and
• $105,000 of legal and accounting fees for
Jasco demerger and growth initiatives.
The Board notes that the weaker performance of the
operating business was a function of slightly lower
revenue, higher sales commissions reflecting inflows
of funds under management and higher costs
from third party service providers. Performance
fees, balance sheet items and share of associate
income grew from $404,473 to $1,101,513 despite
the demerger of Clime Private Limited. A good
turnaround in the share price of Clime Capital Limited
was the main contributor to this outcome.
Statutory profit after income tax included a write-back
of $1,941,185 in provision for deferred tax following
the de-consolidation of Clime Private Limited to give
a one-off net tax benefit of $1,794,391.
R E P O R T F R O M T H E B O A R D | 1 1
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 disposal of property, plant and equipment
Income from associate
Underlying cash profit
Termination costs
Amortisation of intangibles
Statutory profit before income tax
Income tax benefit / (expense)
Statutory profit after income tax
Summary of Total Equity
The Total Equity at balance sheet date comprised the following:
Cash and cash equivalents
Trade and other receivables less payables
Listed investments – Clime Capital Limited
Unlisted investments – Managed funds
Equity accounted investment – Jasco Holdings Limited
Other tangible assets less liabilities
Net tangible assets
Intangibles – Goodwill and other intangibles
Deferred tax assets
Total Equity
No. of ordinary shares on issue as at 30 June
Equity per share
Net tangible assets per share
2017
$
7,422,637
718,142
(5,491,769)
(1,050,854)
1,598,156
(1,112,540)
485,616
115,887
985,136
-
490
1,587,129
(347,168)
(473,222)
766,739
1,794,391
2,561,130
2016
$
7,540,117
1,147,913
(5,374,761)
(907,110)
2,406,159
(822,625)
1,583,534
2,401
(293,518)
826
694,764
1,988,007
(179,654)
(473,223)
1,335,130
(269,800)
1,065,330
30 June 2017
$
30 June 2016
$
4,370,278
(699,374)
4,858,417
1,158,800
-
(829,195)
8,858,926
6,500,963
341,134
15,701,023
48,574,243
32.3 cents
18.2 cents
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
1 2 | C I W 2 0 1 7 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 $0.2 million, compared to
$2.2 million in FY16.
This was primarily a function of the following:
• A decrease in cash receipts from operating activities of $1.54 million;
• An increase in cash payments on operating activities of $90,000;
• A decrease in dividend income of $971,000 mainly due to de-recognition of Jasco; and
• A decrease in tax paid by $624,000.
We generated net cash inflow of $1.7 million in short term financial assets from trading financial assets carried
on the balance sheet.
Thus the net cash inflow from operating activities was $1,862,000, an increase of $2,116,000 in comparison
with the prior corresponding period.
Cash reserves were applied as follows:
• Share buy-back program of $235,140; and
• Payment of dividends to shareholders of $2.26 million.
Outlook for 2018 Financial Year
Directors and management expect 2018 to be a year of further transition as the next steps for longer term
strategic growth are delivered. Focus will be on expanding Clime Private Wealth, improving investment returns
across all portfolios, and growing and supporting our service offering to a wider group of investors seeking
intelligent long term wealth management outcomes.
Since 30 June 2017, the Group has announced the acquisition of CBG Asset Management (CBG) and a
joint-venture with HLB Mann Judd to expand our existing superannuation administration services for SMSF
trustees. From 1 August 2017, the Group commenced as investment sub-manager for Sterling Managed
Investments, an Australian based specialist provider of managed discretionary account services. Each of
these moves continue to provide greater depth and breadth to our service offering and value proposition for
clients.
On behalf of the Board
Donald McLay
Chairman
John Abernethy
Managing Director
C I W 2 0 1 7 A N N U A L R E P O R T | 1 3
DID YOU KNOW?
Over the past two years, the
Clime Australian Income Fund
delivered a total return of
8.2%^ p.a. with a variability of
return of 3.8% p.a.
The Clime Australian Income Fund (CAIF) seeks
attractive returns, over the long term, through
investing in a portfolio of Australian listed and
unlisted securities that display low volatility traits.
The Fund is suitable for those attempting to preserve
capital whilst enjoying an income stream above term
deposits.
In the wake of the global financial crisis, Clime
commenced successfully investing clients’ funds
in low volatility high yield ASX listed companies,
debt securities, income notes and preferred shares.
A critical feature of this style of investing is that in
general, debt and hybrid securities rank ahead of
the ordinary shares.
The Clime Australian Income Fund is appropriate for
investors who:
• Seek to diversify their portfolios across asset
classes other than higher growth, higher risk
equities; and
• Are happy with a steady accumulation of wealth
over the longer term at reduced volatility to the
equity market.
The Fund is intended to be a low to medium risk
fund.
The Clime Australian Income Fund (established
July 2015) has an investment horizon of a minimum
of 3 years. Short term returns are therefore not
necessarily reflective of our long term goals.
You can find out more
about the
Clime Australian Income
Fund by visiting
www.clime.com.au/caif
^ As at 31 July 2017, after fees and not including franking credits. Fund inception 1st July 2015. Past performance is not a guarantee of
future returns.
Clime Australian Income Fund 1 4 | C I W 2 0 1 7 A N N U A L R E P O R T
Directors’ Report
Your Directors present their report on the consolidated entities (“the Group”), consisting of Clime Investment Management Limited and
its controlled entities for the financial year ended 30 June 2017. 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
- Managing Director
N Schafer
- Independent Director
A Chant
- Independent Director
Information on Directors
Mr. Donald McLay BCom, CA, FFin, ACIS, AGIA
Non-executive Chairman, 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 and Clime Private Limited, an unlisted public company de-merged from Clime Investment Management Limited that
holds investments in Jasco Holdings Limited.
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
Member of Audit Committee
Interests in shares and options
7,320,680 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
Managing 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, Clime Private 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
3,761,350 ordinary shares in Clime Investment Management Limited
200,000 options under Employee Incentive Scheme (“EIS”) over 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 strategy and execution, investment 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, Catholic Development Fund and principal of SPG Asia.
Former directorships in last 3 years
None.
Special responsibilities
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 7 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 and a fellow of FINSIA.
Mr. Chant has over 40 years’ experience both in Australia 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
Linear Financial Holdings Pty Limited
Former directorships in last 3 years
None
Special responsibilities
Member of Remuneration Committee
Member of Audit Committee
Interests in shares and options
None
Company Secretary
Mr. Biju Vikraman Bcom, ACA, AGIA, ACIS
Experience and expertise
Mr. Biju Vikraman was appointed to the position of 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 big 4 Accounting Firms and listed entities within Australia, India and Africa.
Mr. Vikraman is also an associate member of the Governance Institute of Australia.
Interests in shares and options
40,000 ordinary shares in Clime Investment Management Limited
200,000 options (EIS) over ordinary shares in Clime Investment Management Limited
D I R E C T O R S ’ R E P O R T | 1 7
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 2017, 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
A – Number of meetings eligible to attend
B – Number of meetings attended
A B
10 10
10 9
10 10
10 10
A B
2 2
2 2
- -
2 1
A B
1 1
1 1
- -
1 1
Rotation and election of Directors
In accordance with the Company’s Constitution:
• Mr. Neil Schafer & Mr. Allyn Chant retire by rotation and, being eligible, offer themselves for re-election.
Principal activities
The Group’s principal activity is investing in listed and unlisted securities for clients and operating under Australian Securities and Investments
Commission (ASIC) approved Australian Financial Services Licences (AFSL) 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 $2,561,130 (2016: $1,065,330).
Dividends paid or recommended
Dividends paid or recommended during the financial year are as follows:
Director
Board of Directors
3 cents per share franked to 100% at 30% corporate income tax rate, final ordinary dividend
paid during the year on 23 September 2016 in respect of the prior financial year (2016: 3 cents
fully franked)
1.5 cents per share franked to 50% at 30% corporate income tax rate, interim ordinary dividend
paid during the year on 3 April 2017 in respect of the current financial year (2016: 3 cents fully
franked)
Total dividends paid
2017
($)
2016
($)
1,511,883
1,507,345
751,170
1,505,945
2,263,053
3,013,290
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 Group, please refer to Report from the Board beginning on page 10.
