CONTANGO ASSET MANAGEMENT LIMITED
AND CONTROLLED ENTITIES
ACN: 080 277 998
Annual Report
2017–2018
LETTER FROM
THE CHAIRMAN
Roger Amos
Non-executive Chairman
Contango Asset
Management Limited
Dear Shareholder,
Welcome to the 2018 Contango Asset Management Annual Report.
FY18 was a significant year for the Company, and it is with great pleasure we deliver our results to you.
Throughout the year, the Company reviewed its strategic objectives and operating model with a view to focus on
the areas of its operations that were growing. As a result, the Company’s focus has moved away from institutional
wholesale mandates, to the distribution of products to retail clients, including via Switzer Asset Management Limited
(SAML). Consequently, the Company restructured its operations, including reducing headcount and relocating its head
office to Sydney.
The Company’s cost base has been substantially reset, and it is progressing with its objective of launching exchange
traded managed funds via SAML.
SAML is a key part of the Company’s growth strategy. During FY18, the Company entered into an agreement to acquire
the shares in SAML that it did not own. We were pleased to announce this was approved by shareholders and the
acquisition was completed in September 2018.
The Company’s growth objectives include the development of a suite of products through SAML, leveraging off the self-
directed and independent financial advisory segments. As part of this strategy we announced a new exchange traded
product, the WCM Quality Global Growth Fund, which started trading in September. Over the coming financial year, the
Board intends to continue to invest in the development of new funds.
An important component of the Company’s ability to implement its future strategies with success relates to the
marketing of our LIC and Exchange Traded Managed Fund (ETMF) mandates, and retaining and attracting key
personnel. The Company has invested in its business developmenet team to help drive its FUM growth.
The restructure and new growth plan has been made possible by the drive and energy of the Company’s new Chief
Exeutive Officer, Mr Martin Switzer, and his management team. To achieve all of this in such a short period of time is a
great achievement. I’m very much looking forward to what can be realised with the new strategy in place.
I would like to thank my fellow directors for their diligent oversight during this major period of transition.
Thank you to our shareholders for supporting our vision. Here’s to another successful year for CGA, and many more
milestones along the way in FY19.
Yours faithfully,
Roger Amos
Chairman
LETTER FROM THE CHAIRMAN FOR THE YEAR ENDED 30 JUNE 2018 | 3
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 MANAGING
DIRECTOR’S REPORT
Martin Switzer
CEO
Contango Asset
Management Limited
The 2018 financial year was one of significant change, progression and achievement for Contango Asset Management
(CGA). The business made the strategic decision to transition from an institutionally focused fund manager to a specialist
listed investment house targeting the self-directed and independent financial adviser (IFA) channels of the retail market.
The rationale for the new strategy was to focus on the parts of the business and industry that are experiencing growth
and to concentrate our efforts on where we believe we have a competitive advantage.
In 2018 the business has shifted its focus from a product manufacturer to a marketing and distribution platform
offering high-quality fund managers access to the retail channel of the $2 trillion superannuation industry.
REVISED BUSINESS MODEL
In FY18, we streamlined our operating structure and implemented a revised business model to drive growth and future
profitability. These changes included:
• a relocation of operations to Sydney;
• revised cost structures and service provider arrangements; and
• a review of fee structures to leverage profit growth and reward outperformance.
This new model will provide us with the opportunity to build operating scale, increase funds under management and
attain sustainable profitability in the years ahead. The change in business direction has also been supported with the
acquisition of Switzer Asset Management.
ACQUISITION OF SWITZER ASSET MANAGEMENT
The Switzer brand entered asset management in December 2015 with the purchase of Switzer Asset Management
(formerly Halidon Asset Management) and the subsequent launch of the Switzer Dividend Growth Fund (Managed
Fund). Within a short period of time, SAM had grown to over $110 million in funds under management (FUM). SAM was
a joint venture between CGA and Switzer Financial Group.
In March 2018, CGA announced its intention to acquire the remaining interest in SAM for an all-scrip consideration
representing 15% of CGA’s total issued capital.
The intent of the acquisition was to more closely align the distribution, marketing, investment, portfolio management
and operational experience of both CGA and Switzer Financial Group (SFG). The acquisition presented a number of
advantages to CGA including:
• attractive valuation metrics;
• acquisition of a retail Australian Financial Services Licence;
• use of the respected Switzer name;
• access to extensive retail and IFA networks;
• access to a media platform of direct investors; and
• a pipeline of new funds.
GROWTH IN RETAIL BUSINESS
Despite significant changes to our operating structure the business continued to grow retail funds under management.
It should be noted that in the past 17 months we have generated almost $200 million in retail funds under
management (FUM) via the Switzer Dividend Growth Fund (SWTZ), Contango Income Generator Limited (CIE), and WCM
Global Growth Limited (WQG), formerly Contango Global Growth Limited.
4 | MANAGING DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2018
This achievement was significant as the Company had no dedicated retail business development personnel and most
products had no research house endorsements. These strong performances of retail asset raising support the new
direction for the business and demonstrate the significant "brand alpha" associated with the Switzer name.
We also announced the recruitment of an experienced distribution team who will target the IFA market and distribute
our product set. This is a key initiative for CGA to achieve our strategic and future growth objectives.
WCM INVESTMENT MANAGEMENT
A key focus in 2018 was the development of our relationship with WCM Investment Management (WCM).
Based in Laguna Beach, California, WCM is a global equities manager whose investment process is based on the belief
that corporate culture is the biggest influence on a company's ability to grow its competitive advantage or "moat". This
process has resulted in WCM’s flagship portfolio outperforming the MSCI World Index by an annualised 5.2% per annum
over the past decade, with assets under management growing from A$200 million to over A$35 billion.
Key developments relating to our relationship with WCM included:
• the announcement to launch a WCM exchanged traded managed fund (ETMF) via our interest in Switzer Asset Management;
• an exclusivity arrangement with CGA and SAM to distribute WCM’s Quality Global Growth investment strategy via a
listed investment company, ETMF and retail managed fund; and
• the change of name for listed investment company Contango Global Growth Limited to WCM Global Growth Limited.
These developments were consistent with our new strategic direction as a marketing and distribution platform that
partners with and promotes best of breed global brands to the self-directed and IFA channels.
Change presents opportunity and I’m confident we’ve initiated the right changes to our business to deliver a platform
for future growth and profitability. I would like to thank our incredible team for their endless efforts throughout the
year as well as the ongoing support from our Chairman and directors. I would also like to thank our shareholders and
investors for the trust they’ve placed in us to manage their investments. We do not take this duty lightly and are very
grateful for your support.
Sincerely,
Martin Switzer
CEO, Contango Asset Management
MANAGING DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 5
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 FINANCIAL REPORT
FOR THE PERIOD ENDED 30 JUNE 2018
CONTANGO ASSET MANAGEMENT LIMITED
AND CONTROLLED ENTITIES
ACN: 080 277 998
6 | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
CONTENTS
Corporate Governance Statement
Directors' Report
Remuneration Report
Auditor's Independence Declaration
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
Additional Information for Listed Public Companies
Pages
8
9–17
18–21
22
23–26
23
24
25
26
27–62
63
64–68
69–70
CONTENTS FOR THE YEAR ENDED 30 JUNE 2018 | 7
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 CORPORATE GOVERNANCE
STATEMENT
The Board and management of Contango Asset
Management Limited are committed to conducting the
Group’s business in an ethical manner and in accordance
with the highest standards of corporate governance. The
Company has adopted and has complied with the ASX
Corporate Governance Principles and Recommendations
(Third Edition) (Recommendations) to the extent
appropriate to the size and nature of the Group’s
operations.
The Company has prepared a statement which sets
out the corporate governance practices that were in
operation throughout the financial year for the Company,
identifies any Recommendations that have not been
followed and provides reasons for not following such
Recommendations (Corporate Governance Statement).
The Corporate Governance Statement is accurate and up
to date as at 21 August 2018 and has been approved by
the Board.
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the
Corporate Governance Statement is available for review
on the Company’s website (www.contango.com.au) and
will be lodged together with an Appendix 4G at the same
time that the Company’s Annual Report is lodged with
ASX.
The Appendix 4G will identify each Recommendation
that needs to be reported against by the Company and
will provide shareholders with information as to where
relevant governance disclosures can be found.
The Company’s corporate governance policies and
charters are all available on the Company’s website
(www.contango.com.au).
8 | CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
DIRECTORS' REPORT
Your directors present their report, together with the
financial statements, of the consolidated entity (referred
to hereafter as the Group) consisting of Contango Asset
Management Limited (the "Company" or "Parent Entity")
and the entities it controlled at the end of, or during, the
financial year ended 30 June 2018.
1. GENERAL INFORMATION
DIRECTORS
The names of the directors in office at any time during, or
since the end of, the year are:
Roger Amos – Non-executive Chairman
George Boubouras – Executive Director
(Resigned 27 October 2017)
Charles Aitken – Non-executive Director
Martin Switzer1 – Executive Director
(Appointed 27 October 2017)
Patricia Toh – Non-executive Director
Nerida Campbell – Non-executive Director
(Appointed 17 August 2018)
1 Martin Switzer was a Non-executive Director up until
his appointment as Chief Executive Officer and Managing
Director on 27 October 2017.
Directors have been in office since the start of the
financial year to the date of this report unless otherwise
stated.
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 9
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 INFORMATION ON DIRECTORS
The skills, experience and expertise of each person who is a director of the Company at the end of the financial year is
provided below, together with details of the Company Secretary as at year end.
Name
Roger Amos
Name
George Boubouras
Position
Non-executive Chairman
Position
Executive Director (Resigned 27 October 2017)
Qualifications
FCA, FAICD
Qualifications
B.Ec (Hons)
Roger was appointed to the Board of Tyrian Diagnostics
Limited in June 2007 and became Chairman six months
later and Roger remained as Chairman following the
acquisition of the Contango business and the Company
becoming Contango Asset Management Limited. Roger
is an independent director of REA Group Limited, Enero
Group Limited and 3P Learning Limited. He was a director
until May 2012 of Austar United Communications
Limited. He was Chairman of Opera Foundation Australia
from 2009 to 2014. Roger previously had a long and
distinguished career with the international accounting
firm KPMG, retiring in June 2006 after 25 years as a
partner.
Special responsibilities: Chairman
Other current directorships: Roger is a Governor of the
Cerebral Palsy Alliance Research Foundation.
George has over 25 years’ experience in financial services
and has held senior leadership positions, as the chief
investment officer, at various global and domestic firms.
George holds a Bachelor of Economics (Honours) and has
undertaken further study at Harvard, MIT Sloan School
of Management, the University of New South Wales and
holds the Stockbrokers Association of Australia RG 146
accreditation.
Special responsibilities: Managing Director and Chief
Investment Officer (Resigned 27 October 2017)
10 | DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018
Name
Charles Aitken
Position
Non-executive Director
Charles is Chief Executive Officer and Chief Investment
Officer of Aitken Investment Management Pty Ltd. He
has more than 24 years of equity and futures market
experience. He is an expert contributor to the Switzer
Super Report, and previously to Alan Kohler’s Eureka
Report. He appears frequently on Australian and global
financial media as an expert on Australian equities and
global macroeconomic strategy.
Charles has previously been a Director and head of
Sydney Sales Trading for Citigroup, Executive Director
and Partner of Southern Cross Equities and Executive
Director and Board member of ASX listed Bell Financial
Group.
Special Responsibilities: Chair of Remuneration and
Nominations Committee
Other current directorships: None
Name
Position
Martin Switzer
Executive Director (Appointed 27 October 2017)
Non-executive Director (Resigned 27 October 2017)
Qualifications
B.Ec (Hons)
Before his appointment as Chief Executive Officer,
Martin was previously the Chief Operating Officer of
Switzer Financial Group, a content and financial services
business. He has been a host on the Sky News Business
channel, as well as a consultant to the Australian
Defence Force Financial Services Consumer Centre.
Special responsibilities: Chief Executive Officer
Other current directorships: Martin is currently a director
of WCM Global Growth Ltd, Switzer Asset Management
Limited, Switzer Home Loans, is on the board of fashion
media business RUSSH and has been a director of the
Entrepreneurs Organisation and an ambassador for the
Fight Duchenne Foundation.
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 11
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
Name
Patricia Toh
Name
Nerida Campbell
Position
Non-executive Director
Position
Non-executive Director
Qualifications
B.Com, LLB
Qualifications
B.Bus, CA, FINSIA, GAICD
Patricia has had 15 years of investment banking and
private equity experience. Patricia has previously held
positions with Goldman Sachs, Macquarie Capital and
GEMS Private Equity. Most recently Patricia was the
Group Head of Strategy at Consolidated Press Holdings.
Through this role, she was involved in CPH’s portfolio
company boards, general oversight of assets under
management, assessing investment opportunities, and
establishing the Hong Kong office.
Special responsibilities: Chair of Risk and Compliance
Committee
Other current directorships: None
Nerida was appointed to the Board on 17 August 2018
following a 25-year career in the financial services
industry. Most recently she acted as the Chief Operating
Officer of Magellan Financial Group Limited, having also
held the roles of Chief Financial Officer and Company
Secretary. Prior to this, Nerida was the CFO of UBS AG
Australia, and had roles at ABN Amro Australia Limited,
Bankers Trust Australia Limited and Ernst and Whinney.
