Euroz Limited Annual Report 2015

Plain-text annual report

Euroz Limited 2015 Annual Report 2 CONTENTS CORPORATE DIRECTORY BELOW WEALTH MANAGEMENT EXECUTIVE CHAIRMAN’S REPORT EUROZ LIMITED DIRECTORS’ PROFILES STOCKBROKING AND CORPORATE FINANCE EUROZ SECURITIES LIMITED MANAGING DIRECTOR’S REPORT EUROZ SECURITIES LIMITED DIRECTORS’ PROFILES FUNDS MANAGEMENT WESTOZ FUNDS MANAGEMENT PTY LTD PRODIGY INVESTMENT PARTNERS LIMITED 02 05 06 06 06 07 10 10 11 ENTRUST PRIVATE WEALTH MANAGEMENT PTY LTD EUROZ GROUP COMMUNITY ACTIVITIES FINANCIAL REPORT EUROZ LIMITED CONTACT DETAILS 12 12 14 15 71 CORPORATE DIRECTORY EUROZ LIMITED ABN 53 000 364 465 DIRECTORS Andrew McKenzie Executive Chairman Jay Hughes Executive Director Doug Young Executive Director Greg Chessell Executive Director Russell Kane Executive Director Simon Yeo Executive Director COMPANY SECRETARY Chris Webster Associate Director PRINCIPAL REGISTERED OFFICE AND PLACE OF BUSINESS Euroz Limited ABN 53 000 364 465 Level 18 Alluvion 58 Mounts Bay Rd Perth Western Australia 6000 Telephone: +61 8 9488 1400 Facsimile: +61 8 9488 1477 info@euroz.com Email: SHARE REGISTERS Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Telephone: 1300 850 505 AUDITOR PKF Mack & Co Chartered Accountants Level 4 35 Havelock Street West Perth WA 6005 Telephone: +61 8 9426 8999 BANKERS Westpac Banking Corporation 109 St Georges Terrace Perth WA 6000 SECURITIES EXCHANGE LISTINGS Euroz Limited shares are listed on the Australian Securities Exchange (ASX: EZL) WEBSITE ADDRESS www.euroz.com EUROZ ANNUAL REPORT 201501 Euroz Limited is a diversified wealth management company. EUROZ ANNUAL REPORT 20150202 Executive Chairman’s Report Euroz Limited is a diversified wealth management company. The past year was a difficult trading environment for all of our businesses but it has also been a year of transition in which we have developed the foundations to transform the structure of Euroz Limited. Stockbroking and corporate finance We now have three core business divisions: y y Funds management y Wealth management All staff have worked extremely hard in the past year to closely manage operating costs to ensure this underlying profitability. We have again proven that in difficult markets we can be modestly profitable and are particularly proud to have paid these dividends in one of the most challenging broking year’s in our collective memory. Stockbroking and Corporate Finance History Euroz Securities For most of our 15 year history we have been identified as a predominantly Western Australian connected, niche stockbroking and funds management business. During this time we have experienced a number of business cycles and our model has proven that we are a defensive business that could manage our costs and prove to be modestly profitable in difficult markets but also enjoy strong transactional fee income and highly profitable performance fees in better markets. During specific points of past business cycles our Euroz Securities business provided excellent upside leverage through higher brokerage revenues and strong Equity Capital Market (ECM) contributions. We very much want to preserve this transactional upside. Our 100% owned Westoz Funds Management (WFM) business has provided a solid base of funds under management (FUM) for our business but it is performance fee upside that has assisted in contributing over $47 million in fees to Euroz Limited over the past 9 years. We are particularly proud that through 15 years and all of these business cycles this strategy has seen us pay fully franked dividends to shareholders of approximately $175 million. The Director’s recognise the importance of these dividends for our shareholders. 2015 Financial Result In the previous financial year we announced that a change in accounting treatment required us to value our investments in the Westoz Investment Company (WIC) and Ozgrowth Limited (OZG) at market value. Short term movements in the share prices of these shareholdings can therefore significantly impact our reported profitability both positively and negatively. The Director’s have reported a headline net loss for the year of $7.1 million which is after accounting for a $15 million after tax decrease in the market value of our investments. We are pleased that our Euroz Securities and Westoz Funds Management divisions remained profitable during particularly difficult trading conditions. This underlying profitability continued to generate cash for the Group and enabled us to report cash earnings per share of approximately 5c per share. The Director’s declared and paid a final 3.25 cents fully franked dividend which combined with the interim dividend of 1.75 cents amounts to a total of 5 cents of fully franked dividends for the year. Our Euroz Securities business is a significantly stronger operation following the merger with Blackswan Equities at the start of the year. We are pleased that the integration of this business was seamless for clients and advisers and all one off costs have now been absorbed. Blackswan has a diverse Private Client business that included FUM of ~$150m and an inhouse Portfolio Administration service. We have doubled the number of our Private Client Dealing Advisers and realised all the anticipated synergies from merging these two operations. The Small Resources Index (Accum) fell 24% in this past year and is a reasonable reflection of a soft Western Australian economy and the difficult markets that we have endured during this period. The Blackswan acquisition assisted brokerage revenues which were up 44% but lower Equity Capital Markets (ECM) activity resulted in corporate income being down for the year. Despite this difficult environment we are pleased that Euroz Securities remained profitable and remains leveraged to an inevitable rebound in our markets. Funds Management Westoz Funds Management (“WFM”) The Listed Investment Companies WIC and OZG have performed in line with their investment universe of Western Australian connected companies. As at June 30 WIC and OZG retain high cash levels of $46.7m and $13.9m respectively. We remain optimistic that we are coming off a low base, that we will be able to deploy these funds into new opportunities and have strong leverage for investors when our markets improve. Prodigy Investment Partners (‘‘Prodigy’’) Prodigy is an 80/20 joint venture between Euroz Limited and Mr Steve Tucker, established in July 2014 that has recently changed its name from Westoz Investment Management to avoid brand confusion. This is a long term strategy to create a quality, multi boutique funds management business. By operating in different market sectors this multi-boutique strategy aims to potentially provide new performance fees to the Group at different points in the cycle. Prodigy announced it’s first partnership with Flinders Investment Partners in July 2015 and recently launched their first fund, the Flinders Emerging Companies Fund. EUROZ ANNUAL REPORT 2015EUROZ ANNUAL REPORT 2015 03 03 EU ROZ LIMITE D A SX CO D E : E ZL A diversiﬁ ed wealth management company STOCKB ROKING AND CORPOR ATE FINANCE FU NDS MANAG E M E NT 1 0 0 % Euroz Securities 8 0 % Prodigy Investment Partners WE ALTH MANAG E M E NT 1 0 0 % Entrust Private Wealth Management 1 0 0 % Westoz Funds Management Manager Future Investment Partner Flinders Investment Partners Future Investment Partner Ozgrowth Limited Westoz Investment Company Limited A SX CO D E : OZG A SX CO D E : W I C ? ? ( 3 8 . 8 % Equity stake) (2 6 . 2 % Equity stake) Wealth Management Summary Entrust Private Wealth Management Wealth management is a personalised service that combines investment, tax, retirement and estate planning advice. We are excited by the emerging wealth management opportunities that are being attracted to our strong balance sheet and established brand. The post balance date acquisition of Entrust Private Wealth Management is a major growth initiative that seeks to leverage an established wealth management business with long term ongoing revenues as a platform for further acquisitions and organic growth. Entrust has a significant high net worth client base with Funds Under Management (FUM) of $565 million as at 30 June 2015. Future Strategy Our strategy is to pursue a higher level of recurring revenues combined with an expanded and diversified stream of high value transactional revenues from a range of diversified sources. Base revenue: Our aim is to create a more consistent base of dependable and stable dividends over and above our traditional base of broking and funds management base fees PLUS grow our Funds Under Management (FUM) from a variety of new sources: y y Expanding our funds management capabilities by launching a range of different new boutique funds which will provide a diverse stream of a base management fees through our Prodigy Investment Partners joint venture. Grow our retail and high net worth FUM through acquisition and organic growth via the recently acquired Entrust Private Wealth Management business. Transactional revenue: Our aim is to retain our existing high value revenue streams from WFM performance fees and Euroz Securities revenues when they occur PLUS expand the possibility of future funds management performance fees from a variety of Prodigy fund boutiques. The past year has been a year of transition where we have laid the foundations and achieved a series of major goals to secure the future direction of Euroz Limited: y y y y Successful cultural and financial integration of Blackswan Equities, boosting our Private Client dealing team and kick starting our wealth management ambitions. The establishment of Prodigy as a gold standard platform for future boutique fund partnerships. The launch of the first of these new boutiques, Flinders Investment Partners. The post balance date acquisition of the established Entrust Private Wealth Management which will be the platform for expanding FUM in the growing wealth management space. In particular, we have worked extremely hard at managing costs and keeping our core team in place so that we remain leveraged to improvements and emerging opportunities in our markets. On behalf of my fellow Director’s I would like to thank all of our staff, clients and shareholders for their efforts and patience during this year of rapid change. We are pleased to report to shareholders that Euroz Limited has now evolved into a truly diversified financial services company. Andrew McKenzie Executive Chairman 04 EUROZ LIMITED PROFIT BEFORE TAX AND NET PROFIT AFTER TAX EUROZ LIMITED DIVIDEND HISTORY I S N O L L M $ I 60 50 40 30 20 10 0 -10 -20 E R A H S R E P S T N E C 30 25 20 15 10 5 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 PROFIT BEFORE TAX NET PROFIT AFTER TAX 2H DIVIDEND PER SHARE 1H DIVIDEND PER SHARE EUROZ LIMITED NTA PER SHARE WESTOZ FUNDS MANAGEMENT PTY LTD FUNDS UNDER MANAGEMENT E R A H S R E P S T N E C 100 80 60 40 20 0 I S N O L L M $ I 400 350 300 250 200 150 100 50 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 CENTS PER SHARE EUROZ ANNUAL REPORT 2015 Euroz Limited Directors’ Profiles 05 Andrew McKenzie Executive Chairman Jay Hughes Executive Director Douglas Young Executive Director Andrew is Executive Chairman of Euroz Limited and Euroz Securities Limited, is an Executive Director of Westoz Funds Management, Entrust Private Wealth, Prodigy Investment Partners, Flinders Investment Partners and is a board member of the Stockbrokers Association of Australia (SAA). Andrew holds a Bachelor of Economics from the University of Western Australia (UWA), is an individual Master Member of the Stockbrokers Association of Australia and was previously an Associate of the Financial Services Institute of Australasia (FINSIA) and the Australian Institute of Company Directors (AICD). Jay has worked in stockbroking since 1986, starting his career on the trading floor. He is Executive Chairman of Westoz Investment Company and Ozgrowth Limited and an Executive Director of Westoz Funds Management. He is an Institutional Dealer specialising in promoting Australian stocks to international clients. Jay holds a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australasia (FINSIA). He was recognised as an affiliate of the ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the Stockbrokers Association of Australia (SAA). Doug is the Euroz Securities Limited Head of Corporate Finance. He has over 25 years of corporate finance experience, covering mergers and acquisitions, debt and equity raisings in domestic and international financial markets, corporate restructuring and other corporate finance transactions. He holds a Bachelor of Commerce from the University of Western Australia (UWA) and is a fellow and graduate of the Financial Services Institute of Australasia (FINSIA). Greg Chessell Executive Director Russell Kane Executive Director Simon Yeo Executive Director Greg is the Euroz Securities Limited Head of Research and is our senior resources analyst. He spent 10 years working as a geologist in WA prior to entering the stockbroking industry in 1995. Greg holds a Bachelor of Applied Science in Geology from the University of Technology, Sydney (UTS) and a Graduate Diploma in Business from Curtin University. Russell has worked in the stockbroking industry since 1994. He holds a Bachelor of Business from Curtin University and is responsible for servicing both domestic institutions and high net worth clients, with a particular emphasis on WA based resources and industrials stocks. Simon has worked in the Stockbroking industry since 1993. In November 2000 he established the Private Client division of Euroz Securities before moving to a specialised role within our Institutional Sales team in 2013. Simon holds a Bachelor of Commerce from the University of Western Australia (UWA)and was previously a chartered accountant and Member of the Institute of Chartered Accountants (CA). EUROZ ANNUAL REPORT 201506 06 EUROZ ANNUAL REPORT 2015 Stockbroking and Corporate Finance Euroz Securities Limited Managing Director’s Report Euroz Securities employs 66 staff across five fully integrated departments; Research, Private Client Dealing, Institutional Sales, Corporate Finance and Operations. Despite market headwinds, Euroz Securities contributed a Net Profit after tax of $1.8 million to Euroz Limited. Research remains the core of our business with our team of 7 analysts continuing to initiate on new stock coverage and providing in depth analysis to institutional and private clients on their specific stocks and sectors. Significant new coverage was initiated over the period with all analysts undertaking substantial site and company visits and management meetings in their efforts to uncover new investment opportunities. This time last year we had just merged our business with Blackswan Equities, and I am pleased to report this has been an outstanding success on all measures. Our Private Client business now accounts for ~ 50% of our broking revenues and the quality of our advisers and quality of their advice continues to improve. Our team of Private Client Advisers are highly skilled and highly respected in the broking community and this business continues to grow. Our Institutional Sales Desk comprises of 10 staff specialising in small to mid-cap stocks, placing us well ahead of our competition in terms of numbers, depth of client relationships, and specialisation in this area. This team has been well established for a number of years which is a key differential to many of our competitors. Institutional investors across Australia and around the world rely on the advice given to them by our team. Combined, the two dealing desks generated substantially higher levels of commission revenue for the financial year compared to the previous year. Our Corporate Finance department was adversely impacted by the downturn in activity in our investment universe resulting in significantly less capital raised for companies compared to previous years. Whilst it’s difficult to accurately forecast future revenues for any department, but in particular Corporate, I am cautiously optimistic by the potential pipeline of work ahead of us coupled by the skills of our executives to execute and deliver it. The backbone of our business is our Operations department. We are fortunate to have such a highly skilled team ensuring efficient accounting, compliance, IT, bookings, settlements, and payments functions that not only run smoothly, but are integral to the day to day operations of our company. Across all departments, staff remain our number one asset. I continue to believe the key difference between Euroz Securities and our competitors is the quality of our staff members and our team approach. The efforts that everyone has put in to the business over the last few difficult years will stand us in good stead for future periods to come. Rob Black Managing Director Euroz Securities Limited EUROZ ANNUAL REPORT 2015Stockbroking and Corporate Finance Euroz Securities Limited Director’s Profiles 07 Rob Black Managing Director Anthony Brittain Chief Operating and Financial Officer Andrew Clayton Executive Director Ben Laird Executive Director Rob has been working in the stockbroking industry since 1995 and has spent time based in Sydney, Melbourne and London. Rob is Head of Institutional Sales and is responsible for servicing domestic and international institutions. Rob holds a Bachelor of Business in Finance and Accounting, and is a graduate of the Australian Institute of Company Directors (AICD). Prior to joining Euroz Anthony spent 7 years at a WA stockbroker. Prior to that Anthony worked in London and Singapore for 7 years with a UK fund manager. Anthony holds a Bachelor of Commerce (UWA), is a member of the Institute of Chartered Accountants (CA), holds a Graduate Diploma in Applied Finance and Investment from the FINSIA, is a Graduate of the Australian Institute of Company Directors and is a member (Master Stockbroking) of the Stockbrokers Association of Australia (SAA). Andrew is a research analyst specialising in resource companies. He has worked in the stockbroking industry since 1994. Andrew holds a Bachelor of Science (Hons) in Geology from Melbourne University, as well as a Diploma in Finance from the Financial Services Institute of Australia (FINSIA). Ben has worked in the stockbroking industry since 2001. He is a institutional dealer responsible for servicing domestic and international institutions. He holds a Bachelor of Science, a Post Graduate Diploma in Finance with the Financial Services Institute of Australasia (FINSIA) and a Chartered Financial Analyst (CFA) designation. Brian Bates Executive Director Brian Beresford Executive Director David Curnow Executive Director Gavin Allen Executive Director Brian is the Head of Private Client Dealing. He has over 16 years experience in stockbroking, investment and superannuation management with Euroz Securities and, prior to this, Blackswan Equities. Brian is a qualified Chartered Accountant, which he attained during employment with Ernst and Young, and holds a Bachelor of Commerce. Brian offers a comprehensive wealth management service to high net worth individuals. Prior to joining Euroz, Brian was a corporate finance partner at PwC, which he joined in 2007 when PwC acquired GEM Consulting (GEM). Brian was a Director and shareholder of GEM, and had previously worked for Arthur Andersen in London. He has managed capital raisings, and provided advisory services to clients across the resources, mining services, engineering, technology and manufacturing sectors. Brian holds a Masters in Finance from London Business School, and a Bachelor of Commerce and Bachelor of Laws from the University of Western Australia (UWA). David has worked in the stockbroking industry since 2000 and has spent his time in London and Sydney. He is an institutional dealer responsible for servicing domestic and international institutions. He holds a Bachelor of Commerce from the University of Western Australia (UWA), is a Chartered Accountant and holds a Graduate Diploma in Applied Finance and Investment with the Financial Services Institute of Australasia (FINSIA) designation. Prior to joining Euroz Securities, Gavin was a senior manager in the Corporate Finance division of a major accounting firm, specialising in the financial analysis of mergers and acquisitions. Gavin holds a Bachelor of Commerce, is a member of the Institute of Chartered Accountants in Australia (CA) and holds a Chartered Financial Analyst (CFA) designation. EUROZ ANNUAL REPORT 201508 EUROZ ANNUAL REPORT 2015 Stockbroking and Corporate Finance Euroz Securities Limited Director’s Profiles (continued) James Mackie Executive Director Jon Bishop Executive Director Lucas Robinson Executive Director Nick McGlew Executive Director James has been working in the stockbroking industry since 1998. James services high net worth investors. He holds a Bachelor of Commerce from Curtin University and a Graduate Diploma from the Financial Services Institute of Australasia (FINSIA). Jon is a resource analyst focused upon both the mining and oil and gas sectors. He has more than 10 years technical and commercial experience within the petroleum and minerals industries. Jon holds a Bachelor of Science (Hons) in Geology from the University of Western Australia (UWA), as well as a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australia (FINSIA). Lucas has been advising in the stockbroking industry since 1998. He holds a Bachelor of Commerce from the University of Western Australia (UWA) with a double major in Finance and Marketing and a minor in Business Law. Nick has over 12 years experience in mergers, acquisitions, corporate and commercial law and corporate finance with major firms in Australia and the United States. He holds a Bachelor of Economics from the University of Western Australia (UWA), a Bachelor of Laws from Bond and Master of Laws from New York University (NYU). Peter Schwarzbach Executive Director Tony Kenny Executive Director Tim Weir Executive Director Tim Lyons Executive Director Tony has worked in stockbroking since 1996, starting his career at Porter Western Limited. Prior to joining Euroz Tony was a founding partner and an Executive Director of Blackswan Equities. Peter has been working in the stockbroking industry since 2006. He holds a Bachelor of Commerce from the University of Western Australia (UWA) and has completed a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australia (FINSIA). Peter is also a Chartered Accountant and prior to joining Euroz was a senior accountant in a chartered accounting firm in Perth. Tim has worked in the stockbroking industry for over 25 years and was previously Executive Chairman of Blackswan Equities where his role included maintaining the firm’s corporate relationships and servicing his high net worth private client base. Tim has completed a Bachelor of Business in Economics and Finance. He began his stockbroking career with Porter Western Ltd in 1993 as a Private Client Adviser and served as a partner of the business until it was acquired by Macquarie Bank in 1999. He manages a high net worth client base and served as an Executive Director at Blackswan Equities Ltd prior to joining Euroz. EUROZ ANNUAL REPORT 2015EUROZ ANNUAL REPORT 2015 EUROZ ANNUAL REPORT 2015 09 Stockbroking and Corporate Finance Euroz Securities Limited Operating Divisions Research Private Client Dealing Corporate Finance Institutional Sales y Our corporate business y Largest institutional is focused on developing strong, long term relationships with our clients y Clients are provided with specialised Corporate Advisory services in: – Capital Raisings – Mergers and Acquisitions – Strategic Planning and Reviews – Privatisation and Reconstructions y Established track record in raising equity capital via: – Initial Public Offerings (IPO) – Placements – Rights Issues dealing desk based in Western Australia y Team of ten institutional dealers with an extensive client base of Australian and International investors y Distribution network strength - long standing relationships with major institutional investors in the small to mid cap market y Western Australia’s geographic isolation makes it difficult for institutional investors to maintain close contact with companies based here - investors can rely on our “on the ground” information y Institutional dealing team “highly focused” on providing the following services: – Quality advice and idea generation – Efficient execution – Regular company contact – Site visits – Roadshows y Team of seven experienced analysts with access to the latest online news and financial information y Based on fundamental analysis, strict financial modelling and regular company contact y Goal: Identify and maximise equity investment opportunities for our clients y Approach: Intimate knowledge of the companies we cover y Coverage: Broad cross section of mostly WA connected industrial and resource companies y Research Products – Morningnote: Overnight market updates – Weekly Informer: Compilation of all company reports throughout the preceding week – Quarterly and/or Semi- annual Review: Regular coverage on midcap companies in book format – Company Reports: Detailed analysis on companies as opportunities emerge y Team of highly experienced and qualified private client advisers y Focus on dealing with high net worth individuals y Extensive research support - high quality research on WA based resource and industrial companies enable our advisers to provide quality investment and trading advice y Access to highly rated, independent blue chip, international and macro research. y Specialised broking allows – Close interaction between research analysts and private client advisers – Timely communication of ideas with clients y Sophisticated investors are able to participate in many of our corporate capital raisings y We pride ourselves on offering a tailored service to our clients based on: – Quality research – Personalised service – Wealth creation y Client services – Exclusive web based research – Web based access to portfolios and ledgers – Portfolio Admnistration Services 10 Funds Management Westoz Funds Management Pty Ltd Westoz Funds Management Pty Ltd (“WFM”) is responsible for $195 million of funds under management at 30 June 2015. It manages funds under mandate from two listed investment companies; Westoz Investment Company Limited (“WIC) and Ozgrowth Limited (“OZG”). WIC commenced its investment activities in May 2005, with OZG commencing in January 2008. Both investment mandates focus on the generation of the target level of returns from investment in small to mid cap ASX listed securities, generally with a connection to Western Australia. Both portfolio’s have produced returns in excess of comparable equity benchmarks. WIC and OZG have now paid $118 million in dividends to shareholders since inception. Philip Rees Executive Director Dermot Woods Executive Director Mr Philip Rees is an Executive Director of the manager and is responsible for the operation and development of the manager’s business. Mr Rees has worked in a range of roles focused on Australian investment markets for the last 27 years. He has previously managed large institutional investment portfolios and developed several early stage investment opportunities until he joined Westoz in April 2005. Mr Dermot Woods is an Executive Director of the manager and oversees the construction of its investment portfolios. Mr Woods joined Westoz Funds Management in 2007. He has previously worked as an industrial analyst for Euroz Securities and prior to this role, as a fund manager specialising in European equities. EUROZ ANNUAL REPORT 2015Funds Management Prodigy Investment Partners Limited Prodigy Investment Partners Limited (Prodigy) is a newly established multi-boutique funds management business. Prodigy is an 80/20 partnership between Euroz and Mr Steve Tucker. Prodigy will look to partner with talented investment management executives. Prodigy will focus on creating boutiques that employ limited capacity, high value adding strategies. It is this style of investment manager that we believe will be attractive to the market, and will enable potential performance fees to be a part of the revenue stream for the business. Flinders Investment Partners is our first boutique partnership. It is a specialist small companies investment manager that brings together three of Australia’s most experienced small and emerging company fund investors, Dr Andrew Mouchacca, Mr Richard Macdougall and Mr Naheed Rahman. The Flinders fund was seeded on 21 August 2015. Prodigy continues to engage with potential boutique partners looking to build its investment management presence over the coming years. 11 Stephen Tucker Executive Chairman Lewis Bearman Director and Chief Operating Officer Prodigy Investment Partners Prodigy Investment Partners Mr Stephen Tucker is Executive Chairman Tucker of Prodigy Investment Partners and holds 20% of the issued equity of the manager. He has been involved in the Australian financial services industry for over twenty five years and brings a broad range of experience to Westoz, most prominently gained through his role as Chief Executive Officer of MLC from 2004 until 2013. As CEO, he had responsibility for MLC, NAB Private Wealth and JB Were. Lewis has worked in the investment management industry since 1986 and brings a substantial amount of operational, risk and compliance experience to Prodigy. Prior to joining Prodigy Lewis worked for multi boutique firm Perennial Investment Partners for 11 years where he was CEO for 2 years and COO for the preceding 9 years. Lewis has previously also worked at Invesco and County Investment Management. Andrew Mouchacca Partner and Portfolio Manager Richard Macdougall Partner and Portfolio Manager Flinders Investment Partners Flinders Investment Partners Andrew began his career in investment management in 1999. Before establishing Flinders, Andrew was Senior Investment Manager with the institutional focused fund manager Contango Asset Management (1999-2014). He was the Portfolio Manager of the Small Companies Fund (2009 – 2014) and specialised in the analytical coverage of a range of sectors. His analytical experience has focused on the emerging companies through his involvement in dedicated products in both the small and microcap universe. Richard began his career in investment management in 1985. Before establishing Flinders, Richard was a Partner and Portfolio Manager with the Australian Equities boutique Perennial Growth (2005 to 2015). Prior this, Richard was a founding executive of Contango Asset Management and a director of Salomon Smith Barney Australia. He has spent time offshore including roles as head of research at ANZ Securities New Zealand and Managing Director of ANZ Securities UK. Naheed Rahman Partner and Deputy Portfolio Manager Flinders Investment Partners Naheed began his career in investment management in 2006. Prior to Flinders, Naheed worked as an Investment Analyst at Contango Asset Management for over seven years working closely with Andrew Mouchacca, where he covered several sectors primarily with an emerging companies focus. He began his career at Warakirri Asset Management as a Portfolio Analyst, conducting fund manager research as well as the dealing of securities. Naheed hold a Bachelor of Commerce/ Information Systems from the University of Melbourne in Finance and Economics, and Chartered Financial Analyst (CFA) designation. EUROZ ANNUAL REPORT 201512 Wealth Management Entrust Private Wealth Management Pty Ltd Entrust commenced in 2002 and over that time has built a strong reputation in the Perth financial services market for providing its clients with sound financial planning and tailored investment advice. Entrust’s client funds under management has grown over the years and now amounts to $578m across circa 650 clients. Entrust was acquired by Euroz Limited in July 2015. Entrust employs 25 staff, including 11 experienced advisers, 3 paraplanners and a portfolio administration team. Euroz brings additional capabilities in research, compliance, finance and balance sheet strength which provides Entrust increased capability to grow. Entrust’s primary focus is to continue organic growth opportunities in the HNW and Not for Profit sector and leverage the existing capability in the SMSF sector, the fastest growing component of the Australian superannuation system. Entrust can also see substantial scope for value adding adviser acquisition opportunities that complement the existing business by utilising the strength of Euroz’s balance sheet and brand in the Perth market. The earnings contribution by Entrust should be enhanced through the extraction of cost synergies by integrating compliance, IT and portfolio administration functions with Euroz and revenue synergies as Entrust increasingly engages with other business units within the Group. Graeme Yuckich Executive Chairman Andrew Fry Managing Director Brad Gordon Director Andrew joined Entrust in January 2003 and was appointed a Director in November of that year. He holds a Bachelor of Commerce and was admitted as a Chartered Accountant by the Institute of Chartered Accountants (CA) in 1996. Brad joined Entrust as a Senior Investment Adviser in January 2003 and was appointed a Director in November of that year. He has over 23 years experience in the financial services industry, in stockbroking, financial planning and trustee services. Brad is a Senior Associate of the Financial Services Institute of Australasia (FINSIA), a member of the Financial Planning Association (FPA) and also a member of the Australian Institute of Company Directors (AICD). Graeme has been advising clients on their financial needs for over 22 years. He graduated from the University of Western Australia (UWA) in 1984, completed his professional year while working for Ernst and Whinney, and was admitted as a Chartered Accountant by the Institute of Chartered Accountants (CA) in 1988. In 1990, he completed a Diploma in Financial Planning from Deakin University. Graeme established Entrust Private Wealth Management in August 2002. The goal was to combine the knowledge and strategy of financial planning with direct investment ownership and portfolio management. EUROZ ANNUAL REPORT 201513 EUROZ ANNUAL REPORT 201514 Euroz Group Community Activities Euroz Charitable Foundation Euroz are proudly West Australian focused and we believe we have an obligation to give back to Western Australian charities in need. In 2007, the Euroz Charitable Foundation was formed in a Private Ancillary Fund (PAF) structure through which Euroz could make donations, invest these funds and make distributions to worthy charities and contribute to the broader community. All businesses within the Euroz Group and many of our staff members have made consistent donations to the Foundation. The funds of the Foundation continue to contribute and make a difference to Western Australian