1 8 | C I W 2 0 1 7 A N N U A L R E P O R T
Significant changes in state of affairs
On 27 October 2016 Clime shareholders approved the separation of Clime’s shareholdings in Jasco Holdings Limited via a subsidiary
company Clime Private Limited (Clime Private) and in-specie distribution of Clime Private shares on a 1 on 1 basis by way of a capital
reduction. The distribution of Clime Private shares involved a reduction in Clime’s paid up share capital (Contributed equity). The demerger
was completed on 11 November 2016.
As a result of the demerger, the carrying value of Jasco Holdings Limited of $7,802,806 at the record date (3 November 2016) was debited to
the share capital account and the investment in associate was de-recognised. Consequently, the deferred tax liability of $1,941,185 carried
in the books in relation to the unrealised gains of this investment was credited to the Statement of Profit or Loss and Other Comprehensive
Income.
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. A final fully franked dividend for the year ended 30 June 2017 of 1.5 cents per share, totalling $849,739 has been declared by the
directors. This provision has not been reflected in the accounts.
b. The Group acquired 100% of CBG Asset Management Ltd (CBG) on 14 July 2017. The acquisition cost was $3,625,000 comprising
$3,250,000 on completion and $375,000 in 12 months based on the fulfilment of certain warranties relating to funds under
management retention and delivery of agreed outcomes.
Initial consideration was paid by way of issue of 6,500,000 ordinary shares in the Company at 50 cents per share being the weighted
average market price over the past 30 trading days. The balance of 750,000 shares, which are subject to agreed outcomes, are to be
issued on 30 June 2018.
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 exchanges.
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 rates, 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.
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
Vesting / Expiry
Date
Exercise
Price
Number under
Option
Employee Incentive Scheme
22 August 2013
4 November 2018
Employee Incentive Scheme
25 October 2013
4 November 2018
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
Employee Incentive Scheme
20 July 2016
23 June 2017
20 July 2019
23 June 2020
$0.800
$0.829
$0.850
$0.750
$0.700
$0.630
$0.500
Total
100,000
250,000
200,000
50,000
275,000
350,000
350,000
1,575,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
D I R E C T O R S ’ R E P O R T | 1 9
Shares issued on the exercise of options
Nil shares (2016: Nil shares) were issued to option holders after the end of the 2017 financial year as a result of the exercise of options. Refer
to 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 Australian Securities and Investments Commission 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, unless otherwise stated.
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 section on Company’s website at www.clime.com.
au.
The Directors have received and considered the annual control certification from the Managing Director and the Chief Operating Officer in
accordance with the Principles relating to financial, operational and compliance risks.
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 Directors
or officers 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.
2 0 | C I W 2 0 1 7 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 2017. The
remuneration report is set out under the following main headings:
A
B
C
D
E
F
G
Directors and other key management personnel
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.
Donald McLay
- Non-executive Chairman
John Abernethy
- Managing Director
Neil Schafer
- Independent Director
Allyn Chant
- Independent Director
Other key management personnel of the consolidated entity
There were no additional persons other than the directors who were considered key management personnel under the Corporations Act 2001.
B. Principles used to determine the nature and amount of remuneration
Directors and other 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.
Commissions
Sales commissions formed part of certain executive remuneration packages during the year, commensurate with the level of revenue generated
during the year.
2 2 | C I W 2 0 1 7 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 in note 25 on pages 64 to 67.
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 2017 and 30 June 2016 are set out in the following tables. The commission payments, if any, 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 and the other key management personnel of Clime Investment Management Limited
2017
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
($)
70,000
($)
-
John Abernethy
267,424
23,231
Neil Schafer
Allyn Chant
54,000
47,489
-
-
Total
438,913
23,231
($)
-
-
-
-
-
($)
-
19,746
-
4,511
($)
-
142
-
-
24,257
142
($)
($)
-
-
-
-
-
70,000
310,543
54,000
52,000
486,543
D I R E C T O R S ’ R E P O R T | 2 3
Remuneration report - Audited (Cont.)
2016
Name
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
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
The relative performance of those elements of remuneration of directors and other key management personnel that are linked to performances:
Name
Donald McLay
John Abernethy
Neil Schafer
Allyn Chant
Short-term incentives
Fixed remuneration
Remuneration linked to
performance
2017
2016
2017
2016
100%
100%
-
-
92.5%
93.0%
7.5%
7.0%
100%
100%
100%
100%
-
-
-
-
$23,231 (2016: $44,292) short term incentives were paid/payable to directors and other key management personnel in respect of the year
ended 30 June 2017. The short term incentives were paid at the discretion of the Remuneration Committee. The short term incentives
therefore vested 100% during the financial year ended 30 June 2017.
2 4 | C I W 2 0 1 7 A N N U A L R E P O R T
Remuneration report - Audited (Cont.)
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 of the Managing Director are set out below.
Mr. John Abernethy
Managing 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 that 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 options via the EIS during the year (2016: Nil).
(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 (note a)
Mr. Neil Schafer
Mr. Allyn Chant
Balance at
1 July 2016
Granted as
compensation /
Received on exercise
of options
Other changes during
the year
Balance
as at Date
No.
6,241,000
3,610,000
548,007
883,600
No.
-
200,000
-
-
No.
1,079,680
151,350
-
(883,600)
No.
7,320,680
3,961,350
548,007
-
Note a: During the year, 200,000 (2016: Nil) ‘in-substance’ options were issued under Clime Employee Incentive Scheme that was approved
by shareholders on 27 October 2016.
D I R E C T O R S ’ R E P O R T | 2 5
Remuneration report - Audited (Cont.)
F. Related party transactions
Clime Capital Limited
i. Mr. John Abernethy is a Director of Clime Capital Limited. The Group received $59,000 (2016: $59,000) as management fees for the
services rendered by the managing director and company secretary to Clime Capital Limited. The Group directly owns 6.24% (2016:
7.47%) of the fully paid ordinary shares of Clime Capital Limited as at 30 June 2017. Clime Investment Management Limited through
Clime Asset Management Pty Limited (a wholly owned subsidiary) has the indirect power to dispose 6.34% (2016: 7.75%) of Clime
Capital Limited’s shares held by the Investment Managers discretionary share portfolio clients as at 30 June 2017.
ii. Clime Asset Management Pty Limited during the year earned $620,894 (2016: $645,020) as management remuneration for managing
Clime Capital Limited’s investment portfolio.
iii. All dividends paid and payable by Clime Capital Limited to its Directors and Directors’ related entities are on the same basis as to other
shareholders.
Clime Australian Income Fund
i. Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $15,909 (2016: Nil) as management,
performance and recoverable fees as remuneration for managing the investment portfolios and acting as trustee on behalf of Clime
Australian Income Fund.
Clime Smaller Companies Fund
i. Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $2,852 (2016: Nil) as management,
performance and recoverable fees as remuneration for managing the investment portfolios and acting as trustee on behalf of Clime
Smaller Companies Fund.
Amigo Consulting Pty Limited
Mr. Allyn Chant, a director of Clime, is also a director and a minority shareholder of Amigo Consulting Pty Limited (“Amigo”). The Group during
the year paid $188,390 (2016: Nil) to Amigo as consultancy fees.
The Group also issued 1,000,000 share options to Amigo to be retainer and an outcome driven incentive. Amigo has been engaged to provide
strategic and outcome driven corporate advisory services.
The Options will expire on 1 October 2019 and may be exercised at any time upon vesting and prior to the expiry date. The amount payable
on exercise of each option is 50 cents, subject to adjustment in accordance with certain conditions as follows:
i.
ii.