She was also a member of the ASX Disciplinary Tribunal
Panel.
12 | DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018
COMPANY SECRETARY
The following person held the position of Company Secretary during the financial year:
Name
Hari Morfis
Position
Company Secretary
Qualifications
B. Com, LLB (Hons)
Hari is a legal, risk and governance professional with over
17 years' experience predominantly in financial services.
She has extensive corporate and commercial experience
having commenced her career as a corporate lawyer at
Herbert Smith Freehills. She spent 11 years at UBS in
senior legal, risk and compliance roles, most recently as
Head of Compliance for the UBS Wealth Management
Australia business. She is director of Melbourne Women
in Film Festival Limited and Company Secretary of ASX-
listed entities WCM Global Growth Limited and Contango
Income Generator Limited.
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 13
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 1. PRINCIPAL ACTIVITIES
The principal activities of the Group were providing funds
management services conducted by a wholly owned
subsidiary, Contango Funds Management Limited (ACN
085 487 421) and by its non-controlling associated entity,
Switzer Asset Management Limited (ACN 123 611 978),
of which the Group, via its subsidiary, owns 46.25%.
Contango Funds Management Limited is the holder of
Australian Financial Services Licence 237119 for the
provision of funds management services to wholesale
clients and is the responsible entity for the registered
wholesale Contango Managed Investment Scheme
ARSN 099 665 264. Switzer Asset Management Limited
is the holder of Australian Financial Services Licence
312247 for the provision of financial services to retail and
wholesale clients.
During the year, the Group reviewed its strategic
objectives and operating model with a view to focus on
the areas of its operations that were growing. As a result,
the Group’s focus has moved away from institutional
wholesale mandates, to distribution of products
to retail clients, including via its interest in Switzer
Asset Management Limited. Consequently, the Group
restructured its operations, including reducing headcount
and relocating its head office to Sydney.
There were no other significant changes in the nature of
the Group's principal activities during the financial year.
2. BUSINESS MODEL, STRATEGY AND OUTLOOK
BUSINESS MODEL
During the course of the year, the Group transitioned
itself from an institutionally focused fund manager to
a specialist listed investment house and via its non-
controlling associated entity Switzer Asset Management
Limited, a fund manager and responsible entity for
products issued to retail clients. It manages the LIC
mandates for Contango Income Generator Limited
(ASX:CIE) and WCM Global Growth Limited (ASX:WQG)
and, until October 2017 Contango MicroCap Limited (now
known as NAOS Small Cap Opportunities Companies
Limited (ASX:NSC)).
STRATEGY
The review of the Contango Group's strategy during the
financial year shifted its focus from a product manager
to a marketing and distribution platform. As a result, the
Group has consolidated its range of in house investment
strategies to focus on income-oriented solutions.
Switzer Asset Management Limited is a key part of the
Group’s growth strategy. The Group has entered into
an agreement to acquire the shares in Switzer Asset
Management Limited that it does not own. The Group’s
growth objectives include the development of a suite of
products through Switzer Asset Management Limited,
leveraging off the self-directed and independent financial
advisory segments.
An important component of the Group's ability to
implement its future strategies with success relates to
the marketing of the LIC and Exchange Traded Managed
Fund (ETMF) mandates and retaining and attracting
key personnel. The Group has invested in its business
development team to help drive its FUM growth. Over
the coming financial year, the Board intends to allocate
a portion of available working capital towards the
development of new funds, marketing and compliance
costs.
3. OPERATIONAL REVIEW
The consolidated profit of the Group amounted to
$3,462,000 after providing for income tax (2017: loss of
$14,148,000). Basic earnings per share were 8.8 cents
(2017: loss of 43.0 cents per share).
Operational highlights in the year ended 30 June 2018
included:
• successful capital funding in August 2017, raising
$5 million through a placement of 5.5 million new
ordinary shares of the Company. The funds raised will
help drive continued growth initiatives in new products
and across Contango’s retail and institutional pipeline;
•
in October 2017, Contango Asset Management
Limited (CGA) had via its subsidiary Contango
Funds Management Limited (CFML) entered into an
agreement to assign its investment management
mandate of Contango Microcap Limited (CTN) to NAOS
Asset Management Limited (NAML). The assignment
of the CTN investment management agreement by
CFML to NAML was for an aggregate consideration of
$12.5 million payable by NAML to CFML. Of the total
consideration of $12.5 million, $2 million was paid
to CFML upon execution of the contract in October
2017 with a further amount of $3.86 million received
in February 2018. The remaining amounts will be
received over a four-year period commencing from 30
June 2019, with all conditions precedent having been
satisfied. As a result of the transaction, the Group
has recognised a pre-tax gain of $9.5 million in the
14 | DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018
Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 June
2018;
• undertaken an employee scheme share buyback to a
total of 5,912,695 ordinary shares that were issued in
accordance the Group’s Employee Share Incentive Plan
and Employee Loan Share Plans. The share buyback
required no outlay of cash consideration by the Group
in accordance with the rules of the Share Plan;
• entered into an agreement to acquire the remaining
equity interest in Switzer Asset Management Limited
(SAM) as announced in March 2018. The Company
currently owns 46.25% of the share capital of SAM
and will increase its ownership interest to 100%. The
transaction is subject to shareholder approval at an
extraordinary meeting to be held on 12 September
2018. The acquisition of SAM will help further the
growth in the Group’s business, being listed and
exchange traded investments targeted at retail, self-
directed and independent financial advisory channels;
and
•
in June 2018, the Group via its interest in Switzer Asset
Management Limited (SAML) proposed to launch an
exchange traded manage fund (ETMF) to be managed
by Californian-based WCM Investment Management
(WCM). WCM has agreed to an exclusivity arrangement
with CGA and SAML to distribute its Quality Global
Growth investment strategy via a listed investment
company, ETMF and retail managed fund.
4. FINANCIAL REVIEW
The net assets of the Group have increased by $7,984,000
from $3,529,000 at 30 June 2017 to $11,513,000 at 30
June 2018. This increase is largely due to the following
factors:
• additional funding raised during the year amounting to
$5.0 million via a share placement issue; and
• cash consideration of $5.86 million received from
NAML for the assignment of the CTN investment
management mandate. An impairment charge of
$676,000 was also incurred on customer relationships
arising from the CTN transaction.
5. OTHER ITEMS
(1) SIGNIFICANT CHANGES IN STATE OF AFFAIRS
Other than stated above in the Operational Review there
were no other significant changes in the state of affairs of
the Group during the financial year.
(2) EVENTS AFTER THE REPORTING DATE
On 28 August 2018 the Group provided a $836,188
Subordinated Loan (SL) at an interest rate of 12% to its
associated entity Switzer Asset Management Limited
(SAM) with no fixed term. The loan is subordinated to all
other creditors of SAM.
On 21 March 2018 the Group announced its intention to
enter into an agreement to acquire the remaining equity
interest in Switzer Asset Management Limited (SAM). The
Company currently owns 46.25% of the share capital of
SAM and will increase its ownership interest to 100%.
The transaction is subject to shareholder approval at an
extraordinary meeting to be held on 12 September 2018.
If the transaction is approved the interest rate on the SL
to SAM will reduce to zero.
The directors are not aware of any other matters
or circumstances that have arisen since the end of
the financial year which significantly affect or could
significantly affect the operations of the Group, the
results of those operations or the state of affairs of the
Group in future financial years.
(3) DIVIDENDS PAID OR RECOMMENDED
No dividends were paid or provided for during the
financial year and no dividend is recommended in respect
of the year (2017:$nil).
(4) FUTURE DEVELOPMENTS AND RESULTS
The Group intends to continue to consolidate and grow its
position in the funds management sector and expected
results of operations in future financial years are likely, in
the short term, to reflect the Group's life cycle status as
it funds the growth phase of its operations. There are no
other likely developments which have not been included
in this report.
(5) ENVIRONMENTAL ISSUES
The Group's operations are not regulated by any
significant environmental regulations under a law of the
Commonwealth or of a state or territory of Australia.
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 15
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 6. MEETINGS OF DIRECTORS
The number of meetings of the Company's Board of Directors ("the Board") held during the year ended 30 June 2018,
and the number of meetings attended by each director are:
DIRECTORS' MEETINGS
AUDIT AND RISK COMMITEE
REMUNERATION AND
NOMINATIONS COMMITTEE
Attended
Held
Attended
Held
Attended
Held
Roger Amos
George Boubouras1
Charles Aitken
Martin Switzer2
Patricia Toh
Nerida Campbell3
23
9
20
21
20
-
23
9
23
21
23
-
1 Resigned on 27 October 2017
4
3
1
4
-
4
4
1
4
-
2
1
2
2
1
-
2
1
2
2
1
-
2 Martin Switzer became interim Chief Executive Officer of the Company with effect on 27 October 2017. His appointment as Chief
Executive Officer was confirmed on 21 March 2018.
3 Nerida Campbell appointed non-executive director 17 August 2018.
Held: represents the number of meetings held during the time the director held office and which the director was eligible to attend.
7. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company,
the company secretaries and all executive officers of the Company and of any related body corporate against a liability
incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in
respect of the directors’ and officers’ liability, costs and charges, as such disclosure is prohibited under the terms of
the contract.
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 related body corporate against a
liability incurred as such an officer or auditor.
8. PROCEEDINGS ON BEHALF OF COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all of those proceedings.
16 | DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018
9. NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for
non-audit services provided during the financial year
by the auditor are outlined in Note 30 to the financial
statements.
The Board of Directors, in accordance with advice from
the Audit Committee, is satisfied that the provision of
non-audit services during the year is compatible with
the general standard of independence for auditors
imposed by the Corporations Act 2001. The directors are
satisfied that the services disclosed in Note 30 did not
compromise the external auditor's independence for the
following reasons:
• all non-audit services are reviewed and approved to
ensure they do not adversely affect the integrity and
objectivity of the auditor; and
• the nature of the services provided do not
compromise the general principles relating to auditor
independence in accordance with APES 110: Code
of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor's own work,
acting in a management or decision-making capacity
for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards.
10. AUDITOR'S INDEPENDENCE DECLARATION
The auditor's independence declaration in accordance
with section 307C the Corporations Act 2001 for the year
ended 30 June 2018 has been received and can be found
on page 22 of the financial report.
11. ROUNDING OF AMOUNTS
The Company has applied the relief available to it under
ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191. Accordingly, amounts in
the financial statements have been rounded off to the
nearest thousand dollars (unless otherwise stated).
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 17
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 SERVICE AGREEMENTS
On appointment to the Board, all non-executive directors
enter into a service agreement with the Company in the
form of a letter of appointment. The letter summarises
the Board's policies and terms, including remuneration,
relevant to the office of director.
Following the resignation of George Boubouras, Martin
Switzer took on the role of interim Chief Executive Officer
of the Company with effect from 27 October 2017. His
total fixed remuneration from this time was $400,000
per annum exclusive of superannuation entitlements.
The Group entered into an employment agreement with
Martin on 22 August 2018 for no fixed term. With effect
from 1 July 2018, Martin’s total fixed remuneration is
$430,000 per annum plus superannuation. Under his
employment agreement, Martin is entitled to incentive
awards calculated by reference to the total fixed
remuneration. Termination by either party can be made
with six months’ notice (or payment in lieu), other than
where employment is terminated for cause, in which case
the Company can terminate with no notice period.
REMUNERATION REPORT
(AUDITED)
The remuneration report for the year ended 30 June
2018 outlines the director and executive remuneration
arrangements of the Group in accordance with the
requirements of the Corporations Act 2001 and its
regulations. For the purposes of this report, key
management personnel (KMP) of the Group are defined
as those persons having authority and responsibility for
planning, directing and controlling the major activities of
the Group, directly or indirectly, including any director of
the parent company.
REMUNERATION POLICY
The Remuneration and Nomination Committee of the
Board of Directors is established to assist the Board to
ensure that the Company:
• has a board of directors with the appropriate
skills and experience to undertaken its duties and
responsibilities; and
• adopts appropriate remuneration policies and
procedures which are designed to meet the needs of
the Company and to enhance individual and corporate
performance.
The Board’s policy for determining the nature and amount
of remuneration for KMP of the Group is based on the
following:
• The remuneration policy has been developed by the
Remuneration Committee and approved by the Board,
after having sought advice from external advisors in
relation to market trends for non-executive director
remuneration.
• All key management personnel receive a base salary
(which is based on factors such as length of service
and experience), superannuation, fringe benefits, and
performance incentives.
•
Incentives paid in the form of options or rights
are intended to align the interest of directors and
executives with those of the shareholders.
• The Remuneration Committee reviews key
management personnel packages annually by
reference to the Group’s performance, executive
performance and comparable information from
industry sectors.
18 | REMUNERATION REPORT (AUDITED) FOR THE YEAR ENDED 30 JUNE 2018
REMUNERATION DETAILS FOR THE YEAR ENDED 30 JUNE 2018
The following table of benefits and payment details, in respect to the financial year, the components of remuneration
for each member of the key management personnel of the Group.