charities. During the past 8 years the Euroz Charitable Foundation has donated in excess of $790,000 to a broad range of charities in Western Australia. In addition to financial support, employees of the Euroz Group are encouraged to volunteer their time to charities in and around their communities. The Euroz Charitable Foundation has been delighted to support the following charities, amongst others, during the past financial year: f o r k i ds at PMH and Rotary pro j e c t s EUROZ ANNUAL REPORT 2015EUROZ ANNUAL REPORT 2015 1515 2015 Financial Report For the year ended June 30 CONTENTS DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT SHAREHOLDER INFORMATION 16 29 30 31 32 33 34 67 68 70 16 Directors’ Report The Directors present their report on the consolidated group consisting of Euroz Limited and the entities it controlled at the end of, or during the year ended 30 June 2015. The following persons were Directors of Euroz Limited (“Euroz”) at any time during or since the end of the financial year and up to the date of this report: EXECUTIVE CHAIRMAN Andrew McKenzie – Executive Chairman Principal activities During the year the principal activities of the Euroz Group consisted of: (a) Stockbroking; (b) Funds Management; and (c) Investing Review of results EXECUTIVE DIRECTORS Jay Hughes – Director Doug Young – Director Greg Chessell – Director Russell Kane – Director Simon Yeo – Director Company Secretary Chris Webster held the position of Company Secretary at the end of the financial year. Chris was appointed Company Secretary in January 2013. Chris has worked in the Financial Services Industry since 2003 holding a variety of positions in Sales, Operations, Risk and Compliance with Euroz in Perth and Deutsche Bank in London. The consolidated group has incurred a consolidated pre-tax loss of $12,218,943 (2014 profit: $35,784,030) for the year ended 30 June 2015. The consolidated net loss after tax was $7,130,652 compared with the 2014 year consolidated net profit after tax of $26,547,100. This result represents basic earnings per share of (4.66) cents versus 18.29 cents in the 2014 year. The Directors have declared a final dividend of 3.25 cents per share fully franked which, combined with the interim dividend of 1.75 cent per share, represents a total dividend of 5.0 cents per share fully franked. Review of operations These results have been achieved through modest contributions from all divisions of the business in difficult market conditions. Stockbroking Principal Trading Funds Management Investment Income SEGMENT REVENUES SEGMENT RESULTS 2015 $ 25,787,206 3,882,298 3,440,074 5,789,203 38,898,781 2014 $ 29,013,405 18,844,057 9,083,064 21,236,414 78,176,940 2015 $ 723,910 (112,170) 1,634,124 (9,376,516) (7,130,652) 2014 $ 4,071,319 1,591,948 5,545,843 15,337,990 26,547,100 EUROZ ANNUAL REPORT 201517 y Distribution network strength - long standing relationships with major institutional investors in the small to mid-cap market y Western Australia’s geographic isolation makes it difficult for institutional investors to maintain close contact with companies based here - investors can rely on our “on the ground” information y Institutional dealing team “highly focused” on providing the following services: – Quality advice and idea generation – – – – Efficient execution Regular company contact Site visits Roadshows (III) PRIVATE CLIENTS y y y y A unique and predominantly “high net worth” client base (s.708 compliant investors) Significant capacity to support new issues and construct quality retail share registers Exposure to high net worth clients via in-house conferences and one-on-one presentations Team of highly experienced and qualified private client advisers y On 1 July 2014 Euroz completed the acquisition of Blackswan Equities Limited. On 4 August 2014, Blackswan staff successfully transitioned to Euroz premises and all clients were integrated within Euroz Securities. We have achieved significant revenue, cost and operational synergies in the merged Group. This has not only added a very experienced team of advisers to the Group, but has also introduced a broader investment offering for clients of Euroz with a wealth management service that provides, strategic investment advice, superannuation advice, investment management and portfolio administration service. y We now have $170m of funds under management with the majority on our in-house portfolio administration service. y Extensive research support - high quality research on WA based resource and industrial companies enable our advisers to provide quality investment and trading advice. y Specialised broking allows: – – – Close interaction between research analysts and private client advisers Timely communication of ideas with clients Sophisticated investors are able to participate in many of our corporate capital raisings. Operating and Financial Review The purpose of this review is to set out information that shareholders may require to assess Euroz’s operations, financial position, and business strategies and prospects for future financial years. This information complements and supports the report presented herein. Disclosure of operations The consolidated group is principally involved in the following activities: (a) Stockbroking; (b) Funds Management; and (c) Investing Our operations are conducted over several locations with Perth, Western Australia being our main office. During the year, we have established offices in Sydney, New South Wales and Melbourne, Victoria to focus on Corporate Finance and Funds Management opportunities. Details of our operations are outlined below: (a) Stockbroking Our stockbroking operation comprises 4 main divisions as follows: (I) EQUITIES RESEARCH y Highly rated research from market leading research team of 7 analysts y Our views are highly rated by Australian and international institutional investors y y Access to the latest online news and financial information Based on fundamental analysis, strict financial modelling and regular company contact – – – Goal: Identify and maximise equity investment opportunities for our clients Approach: Intimate knowledge of the companies we cover Coverage: Broad cross section of mostly WA based industrial & resource companies y Research Products: – Morning Note: Overnight market updates – Weekly Informer: Compilation of all company reports throughout the preceding week – Quarterly and/or Semi-annual Review: Regular coverage on mid-cap companies in book format – Company Reports: Detailed analysis on companies as opportunities emerge (II) INSTITUTIONAL DEALING y One of the largest institutional small to mid-cap dealing desks in the Australian market y Extensive client base of Australian and International institutional investors with strong relationships with small company fund managers EUROZ ANNUAL REPORT 2015Directors’ Report18 (IV) CORPORATE FINANCE Disclosure of operations — Profit y Our corporate finance business is focused on developing strong, long term relationships with our clients. During the year, we established a Sydney office. y Clients are provided with specialised Corporate Advisory services in: – Equity Capital Raisings and Underwriting – Mergers and Acquisitions – – Strategic Planning and Reviews Privatisation and Reconstructions y Established track record in raising equity capital via: – – – Initial Public Offerings (IPO) Placements Rights Issues (b) Funds Management Westoz Funds Management Pty Ltd (“WFM”) is responsible for $195 million of funds under management at 30 June 2015. It manages funds under mandate from two listed investment companies; Westoz Investment Company Limited (“WIC) and Ozgrowth Limited (“OZG”). Both companies have enjoyed competitive portfolio returns since inception. WIC commenced its investment activities in May 2005, with OZG commencing in January 2008. Both investment mandates focus on the generation of the target level of returns from investment in small to mid- cap ASX listed securities, generally with a connection to Western Australia. Both portfolios have produced returns in excess of comparable equity benchmarks. WIC and OZG have now paid $118 million in dividends to shareholders since inception. On 1 July 2014 a new subsidiary, Prodigy Investment Partners Limited (“Prodigy”) was formed with Euroz owning 80% and Mr Steve Tucker, Executive Chairman, owning 20%. The first boutique funds management partnership, Flinders Investment Partners (“Flinders”) was launched subsequent to year end. Flinders specialises in investing in small and emerging companies. (c) Investing Euroz Limited owns significant shareholdings in Westoz Investment Company Limited (WIC.ASX) totalling 26.21% and Ozgrowth Limited. (OZG.ASX) totalling 38.77%. The investment focus of these funds is on small to mid-cap ASX listed securities, generally with a connection to Western Australia. Net loss after tax for FY 2015 was $7.1 million down 127% from a profit of $26.5 million in the previous year. The Directors are pleased that our Euroz Securities and Westoz Funds Management divisions remained modestly profitable for the year given the difficult market conditions. The market value of our investments in the WIC and OZG can have a material impact on our reported profitability. Shareholders should be aware that non-cash fluctuations in these investments at each balance date do not affect our underlying profitability, cash generation or ability to pay dividends. Disclosure of operations — Sales Revenue has decreased by 38% from $63.2 million to $38.9 million predominantly due to the decrease in the market values of WIC and OZG but also due to decreases in principal trading, funds management and corporate revenue. (a) Stockbroking and Corporate Finance Stockbroking and corporate finance revenue was down by 11% from $29 million in FY14 to $25.8 million in FY15 as a result of decreased Equity Capital Market (“ECM”) raisings in our Corporate Finance division. Euroz Securities was involved in 7 ECM transactions this year raising $143 million. (b) Principal Trading Revenue from Principal Trading decreased by 80% from $18.8 million in FY14 to $3.8 million in FY15. (c) Funds Management Revenue from Funds Management decreased to $3.4 million for FY15 compared to $9.1 million for FY14 reflecting the decrease in investment returns and associated performance fees. (d) Investment Income Investment income decreased 73% from $21.2 million in FY14 to $5.8 million in FY15 due to the decrease in market values in WIC and OZG. Disclosure of business strategies and prospects — Growth Volatile commodity prices and resource markets continue to affect our deal flow and turnover in the short term but we remain confident that our Group is well positioned for better markets when they return. This year’s result was achieved in particularly challenging market conditions and the Directors are pleased that we were still able to generate underlying profits before fair value movements on investments and pay 5 cents in fully franked dividends for the year. EUROZ ANNUAL REPORT 2015Directors’ Report19 The Directors believe the company is in a strong and stable financial position to expand and grow its current operations. With effect from 1 July 2015, Euroz acquired Entrust Private Wealth Management (“Entrust”). The post balance date acquisition of Entrust is a major growth initiative that seeks to leverage an established wealth management business with long term ongoing revenues as a platform for further acquisitions and organic growth. 15 CENTS (4.66) (4.66) 14 CENTS 18.29 18.27 The Directors believe that Euroz have now laid the foundations for our strategy to build a more consistent base of underlying recurring revenues through our growing wealth and funds management businesses whilst still retaining the transaction based upside of our traditional stockbroking business. Earnings per share Basic earnings per share Diluted earnings per share Disclosure of business strategies and pros- pects—Material business risks The past year continues the seven year trend of extremely volatile trading conditions since the GFC. Like many businesses we have experienced solid trading months which are often then undermined by any combination of uncertainties. These may take the form of European economic concerns, political instability, inflation concerns, weaker Chinese growth and/or alternating commodity price movements. Stable market conditions give traditional investors the confidence to invest and this continuing volatility is clearly affecting this decision making. Given this backdrop and the increasingly competitive landscape it has created, we are pleased with our overall results for the financial year. Our entire team has worked hard to manage our costs and generate profits and dividends for shareholders. Financial position The net assets of the consolidated group have decreased from $117.1 million at 30 June 2014 to $111.3 million in 2015. This slight decrease has largely resulted from adjustments to the carrying market value of investments as at 30 June 2015. The company’s financial performance has enabled it to continue to pay dividends to shareholders during the year while maintaining a healthy working capital ratio. The consolidated group’s working capital, being current assets less current liabilities, has increased from $40.8 million in 2014 to $44.8 million in 2015. During the past seven years the company has invested in expanding each of its business units to secure its long term success. In particular it has made strategic investments in the investment products of Westoz Funds Management Pty Ltd. Our group remains in an extremely sound financial position with cash and investments of $109.4 million as at 30 June 2015. We have Net Tangible Assets (NTA) of 70¢ per share and no debt. Euroz has a proud history of consistent profits and dividends having paid $175.2 million in fully franked dividends in the last 15 years. Dividends Euroz Limited Dividends paid or provided for during the financial year were as follows: 15 $ 14 $ 2,694,038 2,558,431 5,192,129 13,702,841 Interim ordinary dividend of 1.75 cents (2014 – 1.75 cents) per fully paid ordinary share was paid on 23 January 2015. Provision for final ordinary dividend for 30 June 2015 of 3.25 cents (2014 – 9.0 cents) per fully paid ordinary share paid on 29 July 2015. 7,886,167 16,261,272 Of the total dividends paid during the year, $9,458 was paid to the Euroz Share Trust and is undistributed. Therefore, it has been eliminated on consolidation. Significant changes in the state of affairs On 1 July 2014, a new subsidiary, Prodigy Investment Partners Limited (“Prodigy”) was formed with Euroz owning 80% and Mr Steve Tucker, Executive Chairman, owning 20%. On 1 July 2014, Euroz Securities Limited acquired 100% of the ordinary shares of Blackswan Equities Limited for the total consideration of 5,200,000 Euroz shares ($6,604,000). Share options There were no options on issue at 30 June 2015 and 30 June 2014. Environmental regulation The consolidated group is not subject to significant environmental regulation in respect of its operations. EUROZ ANNUAL REPORT 2015Directors’ Report20 After balance date events With effect from 1 July 2015, Euroz Securities Limited acquired 100% of the issued capital of Entrust Private Wealth Management Pty Ltd for the total consideration of 5.45m Euroz shares and $2.35m cash. Refer to note 31 for further details. Other than this matter the Directors are not aware of any other matter or circumstance subsequent to 30 June 2015 that has significantly affected, or may significantly affect: (a) the consolidated group’s operations in future financial years; or (b) the results of those operations in future financial years; or (c) the consolidated group’s state of affairs in future financial years. Likely developments and expected results of operations The Directors are confident that a strong statement of financial position and established business platforms will support the company in increasingly volatile market conditions. Further information on likely developments in the operations of the consolidated group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated group. Information on Directors PARTICULARS OF DIRECTORS’ INTERESTS IN SHARES AND OPTIONS OF EUROZ LIMITED ORDINARY SHARES* OPTIONS DIRECTOR EXPERIENCE SPECIAL RESPONSIBILITIES AND QUALIFICATIONS A McKenzie Executive Chairman Mr McKenzie has worked in the stockbroking industry since 1991. J Hughes Director Mr Hughes has worked in the stockbroking industry since 1986. Member of Remuneration Committee Member of Underwriting Committee Holds a Bachelor of Economics Degree, is an individual Master Member of the Stockbrokers Association of Australia and was previously an Associate of the Financial Services Institute of Australia (FINSIA) and Fellow of the Australian Institute of Company Directors. Chairman of Remuneration Committee Member of Underwriting Committee Holds a Graduate Diploma in Applied Finance and Investment from FINSIA. He was recognised as an affiliate of the ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the Stockbrokers Association of Australia D Young Director Mr Young has worked in corporate finance since 1984. Head of Corporate Finance of our 100% owned subsidiary Euroz Securities Limited. Chairman of Audit Committee Member of Underwriting Committee G Chessell Director Mr Chessell has worked in the stockbroking industry since 1996. He holds a Bachelor of Commerce degree from the University of Western