333,333 options vest on the date, if it occurs prior to 30 September 2017 that the Company’s securities trade on the Australian
Securities Exchange (“ASX”) at or above 75 cents. If this condition is not met the vesting period is extended to 30 September 2019
and vesting will occur if the Company’s securities trade on the ASX at or above $1.00 by that extended date;
333,333 options vest on the date that the Company completes the purchase or build of a retail platform (defined as a flexible
service that enables investors to buy and hold their investments online all in one place, tracking transactions for tax purposes and
allowing advisor and/or client direction) for client’s monies if this occurs before the expiry date;
iii.
333,334 options vest if the Company’s Funds under Management attains or exceeds $1 billion prior to the expiry date.
Expenses arising from the share based payment transactions recognised during the period was $21,402 (2016: Nil).
2 6 | C I W 2 0 1 7 A N N U A L R E P O R T
Remuneration report - Audited (Cont.)
F. Related party transactions (Cont.)
The following balances prior to group elimination were outstanding at the end of the reporting period:
Amount owed by related parties
Amount owed to related parties
30 June 2017
30 June 2016
30 June 2017
30 June 2016
($)
54,837
4,596
3,137
-
355,000
105,796
($)
54,231
397
-
-
135,000
62,156
($)
-
-
-
22,000
($)
-
-
-
-
12,478,294
9,509,684
-
-
Clime Capital Limited
Clime Australian Income Fund
Clime Smaller Companies Fund
Amigo Consulting Pty Ltd
Clime Investment Management Limited
Subsidiaries of Clime Investment Management Limited
G. Additional Information
Performance of Clime Investment Management Limited
The tables below set out the summary information regarding the economic entity’s earnings and movements in shareholder wealth for the five
years to 30 June 2017:
30 June 2017
30 June 2016 30 June 2015
30 June 2014
30 June 2013
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend - Fully franked 1
Interim dividend - Partially franked 2
Final dividend 1,3
Capital return 4
Basic EPS
Diluted EPS
($)
8,672,692
766,739
2,561,130
$0.65
$0.50*
-
1.5cps
1.5cps
1 CPL for 1 CIW
5.2cps
5.1cps
($)
($)
($)
9,114,230
1,335,130
1,065,330
$0.75
$0.65
3.0cps
-
9,653,739
4,226,840
3,288,651
$0.80
$0.75
3.0cps
-
3.0cps
3.0cps
-
2.2cps
2.1cps
-
6.9cps
6.6cps
8,746,240
4,397,134
3,203,014
$0.70
$0.80
2.5cps
-
3.0cps
8.0cps
6.8cps
6.4cps
1 100% franked dividends (franked to 100% at 30% corporate tax rate)
2 50% franked dividends (franked to 50% at 30% corporate tax rate)
3 Declared after each respective balance date and not reflected in the financial statements
4 In-specie distribution of 1 ordinary Clime Private Limited (CPL) shares for each CIW ordinary share held.
* Price post Jasco demerger
($)
7,659,766
2,207,225
1,421,990
$0.44
$0.70
1.5cps
-
0.00cps
-
3.0cps
2.9cps
D I R E C T O R S ’ R E P O R T | 2 7
Remuneration report - Audited (Cont.)
G. Additional Information (Cont.)
Furthermore, during the five years to 30 June 2017, Clime Investment Management Limited bought back 1,636,497 fully paid ordinary
shares for total consideration of $1,005,643. 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 imposed by s257B of the
Corporations Act 2001).
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
2 8 | C I W 2 0 1 7 A N N U A L R E P O R T
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.
Auditor’s independence declaration
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, 24 August 2017
John Abernethy
Managing Director
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N | 2 9
Auditor’s Independence Declaration
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 2017, 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
24 August 2017
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
29
C I W 2 0 1 7 A N N U A L R E P O R T | 3 0
This page is intentionally left blank F I N A N C I A L S T A T E M E N T S | 3 1
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
32
33
34
35
36
75
76
82
These Financial Statements cover the consolidated entity consisting of Clime Investment Management Limited and its controlled entities.
Clime Investment Management Limited is a company limited by shares, incorporated, domiciled in Australia and listed on the Australian
Securities Exchange. Its registered office and principal place of business is:
Clime Investment Management Limited
Level 7, 1 Market Street
Sydney NSW 2000
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report on pages 14-
19, which is not part of these financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete and accessible at minimum cost to the
Company.
3 2 | C I W 2 0 1 7 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 2017
Director
Revenue
Board of Directors
Notes
2017
($)
2016
($)
5
8,672,692
9,114,230
Net realised and unrealised gains / (losses) on financial assets at fair value
through profit or loss
Occupancy expenses
Administrative expenses
Share of profit of associate
Profit on disposal of property, plant and equipment
Profit before income tax
Income tax expense attributable to operating profit
Income tax benefit arising from de-recognition of deferred tax liability
Total income tax benefit/(expense)
Profit for the year
Other comprehensive (loss) / income, net of income tax
Net movement in other reserves
Other comprehensive income for the year, net of tax
569,110
(717,317)
(248,564)
(231,101)
(8,226,989)
(7,526,272)
490
-
766,739
(146,794)
1,941,185
1,794,391
2,561,130
694,764
826
1,335,130
(269,800)
-
(269,800)
1,065,330
(142,506)
(142,506)
58,464
58,464
13(c)
6
20
8(a)
22(a)
Total comprehensive income for the year
2,418,624
1,123,794
Profit attributable to members of Clime Investment Management
Limited
Total comprehensive income attributable to members of Clime
Investment Management Limited
2,561,130
1,065,330
2,418,624
1,123,794
Earnings per share
Basic - cents per share
Diluted - cents per share
24(a)
24(b)
5.2
5.1
2.2
2.1
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes.
F I N A N C I A L S T A T E M E N T S | 3 3
Consolidated Statement of Financial Position
As at 30 June 2017
Director
Board of Directors
Notes
2017
($)
2016
($)
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Financial assets at fair value through profit or loss
Current tax assets
Total Current Assets
Non-Current Assets
Investments accounted for using the equity method
Property, plant and equipment
Deferred tax assets
Intangible assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Unearned revenue
Provisions
Total Current Liabilities
Non-Current Liabilities
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued Capital
Reserves
Retained earnings
Total Equity
7(a)
4,370,278
4,114,062
10
11
12
13
15
16
17
18
19
20
552,974
121,971
386,578
138,163
6,017,217
7,093,018
303,732
74,994
11,366,172
11,806,815
-
8,752,418
51,206
341,134
6,500,963
6,893,303
90,360
722,147
6,974,185
16,539,110
18,259,475
28,345,925
1,556,080
786,523
172,055
1,244,171
1,028,900
209,556
2,514,658
2,482,627
43,794
43,794
2,343,886
2,343,886
2,558,452
4,826,513
15,701,023
23,519,412
21
22(a)
22(b)
13,822,370
21,860,316
155,798
234,318
1,722,855
1,424,778
15,701,023
23,519,412
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
3 4 | C I W 2 0 1 7 A N N U A L R E P O R T
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Consolidated
Notes
Issued
capital
Share-based
payments
reserve
Other
Reserves
Retained
earnings
Total
($)
($)
($)
($)
($)
Balance as at 1 July 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
- Transfer from share-based payments
reserve to issued capital on
completion of EIS loan term
21(b)
(112,101)
22(a)
-
64,007
21(b)
499,200
-
21(b)
96,000
(96,000)
- Dividends paid or provided for
9(a)
-
-
-
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
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
- In-specie distribution of equity
accounted investment
- Dividends paid or provided for
21(b)
(235,140)
22(a)
-
63,986
21(b)
(7,802,806)
9(a)
-
-
-
Balance as at 30 June 2017
13,822,370
155,798
-
2,561,130
2,561,130
(142,506)
-
(142,506)
(142,506)
2,561,130
2,418,624
-
-
-
-
-
-
-
-
(235,140)
63,986
(7,802,806)
(2,263,053)
(2,263,053)
1,722,855
15,701,023
-
-
-
-
-
-
-
-
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 2017
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 | 3 5
Notes
2017
($)
2016
($)
8,549,009
10,091,432
(8,442,566)
(8,352,340)
47,594
289,165
85,208
(352,675)
175,735
1,003,396
304,876
118,923
(976,824)
2,189,463
3,896,241
228,811
(2,209,678)
(2,672,753)
1,686,563
(2,443,942)
Net cash provided by / (used in) operating activities
7(b)
1,862,298
(254,479)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of equity accounted investments
Payments for property, plant and equipment
-
900,000
(7,889)
1,999
-
(12,797)
Net cash provided by / (used in) investing activities
892,111
(10,798)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for shares bought back (including transaction costs)
Dividends paid to company’s shareholders
(235,140)
(112,101)
(2,263,053)
(3,013,290)
Net cash used in financing activities
(2,498,193)
(3,125,391)
Net increase / (decrease) in cash and cash equivalents
256,216
(3,390,668)
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
7(a)
4,114,062
4,370,278
7,504,730
4,114,062
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
3 6 | C I W 2 0 1 7 A N N U A L R E P O R T
Notes to the Financial Statements
for the year ended 30 June 2017
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 are disclosed in the introduction to the Financial Statements. The principal activities of the Company
and its subsidiaries (“the Group”) are described in note 26(a).