TABLE OF BENEFITS AND PAYMENTS
SHORT-TERM BENEFITS
POST-EMPLOYMENT
2018
Cash Salary
& Fees
$
Bonus
$
Non-
monetary
$
Super-
annuation
$
Other
LONG-TERM
BENEFITS
Long
Service
Leave
$
Share-
based
Payments
$
Total
Remunera-
tion
$
Directors
Roger Amos
George
Boubouras1
90,000
373,986
Charles Aitken
50,000
Martin Switzer2
283,300
Patricia Toh
Total
50,000
847,286
1 Resigned on 27 October 2017.
-
-
-
-
-
-
-
-
-
-
-
-
8,550
-
20,048
100,000
4,750
14,949
4,750
-
-
-
53,047
100,000
-
-
-
-
-
-
-
-
-
-
-
98,550
494,034
54,750
298,249
54,750
1,000,333
2 Martin Switzer became interim Chief Executive Officer of the Company with effect on 27 October 2017. His appointment as Chief
Executive Officer was confirmed on 21 March 2018.
SHORT-TERM BENEFITS
POST-EM-
PLOYMENT
LONG-TERM
BENEFITS
2017
Cash Salary
& Fees
$
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long
Service
Leave
$
Share-
based
Payments
$
Termination
Payments
$
Total
Remunera-
tion
$
Directors
Roger Amos
George
Boubouras
Charles Aitken
Martin Switzer
Patricia Toh
Merilyn Sleigh
Simon
O'Loughlin
82,500
375,384
37,500
37,500
5,265
5,000
5,000
Total
548,149
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,125
19,616
3,563
3,563
500
-
-
34,367
-
-
-
-
-
-
-
-
-
758,478
126,791
126,791
-
-
-
1,012,060
-
-
-
-
-
-
-
-
89,625
1,153,478
167,854
167,854
5,765
5,000
5,000
1,594,576
REMUNERATION REPORT (AUDITED) FOR THE YEAR ENDED 30 JUNE 2018 | 19
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 SECURITIES RECEIVED THAT ARE NOT PERFORMANCE RELATED
No members of key management personnel are entitled to receive securities which are not performance based as part
of their remuneration package.
DESCRIPTION OF SHARES ISSUED AS REMUNERATION
Details of the shares issued as remuneration to those key management personnel and executives during the year:
DIRECTORS
Roger Amos
George Boubouras
Charles Aitken
Martin Switzer
Patricia Toh
SHARE-BASED PAYMENTS
$
NUMBER OF SHARES
-
-
-
-
-
-
-
-
-
-
All options were issued by the Company entitle the holder to ordinary shares in Contango Asset Management Limited
and Controlled Entities for each option exercised.
There have not been any alterations to the terms or conditions of any share-based payment arrangements since grant
date.
KEY MANAGEMENT PERSONNEL'S OPTIONS AND RIGHTS HOLDINGS
30 JUNE 2018
DIRECTORS
BALANCE AT
BEGINNING
OF YEAR
GRANTED AS
REMUNERATION
EXERCISED
OTHER
CHANGES
BALANCE AT THE
END OF YEAR
VESTED
DURING THE
YEAR
VESTED AND
EXERCISABLE
Roger Amos
George Boubouras
Charles Aitken
Martin Switzer
Patricia Toh
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30 JUNE 2017
DIRECTORS
BALANCE AT
BEGINNING
OF YEAR
GRANTED AS
REMUNERATION
EXERCISED
OTHER
CHANGES
BALANCE AT THE
END OF YEAR
VESTED
DURING THE
YEAR
VESTED AND
EXERCISABLE
Roger Amos
George Boubouras
Charles Aitken
Martin Switzer
Patricia Toh
Merilyn Sleigh
Simon O'Loughlin
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20 | REMUNERATION REPORT (AUDITED) FOR THE YEAR ENDED 30 JUNE 2018
KEY MANAGEMENT PERSONNEL'S SHAREHOLDINGS
The number of ordinary shares in the Company held by each key management person of the Group during the financial
year is as follows:
30 JUNE 2018
DIRECTORS
BALANCE AT
BEGINNING OF
YEAR
GRANTED AS
REMUNERATION
EXERCISED
OTHER CHANGES
BALANCE AT THE
END OF YEAR
Roger Amos
107,227
George Boubouras
3,925,750
Charles Aitken
Martin Switzer
Patricia Toh
211,319
818,469
100,000
5,162,765
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
-
107,227
3,925,750*1
211,319
838,469
100,000
20,000
5,182,765
* Balance as at the date of resignation 27 October 2017.
1 On 18 May 2018 the Company exercised its rights under its employee share buyback scheme to acquire 2,425,938 ordinary shares
issued under the Employee Loan Share Plan and Employee Share Incentive Plan for nil consideration.
OPTIONS
The number of options on issue at year end are 345,000. Details of the options are set out at Note 21(a).
This director's report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of
Directors.
Director:
Roger Amos
Chairman
REMUNERATION REPORT (AUDITED) FOR THE YEAR ENDED 30 JUNE 2018 | 21
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 AUDITOR’S INDEPENDENCE
DECLARATION
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67
Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Contango
Asset Management Limited and its subsidiaries
As lead auditor for the audit of Contango Asset Management Limited and its subsidiaries for the
financial year ended 30 June 2018, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
Luke Slater
Partner
28 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
16
22 | AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2018
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 JUNE 2018
NOTES
2018
$'000
2017
$'000
Revenue
Other revenue
Total revenue
Employee benefits expense
Operations expense
Professional services expense
Corporate and administrative expenses
Share of loss of Associate
Earnings before depreciation and amortisation, impairment
loss, finance costs and income tax
Depreciation and amortisation
Impairment loss
Profit / (loss) before finance costs and income tax
Finance costs
Profit / (loss) before income tax
Income tax (expense)/ credit
Net profit / (loss) for the year
Other comprehensive income / (loss), net of income tax
Other comprehensive income
Total comprehensive income / (loss) for the year
Net profit / (loss) attributable to:
Members of the parent entity
Total comprehensive income / (loss) attributable to:
2
2
3(a)
8
3(b)
11(a)
4
3,530
9,506
13,036
(4,301)
(847)
(940)
(3,340)
(39)
3,569
(287)
(676)
2,606
(8)
2,598
864
3,462
-
3,462
4,135
13
4,148
(3,096)
(590)
(514)
(3,570)
(25)
(3,647)
(431)
(10,311)
(14,389)
(48)
(14,437)
289
(14,148)
-
(14,148)
3,462
(14,148)
Members of the parent entity
3,462
(14,148)
Earnings per share attributable to the ordinary equity
holders of the Company:
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes form part of these financial statements.
20
20
8.8
8.3
(43.0)
(43.0)
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 23
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
NOTES
2018
$'000
2017
$'000
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current assets
Trade and other receivables
Investment accounted for using the equity method
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liability
Total current liabilities
Non-current liabilities
Deferred tax liability
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
The accompanying notes form part of these financial statements.
24 | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
5
6
7
6
8
9
10
11
12
13
14
15
15
16
17
18
5,416
2,147
221
7,784
4,221
308
604
13
-
5,146
12,930
1,270
-
147
-
1,417
-
-
1,417
11,513
819
1,348
187
2,354
-
347
504
220
2,882
3,953
6,307
823
750
341
-
1,914
864
864
2,778
3,529
145,431
135
(134,053)
11,513
140,777
267
(137,515)
3,529
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
2017
ISSUED
CAPITAL
$'000
SHARE OPTION
RESERVE
$'000
ACCUMULATED
LOSSES
$'000
TOTAL
$'000
Balance at 1 July 2016
123,626
Loss attributable to members of the parent entity
Total comprehensive income for the period
Transactions with owners in their capacity
as owners
Share-based payment transactions
Issue of options
-
-
-
-
Issue of shares, net of transaction costs
Balance at 30 June 2017
17,151
140,777
-
-
-
214
53
-
267
(123,367)
(14,148)
(14,148)
-
-
-
(137,515)
259
(14,148)
(14,148)
214
53
17,151
3,529
2018
ISSUED
CAPITAL
$'000
SHARE OPTION
RESERVE
$'000
ACCUMULATED
LOSSES
$'000
TOTAL
$'000
Balance at 1 July 2017
140,777
267
(137,515)
Profit attributable to members of the parent
entity
Total comprehensive income for the period
Transactions with owners in their capacity
as owners
Share-based payment transactions
Issue of options
-
-
-
-
Issue of shares, net of transaction costs
Balance at 30 June 2018
4,654
145,431
The accompanying notes form part of these financial statements.
-
-
(132)
-
-
135
3,462
3,462
-
-
-
(134,053)
3,529
3,462
3,462
(132)
-
4,654
11,513
FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 25
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers
Payments to suppliers and employees
Finance costs paid
Interest received
Income tax refund
NOTES
2018
$'000
2017
$'000
4,665
(9,758)
(18)
52
-
3,870
(5,986)
(43)
18
35
Net cash provided by/(used in) operating activities
31(a)
(5,059)
(2,106)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from assignment of CTN Mandate
Purchase of property, plant and equipment
Acquisitions of subsidiary, net of cash acquired
Purchase of investments
Payment for transaction costs to acquire businesses
Loans to related parties
Net cash used by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings
Proceeds from issue of new shares
Transaction costs relating to issue of new shares
Repayment of borrowings
31(c)
Net cash used by financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of financial year
5
The accompanying notes form part of these financial statements.
5,860
(8)
-
-
-
(100)
5,752
-
5,000
(346)
(750)
3,904
4,597
819
5,416
-
(233)
(10,273)
(75)
(366)
(159)
11,106
750
14,244
(1,260)
-
13,734
522
297
819
26 | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING
POLICIES
GENERAL INFORMATION
The consolidated financial statements and notes
represent those of Contango Asset Management Limited
as a Group consisting of Contango Asset Management
Limited and the entities it controlled at the end of,
or during, the year. The financial statements are
presented in Australian dollars, which is Contango Asset
Management Limited's functional and presentation
currency.
Contango Asset Management Limited is a listed public
company limited by shares, incorporated and domiciled in
Australia.
The financial statements were authorised for issue, in
accordance with a resolution of directors, on 28 August
2018.
BASIS OF PREPARATION
These general purpose financial statements have been
prepared in accordance with the Corporations Act 2001,
Australian Accounting Standards and Interpretations
of the Australian Accounting Standards Board and
International Financial Reporting Standards as issued
by the International Accounting Standards Board.
The Group is a for-profit entity for financial reporting
purposes under Australian Accounting Standards.
Material accounting policies adopted in the preparation
of these financial statements are presented below and
have been consistently applied unless stated otherwise.
The financial statements have been prepared on a going
concern basis.
Except for cash flow information, the financial
statements have been prepared on an accruals basis and
are based on historical costs, modified, where applicable,
by the measurement at fair value of selected non-current
assets, financial assets and financial liabilities.
The following is a summary of significant accounting
policies adopted by the Group in the preparation of
the financial report. The accounting policies have been
consistently applied, unless otherwise stated.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate all of
the assets, liabilities and results of the parent Contango
Asset Management Limited and all of the subsidiaries
(including any structured entities). Subsidiaries are
entities the parent controls. The parent controls an entity
when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to
affect those returns through its power over the entity. A
list of the subsidiaries is provided in Note 24.
The assets, liabilities and results of all subsidiaries are
fully consolidated into the financial statements of the
Group from the date on which control is obtained by the
Group. The consolidation of a subsidiary is discontinued
from the date that control ceases. Intercompany
transactions, balances and unrealised gains or losses on
transactions between group entities are fully eliminated
on consolidation. Accounting policies of subsidiaries have
been changed and adjustments made where necessary to
ensure uniformity of the accounting policies adopted by
the Group.
(B) BUSINESS COMBINATIONS
Business combinations occur where an acquirer obtains
control over one or more businesses.
A business combination is accounted for by applying the
acquisition method, unless it is a combination involving
entities or businesses under common control. The
business combination will be accounted for from the
date that control is obtained, whereby the fair value of
the identifiable assets acquired and liabilities (including
contingent liabilities) assumed is recognised (subject to
certain limited exemptions).
When measuring the consideration transferred in the
business combination, any asset or liability resulting
from a contingent consideration arrangement is also
included. Subsequent to initial recognition, contingent
consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset
or liability is remeasured in each reporting period to
fair value, recognising any change to fair value in profit
or loss, unless the change in value can be identified as
existing at acquisition date.
All transaction costs incurred in relation to business
combinations, other than those associated with the issue
of a financial instrument, are recognised as expenses in
profit or loss when incurred.
The acquisition of a business may result in the
recognition of goodwill or a gain from a bargain purchase.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 27
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 Goodwill
(D) INCOME TAX
Goodwill is carried at cost less accumulated impairment
losses. Goodwill is calculated as the excess of the sum of:
i) the consideration transferred;
ii) any non-controlling interest (determined under
either the full goodwill or proportionate interest
method); and
iii) the acquisition date fair value of any previously held
equity interest;
over the acquisition date fair value of net identifiable
assets acquired.
The acquisition date fair value of the consideration
transferred for a business combination plus the
acquisition date fair value of any previously held equity
interest shall form the cost of the investment in the
separate financial statements.
Fair value measurements in any pre-existing equity
holdings are recognised in profit or loss in the period
in which they arise. Where changes in the value of such
equity holdings had previously been recognised in other
comprehensive income, such amounts are recycled to
profit or loss.
Goodwill on acquisition of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates is
included in investments in associates.