Australia and a Graduate Diploma in Applied Finance from FINSIA, is a Fellow of FINSIA and a Fellow of the Australian Society of Certified Practising Accountants. Head of Research of our 100% owned subsidiary Euroz Securities Limited and is our senior resources analyst. Greg holds a B.App.Sc. degree in geology and a Grad. Dip. Business qualification. Member of Audit Committee 11,447,376 11,447,376 4,547,867 4,088,450 2,783,699 R Kane Director S Yeo Director Mr Kane has worked in the stockbroking industry since 1994. Responsible for servicing both domestic institutions and high net worth clients. Member of Underwriting Committee. Member of Compliance Committee. He holds a Bachelor of Business from Edith Cowan University. Mr Yeo has worked in the stockbroking industry since 1993. Established the Private Client division of Euroz Securities which he headed up until October 2013 before moving to a specialised role within the Institutional Dealing team. Member of Audit Committee Member of Compliance Committee 3,883,289 *Total shares includes shares granted under the Performance Rights Plan He holds a Bachelor of Commerce degree from UWA. - - - - - - EUROZ ANNUAL REPORT 2015Directors’ Report21 Meetings of Directors The numbers of meetings of the company’s Board of Directors held during the year ended 30 June 2015, and the numbers of meetings attended by each Director were: DIRECTOR DIRECTORS MEETINGS COMMITTEE MEETINGS Andrew McKenzie Jay Hughes Doug Young Greg Chessell Russell Kane Simon Yeo NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED AUDIT REMUNERATION 16 16 16 16 16 16 16 15 15 15 13 12 - - 2 2 - 2 - - 2 2 - 2 2 2 - - - - 2 2 - - - - Remuneration Report (audited) This Remuneration Report outlines the Key Management Personnel (KMP) remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority for the strategic management and direction of the group including any Director (whether executive or otherwise) of the parent company. Key Management Personnel Remuneration Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity’s operations. The board undertakes regular reviews of its performance and the performance of the board against expectations made at the start of the year. Performance related bonuses are available to KMP based on their performance and that of the Company. Remuneration Policy The remuneration policy has been designed to align the interests of shareholders, Directors and executives. Euroz remunerates its Directors, executives and other employees by way of a fixed base salary, commission and a combination of short and long term incentives. The Company believes this policy to have been effective in increasing shareholder wealth since inception. The following table shows the gross revenue, profits and dividends for the last five years for the listed entity, as well as the share price at the end of the respective financial years. Revenue (including gains on fair value movements in investment entities) 2011 $ 2012 $ 2013 $ 2014 $ 2015 $ 77,806,998 97,609,657 45,979,616 78,176,940 38,898,781 Net profit/(loss) after tax Share price at year end 26,566,040 11,760,189 11,122,304 26,547,100 (7,130,652) 1.62 1.15 1.00 1.30 1.00 Dividends paid or recommended 25,430,670 11,895,469 9,352,340 16,261,272 7,886,167 The objective of the company’s remuneration framework is to ensure reward for performance is competitive and appropriate to the results delivered. The Board / Remuneration Committee ensure that executive rewards satisfy the following key criteria for good reward governance practices: – – – – – competitiveness and reasonableness acceptability to shareholders performance linked transparency capital management EUROZ ANNUAL REPORT 2015Directors’ Report 22 Directors’ fees Commission Private Client Advisers are paid a commission on top of a base salary and superannuation. This is calculated on a sliding scale. Eligible Private Client Advisers are also invited to participate in the Performance Rights Plan based on certain performance hurdles set out in the employment contract. Discretionary bonus Executives and other staff members who do not participate in the profit share pool are paid a discretionary bonus based on the profitability of the Company. Similar to the profit share pool, the distribution of the discretionary bonus is also leveraged to the individual’s performance and is made as a combination of cash (75%) and equity (25%) as detailed below in Equity Based Payments. Equity based payments A Performance Rights Plan was established in 2014 as a long term incentive to assist in the reward, retention and motivation of Directors, executives and staff members. Eligible employees are invited to participate in this plan and are awarded a Performance right at the beginning of the year. There are three separate long term incentives depending on the individual employment contract as below: – – – Profit share Discretionary bonus Commission The Performance Right represents a right to be issued a number of ordinary shares in Euroz to reflect 25% of the profit share or the discretionary bonus that is paid to the participant. Private Client Advisers who are paid a commission may also be paid 5% of their total monthly brokerage and/or Portfolio Administration Revenue in equity. The shares issued will only vest to the employee after 3 years subsequent service following the initial year of service. No Directors fees are paid to Executive Directors. Non-Executive Directors are paid a fixed base salary and superannuation for their role on the Board. Base pay All Directors and executives are offered a competitive base salary and superannuation. Base pay for senior executives is reviewed semiannually by the Remuneration Committee to ensure it is competitive with the market, and is also reviewed upon promotion or additional responsibilities. There is no guarantee of base pay increases fixed in any senior executive or Directors contracts. Executives are offered a competitive salary that comprises of a base salary inclusive of superannuation and a combination of some of the following short term incentives, dependant on the terms of the individual employment contract: – – – Participation in the profit share pool Commission Discretionary Bonus Profit share pool Directors and executives are invited to participate in the profit share pool. The Remuneration Committee determines the allocation of the 40% pretax profit on an ongoing basis. In consultation with relevant Department Heads the Committee uses the following informal criteria to assist in the allocation: – – – – – – Ability to perform individual tasks within the relevant department Ability to add value and innovate beyond the job standard specifications Development of new and existing client relationships Ability to interact with other relevant departments as part of a larger team approach Relevant industry salary benchmarking General requirements to attract and retain staff. The profit share payment is made as a combination of cash (75%) and equity (25%) as detailed below in Equity Based Payments. The three executives on the Remuneration Committee (Andrew McKenzie, Jay Hughes and Robert Black, Executive Director of Euroz Securities Limited) are also entitled to participate in the profit share pool. In these circumstances two members assess the performance of the third member. EUROZ ANNUAL REPORT 2015Directors’ Report23 Details of remuneration Details of the nature and amount of each element of the emoluments of each Key Management Personnel of the Group are set out in the following tables. 2015 SHORT-TERM POST EMPLOYMENT SHARE BASED PAYMENT BASE SALARY PROFIT SHARE/BONUS OTHER BENEFITS COMMISSION SUPER- ANNUATION PERFORMANCE RIGHTS TOTAL PERFORMANCE RELATED $ $ $ $ $ $ Andrew McKenzie Jay Hughes Doug Young Greg Chessell Russell Kane Simon Yeo Robert Black Phil Rees Anthony Brittain 234,904 234,904 230,120 230,120 246,120 246,120 240,228 214,946 213,627 90,000 90,000 60,000 52,500 75,000 75,000 82,500 45,000 52,500 25,495 18,659 26,088 14,432 14,852 17,692 14,245 12,788 15,781 Total 2,091,089 622,500 160,032 Current Directors did not receive any Directors fees. - - - - - - - - - - 30,000 30,000 34,783 34,783 18,783 18,783 18,783 34,450 30,000 26,250 406,649 26,250 399,813 17,500 368,491 16,875 348,710 21,875 376,630 18,750 376,345 21,875 377,631 19,375 326,559 12,500 324,408 250,365 181,250 3,305,236 % 22% 23% 16% 15% 20% 20% 22% 14% 16% 2014 SHORT-TERM POST EMPLOYMENT SHARE BASED PAYMENT BASE SALARY PROFIT SHARE/BONUS OTHER BENEFITS COMMISSION SUPER- ANNUATION PERFORMANCE RIGHTS TOTAL PERFOR-MANCE RELATED Peter Diamond (Resigned 30 October 2013) $ 92,599 $ - $ 244,597 Andrew McKenzie 275,385 225,000 Jay Hughes Doug Young Greg Chessell Russell Kane Simon Yeo Robert Black Phil Rees 282,610 225,000 265,385 150,000 275,385 150,000 264,899 187,500 271,703 150,000 274,918 180,000 199,846 187,500 Anthony Brittain 230,769 97,500 25,756 20,092 24,132 10,599 17,352 16,803 13,873 13,782 14,705 $ - - - - - - 61,502 - - - $ 7,305 25,000 17,775 35,000 25,000 24,570 17,775 17,775 23,853 24,980 $ - 344,501 18,750 569,891 18,750 564,227 12,500 487,017 12,500 473,484 15,625 509,946 12,500 530,283 15,000 501,566 15,625 440,606 8,125 376,079 % 0% 39% 40% 31% 32% 37% 28% 36% 43% 26% Total 2,433,499 1,552,500 401,691 61,502 219,033 129,375 4,797,600 Current Directors did not receive any Directors fees. EUROZ ANNUAL REPORT 2015Directors’ Report 24 Service agreements Simon Yeo, Director y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $225,000 (2014 - $305,000) profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Robert Black, Director Euroz Securities Limited, Entrust Private Wealth Management Pty Ltd y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $200,000 (2014 - $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Phil Rees, Director Westoz Funds Management Pty Ltd y y y Term of contract – ongoing employment contract minimum period 1 year Base salary, inclusive of superannuation for the year ended 30 June 2015 of $200,000 (2014 - $275,000) plus bonus Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Anthony Brittain, Director Euroz Securities Limited, Prodigy Investment Partners and Entrust Private Wealth Management Pty Ltd y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $200,000 (2014 - $265,000) plus bonus. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Remuneration and other terms of employment for the Key Management Personnel are formalised in service agreements. Each of these agreements provide for the provision of performance related cash bonuses and other benefits. Notwithstanding the agreed salary in the service agreement, the base salary may be reduced or increased based on trading conditions. Other major provisions of the agreements relating to remuneration are set out below. Andrew McKenzie, Executive Chairman y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $225,000 (2014- $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Jay Hughes, Director y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $225,000 (2014 - $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Doug Young, Director y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 $225,000 (2014 - $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Greg Chessell, Director y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $225,000 (2014 - $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Russell Kane, Director y y y Term of contract - ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2015 of $225,000 (2014 - $305,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. EUROZ ANNUAL REPORT 2015Directors’ Report25 Shareholdings of Key Management Personnel The movement during the reporting year in the number of shares in Euroz Limited held, directly, indirectly or beneficially, by each member of Key Management Personnel, including related parties, is as follows: 2015 BALANCE AT 1 JULY 2014 HELD BY EUROZ SHARE TRUST (I) GRANTED AS REMUNERATION ON EXERCISE OF OPTIONS BOUGHT & (SOLD) BALANCE AT 30 JUNE 2015 ORDINARY SHARES A McKenzie J Hughes D Young G Chessell R Kane S Yeo R Black P Rees A Brittain 10,500,000 10,500,000 4,350,000 3,580,000 2,623,000 3,750,000 2,600,000 1,200,000 383,400 87,433 87,433 58,289 55,789 72,861 63,289 73,446 62,861 42,388 39,486,400 603,789 - - - - - - - - - - - - - - - - - - - - 496,390 496,390 116,358 399,679 61,050 70,000 360,000 1,813 1,426 11,083,823 11,083,823 4,524,647 4,035,468 2,756,911 3,883,289 3,033,446 - 427,214 2,003,106 42,093,295 (i) These shares are held by the Euroz Share Trust and are currently vesting in accordance with the Euroz Performance Rights Plan. 2014 ORDINARY SHARES BALANCE AT 1 JULY 2013 GRANTED AS REMUNERATION ON EXERCISE OF OPTIONS BOUGHT & (SOLD) BALANCE AT 30 JUNE 2014 P Diamond (Resigned 30 October 2013) 10,000,000 A McKenzie J Hughes D Young G Chessell R Kane S Yeo R Black P Rees A Brittain 10,000,000 10,000,000 4,250,000 3,102,000 2,370,000 3,520,000 1,810,000 1,100,000 303,400 46,455,400 *No amounts disclosed due to resignation during the year. - - - - - - - - - - - - - - - - 233,000 - 360,000 - - - 500,000 500,000 100,000 478,000 20,000 230,000 430,000 100,000 80,000 -* 10,500,000 10,500,000 4,350,000 3,580,000 2,623,000 3,750,000 2,600,000 1,200,000 383,400 593,000 2,438,000 39,486,400 EUROZ ANNUAL REPORT 2015Directors’ Report26 Performance Rights held by Key Management Personnel The movement during the reporting period in performance rights in Euroz Limited held, directly, indirectly or beneficially, by each Key Management Person, including related parties, is as follows: 2015 PERFORMANCE RIGHTS A McKenzie J Hughes D Young G Chessell R Kane S Yeo R Black P Rees A Brittain 2014 PERFORMANCE RIGHTS P Diamond (Resigned 30 October 2013) A McKenzie J Hughes D Young G Chessell R Kane S Yeo R Black P Rees A Brittain BALANCE AT 1 JULY 2014 GRANTED AS REMUNERATION BALANCE AT 30 JUNE 2015 1 1 1 1 1 1 1 1 1 9 1 1 1 1 1 1 1 1 1 9 2 2 2 2 2 2 2 2 2 18 BALANCE AT 1 JULY 2013 GRANTED AS REMUNERATION BALANCE AT 30 JUNE 2014 - - - - - - - - - - - - 1 1 1 1 1 1 1 1 1 9 - 1 1 1 1 1 1 1 1 1 9 These performance rights were issued in accordance with the Performance Rights Plan. EUROZ ANNUAL REPORT 2015Directors’ Report27 Option holdings of Key Management Personnel The movement during the reporting period in the number of options over ordinary shares in Euroz Limited held, directly, indirectly or beneficially, by each Key Management Person, including related parties, is as follows: All options on issue were exercised or expired during the year ended 30 June 2014. No options were issued in the current year. 2014 OPTIONS P Diamond (Resigned 30 October 2013) A McKenzie J Hughes D Young G Chessell R Kane S Yeo R Black P Rees A Brittain BALANCE AT 1 JULY 2013 GRANTED AS REMUNERATION EXERCISED BOUGHT BALANCE AT 30 JUNE 2014 TOTAL EXERCISABLE AT 30 JUNE 2014 TOTAL NOT EXERCISABLE AT 30 JUNE 2014 - - - - - 233,000 - 360,000 - - 593,000 - - - - - - - - - - - - - - - - 233,000 - 360,000 - - 593,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Sharebased compensation A performance right was issued to certain members of Key Management Personnel as part of their annual bonus / profit share plan. The fair value of each right is calculated as 25% of each member’s bonus entitlement. The performance rights are subject to a 4 year vesting period. Total fair values of performance rights issued was $391,197. Loans Key Management Personnel No loans were made to Directors of Euroz Limited and the Key Management Personnel of the consolidated group, including their personally related entities during the year. Remuneration Report - end EUROZ ANNUAL REPORT 2015Directors’ Report28 Indemnifying officers and auditor During the financial year, Euroz Limited paid a premium of $361,515 to insure the Directors and secretaries of the company and its Australian based controlled entities. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated group. Euroz has not indemnified the auditor or paid any insurance premium on behalf of the auditor. Proceedings on behalf of company No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to such proceedings during the year. Non-audit services The following non-audit services were provided by the group’s auditor, PKF Mack. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. PKF Mack received or are due to receive the following amounts for the provision of non-audit services: Tax compliance and other services $ 34,500 Auditor’s independence declaration The lead auditor’s independence declaration for the year ended 30 June 2015 has been received and follows the Directors report. This report is made in accordance with a resolution of the Directors. Andrew McKenzie Executive Chairman Doug Young Director 14 August 2015 EUROZ ANNUAL REPORT 2015Directors’ Report Auditor’s Independence Declaration 29 Accounting, Financial and Business Advisory Tel: 61 8 9426 8999 | Fax: 61 8 9426 8900 | www.pkfmack.com.au PKF Mack | ABN 74 254 453 660 4th Floor, 35 Havelock Street | West Perth | Western Australia 6005 | Australia PO Box 609 | West Perth | Western Australia 6872 | Australia PKF Mack is a member of the PKF International Limited network of legally independent member firms. PKF Mack is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF Mack does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. EUROZ ANNUAL REPORT 2015 Page | 16 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF EUROZ LIMITED In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. PKF MACK SIMON FERMANIS PARTNER 14 AUGUST 2015 WEST PERTH, WESTERN AUSTRALIA 30 Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue Gain/(loss) on fair value movement on investments Employee benefits expense Depreciation and amortisation expenses Regulatory expenses Consultancy expenses Conference and seminar expenses Brokerage and underwriting expense Communication expenses Carrying amount of principal trading securities sold Other expenses (Loss)/Profit before income tax expense Income tax benefit/(expense) NOTES 4 15 $ 14 $ 38,898,781 63,227,567 (21,136,859) 14,949,373 (15,371,583) (14,324,704) (116,253) (273,781) (845,543) (271,711) (1,630,230) (1,550,395) (802,157) (930,459) (3,749,935) (2,098,450) (236,640) (229,650) (3,826,809) (18,344,234) (3,973,477) (3,797,764) 5 6 (12,218,943) 35,784,030 5,088,291 (9,236,930) (Loss)/Profit after income tax expense for the year (7,130,652) 26,547,100 Other comprehensive income Other comprehensive income net of tax Total comprehensive income for the year Profit/(Loss) for the year is attributable to: Non-controlling interest Owners of Euroz Limited Total comprehensive income for the year is attributable to: Non-controlling interest Owners of Euroz Limited - - (7,130,652) 26,547,100 (91,257) - (7,039,395) 26,547,100 (7,130,652) 26,547,100 (91,257) - (7,039,395) 26,547,100 (7,130,652) 26,547,100 Basic earnings per share Diluted earnings per share 34 34 CENTS (4.66) (4.66) CENTS 18.29 18.27 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. EUROZ ANNUAL REPORT 2015Consolidated Statement of Financial Position 31 NOTES 15 $ 14 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets NON-CURRENT ASSETS Long term receivable Investment entities at fair value Plant and equipment Deferred tax assets Intangible asset Total non current assets Total assets CURRENT LIABILITIES Trade and other payables Current tax liabilities Short term provisions Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Long term provisions Total non current liabilities Total liabilities Net assets EQUITY Issued capital Reserves Retained earnings 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 21 Equity attributable to the owners of Euroz Limited Non-controlling interest Total equity The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 45,041,470 55,388,472 1,384,626 5,582,420 1,029,116 922,962 2,998,576 916,885 53,037,632 60,226,895 5,000,000 5,000,000 53,769,308 73,232,177 317,822 5,096,470 2,833,112 67,016,712 198,092 961,782 - 79,392,051 120,054,344 139,618,946 1,525,486 - 6,552,049 8,077,535 397,177 322,220 719,397 1,858,614 2,317,486 15,238,301 19,414,401 3,041,462 23,628 3,065,090 8,796,932 22,479,491 111,257,412 117,139,455 99,533,415 90,924,294 658,175 266,978 11,032,079 25,948,183 111,223,669 117,139,455 33,743 - 111,257,412 117,139,455 EUROZ ANNUAL REPORT 201532 Consolidated Statement of Changes in Equity ISSUED CAPITAL OPTION PREMIUM RESERVE SHARE BASED PAYMENT RESERVE RETAINED EARNINGS NON- CONTROLLING INTEREST Balance at 1 July 2013 89,451,519 186,000 $ $ Profit for the period Total comprehensive income for the period Transactions with owners, recorded directly in equity - - - - Shares issued during the period 2,615,480 (186,000) Treasury shares Share based payments Dividends to equity holders (1,142,705) - - - - - $ - - - - - 266,978 $ 15,662,355 26,547,100 26,547,100 - - - - (16,261,272) Total contributions by and distributions to owners 1,472,775 (186,000) 266,978 (16,261,272) TOTAL $ 105,299,874 26,547,100 26,547,100 2,429,480 (1,142,705) 266,978 (16,261,272) (14,707,519) 117,139,455 117,139,455 $ - - - - - - - - - - Balance at 30 June 2014 Balance at 1 July 2014 Loss for the period Total comprehensive income for the period Transactions with owners, recorded directly in equity Shares issued during the period Treasury shares Share based payments Dividends to equity holders 90,924,294 90,924,294 - - 9,034,366 (425,245) - - Total contributions by and distributions to owners 8,609,121 Balance at 30 June 2015 99,533,415 - - - - - - - - - - - - - - 266,978 25,948,183 266,978 25,948,183 (7,039,395) (91,257) (7,130,652) (7,039,395) (91,257) (7,130,652) - - 125,000 9,159,366 - - - (425,245) 391,197 (7,876,709) 391,197 - (7,876,709) 391,197 (7,876,709) 125,000 1,248,609 658,175 11,032,079 33,743 111,257,412 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. EUROZ ANNUAL REPORT 2015Consolidated Statement of Cash Flows 33 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Proceeds from sale of trading shares Income taxes (paid) Payments for trading shares NOTES 15 $ 14 $ 28,725,358 37,030,613 (27,221,891) (22,732,912) 1,503,467 14,297,701 1,674,775 3,842,298 1,574,326 19,158,477 (4,037,828) (2,832,150) (6,959,128) (19,752,073) Net cash flows (used in)/from operating activities 32 (3,976,416) 12,446,281 CASH FLOWS FROM INVESTING ACTIVITIES Payments for investments Dividends received Payments for plant and equipment Payments for treasury shares Cash acquired on the acquisition of a business Net cash flows from/(used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of shares and other equity securities Dividends paid Payments of financial liabilities Net cash flows from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 July (648,477) (4,572,875) 5,191,190 (223,226) (425,245) 5,824,004 9,718,246 5,572,639 (101,631) (1,142,705) - (244,572) - 2,429,479 (13,957,051) (9,749,156) (2,131,781) - (16,088,832) (7,319,677) (10,347,002) 4,882,032 55,388,472 50,506,440 Cash and cash equivalents at 30 June 7 45,041,470 55,388,472 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. EUROZ ANNUAL REPORT 201534 Notes to the Financial Statements Contents Note 1. Statement of significant accounting policies 34 Note 2. Significant accounting estimates and judgements Note 3. Segment information Note 4 Revenue Note 5. Profit before income tax expense Note 6. Income tax Note 7. Cash and cash equivalents Note 8. Trade and other receivables Note 9. Inventories Note 10. Other current assets Note 11. Long term receivable Note 12. Investment entities at fair value Note 13. Plant and equipment Note 14. Deferred tax assets Note 15. Intangible asset Note 16. Trade and other payables Note 17. Current tax liabilities Note 18. Short term provisions Note 19. Deferred tax liabilities Note 20. Long term provisions Note 21. Contributed equity Note 22. Dividends Note 23. Financial instruments Note 24. Remuneration of auditors Note 25. Contingent liabilities Note 26. Commitments for expenditure Note 27. Employee benefits Note 28. Related parties Note 29. Investments in controlled entities Note 30. Business combination Note 31. Events subsequent to reporting date Note 32. Reconciliation of cash flows from operating activities Note 33. Credit facilities Note 34. Earnings per share Note 35. Deed of cross guarantee Note 36. Parent entity disclosures Note 37. Company details 43 43 45 45 45 48 48 48 48 48 49 49 50 50 51 51 51 52 52 52 54 55 57 57 57 58 58 60 61 61 62 62 63 64 66 66 Note 1. Statement of significant accounting policies The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements as issued by the Australian Accounting Standards Board and the Corporations Act 2001 as appropriate for “for-profit” oriented entities. This financial report has been authorised by the Directors to be issued on 14 August 2015. The Directors have the power to amend and reissue the financial statements. Euroz Limited is a listed public company, trading on the Australian Securities Exchange, limited by shares, incorporated and domiciled in Australia. The financial report of Euroz Limited and controlled entities (the group or consolidated group), complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Separate financial information of the parent company has been included in Note 37 as permitted by amendments to the Corporations Act 2001. The financial report is presented in Australian dollars which is the group’s functional and presentation currency. Amounts are rounded to the nearest dollar in accordance with class order 98/100. The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of preparation REPORTING BASIS AND CONVENTIONS The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Accounting policies (A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Euroz Limited (‘company’ or ‘parent entity’) as at 30 June 2015 and the results of all controlled entities for the year then ended. Euroz Limited and its controlled entities together are referred to in this financial report as the consolidated group. Subsidiaries are all those entities over which the consolidated group has control. The consolidated group controls an entity when the consolidated group 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 to direct the activities of the entity. EUROZ ANNUAL REPORT 201535 The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity’s which intend to settle simultaneously. Euroz Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. Euroz Limited is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. The group formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. (C) BUSINESS COMBINATIONS The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Note 1. Statement of significant accounting policies (continued) (A) PRINCIPLES OF CONSOLIDATION (CONTINUED) Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the consolidated group. A change in ownership interest without the loss of control is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. All controlled entities have a 30 June financial year end. (B) INCOME TAX The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: – When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or – When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements36 Note 1. Statement of significant accounting policies (continued) (C) BUSINESS COMBINATIONS (CONTINUED) The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition- date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. (D) REVENUE RECOGNITION Revenue is recognised when it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognised: – – – – – Brokerage revenue earned from share trading on behalf of clients is recognised on completion of the transactions. That is, the day the security is traded, not the day of settlement. Underwriting, management fees and corporate retainers are brought to account when the fee in respect of the services provided is receivable. Share trading revenue from the sale of stocks in the jobbing account is recognised on the day the security is traded. Revenue comprises the gross proceeds on sale of the security. Interest income is recognised as it accrues. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax (GST), where applicable. (E) RECEIVABLES Trade receivables are recognised as current receivables as they are generally settled within 30 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment is raised when some doubt as to collection exists. All trade receivables relating to brokerage and principal trading have been transferred to Pershing Securities Australia Pty Ltd (“Pershing”) who provides a trust account facility as part of the clearing and settlement service. (F) INVENTORIES Inventories are stocks held in the operating (jobbing) account at year end. All inventory is held at fair value. Refer to Note 1 (u) (i) financial assets at fair value through profit or loss. (G) INVESTMENTS Controlled entities are accounted for in the consolidated financial statements as set out in Note 1 (a), excluding investment entities (which are deemed to be controlled) which are accounted for at fair value at reporting date. Other securities are accounted for at fair value at reporting date. Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (u) (i) financial assets at fair value through profit or loss. Unrealised gains/losses on securities held for long term investment are accounted for as set out in Note 1 (u) (iii) available-for-sale financial assets. (H) PLANT AND EQUIPMENT Each class of plant and equipment is carried at cost as indicated less, where applicable, any accumulated depreciation and impairment losses. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements37 Note 1. Statement of significant accounting policies (continued) (H) PLANT AND EQUIPMENT (CONTINUED) DEPRECIATION The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: CLASS OF FIXED ASSET DEPRECIATION RATE Leasehold improvements Plant and equipment 25% 25 – 33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to the asset are transferred to retained earnings. (I) LEASEHOLD IMPROVEMENTS The cost of improvements to or on leasehold properties are amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated group, whichever is the shorter. (J) LEASES Other operating lease payments are charged to the income statement in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. (K) TRADE AND OTHER CREDITORS Trade and other creditors also includes other liabilities for goods and services provided to the consolidated group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. All trade creditors relating to brokerage and principal trading have been transferred to Pershing who provides a trust account facility as part of the clearing and settlement service. (L) DIVIDENDS Provision is made for the amount of any dividend declared and authorised by the Directors on or before the end of the financial year, but not distributed at reporting date. (M) OPTIONS The fair value of options in the shares of the company issued to Directors and other parties is recognised as an expense in the financial statements in relation to the granting of these options. (N) EMPLOYEE BENEFITS (I) WAGES, SALARIES AND ANNUAL LEAVE Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (II) EMPLOYEE BENEFITS PAYABLE LATER THAN ONE YEAR Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. There have been no changes to the method used to calculate this liability. (III) SUPERANNUATION Contributions are made by the consolidated group to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred. (IV) EMPLOYEE BENEFIT ON COSTS Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities. (V) OPTIONS/PERFORMANCE RIGHTS The fair value of options/performance rights granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date. The fair value of options at grant date is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value of performance rights are estimated at grant date based on expectations of the bonus that will be paid at year end to eligible employees. Each performance right is subject to a 4 year vesting condition. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 38 Note 1. Statement of significant accounting policies (continued) (N) EMPLOYEE BENEFITS (CONTINUED) (VI) PROFIT-SHARING The consolidated entity recognises a liability and an expense for profit-sharing based on a formula that takes into consideration the profit attributable to the company’s employees after certain adjustments. (VII) TERMINATION BENEFITS The consolidated entity recognises a liability and an expense when the entity demonstrate commitment to either terminate the employee before the normal retirement date or provide termination benefits as a result of an offer made to the employee prior to retirement date. (O) CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, cash and cash equivalents includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. (P) EARNINGS PER SHARE (I) BASIC EARNINGS PER SHARE Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (II) DILUTED EARNINGS PER SHARE Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (Q) FAIR VALUE MEASUREMENT When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (R) FAIR VALUE ESTIMATION The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the consolidated group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The consolidated group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long- term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the consolidated group for similar financial instruments. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 39 Amortised cost is calculated as: – – – the amount at which the financial asset or financial liability is measured at initial recognition; less principal repayments; plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and – less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through 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 value with a consequential recognition of an income or expense in profit or loss. The group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. (I) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS This category has two sub-categories; financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a financial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting date. (II) LOANS AND RECEIVABLES Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the consolidated group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. Note 1. Statement of significant accounting policies (continued) (S) GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (T) TREASURY SHARES Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in share-based payments reserve. (U) FINANCIAL INSTRUMENTS The consolidated group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date. INITIAL RECOGNITION AND MEASUREMENT Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (ie: 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 either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 40 Note 1. Statement of significant accounting policies (continued) (U) FINANCIAL INSTRUMENTS (CONTINUED) (III) AVAILABLE-FOR-SALE FINANCIAL ASSETS Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets. Purchases and sales of investments are recognised on trade-date being the date on which the consolidated group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated group has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale investments revaluation reserve are recognised in equity in the “available for sale revaluation reserve”. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the consolidated group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing methods refined to reflect the issuer’s specific circumstances. The consolidated group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available- for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss, is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. (IV) IMPAIRMENT OF FINANCIAL ASSETS The consolidated group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available- for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss, is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. (V) CURRENT/NON-CURRENT CLASSIFICATION Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. (W) CONTRIBUTED EQUITY Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 41 Note 1. Statement of significant accounting policies (continued) (X) IMPAIRMENT OF NON-FINANCIAL ASSETS Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash- generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. (Y) INTANGIBLE ASSET Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. (Z) NEW STANDARDS AND INTERPRETATIONS The AASB has issued the following new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The group has decided against the early adoption of any of these standards, and has not yet determined the potential impact on the financial statements from the adoption of these standards and interpretations. AASB NO. TITLE AASB 9 Financial Instruments APPLICATION DATE OF STANDARD ISSUE DATE 1 January 2018 December 2010 AASB 2013-9 Amendments to Australian Accounting Standards - Conceptual Framework, Part C - 1 January 2015 December 2013 Materiality and Financial Instruments Part C - Financial Instruments AASB 2014-1 Amendments to Australian Accounting Standards Part D - Consequential Amendments arising from AASB 14 Regulatory Deferral Accounts Part E - Financial Instruments Part D - 1 January 2016 Part E - 1 January 2018 June 2014 AASB 2014-3 Amendments to Australian Accounting Standard – Accounting for Acquisition of 1 January 2016 August 2014 Interest in Joint Operations AASB 2014-4 Amendments to Australian Accounting Standard - Clarification of Acceptable 1 January 2016 August 2014 Methods of Depreciation and Amortisation (Amendments to AASB 116 and AASB 138) AASB 2014-5 Amendments to Australian Accounting Standard Arising From AASB 15 1 January 2017 December 2014 AASB 2014-7 Amendments to Australian Accounting Standard Arising From AASB 9 1 January 2018 December 2014 AASB 2014-8 Amendments to Australian Accounting Standards Arising From AASB 9 1 January 2015 December 2014 AASB 2014-9 Amendments to Australian Accounting Standard - Equity Method in Separate 1 January 2016 January 2015 Financial Statements AASB 2014-10 Amendments to Australian Accounting Standard - Sale of Contribution of Assets 1 January 2016 January 2015 Between Investors and its Associates or Joint Venture AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012–2014 Cycle 1 January 2016 January 2015 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements42 Note 1. Statement of significant accounting policies (continued) (Z) NEW STANDARDS AND INTERPRETATIONS (CONTINUED) AASB NO. TITLE AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amend- ments to AASB 101 APPLICATION DATE OF STANDARD ISSUE DATE 1 January 2016 January 2015 AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality I July 2015 January 2015 AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Re- 1 January 2015 January 2015 quirements for Australian Groups with a Foreign Parent AASB 2015-5 Amendments to Australian Accounting Standards – Investment Entities: Apply- 1 January 2016 January 2015 AASB 14 AASB 15 ing the Consolidation Exception Regulatory Deferral Account Revenues from Contracts with Customers 1 January 2016 June 2014 1 January 2017 December 2014 The consolidated group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have a significant impact on the financial performance or position of the consolidated group. The following Accounting Standards and Interpretations are most relevant to the consolidated group: AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities The consolidated group has applied AASB 2012-3 from 1 July 2014. The amendments add application guidance to address inconsistencies in the application of the offsetting criteria in AASB 132 ‘Financial Instruments: Presentation’, by clarifying the meaning of ‘currently has a legally enforceable right of set-off’; and clarifies that some gross settlement systems may be considered to be equivalent to net settlement. AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets The consolidated group has applied AASB 2013-3 from 1 July 2014. The disclosure requirements of AASB 136 ‘Impairment of Assets’ have been enhanced to require additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposals. Additionally, if measured using a present value technique, the discount rate is required to be disclosed. AASB 2014-1 Amendments to Australian Accounting Standards (Parts A to C) The consolidated group has applied Parts A to C of AASB 2014-1 from 1 July 2014. These amendments affect the following standards: AASB 2 ‘Share-based Payment’: clarifies the definition of ‘vesting condition’ by separately defining a ‘performance condition’ and a ‘service condition’ and amends the definition of ‘market condition’; AASB 3 ‘Business Combinations’: clarifies that contingent consideration in a business combination is subsequently measured at fair value with changes in fair value recognised in profit or loss irrespective of whether the contingent consideration is within the scope of AASB 9; AASB 8 ‘Operating Segments’: amended to require disclosures of judgements made in applying the aggregation criteria and clarifies that a reconciliation of the total reportable segment assets to the entity’s assets is required only if segment assets are reported regularly to the chief operating decision maker; AASB 13 ‘Fair Value Measurement’: clarifies that the portfolio exemption applies to the valuation of contracts within the scope of AASB 9 and AASB 139; AASB 116 ‘Property, Plant and Equipment’ and AASB 138 ‘Intangible Assets’: clarifies that on revaluation, restatement of accumulated depreciation will not necessarily be in the same proportion to the change in the gross carrying value of the asset; AASB 124 ‘Related Party Disclosures’: extends the definition of ‘related party’ to include a management entity that provides KMP services to the entity or its parent and requires disclosure of the fees paid to the management entity; AASB 140 ‘Investment Property’: clarifies that the acquisition of an investment property may constitute a business combination. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements43 Note 2. Significant accounting estimates and judgements Estimates and judgements incorporated in the financial statements are 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. Note 3. Segment information Identification of reportable segments The group has identified its operating segments based on the internal reports that are reviewed and used by the executive team (the chief operating decision makers) in assessing performance and in allocating resources. Types of products and services STOCKBROKING Stockbroking business offering trading of Australian securities, post trade reporting, corporate finance opportunities, provision of company research. PRINCIPAL TRADING Principal trading relates to the purchase and sale of securities by the consolidated group. FUNDS MANAGEMENT The consolidated group provides advice in relation to funds management. INVESTMENTS The consolidated group invests in listed and unlisted securities from which it derives dividends. Basis of accounting for purpose of reporting by operating segments The accounting policies used by the group in reporting segments internally are consistent with those adopted in the financial statements of the group, unless otherwise stated. Segment assets and liabilities Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. Liabilities are allocated to segments where there is a direct nexus between the liability and the operations of the segment. Key estimates and judgments (I) IMPAIRMENT At each reporting date, the group compares the carrying values and market values of investment entities to determine whether there is any indication of impairment. If impairment indicators exist, any excess of the investment entity’s carrying value over the recoverable amount is expensed to the statement of profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (II) CLASSIFICATION OF INVENTORIES The group has decided to classify investments in listed securities as held for trading. These securities are accounted for at fair value. Any increments or decrements in their value at year end are charged or credited to the statement of profit or loss. (III) TAXATION Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from temporary differences and tax losses, are recognised only where it is considered more likely than not they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences are recognised to the extent that there are future profits. (IV) GOODWILL Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. For the purpose of impairment testing, the goodwill on acquisition of Blackswan Equities Limited is allocated to private client broking cash- generating unit which represents the lowest level at which it is monitored for internal management purposes. At 30 June 2015, goodwill totalling $2,833,112 has been allocated to the private client broking cash-generated unit. The assumptions used for determining the recoverable amount are based on past experience and expectations for the future. Projected cash flows for each cash-generated unit are discounted using an appropriate discount rate and a value in use is determined over a 5 year life. The discount rate deemed applicable at 30 June 2015 amounted to 5.83%. The Board have assessed that there is no indication the goodwill is impaired. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements44 Note 3. Segment information (continued) Segment performance STOCKBROKING& CORPORATE ACTIVITIES PRINCIPAL TRADING FUNDS MANAGEMENT INVESTMENT INCOME UNALLOCATED ITEMS TOTAL (CONSOLIDATED) 2015 Sales and other fees Interest revenue Other revenues $ $ $ 25,074,027 3,842,298 3,380,405 $ - 713,179 - 59,669 638,013 - 40,000 - 5,151,190 Total segment revenue 25,787,206 3,882,298 3,440,074 5,789,203 Segment net operating profit after tax 723,910 (112,170) 1,634,124 (9,376,516) Depreciation and amortisation 113,149 - 3,104 - Loss on fair value of investments - (1,025,513) - (20,111,346) Segment assets 34,462,677 5,582,420 3,059,467 76,949,780 Fair value of investment entities Capital expenditure Segment liabilities Cash flow information - 142,666 3,192,734 - - - - 53,769,308 80,560 - 360,307 5,243,891 Net cash flow from operating activities (859,586) (3,116,830) - - $ - - - - - - - - - - - - $ 32,296,730 1,410,861 5,191,190 38,898,781 (7,130,652) 116,253 (21,136,859) 120,054,344 53,769,308 223,226 8,796,932 (3,976,416) Net cash flow from investing activities 5,681,338 40,000 (80,560) 4,502,713 (425,245) 9,718,246 Net cash flow from financing activities - - - - (16,088,832) (16,088,832) 2014 Sales and other fees Interest revenue Other revenues 28,264,385 18,844,057 8,975,819 - 745,813 3,207 - - 107,245 714,402 - 20,522,012 Total segment revenue 29,013,405 18,844,057 9,083,064 21,236,414 Segment net operating profit after tax 4,071,319 1,591,948 5,545,843 15,337,990 Depreciation and amortisation Gain on fair value of investment entities 843,319 - - - 2,224 - - 14,949,373 Segment assets 28,642,125 2,032,576 5,342,923 103,601,322 Fair value of investment entities Capital expenditure Segment liabilities Cash flow information - 101,631 2,491,930 - - - - - 73,232,177 - 1,176,457 18,811,104 - - - - - - - - - - - 56,084,261 1,567,460 20,525,219 78,176,940 26,547,100 845,543 14,949,373 139,618,946 73,232,177 101,631 22,479,491 Net cash flow from operating activities 3,099,745 (593,596) 9,225,730 714,401 - 12,446,281 Net cash flow from investing activities (101,631) Net cash flow from financing activities - - - - - 999,764 (1,142,705) (244,572) - (7,319,676) (7,319,676) Entity-wide disclosures The consolidated group predominately operates with in the geographical region of Australia. Therefore, the total revenue and non-current assets are reflected on the face of the financial statements. During the year ended 30 June 2015 approximately 19% (2014: 19%) of the consolidated entity’s external revenue was derived from management fees and dividends from Ozgrowth Limited and Westoz Investment Company Limited. EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 4. Revenue REVENUE FROM OPERATING ACTIVITIES Brokerage Underwriting and management fees Proceeds on sale of principal trading shares Corporate retainers OTHER INCOME Interest received Other revenue Dividend received Total Revenue Note 5. Profit before income tax expense Rental expenses relating to operating lease Superannuation expense Share based payments Write-off of fixed assets Write-off of investment Note 6. Income tax The components of tax expense comprise: Current tax Deferred tax 45 15 $ 14 $ 16,626,934 11,005,474 3,842,298 11,651,450 24,380,270 18,844,058 822,023 1,208,483 32,296,729 56,084,261 1,410,862 1,567,460 - 3,207 5,191,190 5,572,639 6,602,052 7,143,306 38,898,781 63,227,567 15 $ 14 $ 1,837,796 1,456,945 797,118 391,197 131,977 15,000 15 $ 588,821 266,978 - - 14 $ 1,691,318 (6,779,609) 4,511,208 4,725,722 (5,088,291) 9,236,930 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements46 Note 6. Income tax (continued) NUMERICAL RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX ACCOUNTING PROFIT Income tax using company’s tax rate of 30% (2014: 30%) (3,665,683) 10,735,209 15 $ 14 $ Add tax effect of: - other non-allowable items - prior year under provision - other Less tax effect of: - gain on acquisition of associates - franked dividends received Income tax attributable to entity 121,703 - 13,046 49,147 65,760 58,606 (3,530,934) 10,908,722 - - 1,557,357 1,671,792 (5,088,291) 9,236,930 The applicable weighted average effective tax rates are as follows: 41.64% 25.81% RECONCILIATIONS I. GROSS MOVEMENTS The overall movement in the deferred tax account is as follows: Balance at 1 July Recognised in income statement Recognised in other comprehensive income Balance at 30 June II. DEFERRED TAX LIABILITY Movement in temporary differences during the year Fair value gain adjustments Balance at 1 July Recognised in the income statement Balance at 30 June Other Balance at 1 July Recognised in the income statement Balance at 30 June (2,079,680) 2,646,042 6,779,609 (4,725,722) - - 4,699,929 (2,079,680) 2,907,263 (2,933,963) (26,700) - 2,907,263 2,907,263 134,199 289,678 423,877 397,177 91,351 42,848 134,199 3,041,462 EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 6. Income tax (continued) III. DEFERRED TAX ASSETS Movement in temporary difference during the year Fair value gain adjustments Balance at 1 July Recognised in the income statement Balance at 30 June Provisions Balance at 1 July Recognised in the income statement Balance at 30 June Other Balance at 1 July Recognised in the income statement Balance at 30 June 47 15 $ 14 $ - 3,795,921 3,795,921 1,899,140 (1,899,140) - 961,782 (411,824) 549,958 - 750,591 750,591 838,253 123,529 961,782 - - - 5,096,470 961,782 Tax losses No part of the deferred tax asset shown in Note 14 is attributable to tax losses. The Directors advise that the potential future income tax benefit at 30 June 2015 in respect of tax losses not brought to account is nil. Tax consolidation legislation Euroz Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 July 2003. The accounting policy on implementation of the legislation is set out in Note 1(b). The impact on the income tax expense for the year is disclosed in the tax reconciliation above. The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly-owned entities reimburse Euroz Limited for any current income tax payable by Euroz Limited arising in respect of their activities. The reimbursements are payable at the same time as the associated income tax liability falls due and have therefore been recognised as a current tax-related receivable by Euroz Limited. In the opinion of the Directors, the tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the whollyowned entities in the case of a default by Euroz Limited. The whollyowned entities have fully compensated Euroz Limited for deferred tax liabilities assumed by Euroz Limited on the date of the implementation of the legislation and have been fully compensated for any deferred tax assets transferred to Euroz Limited. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements48 Note 7. Cash and cash equivalents Cash at bank and on hand Note 8. Trade and other receivables Trade receivables 15 $ 14 $ 45,041,470 55,388,472 15 $ 14 $ 1,384,626 922,962 All trade receivables relating to brokerage and principal trading have been transferred to Pershing (clearing participant on behalf of Euroz Securities Limited) who provides a trust account facility as part of the clearing and settlement service. Note 9. Inventories Securities in unlisted companies (at cost) (i) Trading securities in listed companies (at cost) (i) Fair value adjustments (ii) Total (i ) These securities are held for trade purposes. (ii) The fair value adjustment is based on the closing price of each investment at year end. Note 10. Other current assets Prepayments Accrued income Current tax asset Total Note 11. Long term receivable Security deposit 15 $ 527,000 6,699,270 14 $ 527,000 2,936,485 (1,643,850) (464,909) 5,582,420 2,998,576 15 $ 642,814 161,237 225,065 14 $ 493,062 423,823 - 1,029,116 916,885 15 $ 14 $ 5,000,000 5,000,000 Deposit held by Pershing (clearing participant on behalf of Euroz Securities Limited) in order to meet the capital requirements under ASX Clear Pty Ltd. EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 12. Investment entities at fair value 49 15 $ 14 $ Listed ordinary shares in investment entities at fair value through profit or loss 53,769,308 73,232,177 Reconciliation Reconciliation of the fair values at the beginning and end of the current financial year are set out below: Opening fair value Additions Revaluation increments/(decrements) Closing fair value Note 13. Plant and equipment LEASEHOLD IMPROVEMENTS At cost Less: Accumulated amortisation SOFTWARE At cost Less: Accumulated depreciation OFFICE EQUIPMENT At cost Less: Accumulated depreciation FURNITURE, FIXTURES AND FITTINGS At cost Less: Accumulated depreciation 73,232,177 54,598,004 648,477 (20,111,346) 4,493,584 14,140,589 53,769,308 73,232,177 15 $ 103,421 (26,817) 76,604 43,392 (26,001) 17,391 193,586 (109,601) 83,985 176,912 (37,070) 139,842 14 $ 29,703 (23,210) 6,493 62,194 (36,025) 26,169 209,394 (129,304) 80,090 94,019 (8,679) 85,340 317,822 198,092 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements50 Note 13. Plant and equipment (continued) Reconciliations Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current and previous financial years are set out below: 2015 Carrying amount at 1 July 2014 Additions Acquired from a business combination Assets written-off Depreciation/amortisation expense LEASEHOLD IMPROVEMENTS PLANT AND EQUIPMENT $ $ 6,493 77,609 - - (7,498) 191,599 143,748 146,603 (131,977) (108,755) TOTAL $ 198,092 221,357 146,603 (131,977) (116,253) Carrying amount at 30 June 2015 76,604 241,218 317,822 2014 Carrying amount at 1 July 2013 Additions Depreciation/amortisation expense 636,360 - 305,644 101,631 942,004 101,631 (629,867) (215,676) (845,543) Carrying amount at 30 June 2014 6,493 191,599 198,092 Note 14. Deferred tax assets Deferred tax asset (Note 6) Note 15. Intangible asset Opening balance Goodwill acquired on the acquisition of Blackswan Equities (note 30) Amortisation Balance 15 $ 14 $ 5,096,470 961,782 15 $ - 2,833,112 - 2,833,112 14 $ - - - - The goodwill acquired upon the acquisition of Blackswan Equities Ltd (Blackswan) is subject to an annual impairment review by the Board. As at 30 June 2015, the Board have assessed that there is no indication that the goodwill is impaired. At 31 December 2014, the intangible acquired on the acquisition of Blackswan was deemed to be customer lists. Subsequent to this date, this has been reassessed as goodwill. Refer to note 2 (iv) for the key assumptions used in the value-in-use calculations. EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 16. Trade and other payables Trade creditors Other payables and accruals Total 51 15 $ - 14 $ - 1,525,486 1,858,614 1,525,486 1,858,614 All trade creditors relating to brokerage and principal trading have been transferred to Pershing who provides a trust account facility as part of the clearing and settlement service. Note 17. Current tax liabilities Provision for taxation Note 18. Short term provisions Dividends Employee entitlements (annual leave) Employee entitlements (long service leave) Total Dividends 15 $ - 15 $ 5,192,129 707,050 652,870 14 $ 2,317,486 14 $ 13,702,841 684,186 851,274 6,552,049 15,238,301 This provision represents the dividend declared by the board before the reporting date and to be paid out to shareholders subsequent to year end. Movements in each class of provisions, other than employee benefits, are set out below: Carrying amount at 1 July Additional provisions recognised Amounts paid out (including through dividend reinvestments) Carrying amount at 30 June 15 $ 13,702,841 7,886,167 14 $ 7,190,724 16,261,272 (16,396,879) (9,749,155) 5,192,129 13,702,841 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements52 Note 19. Deferred tax liabilities Deferred tax liability (Note 6) Note 20. Long term provisions Employee entitlements (long service leave) Note 21. Contributed equity (a) Share capital 15 $ 14 $ 397,177 3,041,462 15 $ 322,220 14 $ 23,628 15 SHARES 14 SHARES 15 $ 14 $ Ordinary shares Issued and paid up capital-consisting of ordinary shares 152,997,812 146,153,785 99,533,415 90,924,294 (b) Movements in ordinary share capital At the beginning of the reporting period Acquisition of Treasury shares Shares issued as consideration to acquire Blackswan Equities Limited Shares issued through dividend reinvestment scheme Exercise of options At the end of the reporting period (c) Movements in ordinary share capital At the beginning of the reporting period Acquisition of Treasury shares Shares issued as consideration to acquire Blackswan Equities Limited Shares issued through dividend reinvestment scheme Exercise of options At the end of the reporting period 15 SHARES 14 SHARES 146,153,785 143,814,479 (410,000) (900,000) 5,200,000 2,054,027 - - - 3,239,306 152,997,812 146,153,785 15 $ 14 $ 90,924,294 89,451,519 (425,245) (1,142,705) 6,604,000 2,430,366 - - - 2,615,480 99,533,415 90,924,294 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements53 Note 21. Contributed equity (continued) (d) Treasury shares 15 SHARES 14 SHARES 15 $ 14 $ Balance of treasury shares at the end of the reporting period (1,310,000) (900,000) (1,567,950) (1,142,705) Treasury shares were acquired by Employee Share Trust at various times during the year. The acquisition of Treasury shares forms part of the Performance Right Plan. (e) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. Ordinary shares have no par value. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (f) Options There were no options on issue at 30 June 2015. (g) Share based payments reserve The reserve records items recognised as expenses on valuation of share based payments. The movement in the current period totalling $391,197 relates to the vesting expense related to the fair value of performance rights issued in the prior year and the current year in connection with the Performance Rights Plan. PERFORMANCE RIGHTS: On issue at 1 July Issued during the year Relinquished during the year Total on issue at year Balance on share based payment reserve at 1 July Recognised during the year Balance on share based payments reserve at 30 June (h) Capital management 15 NO 45 76 (25) 96 $ 266,978 391,197 658,175 14 NO - 47 (2) 45 $ - 266,978 266,978 The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the group. At reporting date, the group has no external borrowings and significant cash reserves. As the holder of AFSLs and as a participant of the ASX the group is exposed to externally imposed capital requirements, which have been complied with at year end and throughout the year. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements54 Note 22. Dividends 15 $ 14 $ ORDINARY SHARES Interim dividend for the half year ended 31 December 2014 of 1.75 cents (2014 – 1.75 cents) per fully paid ordinary share paid on 23 January 2015. Fully franked based on tax paid @ 30% 2,694,038 2,558,431 Final dividend declared and provided for at 30 June 2015 of 3.25 cents (2014 –9 cents) per fully paid ordinary share Fully franked based on tax paid @ 30% Total dividends provided for or paid 5,192,129 13,702,841 7,886,167 16,261,272 Of the total dividends paid during the year, $9,458 was paid to the Euroz Share Trust and is undistributed. Therefore, it has been eliminated on consolidation. Franked dividends The franked portions of the dividends recommended after 30 June 2015 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2015. 15 $ 14 $ Franking credits available for subsequent financial years based on a tax rate of 30% (2014: 30%) 11,279,279 11,110,575 These dividends are fully-franked and therefore, there are no income tax consequences for the owners of Euroz Limited The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of the current tax liability (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and (d) franking credits that may be prevented from being distributed in subsequent financial years. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of controlled entities were paid as dividends. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 55 Note 23. Financial instruments (a) Financial risk management The group’s financial instruments consist of deposits with banks, trade receivables and payables, short term investments and available for sale investments. Derivative financial instruments are not used by the group. Senior executives meet regularly to analyse and monitor the financial risk associated with the financial instruments used by the group. (b) Financial risk exposure and management (I) INTEREST RATE RISK The group has no borrowings and therefore is not exposed to interest rate risk associated with debt. The group has significant cash reserves and the interest income earned from these cash reserves will be effected by movements in the interest rate. A sensitivity analysis has been provided in the note to illustrate the effect of interest rate movements on interest income earned. (II) LIQUIDITY RISK The group manages liquidity risk using forward cashflow projections, maintaining cash reserves and having no borrowings or debt. Trade and other payables are expected to be paid as follows: Less than 1 month (III) CREDIT RISK 15 $ 14 $ 1,525,486 1,858,614 The maximum exposure to credit risk, excluding the value of any collateral or security, at reporting date is the carrying amount of the financial assets disclosed in the statement of financial position. There is no collateral or security held for those assets at 30 June 2015. Credit risk arises from exposure to customers and deposits with banks. Senior management monitors its exposure to customers on a regular basis to ensure recovery and repayment of outstanding amounts. Cash deposits are only made with Australian based banks. All trade debtors relating to brokerage and principal trading have been transferred to Pershing who provides a trust account facility as part of the clearing and settlement service. Trade receivables are usually paid within 30 days. The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated entity’s maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Receivables Long term deposit IMPAIRMENT LOSSES None of the consolidated entity’s receivables are past due (2014: Nil). CARRYING AMOUNT 14 $ 15 $ 45,041,470 55,388,472 1,384,626 5,000,000 51,426,096 922,962 5,000,000 61,311,434 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 56 Note 23. Financial instruments (continued) (IV) FINANCIAL INSTRUMENTS COMPOSITION AND MATURITY ANALYSIS WEIGHTED AVERAGE EFFECTIVE INTEREST RATE FLOATING INTEREST RATE NON INTEREST BEARING 2015 % 2.19 - - - 2014 % 2015 $ 2014 $ 2.95 45,041,470 55,388,472 2015 $ - 2014 $ - - - - - - - - - - 1,384,626 922,962 5,582,420 2,998,576 53,769,308 73,232,177 1.25 1.75 5,000,000 5,000,000 - - 50,041,470 60,388,472 60,736,354 77,153,715 FINANCIAL ASSETS Cash and cash equivalents Trade and other Receivables Financial assets held for trading Financial assets at fair value through profit and loss Long term deposit Total financial assets FINANCIAL LIABILITIES Trade and other payables - - - - 1,525,486 1,858,614 The following table details the consolidated entities fair value of financial instruments categorised by the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) Level 3: Inputs for the assets or liability that are not based on observable market data (unobservable inputs) 2015 Assets Investments Total Assets 2014 Assets Investments Total Assets LEVEL 1 LEVEL 2 LEVEL 3 TOTAL 59,061,113 59,061,113 290,615 290,615 - - 59,351,728 59,351,728 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL 75,703,753 75,703,753 527,000 527,000 - - 76,230,753 76,230,753 (V) SENSITIVITY ANALYSIS Assuming all variables remain constant and the interest rate fluctuated by 1% at year end the effect on the group’s equity and profit as follows: Increase by 1% Decrease by 1% 15 $ 500,415 (500,415) 14 $ 603,885 (603,885) Assuming all variables remain constant and the equity market fluctuated by 5% at year end the effect on the group’s equity and profit is as follows: Increase by 5% Decrease by 5% 15 $ 14 $ 2,967,586 3,811,538 (2,967,586) (3,811,538) EUROZ ANNUAL REPORT 2015Notes to the Financial Statements Note 24. Remuneration of auditors AUDIT SERVICES Audit and review of financial reports for the Group Fees paid to PKF Mack firm OTHER SERVICES Tax compliance services Other services Note 25. Contingent liabilities The parent entity and consolidated group had contingent liabilities at 30 June 2015 as follows: 57 15 $ 14 $ 136,000 114,000 24,500 10,000 34,500 15 $ 16,650 - 16,650 14 $ Secured guarantees in respect of: operating lease of a controlled group entity 1,321,126 591,000 As noted in note 11 the consolidated group has a deposit with Pershing in order to meet capital requirements under ASX Clear Pty Ltd. This deposit totalled $5,000,000 at reporting date (2014: $5,000,000) Note 26. Commitments for expenditure (a) Operating leases Commitments for minimum lease payments in relation to noncancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 15 $ 14 $ 1,232,415 5,393,288 261,699 977,809 5,559,363 - Commitments not recognised in the financial statements 6,887,402 6,537,172 The lease on the premises at Level 18, 54-58 Mounts Bay Road is for the period of 10 years commencing 2 July 2010 and expiring on 1 July 2020. The licence on the premises at Level 23, Goldfields House, 1 Alfred Street, Sydney NSW is for the period of 5 years commencing 13 June 2014 and expiring on 31 October 2019. The licence on the premises at Level 16, 385 Bourke Street, Melbourne is for the period of 8 years commencing 1 June 2015 and expiring on 31 May 2022. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements58 Note 27. Employee benefits Employee benefit and related on-costs liabilities Provision for employee entitlements Aggregate employee benefit and related oncosts liabilities Note 28. Related parties (a) Key Management Personnel compensation Short-term employee benefits Post-employment benefits Share based payments Total compensation 15 $ 14 $ 1,682,140 1,682,140 1,559,090 1,559,090 15 $ 2,873,621 250,365 181,250 14 $ 4,449,192 219,033 129,375 3,305,236 4,797,600 (b) Individual Key Management Personnel compensation disclosure Information regarding individual Key Management Personnel compensation and some equity instruments disclosures as required by Corporations Regulation is provided in the remuneration report section of the Directors’ report. Apart from the details disclosed in this note, no Key Management Personnel has entered into a material contract with the group since the end of the previous financial year and there were no material contracts involving Key Management Personnel interest existing at year end. (c) Parent entity The ultimate parent entity within the group is Euroz Limited. (d) Share-based payments During the year a performance right was issued to 57 employees (2014: 45 employees). This performance right entitles the holder to a number of shares in Euroz Limited calculated as 25% of their bonus entitlement for the year. At point of issue, these performance rights are subject to a 4 year vesting period. The fair value of each performance right is calculated as 25% of the individual’s bonus entitlement. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements59 Note 28. Related parties (continued) (e) Wholly-owned group transactions Wholly-owned group The wholly-owned group consists of Euroz Limited and its whollyowned controlled entities. See Note 29. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with related parties consisting of: (I) SUBSIDIARIES - Loans advanced by Euroz Limited to subsidiaries - Payments of dividends to Euroz Limited by subsidiaries - Payments of dividends to Euroz Securities by subsidiaries - Loans advanced by Prodigy Investment Partners (II) OTHER 15 $ 14 $ 8,495,488 1,750,000 80,000 47,819 4,662,071 12,100,000 - - - Dividends received by Euroz Limited from investment entities - Management fee received by the Euroz Group from investment entities - Performance fee received by the Euroz Group from investment entities 5,151,190 2,210,600 5,572,639 2,670,819 - 6,305,000 Ownership interests in related parties Interests held in the following classes of related parties are set out in the following notes: (a) controlled entities - Note 29 Other transactions with Directors and specified Executives During the year ended 30 June 2015 the Directors and Key Management Personnel transacted share business through Euroz Securities Limited on normal terms and conditions. Aggregate amounts of the above transactions with Directors and Key Management Personnel of the consolidated group: Amounts recognised as revenue Brokerage earned on Key Management Personnel accounts 50,922 70,769 15 $ 14 $ EUROZ ANNUAL REPORT 2015Notes to the Financial Statements 60 Note 29. Investments in controlled entities NAME OF ENTITY COUNTRY OF INCORPORATION CLASS OF SHARES EQUITY HOLDING COST OF PARENT ENTITY’S INVESTMENT Euroz Securities Limited Detail Nominees Pty Ltd Zero Nominees Pty Ltd (i) Westoz Funds Management Pty Ltd Euroz Employee Share Trust Ozgrowth Limited* Westoz Investment Company Limited* Prodigy Investment Partners Limited Blackswan Equities Ltd (i) Flinders Investment Partners Pty Ltd (ii) Blackswan Corporate Pty Ltd (i) Blackswan Financial Planning Pty Ltd (i) WIM WA Resources Limited WIM Small Cap Limited Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary The ultimate parent entity in the wholly owned group is Euroz Limited. (i) Owned by Euroz Securities Limited (ii) Owned by Prodigy Investment Partners Limited 2015 % 100 100 100 100 - 38.77 26.21 80 100 100 100 100 100 100 2014 % 2015 $ 2014 $ 100 25,000,000 25,000,000 100 100 100 - 38.52 26.10 - - - - - - - - - - - 1,450,000 1,450,000 - - - 500,000 6,604,000 2 - - 1 1 - - - - - - - - - - A brief description of each entity as follows:- (a) Euroz Limited – Group holding company listed on the Australian Stock Exchange. Euroz Limited manages cash and investments including significant positions in Ozgrowth Limited and Westoz Investment Company Limited. (b) Euroz Securities Limited – Financial Services Company providing stockbroking services with a focus on Western Australian companies. (c) Westoz Funds Management Pty Ltd – Manages the mandates for two listed investment companies, Ozgrowth Limited and Westoz Investment Company Limited with a focus on investing in opportunities with a Western Australian connection. (d) Zero Nominees – Custodian company holding shares on behalf of clients of Euroz Securities Limited. (e) Detail Nominees - Dormant company that was previously used to for settlement obligation in relation to shares for the Group. (f) Euroz Limited Employee Share Trust vehicle established to acquire treasury shares on-market for distribution to eligible employees in connection with the Performance Rights Plan. (g) Prodigy Investment Partners Limited – A 80/20 joint venture with former MLC CEO, Mr Steve Tucker to create a multi boutique funds management business. The first boutique funds management partnership was launched subsequent to year end with Flinders Investment Partners. (h) Blackswan Equities Ltd – The activities of the Blackswan group of entities have been transferred over to Euroz Securities Limited during the financial year. (i) Blackswan Corporate Pty Ltd – The activities of the Blackswan group of entities have been transferred over to Euroz Securities Limited during the financial year. (j) Blackswan Wealth Management Pty Ltd - The activities of the Blackswan group of entities have been transferred over to Euroz Securities Limited during the financial year. (k) Flinders Investment Partners Pty Ltd - New boutique fund management specialising in investing in small and emerging companies. *Although Ozgrowth Limited and Westoz Investment Company Limited are controlled entities, exemption from consolidation was derived from the adoption of AASB 2013-5 Investment Entities. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements61 Note 30. Business combination On 1 July 2014 Euroz Securities Limited, acquired 100% of the ordinary shares of Blackswan Equities Limited for the total consideration of $6,604,000. Blackswan Equities Limited is a stockbroking, investment management and corporate advisory firm. Euroz Limited has acquired Blackswan Equities Limited to increase its market share and profitability under these areas. Details of the acquisition is as follows: ASSETS Cash and cash equivalents Receivables and other current assets Financial assets Deferred tax assets Property, plant and equipment Total assets acquired Goodwill LIABILITIES Trade and other current liabilities Financial liabilities Provisions Fair value of net assets acquired Representing: Fair value of shares issued in Euroz Limited to the vendors FAIR VALUE $ 5,824,004 908,058 316,571 195,405 146,063 7,390,101 2,833,112 10,223,213 1,156,083 2,131,781 331,349 3,619,213 6,604,000 6,604,000 The initial determination made as at 31 December 2014 assessed the intangible as customer lists. However, subsequent to 31 December 2014 this was reassessed as goodwill in light of events occurring subsequent to the initial determination being made. Note 31. Events subsequent to reporting date On 1 July 2015, Euroz Limited acquired 100% of the issued share capital of Entrust Private Wealth Management Pty Ltd (“Entrust”) for the total consideration of 5.45m Euroz shares and $2.35m in cash. Entrust is a leading West Australian based wealth management business. Entrust will provide valuable wealth management and strategic financial planning support for the entire Euroz Group. The fair values in relation to the acquisition are unaudited at this stage. Other than this matter, the Directors are not aware of any other matter or circumstance subsequent to 30 June 2015 that has significantly affected, or may significantly affect: (a) (b) (c) the consolidated group’s operations in future financial years: or the results of those operations in future financial years: or the consolidated group’s state of affairs in future financial years. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements62 Note 32. Reconciliation of cash flows from operating activities (Loss)/Profit for the period Adjustments for: Depreciation and amortisation Share based payments Unrealised loss/(gain) arising from fair value of investment entities Dividends received from investment entities (investing activity) Write-off of fixed assets Write-off of investments Changes in assets and liabilities Decrease/(increase) in trade and other receivables Decrease/(increase) in other current assets Decrease/(increase) in inventories Decrease/(increase) in deferred tax assets Increase/(decrease) in trade and other payables Increase/(decrease) in current tax liabilities Increase/(decrease) in deferred tax liabilities Increase/(decrease) in provisions (excluding dividends) 15 $ 14 $ (7,130,652) 26,547,100 116,253 391,197 845,543 266,978 20,111,346 (13,892,168) (5,151,190) (5,572,639) 131,977 15,000 - - (461,664) 112,833 (147,617) (73,932) (2,583,844) (2,185,543) (4,134,688) (333,128) 1,775,611 54,812 (2,542,551) 1,679,058 (2,644,285) 126,980 2,950,111 198,967 Net cash (used in)/from operating activities (3,976,416) 12,446,281 Note 33. Credit facilities Unrestricted access was available at reporting date to the following lines of credit: Credit standby arrangements Bank overdrafts Unused at reporting date Bank overdrafts 15 $ - - 14 $ 20,000,000 20,000,000 Euroz Securities Ltd, a wholly owned subsidiary of Euroz Limited, has a bank overdraft facility as at 30 June 2014 for up to $10,000,000. The facility may be drawn down at any time, is repayable on demand and interest is incurred at the standard variable rate. The facility is secured by a fixed and floating charge over the assets of Euroz Limited and Euroz Securities Limited. These credit facilities have been cancelled during the 2015 financial year. EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 34. Earnings per share Basic earnings per share Diluted earnings per share 63 14 CENTS 18.29 18.27 14 15 CENTS (4.66) (4.66) 15 WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share. NUMBERS NUMBERS 152,973,466 145,166,494 Weighted average number of ordinary shares and potential ordinary shares (including treasury shares) used as the denominator in calculating diluted earnings per share. 153,077,010 145,299,592 The profit after tax figures used to calculate the earnings per share for both the basic and diluted calculations was the same as the profit figure from income statement. EUROZ ANNUAL REPORT 2015Notes to the Financial Statements64 Note 35. Deed of cross guarantee The following entities are party to a deed of cross guarantee entered into on 19 June 2015 under which each company guarantees the debts of the others: Euroz Limited Blackswan Equities Ltd By entering into the deed, the wholly-owned entity has been relieved from the requirement to prepare financial statements and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’). The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by Euroz Limited, they also represent the ‘Extended Closed Group’. Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position of the ‘Closed Group’. CLOSED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue Unrealised loss on investments Employee benefits expense Depreciation and amortisation expenses Regulatory expenses Consultancy expenses Conference and seminar expenses Brokerage and underwriting expense Communication expenses Carrying amount of principal trading securities sold Other expenses Loss before income tax expense Income tax benefit Loss after income tax expense for the year Other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the year 2015 $ 8,308,822 (20,872,520) (423,276) (2,759) (165,034) (151,158) (7,391) (46,196) (6,470) (65,800) (114,993) (13,546,775) 5,994,854 (7,551,921) - - (7,551,921) EUROZ ANNUAL REPORT 2015Notes to the Financial StatementsNote 35. Deed of cross guarantee (continued) CLOSED GROUP STATEMENT OF FINANCIAL POSITION CURRENT ASSETS Cash and cash equivalents Inventories Other current assets Total current assets NON-CURRENT ASSETS Plant and equipment Investments Financial liabilities Deferred tax assets Total non-current assets Total assets CURRENT LIABILITIES Trade and other payables Short term provisions Total current liabilities Net assets EQUITY Issued capital Reserves Retained earnings Total equity 65 2015 $ 22,819,524 2,527,149 42,288 25,388,961 9,998 77,219,309 8,495,488 3,872,562 89,597,357 114,986,318 167,561 5,192,129 5,359,690 109,626,628 99,510,043 653,657 9,462,928 109,626,628 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements66 Note 36. Parent entity disclosures Financial position Assets Current assets Non-current assets Total assets LIABILITIES Current liabilities Total liabilities EQUITY Issued capital Retained earnings RESERVES Share based payment reserve Asset revaluation reserve Option premium reserve Total equity Financial performance Profit/(loss) for the year Other comprehensive income Total comprehensive income Note 37. Company details The registered office and principal place of business address of the company is: Euroz Limited Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 . 15 $ 14 $ 21,682,004 29,394,171 92,915,425 105,315,498 114,597,429 134,709,669 5,218,054 16,066,994 - 5,218,054 2,744,112 18,811,105 99,324,043 90,734,570 9,401,675 24,711,016 653,657 266,978 - - - 186,000 109,379,375 115,898,564 (7,609,174) 27,744,525 - - (7,609,174) 27,744,525 EUROZ ANNUAL REPORT 2015Notes to the Financial Statements Directors’ Declaration 67 The Directors declare that: 1. The financial statements, notes and additional disclosures included in the Directors’ report and designated as audited, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and Corporations Regulations 2001; (b) give a true and fair view of the company’s and consolidated group’s financial position as at 30 June 2015 and of their performance for the year ended on that date; (c) the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the financial statements. 2. The Chief Executive Officer and Chief Financial Officer have declared in accordance with section 295A of the Corporations Act 2001 that: (a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with Accounting Standards; and (c) 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. 4. At the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 35. This declaration is made in accordance with a resolution of the Board of Directors. Andrew McKenzie Director Doug Young Director 14 August 2015 EUROZ ANNUAL REPORT 2015 68 Independent Auditor’s Report Accounting, Financial and Business Advisory Tel: 61 8 9426 8999 | Fax: 61 8 9426 8900 | www.pkfmack.com.au PKF Mack | ABN 74 254 453 660 4th Floor, 35 Havelock Street | West Perth | Western Australia 6005 | Australia PO Box 609 | West Perth | Western Australia 6872 | Australia PKF Mack is a member of the PKF International Limited network of legally independent member firms. PKF Mack is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF Mack does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. EUROZ ANNUAL REPORT 2015 Page | 56 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EUROZ LIMITED Report on the Financial Report We have audited the accompanying financial report of Euroz Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of 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 Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.Independent Auditor’s Report 69 Accounting, Financial and Business Advisory Tel: 61 8 9426 8999 | Fax: 61 8 9426 8900 | www.pkfmack.com.au PKF Mack | ABN 74 254 453 660 4th Floor, 35 Havelock Street | West Perth | Western Australia 6005 | Australia PO Box 609 | West Perth | Western Australia 6872 | Australia PKF Mack is a member of the PKF International Limited network of legally independent member firms. PKF Mack is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF Mack does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. EUROZ ANNUAL REPORT 2015 Page | 57 Opinion In our opinion: (a) the financial report of Euroz Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. . Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2015. 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. Opinion In our opinion, the Remuneration Report of Euroz Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. PKF MACK SIMON FERMANIS PARTNER 14 AUGUST 2015 WEST PERTH, WESTERN AUSTRALIA 70 Shareholder Information Distribution of Shareholders Ordinary fully paid shares (total) as of 31 Aug 2015 RANGE 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 Rounding Total TOTAL HOLDERS UNITS % OF ISSUED CAPITAL 323 524 308 777 180 136,966 1,554,914 2,483,839 26,909,860 129,844,741 2,112 160,930,320 UNMARKETABLE PARCELS Minimum $ 500.00 parcel at $ 0.90 per unit MINIMUM PARCEL SIZE 556 HOLDERS 218 Top 20 Shareholders RANK NAME 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. ZERO NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ICE COLD INVESTMENTS PTY LTD MR SIMON DAVID YEO + MRS JENNIFER DALE YEO ICE COLD INVESTMENTS PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED MR ANDREW WILLIAM MCKENZIE + MRS CATHERINE PATRICIA MCKENZIE MR ROBERT HIRZEL BLACK NAVIGATOR AUSTRALIA LTD ICON HOLDINGS PTY LTD WESTRADE RESOURCES PTY LTD ICE COLD INVESTMENTS PTY LTD REEF INVESTMENTS PTY LTD MRS FRANCES ELIZABETH YUKICH MRS CATHERINE ELIZABETH KANE MR GREGORY CHESSELL + MRS MELANIE CHESSELL CITICORP NOMINEES PTY LIMITED ARDEN HOLDINGS PTY LTD HILLBOI NOMINEES PTY LTD 20. CPU SHARE PLANS PTY LTD Total Total Remaining Holders Balance UNITS 34,656,309 6,177,126 3,707,000 3,000,000 2,800,000 2,847,493 2,699,339 2,650,866 2,819,029 2,480,151 2,035,269 2,000,000 1,920,954 1,869,124 1,585,050 1,582,661 1,656,715 1,363,318 1,289,540 1,263,879 80,528,058 80,402,262 0.09 0.97 1.54 16.72 80.68 0.00 100.00 UNITS 47434 % 21.58 3.85 2.30 1.86 1.78 1.78 1.72 1.69 1.69 1.54 1.33 1.24 1.19 1.16 1.00 0.98 0.90 0.85 0.80 0.79 50.04 49.96 EUROZ ANNUAL REPORT 2015 EUROZ ANNUAL REPORT 2015 71 Euroz Limited contact details EUROZ SECURITIES LIMITED Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9488 1400 F: +61 8 9488 1477 euroz.com Euroz Securities Limited ACN 089 314 983 AFSL 243302 Stockbrokers Participant of the ASX Group Authorised to provide financial services WESTOZ FUNDS MANAGEMENT PTY LTD Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9321 7877 F: +61 8 9321 8288 westozfunds.com.au Westoz Funds Management Pty Ltd ACN 106 677 721 AFSL 285607 OZGROWTH LIMITED Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9321 7877 F: +61 8 9321 8288 ozgrowth.com.au Ozgrowth Limited ACN 126 450 271 WESTOZ INVESTMENT COMPANY LIMITED Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9321 7877 F: +61 8 9321 8288 westoz.com.au Westoz Investment Company Limited ACN 113 332 942 PRODIGY INVESTMENT PARTNERS LIMITED Level 23, Goldfields House 1 Alfred Street Sydney 2000 New South Wales T: +61 2 8651 3490 Prodigy Investment Partners ACN 600 471 430 AFSL 466173 FLINDERS INVESTMENT PARTNERS PTY LTD Level 15, 385 Bourke Street Melbourne 3000 Victoria T +61 3 9909 2690 flinderinvest.com.au Flinders Investment Partners Pty Ltd ACN 604 121 271 AFSL 466173 Flinders Investment Partners Pty Ltd is a Corporate Authorised Representative of Prodigy Investment Partners. ENTRUST PRIVATE WEALTH MANAGEMENT PTY LTD Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5034 Perth 6831 Western Australia T: +618 9476 3900 F: +618 9321 6333 E: info@entrustpwm.com.au entrustpwm.com.au Entrust Private Wealth Management Pty Ltd ACN 100 088 168 AFSL 222152 Level 18, Alluvion 58 Mounts Bay Road Perth 6000 Western Australia PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9488 1400 F: +61 8 9488 1477 euroz.com Euroz Limited ACN 000 364 465 1 2 7 6 1 _ O R U E y b d e n g s e D i

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