The financial statements of Clime Investment Management Limited for the year ended 30 June 2017 were authorised for issue in
accordance with a resolution of the directors on 24 August 2017 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 the Group comply with International Financial Reporting Standards (‘IFRS’).
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory and relevant to the operations and effective for the current reporting period.
New and revised Standards and amendments thereof and Interpretations effective for the current reporting period that are relevant to the
Group include:
i.
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and
Amortisation
ii. AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
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.
F I N A N C I A L S T A T E M E N T S | 3 7
2. Summary of significant accounting policies (Cont.)
(a) Basis of preparation (Cont.)
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.
(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;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
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.
3 8 | C I W 2 0 1 7 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.
(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.
F I N A N C I A L S T A T E M E N T S | 3 9
2. Summary of significant accounting policies (Cont.)
(e) Leases (Cont.)
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).
(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.
4 0 | C I W 2 0 1 7 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(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.
(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.
F I N A N C I A L S T A T E M E N T S | 4 1
2. Summary of significant accounting policies (Cont.)
(j) Investments and other financial assets (Cont.)
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 financial assets at fair value through profit or loss 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 considered 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.
(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.
4 2 | C I W 2 0 1 7 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(l) Property, plant and equipment (Cont.)
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 recognised 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.
(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.
F I N A N C I A L S T A T E M E N T S | 4 3
2. Summary of significant accounting policies (Cont.)
(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.
(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.
4 4 | C I W 2 0 1 7 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(o) Employee benefits (Cont.)
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.
(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 the 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.
F I N A N C I A L S T A T E M E N T S | 4 5
2. Summary of significant accounting policies (Cont.)
(q) Financial liabilities and equity instruments (Cont.)
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.
(t) Goods and service tax
Revenues, expenses, assets and liabilities 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 2017
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.
4 6 | C I W 2 0 1 7 A N N U A L R E P O R T
2. Summary of significant accounting policies (Cont.)
(u) New accounting standards and interpretations for application in future periods (Cont.)
The directors are still in the process of assessing the full impact of the application of AASB 9 on the Group’s financial statements and it
is not practicable to provide a reasonable financial estimate of the effect until the directors complete the detailed review. However, the
directors do not anticipate significant impact of the application of AASB 9. The directors do not intend to early adopt the standard.
(ii) 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.
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 directors are still in the process of assessing the full impact of the application of AASB 15 on the Group’s financial statements and
it is not practicable to provide a reasonable financial estimate of the effect until the directors complete the detailed review. However, the
directors do not anticipate significant impact of the application of AASB 15. The directors do not intend to early adopt the standard.
(iii) 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. As at 30 June 2017, the Group has non-cancellable operating
lease commitment of $469,249 (note 28). A preliminary assessment indicates that these arrangement will meet the definition of a lease
under AASB16, and hence the Group will recognize a right-of-use asset and a corresponding liability in respect of all these leases unless
they qualify for low value or short-term leases upon the application of AASB 16. The directors currently anticipate that the adoption of
AASB 16 in the future will not have a significant impact on the amounts reported and disclosures made in the Group’s consolidated
financial statements.
F I N A N C I A L S T A T E M E N T S | 4 7
3. 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.
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 rate risks (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.
4 8 | C I W 2 0 1 7 A N N U A L R E P O R T
4. Financial risk management (Cont.)
(a) Market risk (Cont.)
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 2017
30 June 2016
Impact on profit (pre-tax)
$615,888
($615,888)
$1,125,097
($1,125,097)
5% Increase in
Market Prices
5% Decrease in
Market Prices
5% Increase in
Market Prices
5% Decrease in
Market Prices
(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 (1.80% weighted average interest rate in 2017 and
2.20% weighted average interest rate in 2016).
Director
30 June 2017
30 June 2016
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)
$45,672
($45,672)
$54,135
($54,135)
(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. All financial assets that are not impaired
or past due are of good credit quality.
(ii) Trade and other receivables
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.
F I N A N C I A L S T A T E M E N T S | 4 9
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
2017
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
Cash and cash equivalents
Trade and other receivables – current
Total financial assets
$
1,337,085
1,337,085
4,370,278
552,974
4,923,252
$
1,337,085
1,337,085
4,370,278
552,974
4,923,252
$
1,337,085
1,337,085
4,114,792
552,974
4,667,766
$
-
-
-
-
-
$
-
-
255,486
-
255,486
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
Cash and cash equivalents
Trade and other receivables – current
Total financial assets
$
1,000,442
1,000,442
4,114,062
386,578
4,500,640
$
1,000,442
1,000,442
4,114,062
386,578
4,500,640
$
1,000,442
1,000,442
3,858,576
386,578
4,245,154
$
-
-
-
-
-
$
-
-
255,486
-
255,486
Trade and other payables 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.
5 0 | C I W 2 0 1 7 A N N U A L R E P O R T
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 2017
Financial assets at fair value through profit or loss
- Listed equities
- Unlisted funds
At 30 June 2016
Financial assets at fair value through profit or loss
- Listed equities
- Listed preference shares
- Unlisted funds
(ii) Valuation technique
Level 1
Level 2
Level 3
($)
($)
($)
Total
($)
4,858,417
-
-
1,158,800
4,858,417
1,158,800
-
-
-
4,858,417
1,158,800
6,017,217
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
Listed Investment in equity and preference securities and managed funds
When fair values of publicly traded equities and preference securities 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.
F I N A N C I A L S T A T E M E N T S | 5 1
4. Financial risk management (Cont.)
(d) Fair value risk (Cont.)
Unlisted managed funds
The Group invests in managed funds, which is 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 invests in 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.
Financial liabilites
The carrying value of financial liabilities approximate their fair values.
5. Revenue
Management fees and commissions
Performance fees
Director fees
Dividends and distributions received
Interest received
Investment software and education
Other income
Total revenue
See note 26(b) for an analysis of revenue by major products and services.
6. Expenses
2017
$
2016
$
7,202,514
7,440,834
115,887
55,000
330,818
85,208
718,142
165,123
8,672,692
2,401
75,000
304,876
118,923
1,147,913
24,283
9,114,230
2017
$
2016
$
Profit before income tax includes the following specific expenses:
Employee benefits expense (excluding superannuation)
4,453,659
4,089,980
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
327,733
63,986
223,008
47,043
260,348
212,874
281,706
64,007
205,799
67,408
260,348
212,875
5 2 | C I W 2 0 1 7 A N N U A L R E P O R T
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
2017
$
2016
$
4,370,278
4,370,278
4,114,062
4,114,062
Cash at bank is interest bearing. Cash at bank and deposits at call bear floating interest rates between 1.4% and 1.8% (2016: 1.9% and
2.3%).