Goodwill is tested for impairment annually and is
allocated to the Group's cash-generating units or groups
of cash-generating units, representing the lowest level
at which goodwill is monitored and not larger than an
operating segment. Gains and losses on the disposal of
an entity include the carrying amount of goodwill related
to the entity disposed of.
Changes in the ownership interests in a subsidiary
that do not result in a loss of control are accounted for
as equity transactions and do not affect the carrying
amounts of goodwill.
(C) TAX CONSOLIDATION
Contango Asset Management Limited and its wholly
owned subsidiaries are consolidated for tax purposes.
The income tax expense (income) for the year comprises
current income tax expense (income) and deferred tax
expense (income).
Current income tax expense charged to profit or loss
is the tax payable on taxable income for the current
period. Current tax liabilities (assets) are measured at
the amounts expected to be paid to (recovered from) the
relevant taxation authority using tax rates (and tax laws)
that have been enacted or substantively enacted by the
end of the reporting period.
Deferred income tax expense reflects movements in
deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense (income) is
charged or credited outside profit or loss when the tax
relates to items that are recognised outside profit or
loss or arising from a business combination. Except
for business combinations, no deferred income tax is
recognised from the initial recognition of an asset or
liability, where there is no effect on accounting or taxable
profit or loss.
Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled and
their measurement also reflects the manner in which
management expects to recover or settle the carrying
amount of the related asset or liability.
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available
against which the benefits of the deferred tax asset can
be utilised.
Where temporary differences exist in relation to
investments in subsidiaries, branches, associates, and
joint ventures, deferred tax assets and liabilities are
not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not
probable that the reversal will occur in the foreseeable
future.
28 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
Current tax assets and liabilities are offset where
a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation
and settlement of the respective asset and liability will
occur. Deferred tax assets and liabilities are offset where:
(i) a legally enforceable right of set-off exists; and (ii) the
deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is
intended that net settlement or simultaneous realisation
and settlement of the respective asset and liability will
occur in future periods in which significant amounts
of deferred tax assets or liabilities are expected to be
recovered or settled.
(E) PROPERTY, PLANT AND EQUIPMENT
All classes of property, plant and equipment are
stated at cost less accumulated depreciation and any
accumulated impairment losses. In the event the carrying
amount of property, plant and equipment is greater than
the estimated recoverable amount, the carrying amount
is written down immediately to the estimated recoverable
amount and impairment losses are recognised in profit or
loss. A formal assessment of recoverable amount is made
when impairment indicators are present.
(F) DEPRECIATION
The depreciable amounts of all fixed assets are
calculated using the diminishing balance method over
their estimated useful lives commencing from the time
the asset is held ready for use.
The estimated useful life for plant and equipment for the
period is three years (2017: three years).
(G) FINANCIAL INSTRUMENTS
Initial recognition and measurement:
Financial assets and financial liabilities are recognised
when the entity becomes a party to the contractual
provisions to the instrument. For financial assets, this is
equivalent to the date that the entity commits itself to
either the purchase or sale of the asset (that is, trade date
accounting is adopted).
Financial instruments are initially measured at fair value
plus transaction costs, except where the instrument is
classified “at fair value through profit or loss”, in which
case transaction costs are expensed to profit or loss
immediately.
Classification and subsequent measurement:
Financial instruments are subsequently measured at fair
value, amortised cost using the effective interest method,
or at cost.
Amortised cost is calculated as the amount at which the
financial asset or financial liability is measured at initial
recognition less principal repayments and any reduction
for impairment, and adjusted for any cumulative
amortisation of the difference between that initial
amount and the maturity amount calculated using the
effective interest method.
The effective interest method is used to allocate interest
income or interest expense over the relevant period and
is equivalent to the rate that discounts estimated future
cash payments or receipts (including fees, transaction
costs and other premiums or discounts) over the
expected life (or when this cannot be reliably predicted,
the contractual term) of the financial instrument to the
net carrying amount of the financial asset or financial
liability. Revisions to expected future net cash flows will
necessitate an adjustment to the carrying amount with a
consequential recognition of an income or expense item
in profit or loss.
Non-derivative financial liabilities other than financial
guarantees are subsequently measured at amortised
cost. Gains or losses are recognised in profit or loss
through the amortisation process and when the financial
liability is derecognised.
Impairment:
A financial asset (or a group of financial assets) is
deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events
(a “loss event”) having occurred, which has an impact on
the estimated future cash flows of the financial asset(s).
In the case of financial assets carried at amortised cost,
loss events may include: indications that the debtors or
a group of debtors are experiencing significant financial
difficulty, default or delinquency in interest or principal
payments; indications that they will enter bankruptcy or
other financial reorganisation; and changes in arrears or
economic conditions that correlate with defaults.
For financial assets carried at amortised cost (including
loans and receivables), a separate allowance account is
used to reduce the carrying amount of financial assets
impaired by credit losses. After having taken all possible
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 29
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 measures of recovery, if management establishes that
the carrying amount cannot be recovered by any means,
at that point the written off amounts are charged to the
allowance account or the carrying amount of impaired
financial assets is reduced directly if no impairment
amount was previously recognised in the allowance
account.
When the terms of financial assets that would otherwise
have been past due or impaired have been renegotiated,
the Group recognises the impairment for such financial
assets by taking into account the original terms as if the
terms have not been renegotiated so that the loss events
that have occurred are duly considered.
Derecognition:
Financial assets are derecognised when the contractual
rights to receipt of cash flows expire or the asset is
transferred to another party whereby the entity no
longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial
liabilities are derecognised when the related obligations
are discharged, cancelled or have expired. The difference
between the carrying amount of the financial liability
extinguished or transferred to another party and the fair
value of consideration paid, including the transfer of non-
cash assets or liabilities assumed, is recognised in profit
or loss.
(H) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and
at banks, short-term deposits with an original maturity
of three months or less held at call with financial
institutions.
(I) TRADE AND OTHER RECEIVABLES
Trade receivables, which generally have 30 day terms,
are recognised initially at fair value, less an allowance
for impairment. Collectability of trade receivables is
reviewed on an ongoing basis. Debts that are known
to be uncollectible are written off when identified. An
allowance for doubtful debts is raised when there is
objective evidence that the Group will not be able to
collect the debt.
Objective evidence of impairment includes financial
difficulties of the debtor, default payments or debts more
than 90 days overdue. On confirmation that the trade
receivable will not be collectable an estimated loss of the
gross carrying value of the asset is written off against the
associated provision.
(J) INVESTMENT IN JOINT VENTURES
An associate is an entity over which the Group has
significant influence. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee, but is not control or joint control over
those policies.
A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint
control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about
the relevant activities require the unanimous consent of
the parties sharing control.
The considerations made in determining significant
influence or joint control are similar to those necessary
to determine control over subsidiaries. The Group’s
investments in its joint venture are accounted for using
the equity method.
Under the equity method, the investment in a joint
venture is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise
changes in the Group’s share of net assets of the joint
venture since the acquisition date. Goodwill relating to
the joint venture is included in the carrying amount of the
investment and is not tested for impairment separately.
The Statement of Profit or Loss reflects the Group’s
share of the results of operations of the joint venture.
Any change in other comprehensive income (“OCI”) of
those investees is presented as part of the Group’s other
comprehensive income. Unrealised gains and losses
resulting from transactions between the Group and joint
venture are eliminated to the extent of the interest in the
joint venture.
The financial statements of the associate or joint venture
are prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
After application of the equity method, the Group
determines whether it is necessary to recognise an
impairment loss on its investment in its joint venture. At
each reporting date, the Group determines whether there
is objective evidence that the investment in the joint
venture is impaired. If there is such evidence, the Group
calculates the amount of impairment as the difference
between the recoverable amount of the joint venture and
its carrying value, and then recognises the loss in profit
or loss.
30 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
(K) IMPAIRMENT OF ASSETS
Goodwill and other assets that have an indefinite
useful life are not amortised but are tested annually for
impairment in accordance with AASB 136 "Impairment of
Assets". The depreciable amount of intangible assets with
a finite life is amortised over its useful life. Assets subject
to annual depreciation or amortisation are reviewed for
impairment whenever events or circumstances arise that
indicate that the carrying amount of the asset may be
impaired.
An impairment loss is recognised where the carrying
amount of the asset exceeds its recoverable amount. The
recoverable amount of an asset is defined as the higher
of its fair value less costs to sell and value in use.
For the purposes of impairment, assets are grouped
at the lowest level for which there are separately
identifiable cash flows (cash-generating units).
(L) REVENUE RECOGNITION
Revenue is recognised and measured at the fair value of
the consideration received or receivable to the extent it
is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured.
The following specific recognition criteria must also be
met before revenue is recognised:
(i) Rendering of services
Management and service fees are recognised upon
delivery of the service to the customer.
(ii) Interest revenue
Interest revenue is recognised when it becomes
receivable on a proportional basis taking into account
the interest rates applicable to the financial assets.
All revenue is stated net of the amount of goods and
services tax (GST).
(M) GOODS AND SERVICES TAX (GST)
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the
Australian Taxation Office (ATO). In these circumstances
the GST is recognised as part of the acquisition of the
asset or as part of an item of expense.
Receivables and payables in the Statement of Financial
Position are shown inclusive of GST.
Cash flows are presented in the Consolidated Statement
of Cash Flows on a gross basis, except for the GST
component of investing and financing activities, which
are disclosed as operating cash flows.
(N) EMPLOYEE BENEFITS
Employee benefit obligations are presented as current
liabilities in the Statement of Financial Position if the
entity does not have an unconditional right to defer
settlement for at least 12 months after the reporting
date, regardless of when the actual settlement is
expected to occur.
(i) Short-term employee benefit obligations
Liabilities arising in respect of wages and salaries,
annual leave, and any other employee benefits
expected to be settled within 12 months of the
reporting date are measured at the amounts based
on remuneration rates which are expected to be paid
when the liability is settled. The expected cost of short-
term employee benefits in the form of compensated
absences such as annual leave is recognised in the
provision for employee benefits. All other short-
term employee benefit obligations are presented as
provisions.
(ii) Long-term employee benefit obligations
The provision for employee benefits in respect of long
service leave and annual leave which, are not expected
to be settled within 12 months of the reporting date,
are measured at the present value of the estimated
future cash outflow to be made in respect of services
provided by employees up to the reporting date.
(iii) Bonus plan
The consolidated entity recognises a provision when
a bonus is payable in accordance with the employee’s
contract of employment, and the amount can be
reliably measured.
(O) TRADE AND OTHER PAYABLES
Trade payables and other payables represent liabilities
for goods and services provided to the Group prior to
the end of the period that are unpaid and arise when
the Group becomes obliged to make future payments in
respect of the purchase of these goods and services. The
amounts are unsecured and are usually paid within 7–60
days of recognition.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 31
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 (P) PROVISIONS
Provisions are recognised when the consolidated entity
has a legal or constructive obligation, as a result of
past events, for which it is probable that an outflow of
economic benefits will result and that outflow can be
reliably measured.
(Q) BORROWINGS
All loans and borrowings are initially recognised at the
fair value of the consideration received less directly
attributable transaction costs. After initial recognition,
interest-bearing loans and borrowings are subsequently
measured at amortised cost using effective interest
method. Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the
Statement of Financial Position date.
(R) LEASES
The determination of whether an arrangement is
or contains a lease is based on the substance of an
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a
right to use the asset.
Finance leases, which transfer to the Group substantially
all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease
at the fair value of the leased property or, if lower, at the
present value of the minimum lease payments. Lease
payments are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability.
Finance charges are recognised as an expense in profit or
loss. There were no finance leases during the year.
Operating lease payments are recognised as an expense
in profit and loss on a straight-line basis over the lease
term. Lease incentives are recognised in profit or loss as
an integral part of the total lease expense.
(S) SHARE-BASED PAYMENTS
The consolidated entity provides benefits to its
employees in the form of share-based payments, whereby
employees render services in exchange for shares or
rights over shares (equity-settled transactions). The cost
of these equity-settled transactions with employees is
measured by reference to the fair value of the equity
instrument at the date at which they are granted. The fair
value of the equity to which employees become entitled
is measured at grant date and recognised as an expense
over the vesting period, with a corresponding increase to
an equity account. The fair value of shares is measured
at the market bid price at grant date. The fair value of
shares issued where the shares are treated as an option
is determined using the Black–Scholes valuation model.
In respect of share-based payments that are dependent
on the satisfaction of service conditions, the number of
shares expected to vest is reviewed and adjusted at each
reporting date.
The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over the
period in which the service conditions are fulfilled (the
vesting period), ending on the date on which the relevant
employees become fully entitled to the award (the vesting
date). The amount recognised for services received as
consideration for these equity instruments granted is
adjusted to reflect the best estimate of the number of
equity instruments that eventually vest.
(T) SHARE CAPITAL
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.
(U) CRITICAL ACCOUNTING ESTIMATES AND
JUDGEMENTS
The directors evaluate estimates and judgements
incorporated into the financial statements based on
historical knowledge and best available current information.
Estimates assume a reasonable expectation of future
events and are based on current trends and economic data,
obtained both externally and within the Group:
(i) Income tax
Income tax benefits are based on the assumption
that no adverse change will occur in the income
tax legislation and the anticipation that the Group
will derive sufficient future assessable income to
enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law.
(ii) Impairment of goodwill
Goodwill is allocated to cash-generating units (CGUs)
according to applicable business operations. The
recoverable amount of a CGU is based on value in use
calculations.
32 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
(iii) Customer relationships
The useful life of customer relationships is estimated by
management to be the expected period from which the
Group is expected to derive benefits from this asset.
(iv) Share-based payments
The Black–Scholes valuation model is used to
determine the fair value of equity-settled options.
Key assumptions applied in the valuation may
require judgement and estimates which includes the
estimated number of the awards that will ultimately
vest, the expected dividend yield and volatility.
(v) Going concern
As a component of the going concern assessment,
the Group has prepared forecasted cash flow
from operations over the next 12 months. The key
assumptions used in this assessment include
acquiring the remaining shares in Switzer Asset
Management that it does not own and launching
further ETMFs, including WCM Quality Global Growth
Fund (Quoted Managed Fund), to be managed by WCM
Investment. To support its strategic growth objectives,
the Group intends to strengthen its cash position
through debt or equity funding sources.
(V) COMPARATIVE FIGURES
When necessary, comparative information has been
reclassified and repositioned for consistency with current
year disclosures.
(W) ROUNDING OF AMOUNTS
The amounts in the consolidated financial statements
and directors’ report have been rounded to the nearest
$1,000 (where rounding is applicable) where noted ($’000)
under the option available to the Company under ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191. The Company is an entity to which
this legislative instrument applies.
(X) NEW AND AMENDED STANDARDS ADOPTED BY
THE GROUP
The new standards that are applicable to for the first
time for the year ended 30 June 2018 are:
• AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses;
• AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to
AASB 107; and
• AASB 2017-2 Amendments to Australian Accounting
Standards – Further Annual Improvements 2014–2016
Cycle.
These standards have introduced new disclosures for the
Annual Financial Report but did not affect the Group's
accounting policies or any of the amounts recognised in
the financial statement.
(Z) NEW ACCOUNTING STANDARDS FOR APPLICATION IN
FUTURE PERIODS
Accounting standards issued by the AASB that are
not yet mandatorily applicable to the Group, together
with an assessment of the potential impact of such
pronouncements on the Group when adopted in future
periods, are discussed below:
AASB 9: Financial Instruments and Associated
Amending Standards (applicable to annual reporting
periods beginning on or after 1 January 2018).
The standard will be applicable retrospectively (subject
to the provisions on hedge accounting outlined below)
and includes revised requirements for the classification
and measurement of financial instruments, revised
recognition and derecognition requirements for financial
instruments and simplified requirements for hedge
accounting.
The key changes that may affect the Group on initial
application include certain simplifications to the
classification of financial assets, simplifications to
the accounting of embedded derivatives, upfront
accounting for expected credit loss, and the irrevocable
election to recognise gains and losses on investments
in equity instruments that are not held for trading in
other comprehensive income. AASB 9 also introduces a
new model for hedge accounting that will allow greater
flexibility in the ability to hedge risk, particularly with
respect to hedges of non-financial items. Should the
Group elect to change its hedge policies in line with the
new hedge accounting requirements of the standard,
the application of such accounting would be largely
prospective.
The financial assets and liabilities of the Group consist of
cash, receivables and payables. Therefore, the directors
do not expect a material impact on transition to AASB 9.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 33
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 AASB 15: Revenue from Contracts with Customers
(applicable to annual reporting periods beginning on
or after 1 January 2018, as deferred by AASB 2015 8:
Amendments to Australian Accounting Standards –
Effective Date of AASB 15).
When effective, this standard will replace the current
accounting requirements applicable to revenue with
a single, principles-based model. Except for a limited
number of exceptions, including leases, the new revenue
model in AASB 15 will apply to all contracts with
customers as well as non-monetary exchanges between
entities in the same line of business to facilitate sales to
customers and potential customers.
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 the goods or services. To achieve
this objective, AASB 15 provides the following five step
process:
•
•
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
AASB 16: Leases (applicable to annual reporting periods
beginning on or after 1 January 2019).
When effective, this standard will replace the current
accounting requirements applicable to leases in
AASB 117: Leases and related Interpretations. AASB
16 introduces a single lessee accounting model that
eliminates the requirement for leases to be classified as
operating or finance leases.
The main changes introduced by the new standard
include:
• recognition of a right to use asset and liability for all
leases (excluding short-term leases with less than
12 months of tenure and leases relating to low-value
assets);
• depreciation of right to use assets in line with AASB
116: Property, Plant and Equipment in profit or loss
and unwinding of the liability in principal and interest
components;
• variable lease payments that depend on an index
or a rate are included in the initial measurement
of the lease liability using the index or rate at the
commencement date;
• determine the transaction price;
• allocate the transaction price to the performance
obligations in the contract(s); and
• by applying a practical expedient, a lessee is permitted
to elect not to separate non-lease components and
instead account for all components as a lease; and
• recognise revenue when (or as) the performance
• additional disclosure requirements.
obligations are satisfied.
The transitional provisions of this standard permit an
entity to either:
• restate the contracts that existed in each prior period
presented per AASB 108: Accounting Policies, Changes
in Accounting Estimates and Errors (subject to certain
practical expedients in AASB 15);
• or recognise the cumulative effect of retrospective
application to incomplete contracts on the date of
initial application. There are also enhanced disclosure
requirements regarding revenue.
The revenue of the Group is primarily derived from
management and service fees. These fees are recognised
as revenue when services are delivered at which point
the performance obligations are satisfied. Therefore, the
directors expect that there will be no material impact on
transition to AASB 15.
The transitional provisions of AASB 16 allow a lessee to
either retrospectively apply the standard to comparatives
in line with AASB 108: Accounting Policies, Changes
in Accounting Estimates and Errors or recognise the
cumulative effect of retrospective application as an
adjustment to opening equity on the date of initial
application.
The directors expect that the adoption of AASB 16 will
result in lease assets and liabilities being recognised on
balance sheet and a change in how related expenses are
incurred. The financial impact of this had not yet been
determined.
AASB 2014 10: Amendments to Australian Accounting
Standards – Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture (applicable to
annual reporting periods beginning on or after 1 January
2018).
34 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
This standard amends AASB 10: Consolidated Financial
Statements with regards to a parent losing control over a
subsidiary that is not a “business” as defined in AASB 3:
Business Combinations to an associate or joint venture,
and requires that:
• a gain or loss (including any amounts in other
comprehensive income (OCI)) be recognised only to
the extent of the unrelated investor’s interest in that
associate or joint venture;
• the remaining gain or loss be eliminated against the
carrying amount of the investment in that associate or
joint venture; and
• any gain or loss from remeasuring the remaining
investment in the former subsidiary at fair value also
be recognised only to the extent of the unrelated
investor’s interest in the associate or joint venture. The
remaining gain or loss should be eliminated against
the carrying amount of the remaining investment.
The application of AASB 2014 10 will result in a change
in accounting policies for transactions of loss of control
over subsidiaries (involving an associate or joint venture)
that are businesses per AASB 3: Business Combinations
for which gains or losses were previously recognised only
to the extent of the unrelated investor’s interest.
The directors do not expect a material impact when this
standard is adopted.
AASB 2016 5: Amendments to Australian Accounting
Standards – Classification and Measurement of Share
based Payment Transactions (applicable from 1 January
2018).
This standard provides guidance on treatment of vesting
conditions in a cash-settled share-based payment
arrangement that are similar to what has been prescribed
for equity-settled, share-based payment arrangements.
It also clarifies that, subject to certain exceptions, share
based payment transactions with net settlement feature
on account of withholding tax obligations should be
classified in entirety as equity-settled, share-based
payment.
The Group does not have a policy of cash-settled, share-
based awards or net settlement features in equity-settled
plans, therefore this standard is not expected to impact
the Group’s financial statements.
AASB 2017 1: Amendments to Australian Accounting
Standards – Transfers of Investment Property, Annual
Improvements 2014 2016 Cycle and Other Amendments
(applicable to annual reporting periods beginning on or
after 1 January 2018).
This standard amends AASB 140: Investment Property to
clarify that a change in use of a property is evidenced only
by acts indicating actual change in use and not merely
due to change in management intentions.
This standard also amends AASB 128: Investments in
Associates and Joint Ventures to provide that the election
to measure investment in an associate or joint venture
that is held through venture capital organisations or a
mutual fund, unit trust and similar entities including
investment linked insurance funds at fair value through
profit or loss, should be made at the time of initial
recognition of the investment in associate or joint
venture. Similarly, the election by an entity that is not an
investment entity to retain fair value measurements used
by its investment entity associate or joint venture for its
subsidiaries, has to be made at the later of:
• the date of initial recognition of the associate or joint
venture;
• date when the investment entity associate or joint
venture becomes a parent; and
• date when the associate or joint venture becomes an
investment entity.
The above amendments are required to be retrospectively
applied in accordance with AASB 108: Accounting
Policies, Changes in Accounting Estimates and Errors. This
standard is not expected to impact the Group’s financial
statements.
AASB 2017-6: Amendments to Australian Accounting
Standards – Prepayment Features with Negative
Compensation (applicable to annual reporting periods
beginning on or after 1 January 2019).
This standard amends AASB 9 to permit an entity
to measure its financial assets with prepayment
feature at amortised cost or fair value through other
comprehensive income notwithstanding the type of event
or circumstances causing the early termination of the
contract and the fact whether the entity pays or receives
a reasonable compensation for the early termination.
The transitional provisions of the standard require
retrospective application of the amendments. However,
the directors do not expect a material impact on the
Group’s financial statements when this standard is
adopted.
AASB 2017-7: Amendments to Australian Accounting
Standards – Long-term Interests in Associates and
Joint Ventures (applicable to annual reporting periods
beginning on or after 1 January 2019).
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 35
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 This amendment to AASB 128 clarifies that an entity
should apply the requirements in AASB 9 to its long-
term interests in an associate or joint venture, which
in substance form part of the net investment in the
associate or joint venture and that are not equity-
accounted. However the loss allocation and impairment
requirements in AASB 128 are required to be applied
after accounting for such interests in accordance with
AASB 9.
The directors do not expect a material impact on the
Group’s financial statements when this standard is
adopted.
AASB 2018-1: Amendments to Australian Accounting
Standards – Annual Improvements 2015–2017 Cycle
(applicable to annual reporting periods beginning on or
after 1 January 2019).
The standard amends:
• AASB 3 Business Combinations to clarify that an entity
remeasures its previously held interest in a joint
operation when it obtains control of the business;
• AASB 11 Joint Arrangements to clarify that an entity
does not remeasure its previously held interest in a
joint operation when it obtains joint control of the
business;
• AASB 112 Income Taxes to clarify that an entity
accounts for all income tax consequences of dividend
payments according to where the entity originally
recognised the past transactions or events that
generated the distributable profits; and
• AASB 123 Borrowing Costs to clarify that an entity
treats any borrowing originally made to develop a
qualifying asset as part of general borrowings when
the asset is ready for its intended use or sale.
The above amendments are required to be prospectively
applied. In the opinion of the directors, although the
amendments to AASB 3 and AASB 11 mentioned above
may have an impact on the financial statements of the
Group it is impracticable to make a reasonable estimate
of the impact on initial application. The amendments
to AASB 112 and AASB 123 are not expected to have a
material impact on the Group’s financial statements
since the current accounting policies of the Group are
already aligned with the amended standards.
AASB 2018-2: Amendments to Australian Accounting
Standards – Plan Amendment, Curtailment or
Settlement (applicable to annual reporting periods
beginning on or after 1 January 2019).
The standard amends AASB 119 to specify how an
entity accounts for defined benefit plans when a plan
amendment, curtailment or settlement occurs during
a reporting period. The amendments require an entity
to use the assumptions used for the re-measurement
of the net defined benefit liability or asset to determine
the current service cost and the net interest for the
remainder of the reporting period after a plan event
occurs. The standard also clarifies that, when a plan
event occurs, an entity recognises the past service
cost or a gain or loss on settlement separately from its
assessment of the asset ceiling.
The directors do not expect a material impact on the
Group’s financial statements when this interpretation is
adopted.
Interpretation 22: Foreign Currency Transactions and
Advance Consideration.
This interpretation clarifies that the date of the
transaction for the purpose of determining the exchange
rate to use on initial recognition of the related asset,
expense or income (or part of it) is the date on which an
entity initially recognises the non-monetary asset or non-
monetary liability arising from the payment or receipt of
advance consideration. If there are multiple payments or
receipts in advance, the entity shall determine a date of
the transaction for each payment or receipt of advance
consideration.
Interpretation 22 mandatorily applies to for-profit
entities for annual reporting periods beginning on or after
1 January 2018, with early application permitted. The
directors do not expect a material impact on the Group’s
financial statements when this standard is adopted.
Interpretation 23: Uncertainty over Income Tax
Treatments (applicable from annual reporting periods
beginning on or after 1 January 2019).
This interpretation clarifies that when determining the
taxable profit (loss), tax base, unused tax loss, unused
tax credit and tax rates, the probability of the "uncertain
tax treatment" being accepted by the taxation authority
has to be taken into account. Any change in facts and
circumstances that impacts the judgement or estimates
required by this interpretation has to be recognised with
prospective effect.
The directors do not expect a material impact on the
Group’s financial statements when this interpretation is
adopted.