Cash and bank balances above includes deposits of $256,559 (2016: 256,700) 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
Adjustments and non-cash items:
Depreciation and amortisation
Gain on disposal of property, plant and equipment
Non-cash share-based payment expense
Share of profit of associate
Dividends received from associate
Change in operating assets and liabilities
Trade and other receivables and other assets
Financial assets at fair value through profit or loss
Trade and other payables and unearned revenue
Current tax liability
Movement in other reserve recycled to profit or loss
Deferred tax assets and liabilities
Provisions
Net cash provided by / (used in) operating activities
8. Income tax expense
(a) Income tax (credit) / expenses
Current tax expense
Deferred tax credit
Deferred income tax expense included in income tax expense comprises:
Decrease in deferred tax assets (note 16)
Decrease in deferred tax liabilities (note 20)
2017
$
2016
$
2,561,130
1,065,330
520,265
-
63,986
(490)
47,594
(150,204)
1,075,801
69,532
(228,738)
(140,750)
(1,918,327)
(37,501)
1,862,298
2017
$
124,688
(1,919,079)
(1,794,391)
381,013
(2,300,092)
(1,919,079)
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)
2016
$
359,495
(89,695)
269,800
67,763
(157,458)
(89,695)
F I N A N C I A L S T A T E M E N T S | 5 3
8. Income tax expense (Cont.)
(b) Numerical reconciliation of income tax expense to
prima facie tax (credit) / payable
Profit before income tax expense
2017
$
766,739
2016
$
1,335,130
Tax at the Australian tax rate of 30% (2016: 30%)
230,022
400,539
Tax effect of amounts which are not deductible / (taxable) in
calculating taxable income:
- Amortisation of intangibles
- Share-based payment expense
- Dividends received
- Deferred tax liability movement due to demerger of Jasco
- Movement in other reserves
- Under provision of prior year tax
- Sundry items
Income tax (credit) / expense
9. Dividends
128,213
19,196
(100,160)
(1,941,185)
(148,038)
10,215
7,346
(1,794,391)
128,213
19,202
(424,893)
-
-
143,149
3,590
269,800
(a) Dividends provided for or paid during the year
Final dividend in respect of the previous financial year – 3 cents per share fully
franked (2016: 3 cents per share fully franked)
Interim dividend in respect of the current financial year – 1.5 cents per share
50% franked (2016: 3 cents per share fully franked)
2017
$
2016
$
1,511,883
1,507,345
751,170
1,505,945
2,263,053
3,013,290
Fully franked portion
1,511,883
3,013,290
(b) Dividends not recognised at year end
Proposed fully franked dividend – 1.5 cents per share (2016: 3 cents fully
franked)
849,739
1,511,883
(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
Franking debits from income tax refund
Balance of franking account at year end adjusted
315,201
697,894
143,086
(808,915)
(345,220)
2,046
2,998
996,624
606,989
(1,291,410)
-
315,201
Impact on franking account of proposed dividend not recognised at year end at
27.5% corporate tax rate (2016: 30%)
333,826
647,950
5 4 | C I W 2 0 1 7 A N N U A L R E P O R T
10. Trade and other receivables - Current
Trade receivables
Other receivables
2017
$
530,441
22,533
552,974
2016
$
300,212
86,366
386,578
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. 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. The carrying amounts of trade and other receivables are considered to represent a reasonable approximation of their fair values.
11. Other current assets
Prepayments
2017
$
121,971
2016
$
138,163
12. Financial assets at fair value through profit or loss - Current
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
2017
$
4,858,417
1,158,800
6,017,217
2016
$
4,584,427
2,508,591
7,093,018
2017
$
-
2016
$
8,752,418
F I N A N C I A L S T A T E M E N T S | 5 5
13. Investments accounted for using the equity method (Cont.)
(a) Carrying amounts
Information relating to associate is set out below.
Name of companies
Principal activity
2017
%
2016
%
2017
$
2016
$
Carrying amounts
Unlisted
JASCO Holdings Ltd (i)
The above associate is incorporated in Australia
(i) Jasco Holdings Limited
Importing and
distribution
-
21.75
-
8,752,418
On 27 October 2016 Clime shareholders approved the separation of Clime’s shareholdings in Jasco Holdings Limited via a subsidiary
company Clime Private Limited (Clime Private) and in-specie distribution of Clime Private shares on a 1 on 1 basis by way of a capital
reduction. The demerger was to simplify Clime’s structure and to potentially unlock shareholder value. The distribution of Clime Private
shares involved a reduction in Clime’s paid up share capital (Contributed equity). The demerger was completed on 11 November 2016.
As a result of the demerger, the carrying value of Jasco Holdings Limited of $7,802,806 at the record date (3 November 2016) was
debited to the share capital account and the investment in associate was de-recognised. Consequently, the deferred tax liability of
$1,941,185 carried in the books in relation to the unrealised gain of this investment was credited to the Statement of Profit or Loss and
Other Comprehensive Income.
(b) Movements of carrying amounts
Carrying amount at the beginning of the financial year
Share of profit after income tax
Share of (decrease) / increase in reserves
Dividends received/receivable
Dividends reinvested
Disposal of equity accounted investments
De-recognition of equity accounted investments on demerger of Jasco
2017
$
8,752,418
490
(2,508)
(47,594)
-
(900,000)
(7,802,806)
2016
$
8,977,530
694,764
83,520
(1,129,109)
125,713
-
-
Carrying amount at the end of the financial year
-
8,752,418
Associates
Net profit of Associate before income tax
Income tax expenses
Profit after income tax
700
(210)
490
953,154
(258,390)
694,764
5 6 | C I W 2 0 1 7 A N N U A L R E P O R T
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
2017
$
490
2016
$
694,764
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
$
-
-
3,233,230
490
2017
Jasco Holdings Limited - up to 31
October 2016
2016
Jasco Holdings Limited
12,844,245
4,091,828
10,358,003
694,764
14. Investments in 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
Clime Private Wealth Pty Ltd ^
Clime Private Limited ^^
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Class of shares
Fully Paid Ordinary
Fully Paid Ordinary
Fully Paid Ordinary
Fully Paid Ordinary
Fully Paid Ordinary
Equity holding *
2017
%
100
100
100
100
-
2016
%
100
100
100
-
-
* The proportion of ownership interest is equal to the proportion of voting power held.
^ incorporated on 7 February 2017.
^^ incorporated on 5 August 2016 and remained as a subsidiary of the Group until demerged from the Group on 3 November 2016.
15. Property, plant and equipment
Plant and equipment - at cost
Accumulated depreciation and impairment
Written down value of property, plant and equipment
Reconciliation
Carrying value at beginning
Additions during the year
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
Realised tax losses carried forward – capital
Deferred tax assets
Movements
Opening balance at 1 July
Charged to profit or loss (note 8(a))
Closing balance at 30 June
F I N A N C I A L S T A T E M E N T S | 5 7
2017
$
436,645
(385,439)
51,206
90,360
7,889
-
(47,043)
-
51,206
2017
$
51,616
23,664
-
265,854
341,134
722,147
(381,013)
341,134
2016
$
428,756
(338,396)
90,360
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
5 8 | C I W 2 0 1 7 A N N U A L R E P O R T
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
2017
$
2016
$
3,351,564
3,351,564
4,790,000
(2,441,175)
2,348,825
576,300
(123,690)
452,610
650,023
(302,059)
347,964
4,790,000
(2,180,826)
2,609,174
576,300
(61,845)
514,455
650,022
(151,030)
498,992
Closing balance at 30 June
6,500,963
6,974,185
(a) Reconciliations
2017 Consolidated
Goodwill
Carrying amount at beginning of year
Amortisation expense1
($)
3,351,564
-
Carrying amount at end of year
3,351,564
2016 Consolidated
Goodwill
Carrying amount at beginning of year
Amortisation expense1
Carrying amount at end of year
($)
3,351,564
-
3,351,564
Investment
management
contracts &
relationships
($)
2,609,173
(260,348)
2,348,825
Investment
management
contracts &
relationships
($)
2,869,521
(260,348)
2,609,173
Software
licences
($)
514,455
(61,845)
452,610
Software
licences
($)
576,300
(61,845)
514,455
Customer
relationships
& customer
lists
Total
($)
($)
498,993
6,974,185
(151,029)
(473,222)
347,964
6,500,963
Customer
relationships
& customer
lists
Total
($)
($)
650,023
7,447,408
(151,030)
(473,223)
498,993
6,974,185
1 Amortisation of $473,222 (2016: $473,223) is included in the consolidated statement of profit or loss and other comprehensive income.