36 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 2: REVENUE
Revenue
Investment management and service fees
Interest income
Total revenue
Other Income
Other income
Gain on assignment of CTN Investment mandate1
Total other income
2018
$’000
2017
$’000
3,478
52
3,530
-
9,506
9,506
4,117
18
4,135
13
-
13
1 During the year, the Group via its subsidiary Contango Funds Management Limited (CFML) entered into an agreement to assign its
investment management mandate of Contango Microcap Limited (CTN) to NAOS Asset Management Limited (NAML).
The assignment of the CTN mandate was made for an aggregate consideration of $12.5 million, of which $2 million
was paid to CFML upon execution of the contract in October 2017 with a further amount of $3.86 million received in
February 2018. The remaining amount receivable from NAML of $6.64 million will be received over a four-year period
commencing from 30 June 2019.
As a result of the transaction, the Group recognised a pre-tax gain of $9.506 million in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income for the year ended 30 June 2018. The net gain is the total consideration
of $12.5 million less the carrying value of customer relationships transferred in the sale of $1.977 million, and less a
discount of $1.017 million applied to the remaining amount that will be received over a four-year period.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 37
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 3:
(A) CORPORATE AND ADMINISTRATIVE EXPENSES
Advertising
Accounting, audit, acquisition and relisting costs
Insurance
IT expenses
Office and communication costs
Travel and accommodation
Share-based payments
Loyalty incentive costs
Loss on disposal of assets
Other
Total corporate and administrative expenses
(B) DEPRECIATION AND AMORTISATION
Depreciation – plant and equipment
Amortisation – customer relationships
Total depreciation and amortisation
2018
$’000
2017
$’000
250
806
150
53
211
552
(132)
487
155
808
3,340
58
229
287
214
1,353
97
80
54
385
1,196
-
-
191
3,570
20
411
431
10
11
38 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 4: INCOME TAX EXPENSE
(A) THE MAJOR COMPONENTS OF TAX EXPENSE COMPRISE:
Current tax
Derecognition of deferred tax liabilities
2018
$’000
2017
$’000
-
864
864
-
289
289
(B) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA
FACIE TAX PAYABLE:
Profit/ (loss) before income tax expense
2,598
(14,437)
Prima facie income tax (expense)/ benefit at the statutory rate of 27.5% (2017: 27.5%)
(714)
3,970
Effect of amounts which are non-deductible/assessable in calculating taxable income
Non-allowable items
Tax losses not recognised as deferred tax assets
Recoupment of prior year losses not previously brought to account
Income (expense)/benefit reported in the Consolidated Statement Profit or Loss
and Other Comprehensive Income
(C) THE AMOUNT OF DEDUCTIVE TEMPORARY DIFFERENCES AND UNUSED
TAX LOSSES FOR WHICH NO DEFERRED TAX ASSET HAS BEEN RECOGNISED:
(346)
-
1,924
864
(2,834)
(847)
-
289
Potential tax benefit at 27.5% (2017: 27.5%)
1,169
2,712
In prior year the Group disclosed a potential tax benefit not brought to account as $469,000 which was incorrect and
should have been $2,712,000. The Group incorrectly assessed the tax losses that would be available for offset in future
years.
A tax asset will not be recognised until it becomes probable that the tax consolidated group will obtain the benefit of
these losses, because:
i.
it derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deduction for the losses to be realised, or
ii. the losses are transferred to an eligible entity, and
iii. the tax consolidated group continues to comply with the conditions for deductibility imposed by tax legislation, and
there are no tax legislation changes that adversely affect the ability of the consolidated tax entity to realise the
benefit from the deductions for the losses.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 39
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank
NOTE 6: TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Sundry debtors
GST receivable
NAML receivable1
Total current trade and other receivables
NON-CURRENT
NAML receivable1
Other receivable
Total non-current trade and other receivables
Total trade and other receivables
2018
$’000
2017
$’000
5,416
819
2018
$’000
2017
$’000
263
214
118
1,552
2,147
4,071
150
4,221
6,368
1,257
45
46
-
1,348
-
-
-
1,348
1 The NAML receivable relates to the deferred consideration payable by NAML to CFML over the four-year period in accordance with
the conditions of the arrangement disclosed in Note 2. This has been measured at amortised cost using the effective interest method.
The ageing of trade receivables as at 30 June 2018 is less than 30 days (2017: 30 days). There are no trade receivables
which are past due and impaired as at 30 June 2018 (2017: nil).
NOTE 7: OTHER ASSETS
CURRENT
Prepayments
Accrued income
Total other assets
2018
$’000
2017
$’000
112
109
221
110
77
187
40 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 8: INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD
PRINCIPAL PLACE
OF BUSINESS/
COUNTRY OF
INCORPORATION
PERCENTAGE
INTEREST (%)
2018
PERCENTAGE
INTEREST (%)
2017
(A) INFORMATION ABOUT ASSOCIATES AND JOINT
VENTURES
Switzer Asset Management Limited
Australia
46.25
46.25
The Group has a 46.25% interest in Switzer Asset Management Limited (ACN: 123 611 978). The Group’s interest in
Switzer Asset Management Limited is accounted for using the equity method in the consolidated financial statements.
2018
$'000
2017
$'000
(B) SUMMARISED FINANCIAL INFORMATION
Summarised Statement of Financial Position of Switzer Asset
Management Limited:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group's share of equity
Summarised Statement of Comprehensive Income of Switzer Asset
Management Limited:
Revenue
Administration expenses
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the period (continuing operations)
Total comprehensive income for the period (continuing
operations)
Group's share of profit/(loss) for the period
866
67
(243)
(519)
171
79
881
(1,002)
(121)
36
(85)
(85)
(39)
623
30
(79)
(319)
255
118
446
(522)
(76)
22
(54)
(54)
(25)
The associate entity had no contingent liabilities or capital commitments as at 30 June 2018 (2017: nil).
The loss in Switzer Asset Management Limited amounted to $(85,000) after providing for income tax (2017: $54,000). At
30 June 2018, the Group reduced the value of its investment in Switzer Asset Management Limited by its share of the joint
venture’s loss of $39,000 This reduced the value of the investment to $308,000.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 41
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
NOTE 8: INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
(C) RECONCILIATION TO CARRYING AMOUNTS
Opening balance
Amounts acquired as part of business combination
Amounts invested during the year
Share of losses during the year
Closing balance
2018
$’000
2017
$’000
347
-
-
(39)
308
-
372
-
(25)
347
The Group performs its annual impairment test at year end of its interest in Switzer Asset Management Limited and
when circumstances indicate the carrying value may be impaired. The Group’s impairment test for its interest in
the joint venture assumes that sales will increase by 10% in the 2018 year as a result of an increase in funds under
management and costs will reduce by 5% as a result of the one-off costs being incurred in the 2017 year for the
development of the Exchange Traded Products (ETP).
NOTE 9: OTHER FINANCIAL ASSETS
NON-CURRENT
Other financial asset1
Loan to Switzer Asset Management Limited (Note 25(b))
2018
$’000
2017
$’000
345
259
604
345
159
504
1 Other financial assets are interest-bearing deposits supporting bank guarantees for operating leases and are refunded upon
termination of the lease contract
42 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 10: PROPERTY, PLANT AND EQUIPMENT
Furniture, fixtures and fittings
At cost
Accumulated depreciation
Total furniture, fixtures and fittings
Computer equipment
At cost
Accumulated depreciation
Total computer equipment
Total property, plant and equipment
2018
$’000
2017
$’000
-
-
-
26
(13)
13
13
187
(9)
178
46
(4)
42
220
Movements in carrying amounts of property, plant and equipment
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end
of the current financial year:
2017
Opening balance at 1 July 2016
Additions
Disposals
Depreciation expense
Closing balance at 30 June 2017
2018
Opening balance at 1 July 2017
Additions
Disposals
Depreciation expense
Closing balance at 30 June 2018
FURNITURE,
FIXTURES AND
FITTINGS
$'000
COMPUTER
EQUIPMENT
$'000
TOTAL
$'000
-
208
(19)
(11)
178
178
8
(136)
(50)
-
-
66
(15)
(9)
42
42
-
(21)
(8)
13
-
274
(34)
(20)
220
220
8
(157)
(58)
13
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 43
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 11: INTANGIBLE ASSETS
Goodwill
Accumulated impairment loss
Customer relationships
Accumulated amortisation and impairment loss
Total intangibles
(A) MOVEMENTS IN CARRYING AMOUNTS OF
INTANGIBLE ASSETS
Opening value at 1 July 2016
Additions through business combinations
Amortisation charge
Impairment loss
Closing value at 30 June 2017
Opening value at 1 July 2017
Disposal of asset1
Amortisation charge
Impairment loss
Closing value at 30 June 2018
2018
$’000
2017
$’000
9,760
(9,760)
-
1,867
(1,867)
-
-
9,760
(9,760)
-
3,844
(962)
2,882
2,882
GOODWILL
$'000
CUSTOMER
RELATIONSHIPS
$'000
TOTAL
$'000
-
9,760
-
(9,760)
-
-
-
-
-
-
-
3,844
(411)
(551)
2,882
2,882
(1,977)
(229)
(676)
-
-
13,604
(411)
(10,311)
2,882
2,882
(1,977)
(229)
(676)
-
1 The disposal amount of customer relationships relates to the CTN transaction disclosed in Note 2.
(B) IMPAIRMENT
Customer relationships represent the value of relationships with customers (primarily investment management
agreements) existing at the date of acquisition of the Contango business – September 2016. During the year, an
impairment charge of $676,000 has been recognised against customer relationships based on the assessment of net
cash flows expected from remaining investment management agreements in place at 31 December 2017, less cost of
operations.
The impairment charge recognised forms part of the one reporting segment as disclosed in Note 29.
44 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 12: TRADE AND OTHER PAYABLES
CURRENT
Trade payables
GST payable
Accrued expenses
Interest payable on short-term loan
Other payables
Total trade and other payables
Refer to Note 22 for further information on financial risk management.
NOTE 13: BORROWINGS
CURRENT
Other unsecured loans
Total current borrowings
2018
$’000
2017
$’000
447
43
758
-
22
1,270
2018
$’000
2017
$’000
-
-
355
49
360
10
49
823
750
750
Summary of borrowing arrangements
Borrowings consisted of an unsecured loan repayable at an interest rate of 5.25%. The loan was repaid on 5 September
2017.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 45
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 14: PROVISIONS
CURRENT
Annual leave
Long service leave
MOVEMENT IN CARRYING AMOUNTS
Opening balance at 1 July 2017
Additional provisions
Provisions used
Closing balance at 30 June 2018
NOTE 15: TAX LIABILITIES
(A) CURRENT TAX LIABILITY
Provision for income tax
(B) DEFERRED TAX LIABILITY
Deferred tax liability on customer relationships consists of:
Opening balance
Acquired during the year
Reduction through impairment and amortisation of intangible
Closing balance at the end of the reporting period
2018
$’000
2017
$’000
113
34
147
204
137
341
EMPLOYEE
BENEFITS
$'000
341
279
(473)
147
-
-
1,153
(289)
864
2018
$’000
2017
$’000
-
864
-
(864)
-
46 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 16: ISSUED CAPITAL
41,908,361 (2017: 42,265,500) ordinary shares
145,431
140,777
2018
$’000
2017
$’000
MOVEMENTS IN ORDINARY SHARES CAPITAL
Opening balance 1 July 2017
Issue of shares, net of transactions costs
Cancellation of shares
At the end of the reporting period
NUMBER OF
SHARES
$'000
$'000
42,265,500
5,555,556
(5,912,695)
41,908,361
140,777
4,654
-
145,431
On the 28 August 2017, Contango Asset Management Limited had issued placement shares to a total of 5.5 million at a
price of $0.90 per share. The placement shares were issued on the same terms as, and rank equally in all respects with
the existing fully paid ordinary shares in the Company.
EMPLOYEE SHARE PLANS:
The shares issued under the Employee Share Incentive Plan (ESIP) and Employee Loan Share Plan (ELSP) are treated
as options under Australian Accounting Standards. The fair value of the equity to which employees become entitled
is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to
the reserve account, refer to the Consolidated Statement of Changes in Equity. The fair value of any shares issued
are measured at the market bid price at grant date. In respect of share-based payments that are dependent on the
satisfaction of conditions, the number of shares expected to vest is reviewed and adjusted at each reporting date. The
amount recognised for services received as consideration for these equity instruments granted is adjusted to reflect
the best estimate of the number of equity instruments that eventually vest.
During the year, the Company has undertaken a share buyback of 1,369,344 fully paid ordinary shares issued under
ESIP and 4,543,351 fully paid ordinary shares issued under ELSP for nil cash consideration pursuant to the respective
share-buy back agreements.
NOTE 17: RESERVES
Share option reserve
Opening balance
Recognition of share-based payments
Issue of share options
Cancellation of share options
Total reserves
2018
$’000
2017
$’000
267
-
-
(132)
135
135
-
214
53
-
267
267
The share option reserve is used to recognise the value of equity benefits provided to employees and directors as part
of their remuneration, and other parties as part of their compensation for services.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 47
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 18: ACCUMULATED LOSSES
Opening balance
Net profit/ (loss) attributable to the shareholders
Accumulated losses at end of the year
NOTE 19: DIVIDENDS
2018
$’000
2017
$’000
(137,515)
3,462
(134,053)
(123,367)
(14,148)
(137,515)
No dividend has been declared or paid in respect to the financial year ended 30 June 2018 (2017: $nil).