F I N A N C I A L S T A T E M E N T S | 5 9
17. Intangible assets (Cont.)
(b) Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated to the applicable cash-generating unit for impairment testing. Each
cash-generating unit represents a business operation of the Group.
Cash-generating unit
2017 - Consolidated
Funds
Management
Investment
Software and
Education
($)
($)
Total
($)
Balance at the beginning of the year
3,026,564
325,000
3,351,564
Movements during the year
Balance at end of year
2016 - Consolidated
-
-
-
3,026,564
325,000
3,351,564
Balance at the beginning of the year
3,026,564
325,000
3,351,564
Movements during the year
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
Dividends received on shares issued under the Employee Incentive
Scheme
Accruals
Other payables
2017
$
370,558
234,750
725,843
224,929
2016
$
435,859
172,875
375,682
259,755
1,556,080
1,244,171
The carrying amounts of trade and other payables are considered to represent a reasonable approximation of their values.
19. Provisions
Employee benefits
2017
$
172,055
2016
$
209,556
The provision for employee benefits represents annual leave and long service leave entitlements accrued.
6 0 | C I W 2 0 1 7 A N N U A L R E P O R T
20. Deferred tax liabilities
The balance comprises temporary differences attributable to:
Available for sale and equity accounted investments
Financial assets at fair value through profit or loss
Sundry items
Deferred tax liabilities
Movements
Opening balance at 1 July
Credited to the profit or loss (note 8)
- Deferred tax liability movement due to demerger of Jasco
- Others
Charged directly to equity (note 22(a))
Closing balance at 30 June
21. Issued capital
2017
$
-
43,794
-
43,794
2016
$
2,264,063
18,749
61,074
2,343,886
2,343,886
2,476,288
(1,941,185)
(358,907)
-
43,794
-
(157,458)
25,056
2,343,886
(a) Share Capital
Parent Equity
Parent Equity
Ordinary shares
Fully paid
Notes
2017
Shares
2016
Shares
2017
$
2016
$
(b),(d)
48,574,243
49,021,093
13,822,370
21,860,316
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
30 June 2015
Various
Various
Details
Balance
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
$
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
July 2016 to June 2017
Shares bought back on-market and cancelled
(d)
(446,850)
(234,972)
July 2016 to June 2017
Transaction costs arising from on-market buy-back
11 November 2016
Capital reduction on account of in-specie
distribution of equity accounted investment
-
-
(168)
(7,802,806)
30 June 2017
Balance
48,574,243
13,822,370
F I N A N C I A L S T A T E M E N T S | 6 1
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
During the financial year ended 30 June 2017, Clime Investment Management Limited, in accordance with its on-market share buy-back
scheme, bought back 446,850 (2016: 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 52.58 cents per share (2016: 64.52 cents per share). The total cost of $235,140 (2016: $112,101), including $168
(2016: $140) of transaction costs, was deducted from contributed equity. The shares bought back in the current year were cancelled
immediately.
(e) Employee Incentive Scheme (“EIS”)
As at 30 June 2017, there are 1,575,000 (2016: 1,050,000) 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 2016.
6 2 | C I W 2 0 1 7 A N N U A L R E P O R T
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
Credit to profit or loss
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
2017
$
155,798
-
155,798
91,812
63,986
-
155,798
142,506
(203,580)
-
61,074
-
2016
$
91,812
142,506
234,318
123,805
64,007
(96,000)
91,812
84,042
83,520
(25,056)
-
142,506
2017
$
2016
$
1,424,778
2,561,130
(2,263,053)
1,722,855
3,372,738
1,065,330
(3,013,290)
1,424,778
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.
F I N A N C I A L S T A T E M E N T S | 6 3
23. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity (Pitcher Partners) and its
related practices:
Audit and review of financial statements
Taxation matters
Other matters
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
2017
$
76,867
17,255
39,700
133,822
2017
Cents
5.2
5.1
2017
$
2016
$
77,207
19,610
-
96,817
2016
Cents
2.2
2.1
2016
$
(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
Profit attributable to the ordinary equity holders of the Group used in
calculating basic and diluted earnings per share
2,561,130
2,561,130
1,065,330
1,065,330
6 4 | C I W 2 0 1 7 A N N U A L R E P O R T
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
2017
Number
2016
Number
48,804,416
49,122,496
50,379,416
50,172,496
48,804,416
49,122,496
1,575,000
1,050,000
50,379,416
50,172,496
(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.
F I N A N C I A L S T A T E M E N T S | 6 5
25. Share-based payments (Cont.)
(a) Employee Incentive Scheme (EIS) (Cont.)
Set out below is a summary of in-substance options granted under the plan:
Grant Date
Vesting /
Expiry 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
2017
22/08/2013
04/11/2018
25/10/2013
04/11/2018
19/08/2014
19/08/2017
25/02/2015
25/02/2018
11/09/2015
11/09/2018
20/07/2016
20/07/2019
23/06/2017
23/06/2020
Total
Number
Number
Number
Number
Number
Number
$0.800
$0.829
$0.850
$0.750
$0.700
$0.630
$0.500
100,000
300,000
200,000
75,000
375,000
-
-
-
-
-
-
-
400,000
350,000*
1,050,000
750,000
-
-
-
-
-
-
-
-
-
(50,000)
-
(25,000)
(100,000)
(50,000)
-
100,000
250,000
200,000
50,000
275,000
350,000
350,000
100,000
250,000
-
-
-
-
-
(225,000)
1,575,000
350,000
Weighted average exercise price
$0.649
* Includes 200,000 (2016: Nil) in-substance options granted to the Managing Director approved by shareholders on 27th October 2016.
Grant Date
Vesting /
Expiry 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
23/10/2016
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
The weighted average contractual life of in-substance options outstanding at the end of the period was 1.57 years (2016 – 1.17 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.
6 6 | C I W 2 0 1 7 A N N U A L R E P O R T
25. Share-based payments (Cont.)
(a) Employee Incentive Scheme (EIS) (Cont.)
The model inputs for in-substance options granted during the year ended 30 June 2017 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 $0.65 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%;
risk-free interest rate: 2.75%; and
•
•
•
• discount rate: 14%.
The resulting fair values per in-substance option are:
Number of
Options
Grant Date
Exercise Price
Value per option
at grant date
Vesting / Expiry Date
100,000
250,000
200,000
50,000
275,000
350,000
350,000
22/08/2013
25/10/2013
19/08/2014
25/02/2015
11/09/2015
20/07/2016
23/06/2017
$0.800
$0.829
$0.850
$0.750
$0.700
$0.630
$0.500
$0.140
$0.140
$0.140
$0.134
$0.121
$0.107
$0.111
04/11/2018
04/11/2018
19/08/2017
25/02/2018
11/09/2018
20/07/2019
23/06/2020
Refer to the Remuneration Report on pages 20 to 27, for additional information in relation to the EIS.
(b) Options issued to Amigo Consulting Pty Limited
The Group issued 1,000,000 share options to Amigo Consulting Pty Limited (“Amigo”) to be retainer and an outcome driven incentive.
Amigo has been engaged to provide strategic and outcome driven corporate advisory services. Mr. Allyn Chant, a director of Clime, is also
a director and a minority shareholder of Amigo.
The Options will expire on 1 October 2019 and may be exercised at any time upon vesting and prior to the expiry date. The amount
payable on exercise of each option is 50 cents, subject to adjustment in accordance with certain conditions.
Vesting conditions:
i.
ii.