NOTE 20: EARNINGS PER SHARE
Basic EPS is calculated by dividing the profit or loss for the period attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by dividing the profit or loss attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period plus the weighted average number of
ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Basic earnings (loss) per share
Total profit/ (loss) per share attributable to the ordinary equity holders of the Company
Dilutive earnings (loss) per share
Total profit/ (loss) per share attributable to the ordinary equity holders and
potential ordinary equity holders of the Company
2018
CENTS
2017
CENTS
8.8
8.3
(43.0)
(43.0)
The following table reflects the income and share data used in the basic and diluted EPS computations:
2018
$’000
2017
$’000
(A) RECONCILIATION OF EARNINGS TO PROFIT OR LOSS FROM
CONTINUING OPERATIONS
Basic earnings per share
Profit/ (loss) attributable to the ordinary equity holders of the Company used in
calculating basic loss per share
3,462
(14,148)
Diluted earnings per share
Profit/ (loss) attributable to the ordinary equity holders of the Company used in
calculating diluted loss per share
(B) EARNINGS USED TO CALCULATE OVERALL EARNINGS PER SHARE
3,462
(14,148)
Earnings used to calculate overall earnings per share
3,462
(14,148)
48 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
(C) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE
DENOMINATOR IN CALCULATION OF EARNINGS PER SHARE
Weighted average number of ordinary shares used in calculating basic earnings
per share
39,214,130
32,896,924
2018
NO.
2017
NO.
Effects of dilution from:
Pacific Point Partners Options
ELSP Options
ESIP Options
48,501
689,914
1,847,747
-
-
-
Weighted average number of ordinary shares adjusted for the effect of dilution
41,800,292
32,896,924
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting
date and the date of authorisation of these financial statements.
NOTE 21: SHARE-BASED PAYMENTS
(A) SHARE OPTIONS TO PACIFIC POINT PARTNERS LIMITED
Contango Asset Management Limited (formerly Tyrian Diagnostics Ltd) had issued 345,000 share options to Pacific
Point Partners Limited in partial consideration of it providing a loan to assist in the acquisition of the Contango
business in September 2016. The Options have an exercise price of $0.60 each, granted on 26 September 2016 and are
exercisable at any time after the one year anniversary of the date of grant until the fifth year anniversary of the date of
grant. The fair value at grant date is estimated using a Black–Scholes pricing model, taking into account the terms and
conditions upon which the options were granted. The fair value of options was estimated on the date of grant using the
following assumptions:
Exercise price
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Fair value per option
$0.60
0.00
25.00
1.70
$0.1527
For the year ended 30 June 2018, these options have vested and are exercisable by Pacific Point Partners Limited.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 49
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 21: SHARE-BASED PAYMENTS (CONTINUED)
2018
2017
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
MOVEMENTS DURING THE YEAR
Options outstanding as at 1 July
345,000
$0.60
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Options outstanding as at 30 June
Options exercisable as at 30 June
(B) EMPLOYEE SHARE PLANS
-
-
-
-
345,000
345,000
-
-
-
-
-
345,000
-
-
-
-
$0.60
-
-
-
$0.60
345,000
$0.60
-
The Group had established the Employee Loan Share Plan (ELSP) and Employee Share Incentive Plan (ESIP) in
September 2016. The key details of the share plans are as follows:
• Only certain employees of the Group are eligible to participant in the share plans, which is for fully paid ordinary
shares in the capital of the Company. The Company loans the employee an amount equal to the acquisition price of
the shares at zero interest.
• The loan amount for shares acquired under the ESIP and is repayable in instalments during the three years after the
acquisition of shares.
• The loan amount for shares acquired under the share plans is repayable within 30 days after the seventh
anniversary of the date of acquisition of shares.
• A third of the shares are locked until the fifth anniversary of the date of acquisition of the shares. A further third of
the shares are locked until the sixth anniversary of the date of acquisition of the shares. The final third of the shares
are locked until the seventh anniversary of the date of acquisition of the shares.
•
If an employee who is a participant ceases to be an employee during the relevant loan period or prior to the fifth
anniversary of the date of acquisition due to dismissal the shares will become "Leaver Shares" and may be
purchased by the Company or employee pursuant to the put/call option arrangements.
50 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
The fair value of options was estimated on the date of grant using the following assumptions:
Exercise price
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Life
Calculated fair value per share: between
Model used
ELSP
ESIP
$0.60
0.00
25.00
1.70
nil
0.00
25.00
1.70
6.0, 6.5 and 7.0 years
6.0, 6.5 and 7.0 years
$0.17 and $0.18
$0.60
Black-Scholes
Black-Scholes
Estimated likelihood of employees remaining an employee over the term of the share plans is assessed annually. For
the year ended 30 June 2018, the Group has undertaken an employee share scheme buyback on 17 January 2018 with
respect to 1,369,344 fully paid ordinary shares issued under ESIP and 4,543,351 fully ordinary shares under ELSP. This
resulted in a forfeiture of rights to the options which the Group has recognised a reversal of $142,612 in share-based
payment expenses cumulated from prior periods. For unvested options, the Group has recognised $10,767 in regard to
shares issued under the share plans in profit or loss (2017: $214,168).
ELSP
MOVEMENTS DURING THE YEAR
Options outstanding as at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
2018
2017
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
5,705,604
-
(4,543,351)
-
-
$0.60
-
$0.60
-
-
-
5,705,604
-
-
-
-
$0.60
-
-
-
Options outstanding as at 30 June
1,162,253
$0.60
5,705,604
$0.60
Options exercisable as at 30 June
-
-
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 51
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 (B) EMPLOYEE SHARE PLANS (CONTINUED)
ESIP
MOVEMENTS DURING THE YEAR
Options outstanding as at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Options outstanding as at 30 June
Options exercisable as at 30 June
2018
2017
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER
WEIGHTED
AVERAGE
EXERCISE
PRICE
2,003,301
-
(1,369,344)
-
-
633,957
-
-
-
-
-
-
-
-
2,003,301
-
-
-
2,003,301
-
-
-
-
-
-
-
NOTE 22: FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk),
credit risk and liquidity risk. The Group uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of foreign exchange risk and aging analysis for credit risk.
Risk management is carried out by the Board of Directors.
MARKET RISK
Foreign currency risk
The Group was not subject to any material foreign exchange risk in the 2018 and 2017 financial years.
Price risk
The Group was not subject to any material price risk in the 2018 and 2017 financial years, including equities securities
price risk and commodities price risk.
Interest rate risk
The Group's main interest rate risk arises from cash and cash equivalents, the majority of which is held in various at
call deposits at variable rates and various short-term deposits with interest rates fixed for the terms of the deposit.
During 2017 and 2018, the Group's cash on hand at variable rate was denominated in Australian dollars. As at the
reporting date, the Group had the following variable rate cash on hand:
52 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
2018
2017
WEIGHTED
AVERAGE
INTEREST RATE
%
1.01
WEIGHTED
AVERAGE
INTEREST RATE
%
1.31
BALANCE
$’000
5,416
5,416
BALANCE
$’000
819
819
Cash at bank
Net exposure to cash flow interest rate risk
Sensitivity
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, exchange rates and
commodity and equity prices. The table indicates the impact of how profit and equity values reported at the end of the
reporting period would have been affected by changes in the relevant risk variable that management considers to be
reasonably possible.
These sensitivities assume that the movement in a particular variable is independent of other variables.
Year ended 30 June 2018
+/ 1.00% in interest rates
Year ended 30 June 2017
+/ 1.00% in interest rates
Credit risk
PROFIT
$’000
EQUITY
$’000
55
8
55
8
The Group has conducted a credit risk assessment on the NAML receivable (disclosed in Note 6) and have determined
that the credit risk is minimal given NAML has been paying instalments in line with the agreement terms and there
have been no liquidity issues identified affecting the recoverability of this balance.
The Group was not subject to any material credit risk in the 2018 financial year.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an
adequate amount of committed credit facilities. The Group manages liquidity risk by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the simple nature of
the underlying businesses, and consistently negative cash flows from operations, the Group aims to simplify funding by
minimising credit lines and investing surplus funds in very liquid deposits at call or short-term deposits.
Financial liability and financial asset maturity analysis
The tables below analyse the Group's financial liabilities into relevant maturity groupings based on the remaining
period between the reporting date and the contractual maturity date. Cash flows realised from financial assets reflect
management's expectations as to the timing of realisation. Actual timing may therefore differ from that disclosed. The
amounts disclosed in the table are the contractual undiscounted cash flows.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 53
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 22: FINANCIAL RISK MANAGEMENT (CONTINUED)
WITHIN 1 YEAR
$’000
1 TO 5 YEARS
$’000
OVER 5 YEARS
$’000
TOTAL
$’000
Group 2017
Financial liabilities due for payment
Trade payables (Note 12)
Borrowings
Total expected outflows
Financial assets cash flows realisable
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total anticipated inflow on financial instruments
Net inflow on financial instruments
Group 2018
Financial liabilities due for payment
Trade payables (Note 12)
Total expected outflows
Financial assets cash flows realisable
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total anticipated inflow on financial instruments
Net inflow on financial instruments
(823)
(750)
(1,573)
819
1,348
-
2,167
594
1,270
1,270
5,416
2,255
-
7,671
6,401
-
-
-
-
-
-
-
-
-
-
-
5,130
-
5,130
5,130
-
-
-
-
-
504
504
504
-
-
-
-
604
604
604
(823)
(750)
(1,573)
819
1,348
504
2,671
1,098
1,270
1,270
5,416
7,385
604
13,405
12,135
54 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
Fair value
Fair value estimation
The fair values of financial assets and financial liabilities are presented in the following table and can be compared to
their carrying values as presented in the Consolidated Statement of Financial Position. Fair values are those amounts
at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length
transaction.
Fair values derived may be based on information that is estimated or subject to judgement, where changes in
assumptions may have a material impact on the amounts estimated. Areas of judgement and the assumptions have
been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market,
with more reliable information available from markets that are actively traded. In this regard, fair values for listed
securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are
available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by
market participants.
The net fair value of cash and cash equivalents and non-interest-bearing monetary financial assets and financial
liabilities of the Group approximate their carrying amounts.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair
values due to their short-term nature.
2018
2017
NET CARRYING
VALUE
$’000
NET FAIR
VALUE
$’000
NET CARRYING
VALUE
$’000
NET FAIR
VALUE
$’000
5,416
7,385
604
5,416
7,385
604
13,405
13,405
1,270
-
1,270
1,270
-
1,270
819
1,348
504
2,671
823
750
1,573
819
1,348
504
2,671
823
750
1,573
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
Total financial liabilities
CAPITAL RISK MANAGEMENT
The Group's objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital. As the Group incurs net cash outflows from operations and has large accumulated losses,
the primary method used to adjust its capital structure is the issue of new shares. The Group has determined that
where possible it will issue ordinary shares, rather than issue hybrid forms of securities, so as to avoid any restrictions
on its use of capital or commit to interest repayments. There are also regulatory capital requirements of the wholly
owned subsidiary, Contango Funds Management Limited which the Group considers in managing its overall capital
requirements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 55
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 23: PARENT ENTITY
Set out below is the supplementary information about the parent entity.
Statement of Financial Position
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Accumulated losses
Share option reserve
Total equity
Statement of Profit or Loss and Other Comprehensive Income
Total profit/ (loss) for the year
Total other comprehensive income
Total comprehensive income
2018
$’000
2017
$’000
3,223
3,247
6,470
129
-
129
145,431
(139,225)
135
6,341
(2,588)
-
(2,588)
66
2,882
2,948
774
864
1,638
140,777
(139,734)
267
1,310
(16,367)
-
(16,367)
Contingent liabilities
The parent entity has no contingent liabilities as at 30 June 2018 (2017: nil).
Contractual commitments
The parent entity did not have any commitments as at 30 June 2018 (2017: nil).
56 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 24: INTERESTS IN SUBSIDIARIES
COMPOSITION OF THE GROUP
The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the
Group. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s
principal place of business is also its country of incorporation.
Subsidiaries:
CAM SPV Pty Ltd
2735 CSM Holdings Pty Ltd
Contango Funds Management Limited
Contango International Pty Limited
Contango Group Services Pty Ltd
PRINCIPAL
PLACE OF
BUSINESS /
COUNTRY OF
INCORPORATION
PERCENTAGE
OWNED
2018
%
PERCENTAGE
OWNED
2017
%
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
Subsidiary financial statements used in the preparation of these consolidated financial statements have also been
prepared as at the same reporting date as the Group’s financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 57
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 25: RELATED PARTIES
(i) Entities exercising control over the Group:
The ultimate parent entity, which exercises control over the Group, is Contango Asset Management Limited which is
incorporated in Australia and owns 100% of the controlled entities.
(ii) Key management personnel
Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key
management personnel.
For details of remuneration disclosures relating to key management personnel, refer to Note 26: Key Management
Personnel Disclosures and the remuneration report in the directors' report.
(iii) Subsidiaries
Interests in subsidiaries are set out in Note 24.