333,333 options vest on the date, if it occurs prior to 30 September 2017, that the Company’s securities trade on the
Australian Securities Exchange (“ASX”) at or above 75 cents. If this condition is not met the vesting period is extended to 30
September 2019 and vesting will occur if the Company’s securities trade on the ASX at or above $1.00 by that extended date;
333,333 options vest on the date that the Company completes the purchase or build of a retail platform (defined as
a flexible service that enables investors to buy and hold their investments online all in one place, tracking transactions
for tax purposes and allowing advisor and/or client direction) for client’s monies if this occurs before the expiry date;
iii.
333,334 options vest if the Company’s funds under management attains or exceeds $1 billion prior to the expiry date.
F I N A N C I A L S T A T E M E N T S | 6 7
25. Share-based payments (Cont.)
(c) 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
Amigo Consulting Pty Limited
2017
$
42,584
21,402
63,986
2016
$
64,007
-
64,007
Refer to the Remuneration Report on pages 20 to 27, for additional information in relation to the Employee Incentive Scheme.
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.
6 8 | C I W 2 0 1 7 A N N U A L R E P O R T
26. Segment information (Cont.)
(b) Reportable Segments
2017
Funds
Management
Investment
Software
Direct
Investments
Inter Segment
/ unallocated
Consolidated
($)
($)
Segment revenue
Sales to external customers
7,318,774
718,142
Share of profits from
investments in associate
Investment income
-
-
-
-
Total segment revenue
7,318,774
718,142
($)
-
490
1,125,886
1,126,376
Net group result
Net group result before tax
871,184
137,279
1,126,376
(1,368,100)
296,630
105,202
-
118,433
520,265
2016
Funds
Management
Investment
Software
Direct
Investments
Inter Segment
/ unallocated
Consolidated
Segment revenue
Sales to external customers
7,443,517
1,147,913
($)
($)
Share of profits from
investments in associate
Investment income
-
-
-
-
Total segment revenue
7,443,517
1,147,913
($)
-
694,764
(293,517)
401,247
Net group result
Net group result before tax
1,946,832
81,598
401,247
(1,094,547)
($)
($)
79,000
8,115,916
-
-
79,000
490
1,125,886
9,242,292
766,739
1,794,391
2,561,130
($)
($)
99,000
8,690,430
-
-
99,000
694,764
(293,517)
9,091,677
1,335,130
(269,800)
1,065,330
Income tax benefit
Profit for the year
Depreciation and
amortisation expense
Income tax expense
Profit for the year
Depreciation and
amortisation expense
311,756
106,660
-
122,215
540,631
(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 $7.32 million (2016: $7.44 million) (see 26 (b) above) are revenues
of approximately $1.6 million (2016: $1.7 million) which arose from sales to the Group’s largest customer.
F I N A N C I A L S T A T E M E N T S | 6 9
27. Subsequent Events
a.
b.
A final fully franked dividend for the year ended 30 June 2017 of 1.5 cents per share, totalling $849,739 has been declared by the
directors. This provision has not been reflected in the accounts.
The Group acquired 100% of CBG Asset Management Ltd (CBG) on 14 July 2017. The acquisition cost was $3,625,000
comprising $3,250,000 on completion and $375,000 in 12 months based on the fulfilment of certain warranties relating to funds
under management retention and delivery of agreed outcomes.
Initial consideration was paid by way of issue of 6,500,000 ordinary shares in the Company at 50 cents per share being the
weighted average market price over the past 30 trading days. The balance of 750,000 shares, which are subject to agreed
outcomes, are to be issued on 30 June 2018.
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.
28. Contingent liabilities, contingent assets and commitments
The Group has no material contingent liabilities or contingent assets as at 30 June 2017 (2016: 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 2017 (2016: 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 various lease agreements are as follows.
Not later than 1 year
Later than 1 year and not later than 5 years
2017
$
231,414
237,835
469,249
2016
$
230,595
400,252
630,847
7 0 | C I W 2 0 1 7 A N N U A L R E P O R T
29. 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
($)
($)
462,144
24,257
($)
142
725,955
52,138
-
($)
($)
-
-
486,543
778,093
2017
Remuneration of Directors and other
key management personnel
2016
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 27 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 the remuneration report on pages 20 to 27.
(ii) Option holdings
Refer to note 25(b) for 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’ holding of ordinary shares in Clime Investment Management Limited
Name
2017
Mr. Donald McLay
Mr. John Abernethy (note a)
Mr. Neil Schafer
Mr. Allyn Chant
Balance at
1 July 2016
No.
6,241,000
3,610,000
548,007
883,600
Granted as
compensation
/ Received on
exercise of
options
Other changes
during the year
Balance
as at Date
No.
-
200,000
-
-
No.
1,079,680
151,350
-
(883,600)
No.
7,320,680
3,961,350
548,007
-
Note a: During the year, 200,000 (2016: Nil) ‘in-substance’ options were issued under Clime Employee Incentive Scheme that was approved
by shareholders on 27 October 2016.
F I N A N C I A L S T A T E M E N T S | 7 1
29. Key management personnel disclosures (Cont.)
(b) Equity instrument disclosures relating to directors and other key management personnel
(Cont.)
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
(c) Loans to directors and other key management personnel
$100,000 (2016: Nil) loan to managing director in relation to the EIS share issued during the year 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.
30. Related party transactions
All transactions with related entities were made on normal commercial terms and conditions no more favourable than transactions with
other parties unless otherwise stated. Details of transactions between the Group and other related parties are disclosed below.
(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.
(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 29.
7 2 | C I W 2 0 1 7 A N N U A L R E P O R T
30. Related party transactions (Cont.)
(e) Other related party transactions
Clime Capital Limited
i. Mr. John Abernethy is a Director in Clime Capital Limited. The Group received $59,000 (2016: $59,000) as management fees for
the services rendered by the managing director and the Company secretary to Clime Capital Limited. The Group directly owns
6.24% (2016: 7.47%) of the fully paid ordinary shares of Clime Capital Limited as at 30 June 2017. Clime Investment Management
Limited through Clime Asset Management Pty Limited (a wholly owned subsidiary) has the indirect power to dispose 6.34% (2016:
7.75%) of Clime Capital Limited’s shares held by the Investment Managers discretionary share portfolio clients as at 30 June 2017.
ii. Clime Asset Management Pty Limited during the year received $620,894 (2016: $645,020) 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 Australian Income Fund
Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $15,909 (2016: Nil) as management, performance
and recoverable fees as remuneration for managing the investment portfolios and acting as trustees on behalf of Clime Australian Income
Fund.
Clime Smaller Companies Fund
Clime Asset Management Pty Limited (a wholly owned subsidiary), during the year received $2,852 (2016: Nil) as management, performance
and recoverable fees as remuneration for managing the investment portfolios and act as trustee on behalf of Clime Smaller Companies Fund.
Amigo Consulting Pty Limited
Mr. Allyn Chant, a director of Clime, is also a director and a minority shareholder of Amigo Consulting Pty Limited (“Amigo”). The Group during
the year paid $188,390 (2016: Nil) to Amigo as consultancy fees.
The Group also issued 1,000,000 share options to Amigo to be retainer and an outcome driven incentive. Amigo has been engaged to provide
strategic and outcome driven corporate advisory services.
The Options will expire on 1 October 2019 and may be exercised at any time upon vesting and prior to the expiry date. The amount payable
on exercise of each option is 50 cents, subject to adjustment in accordance with certain conditions as follows:
i.
ii.
333,333 options vest on the date, if it occurs prior to 30 September 2017 that the Company’s securities trade on the ASX at or
above 75 cents. If this condition is not met the vesting period is extended to 30 September 2019 and vesting will occur if the
Company’s securities trade on the ASX at or above $1.00 by that extended date;
333,333 options vest on the date that the Company completes the purchase or build of a retail platform (defined as a flexible
service that enables investors to buy and hold their investments online all in one place, tracking transactions for tax purposes and
allowing advisor and/or client direction) for client’s monies if this occurs before the expiry date;
iii.
333,334 options vest if the Company’s Funds Under Management attains or exceeds $1 billion prior to the expiry date.
Expenses arising from the share based payment transactions recognised during the period was $21,402 (2016: Nil).