(A) TRANSACTIONS WITH RELATED PARTIES
Other than the loan to associates outlined below and remuneration to key management personnel, the Group had no
related party transactions during the year.
(B) LOANS TO/FROM RELATED PARTIES
During the year, the Group provided a zero-interest subordinated loan of $259,469 (2017: $159,469) to its associate
Switzer Asset Management Limited (SAM) with no fixed term. The loan is subordinated to all other creditors of SAM.
Balance of loan at beginning of the year
Loans advanced
Balance at the end of the year
$’000
159
100
259
NOTE 26: KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel remuneration included within employee expenses for the year is shown below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
2018
$’000
2017
$’000
831
53
-
100
-
984
548
34
-
-
1,012
1,594
58 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 27: CONTINGENT LIABILITIES
In the opinion of the directors, the Company did not have any contingencies at 30 June 2018 (30 June 2017: none).
NOTE 28: CAPITAL AND LEASING COMMITMENTS
(A) FINANCE LEASES
There were no finance lease commitments for the year (2017: nil).
(B) OPERATING LEASES
Non-cancellable operating leases contracted for but not recognised in the financial statements:
Minimum lease payments under non-cancellable operating leases:
not later than one year
between one year and five years
later than five years
2018
$’000
2017
$’000
144
112
-
256
412
653
-
1,065
Operating leases have been have been taken out for the rental of premises. Lease payments are increased on an annual
basis to reflect market rentals.
NOTE 29: SEGMENT INFORMATION
The Group operates solely in the business of providing funds management services. Revenue, profit, net assets and
other financial information reported to and monitored by the Chief Operating Decision Maker (CODM) for the single
identified operating segment are the amounts reflected in the Statement of Profit or Loss and Other Comprehensive
Income, Statement of Financial Position, Statement of Changes in Equity and Statement of Cash Flows. The CODM has
been identified as the Chief Executive Officer.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 59
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 NOTE 30: AUDITORS' REMUNERATION
Auditors of the parent entity
Remuneration of the auditor for:
auditing or reviewing the financial statements
taxation services
preparation of Investigating Accountant’s Report and member of Due Diligence
Committee
Auditors of subsidiary entities
Remuneration of the auditor for:
auditing or reviewing the financial statements
taxation services
due diligence services
The auditor of the Company is Ernst & Young.
2018
$’000
2017
$’000
95,000
-
-
67,500
5,600
27,500
95,000
100,600
80,000
-
-
80,000
147,441
10,300
-
157,741
60 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 31: CASH FLOW INFORMATION
2018
$’000
2017
$’000
(A) RECONCILIATION OF RESULT FOR THE YEAR TO CASH FLOWS FROM
OPERATING ACTIVITIES
Reconciliation of net income to net cash provided by operating activities:
Profit/ (loss) for the year after income tax
3,462
(14,148)
Cash flows excluded from profit attributable to operating activities
Non-cash flows in profit:
impairment loss
depreciation and amortisation
employee share option expense
net (gain)/loss on disposal of property, plant and equipment
(gain)/loss on revaluation of investment in associate
(gain) on disposal of intangible asset
unrealised gain on investment
Changes in assets and liabilities, net of the effects of purchase and disposal of
subsidiaries:
(increase)/decrease in trade and other receivables
(increase)/decrease in other assets
increase/(decrease) in trade and other payables
increase/(decrease) in income taxes payable
increase/(decrease) in deferred tax liability
increase/(decrease) in provisions
Cash flow from operations
(B) LOAN FACILITIES
Amount unutilised
Amount utilised
676
287
(132)
155
39
(9,506)
-
839
(152)
381
-
(864)
(244)
10,311
431
267
33
22
-
(45)
(500)
527
1,578
35
(289)
(328)
(5,059)
(2,106)
-
-
-
-
750
750
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 | 61
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 (C) RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
1 JULY 2017
$’000
CASH FLOWS
$’000
FOREIGN
EXCHANGE
MOVEMENT
$’000
FAIR VALUE
CHANGES
$’000
OTHER
$’000
30 JUNE 2018
$’000
Short-term
borrowings
Total liabilities from
financing activities
750
750
(750)
(750)
-
-
1 JULY 2016
$’000
CASH FLOWS
$’000
FOREIGN
EXCHANGE
MOVEMENT
$’000
FAIR VALUE
CHANGES
$’000
Short-term
borrowings
Total liabilities from
financing activities
-
-
750
750
-
-
-
-
-
-
OTHER
$’000
-
-
-
-
-
-
30 JUNE 2017
$’000
750
750
NOTE 32: EVENTS OCCURRING AFTER THE REPORTING DATE
On 28 August 2018 the Group provided a $836,188 subordinated loan (SL) at an interest rate of 12% to its associated
entity Switzer Asset Management Limited (SAM) with no fixed term. The loan is subordinated to all other creditors of
SAM.
On 21 March 2018 the Group announced its intention to enter into an agreement to acquire the remaining equity
interest in Switzer Asset Management Limited (SAM). The Company currently owns 46.25% of the share capital of SAM
and will increase its ownership interest to 100%. The transaction is subject to shareholder approval at an extraordinary
meeting to be held on 12 September 2018. If the transaction is approved the interest rate on the SL to SAM will reduce
to zero.
The directors are not aware of any other matters or circumstances that have arisen since the end of the financial year
which significantly affect or could significantly affect the operations of the Group, the results of those operations or the
state of affairs of the Group in future financial years.
NOTE 33: COMPANY DETAILS
The registered office of the Company is:
Contango Asset Management Limited
Level 6
10 Spring Street
Sydney NSW 2000
62 | NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
DIRECTORS'
DECLARATION
The directors of the Company declare that:
1. the financial statements and notes for the year ended 30 June 2018 are in accordance with the Corporations Act
2001 and:
a.
comply with Accounting Standards, which, as stated in basis of preparation Note 1 to the financial statements,
constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and
b.
give a true and fair view of the financial position and performance of the consolidated group;
2. the Chief Executive Officer and Chief Finance Officer have given the declarations required by Section 295A that:
a.
b.
c.
the financial records of the Company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting Standards; and
the financial statements and notes for the financial year give a true and fair view.
3. in the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Director:
Roger Amos
Chairman
DIRECTORS' DECLARATION FOR THE YEAR ENDED 30 JUNE 2018 | 63
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 INDEPENDENT
AUDITOR'S REPORT
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Contango Asset
Management Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Contango Asset Management Limited (the Company) and its
subsidiaries (the Group), which comprises the statement of financial position as at 30 June 2018, the
statement of comprehensive income, statement of changes in equity and statement of cash flows for
the year then ended, notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration of the Group.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, 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, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
61
64 | INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 30 JUNE 2018
Key audit matter
Going concern
How our audit addressed the key audit matter
The Group’s financial report has been
prepared on a going concern basis. As
described in Note 1(u), the Directors’
assessment that the Group will be able to
continue to meet its obligations as and when
they fall due, was based upon their FY19
Board-approved cash flow forecasts.
The Going concern basis of accounting is
fundamental to the preparation of the financial
report and given the judgements and
assumptions relating to future events
contained in the cash flow forecasts this was
considered a key audit matter
Our audit procedures included the following:
► Evaluated the assumptions made in the Board-
approved cash flow forecasts. Our valuation
specialists were involved where considered
necessary.
► Consideration of a range of sensitivities and
scenario analysis to the cash flow forecasts.
► Consideration of the historical accuracy of the
Group’s cash flow forecasting.
► Assessment of the adequacy of going concern
disclosures and the disclosure of the key
assumptions that support going concern
assumption.
Amounts received and receivable from NAOS Asset Management Limited
During the year the Group assigned its
investment management mandate of
Contango Microcap Limited to NAOS Asset
Management Limited (NAOS) for an aggregate
consideration of $12.5 million. $5.9 million of
this was received in 2018 and the remaining
receivable over a four year period
commencing from 30 June 2019.
The Group has recognised a pre-tax gain of
$9.5 million in the Statement of Profit or Loss
and Other Comprehensive Income for the year
ended 30 June 2018. This was a key audit
matter due to the value of income recognised
and the current and the non-current
receivables held on the balance sheet of $5.6
million, which are disclosed in Note 6.
Our audit procedures included the following:
► Agreed the amounts received from NAOS
during the year to cash receipt and
independently confirmed the current and non-
current receivables with NAOS.
► Assessed the Group’s assessment of the
recoverability of the current and non-current
receivable with NAOS.
► Tested the calculation of the discounted
receivable, being a net present value
calculation, which also involved our valuation
specialists determining whether an
appropriate discount rate had been used.
► Assessed the adequacy of the disclosures in
respect of the pre-tax gain recognised and the
current and non-current receivables recorded
in the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
62
INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 65
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
Application of carry forward tax losses to income tax payable
As described in Note 4, judgement is exercised
by the Group in assessing whether the unused
tax losses can be applied to offset current
income tax.
This was a key audit matter due to the
significance of the judgements made by the
Group in relation to utilising its carried
forward tax losses, including assessing
whether the Group satisfied the tests set out
in the relevant income tax legislation related
to the availability of tax losses.
Our audit procedures included the following:
► Assessed the appropriateness of the
assumptions the Group applied for the
calculation of the current income tax payable
including the application of carry forward tax
losses.
► Involved our taxation specialists to assess the
reasonableness of the Group’s assessment
that carried forward tax losses can be applied
to current income tax payable.
► Assessed the adequacy of the disclosures in
respect of the application of carried-forward
tax losses in the financial report.
Information Other than the Financial Report and Auditor’s Report Thereon
The Directors are responsible for the other information. The other information comprises the
information included in the Group’s 2018 Annual Report, 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 we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
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.
Responsibilities of the Directors 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.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating 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 have no realistic alternative but to do so.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
63
66 | INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 30 JUNE 2018
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
judgment 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.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
64
INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 30 JUNE 2018 | 67
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
From the matters communicated to 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 Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 15 of the Directors' Report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Contango Asset Management Limited and its subsidiaries
for the year ended 30 June 2018, 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.
Ernst & Young
Luke Slater
Partner
Melbourne
Date: 28 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
65
68 | INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 30 JUNE 2018
ADDITIONAL INFORMATION
FOR LISTED PUBLIC COMPANIES
ASX ADDITIONAL INFORMATION
Additional information required by the ASX Listing Rules and not disclosed elsewhere in this report is set out below.
This information is effective as at 31 July 2018.
SUBSTANTIAL SHAREHOLDERS
The number of substantial shareholders and their associates are set out below.
VOTING RIGHTS
Ordinary shares
On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Options
No voting rights.
DISTRIBUTION OF EQUITY SECURITY HOLDERS
Analysis of the number of shareholders by size of holding at 31 July 2018 is presented below:
HOLDING
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of holders with less than a marketable parcel of
ordinary shares
NUMBER OF
HOLDERS
NUMBER OF
ORDINARY
SHARES
PERCENTAGE
OF SHARES ON
ISSUE
%
653
142
71
234
60
121,305
377,220
567,268
8,975,327
31,867,241
1,160
41,908,361
620
90,905
0.29
0.90
1.35
21.42
76.04
100
0.22
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES FOR THE YEAR ENDED 30 JUNE 2018 | 69
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998 TWENTY LARGEST SHAREHOLDERS
The names of the 20 largest shareholders of the Company as at 31 July 2018 are listed below
HOLDER NAME
NATIONAL NOMINEES LIMITED
PACIFIC POINT PARTNERS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PACIFIC POINT PARTNERS LIMITED
MR ROBERT DARIUS FRASER
AET SFS PTY LTD
SHAWN REX BURNS
MR VICTOR JOHN PLUMMER
CITICORP NOMINEES PTY LIMITED
TC CORPORATE P/L
MRS TRACY FRASER
MR PETER WILLIAM SWITZER & MRS MAUREEN ELIZABETH SWITZER & MR MARTIN
FRANCIS SWITZER
MR VICTOR JOHN PLUMMER
BISCUIT TIN PTY LTD
WARRIOR 1995 PTY LTD
MR HARVEY JAY BLACKNEY
DR DAVID JOHN RITCHIE & DR GILLIAN JOAN RITCHIE
ROBERT NAIRN PTY LTD
SAGRADA FAMILIA HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Total shares held by the 20 largest shareholders
Total ordinary shares on issue
UNISSUED EQUITY SECURITIES
Options issued.
SECURITIES EXCHANGE
The Company is listed on the Australian Securities Exchange.
NUMBER OF
ORDINARY
SHARES
PERCENTAGE OF
SHARES ON ISSUE
%
7,543,172
4,224,393
1,388,889
1,388,889
1,250,000
833,334
739,616
708,923
668,176
600,000
579,444
576,817
555,556
528,298
528,296
500,000
500,000
500,000
400,000
350,704
24,364,507
41,908,361
18.00
10.08
3.31
3.31
2.98
1.99
1.76
1.69
1.59
1.43
1.38
1.38
1.33
1.26
1.26
1.19
1.19
1.19
0.95
0.84
58.14
70 | ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES FOR THE YEAR ENDED 30 JUNE 2018
CONTANGO ASSET MANAGEMENT LIMITED AND CONTROLLED ENTITIES | ACN 080 277 998
Level 6, 10 Spring Street
Sydney NSW 2000 Australia
W contango.com.au
E
invest@contango.com.au
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