F I N A N C I A L S T A T E M E N T S | 7 3
30. Related party transactions (Cont.)
(f) Outstanding balances as at year end
The following balances, prior to group elimination, were outstanding at the end of the reporting period:
Amount owed by related parties
Amount owed to related parties
30 June 2017
30 June 2016
30 June 2017
30 June 2016
($)
54,837
4,596
3,137
-
355,000
105,796
($)
54,231
397
-
-
135,000
62,156
($)
-
-
-
22,000
($)
-
-
-
-
12,478,294
9,509,684
-
-
Clime Capital Limited
Clime Australian Income Fund
Clime Smaller Companies Fund
Amigo Consulting Pty Ltd
Clime Investment Management Limited
Subsidiaries of Clime Investment Management Limited
31. 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
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 reserve
Total Equity
(b) Financial Performance
Profit for the year
Other comprehensive (loss) / income
Total comprehensive income
2017
$
6,812,262
12,775,735
19,587,997
11,607,341
-
11,607,341
7,980,656
13,822,370
18,006,923
(24,004,435)
155,798
7,980,656
2016
$
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
2,787,353
(142,506)
2,644,847
20,495,912
58,464
20,554,376
7 4 | C I W 2 0 1 7 A N N U A L R E P O R T
31. Parent entity disclosures (Cont.)
(c) Guarantees entered into by the Parent Company
The parent company provides cash backed guarantees for the operating lease agreement of office premises. During the year these
guarantees amounted to $255,486 (2016: $255,486).
(d) Commitments for the acquisition of property, plant and equipment by the parent entity
The parent entity has no commitment (2016: Nil) for the acquisition of property, plant and equipment and $469,249 (2016: $630,847) for
the operating lease commitments.
D I R E C T O R S ’ D E C L A R A T I O N | 7 5
The Directors declare that:
a.
b.
c.
in the directors’ opinion, the attached financial statements and notes thereto, as set out on pages 31 to 74, 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: 24 August 2017
John Abernethy
Managing Director
7 6 | C I W 2 0 1 7 A N N U A L R E P O R T
Independent Auditor’s Report to the Members
CLIME INVESTMENT MANAGEMENT LIMITED
ABN 37 067 185 899
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CLIME INVESTMENT MANAGEMENT LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Clime Investment Management Limited, “the Company” and
its Controlled Entities “the Group”, which comprises the consolidated statement of financial position
as at 30 June 2017, the consolidated statement of profit and loss and other comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of
significant accounting policies, and the directors’ declaration.
In our opinion:
a) the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
i.
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended; and
ii.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
b) the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2 Basis of preparation.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our 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
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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 | 7 7
Independent Auditor’s Report to the Members
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Accuracy of Management and Performance Fees
Refer to Note 5: Revenue and Note 30: Related Party Transactions
Management and performance fees account for
$7.3M of the Group’s $8.6M reported revenues
in 2017.
We focused our audit effort on the accuracy of
management and performance fees given their
significance to the revenues of the Group and
because
require
adjustments for significant events in accordance
with the Investment Management Agreement.
calculation may
their
In addition to their size, as some of these
transactions are made with related parties,
consequently there are additional inherent risks
associated with these transactions, including the
potential for these transactions to be made on
terms and conditions more favourable than if
they had been with an independent third-party.
therefore
identified
the accuracy of
We
management and performance fees as a key
audit matter.
Our procedures included amongst others:
Obtaining and
reviewing all current
Investment Management Agreements;
Making enquiries with Management and
Directors with respect to any significant
events during the year that may impact the
calculation
and
performance fees;
of management
Recalculating
management
and
performance fees in accordance with our
understanding of the current Investment
Management Agreements and comparing
our calculations to those fees reported;
and
Assessing the appropriateness of the
current accounting policy in relation to
management and performance fees and
the adequacy of disclosures in the financial
statements.
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Independent Auditor’s Report to the Members
Key audit matter
How our audit addressed the key audit matter
Impairment Assessment of Intangible Assets
Refer to Note 17: Intangible Assets
At 30 June 2017 the Group’s statement of
intangible assets,
financial position had
including goodwill, totalling $6.5M.
assets
incorporates
The assessment of impairment of the Group’s
significant
intangible
the
management
assumptions and estimates used in calculating
the fair value less cost to sell these assets when
evaluating their recoverable amount.
surrounding
judgement
We therefore
intangible assets as a key audit matter.
identified the valuation of
Our procedures included amongst others:
Evaluating
management’s
process
regarding the valuation of intangible assets
to determine any asset impairments;
Challenging any assumptions or estimates
used to determine the fair value of an
intangible asset;
Checking the mathematical accuracy and
performing sensitivity analysis on fair value
calculations performed by management;
and
Assessing the appropriateness of the
current accounting policy in relation to
impairment
adequacy of
disclosures in the financial statements
and
the
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ Responsibilities for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
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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 | 7 9
Independent Auditor’s Report to the Members
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
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8 0 | C I W 2 0 1 7 A N N U A L R E P O R T
Independent Auditor’s Report to the Members
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 20 to 27 of the directors’ report for the
year ended 30 June 2017. In our opinion, the Remuneration Report of Clime Investment Management
Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
S M WHIDDETT
Partner
24 August 2017
PITCHER PARTNERS
Sydney
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C I W 2 0 1 7 A N N U A L R E P O R T | 8 1
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8 2 | C I W 2 0 1 7 A N N U A L R E P O R T
Shareholder information
The shareholder information set out below was applicable as at 18 August 2017.
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
34
184
109
264
54
645
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 Nominees Pty Ltd
Torres Industries Pty Limited & Nagarit Pty Limited
Locope Pty Ltd & Savoir Superannuation Pty Ltd
Double Pty Limited & Abernethy SMSF Pty Ltd
Mr David Schwartz & related entities
Capital Property Corporation Pty Limited
Clodene Pty Ltd
Robansheil Pty Limited
Allingham Holdings Pty Ltd
Ruminator Pty Ltd
Di Iulio Homes Pty Limited
Barrob Bondi Pty Ltd
Mr Neil Edward Schafer & Mrs Molly Clark Schafer
Mr Orlando Berardino Di Iulio & Ms Catharina Maria Koopman
Mr Robert Archer Black
Arcelia Pty Ltd
J P Morgan Nominees Australia Limited
Sanlam Private Wealth Pty Ltd
John E Gill Trading Pty Ltd
Delta Asset Management Pty Ltd
Ordinary Shares
No. of Shares
Percentage of
issued shares
10,979,791
7,320,680
6,500,000
3,761,350
2,612,153
1,241,122
1,194,121
1,130,446
984,000
871,419
850,000
561,066
548,007
500,000
500,000
485,334
342,022
320,000
300,298
300,000
19.936
13.292
11.802
6.830
4.743
2.254
2.168
2.053
1.787
1.582
1.543
1.019
0.995
0.908
0.908
0.881
0.621
0.581
0.545
0.545
41,301,809
74.993
S H A R E H O L D E R I N F O R M A T I O N | 8 3
B. Equity Security Holders (Cont.)
Ordinary Shares
Quoted equity securities issued under Employee Incentive
scheme not yet vested
No. of Shares
Number of
holders
Shares issued under the Employee Incentive Scheme to take up ordinary
shares
1,575,000
12
C. Substantial Holders
Substantial holders in the company are set out below:
Ordinary Shares
Wilson Management Group
Torres Industries Pty Ltd
Locope Pty Ltd & Savoir Superannuation
Mr. John Abernethy
D. Voting Rights
No. of Shares
Percentage of
issued shares
10,979,791
7,320,680
6,500,000
3,761,350
19.936
13.292
11.802
6.830
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 16 November 2017.
Stock Exchange Listing
The shares of the Company are listed on the Australian Securities Exchange Limited under the exchange code CIW. 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 24 August 2017 an on-market buy-back scheme existed and continues to be in operation as at the date of this report.
Contact Details
The name of the Company Secretary is 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 7 A N N U A L R E P O R T | 8 4
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