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Affiliated Managers Group2011 AnnuAl RepoRt
01 ChAiRmAn’s letteR
02
investment RepoRt
04 DiReCtoRs’ RepoRt
13 FinAnCiAl stAtements
41 CoRpoRAte GoveRnAnCe stAtement
50 ADDitionAl AsX inFoRmAtion
Katana Capital will combine its listed
investment company structure with the
proven ability of its Manager (“Katana Asset
Management Ltd”) to provide investors
with access to comprehensive investment
techniques aimed at providing strong capital
and income returns.
The Company and the Manager share similar
investment philosophies. The role of the
Company is to assess and monitor the Manager
and liaise with the Manager with respect to
its Mandate as detailed in the Management
Agreement. In addition, the Company will
seek to identify appropriate investment
opportunities for review by the Manager.
Our investment philosophy
As an ‘All Opportunities’ fund, the underlying goal of the Manager
is to assess the risk adjusted return of every potential opportunity
identified by the Manager. The Manager’s intended approach
includes selectively and modestly taking higher-risk positions,
provided that the potential return exceeds the additional risk –
preferably in terms of both value and time.
Whilst the Manager intends to combine the best principles of value
investing, fundamental and technical analysis, it does not wish to
be constrained by the constructs of any one approach. The key to
the long-term success of the Company is seen as the capacity of the
Manager to integrate the best principles of each discipline with the
extensive and varied experiences of the Manager.
This is achieved by encouraging flexibility and adaptability, but
within the confines of an overall framework that controls risk.
Corporate Directory
Katana Capital Limited
ABN 56 116 054 301
Directors
Dalton Gooding
Peter Wallace
Giuliano Sala Tenna
Company Secretary
Gabriel Chiappini
Registered Office
Level 36, Exchange Plaza
2 The Esplanade
Perth, Western Australia 6000
Telephone (08) 9220 9808
(08) 9326 7676
Facsimile
www.katanacapital.com.au
Share Registry
Computershare Investor Services Pty Ltd
Level 2, 45 St George’s Terrace,
Perth WA 6000
Telephone (08) 9323 2000
(08) 9323 2033
Facsimile
Auditor
Ernst & Young
The Ernst & Young Building
11 Mounts Bay Road
PERTH WA 6000
ASX Code: KAT
ChAIrMAn’s
LeTTer
Dear Shareholder
The Financial Year ended 30 June 2011 (FY11) saw a continuation
in the stability of our local equity market. Although during Q4 FY11
and post 30 June we have witnessed an increase in volatility on the
back of the European Currency, Debt and Bank difficulties coupled
with a potential slow-down in the global economy. During FY11
your company posted an after tax net profit of $3.94m.
As Chairman of Katana Capital I am pleased to report that in
FY11 Katana out-performed the All Ordinaries Index again, this is
the 6th time since our listing on the ASX that your company has
out-performed the Index. In percentage terms and before General
and Administrative expenses, the portfolio generated a return of
19.1% compared to the All Ordinaries Index return of 7.75%.
As noted, the Company reported a FY11 after tax net profit of
$3.94m and with current cash reserves of approximately $10.5m
or 30% of the value of the portfolio, we believe the Fund Manager
has placed your Company in a strong and resilient position to
move with and take advantage of the expected volatility in global
and domestic markets.
The Company, via its Fund Manager Katana Asset Management,
continues to have a focused long term investment philosophy
which includes energy, (via thermal coal, liquefied natural gas,
uranium and oil), resources and wealth management businesses
that have strong cash flows, pricing power and robust business
models, as reflected in our top 10 holdings.
The Company continues to have complete confidence in the
Fund Manager concerning the ongoing management of the
investment portfolio. On behalf of your board we would also
like to take this opportunity to thank the Fund Manager for
Outstanding performance since listing on the ASX.
On behalf of the Board of Directors I would also like to thank you
for your continued support of the Company throughout this year.
Yours sincerely
Dalton Gooding
Chairman
01
Katana Capital limited 2011 AnnuAl RepoRt Katana Asset Management Ltd as manager (‘Manager’)
for Katana Capital Limited (‘Company’) is pleased to attach
a report on the performance of the Company’s portfolio for
the 12 months to June 30th 2011.
InvesTMenT
repOrT
The MAnAger Is OnCe
AgAIn DeLIghTeD wITh
The perfOrMAnCe Of The
funD ThrOughOuT The
2011 fInAnCIAL yeAr.
In percentage terms, the portfolio yielded a gross investment return
of 19.10% before operating expenses and tax. The Company’s stated
benchmark - the All Ordinaries index – returned 7.75% over the same
period. This is a significant relative outperformance of 146%.
Katana Capital Ltd listed in December 2005. Since listing, the Manager
has outperformed the All Ordinaries index during each and every
financial year. During this 6-year period, the Manager has produced an
average gross investment return of 12.11% pa versus 1.35% pa for the
All Ordinaries index. This is an excellent achievement, yielding an
average outperformance of 84%per annum.
Year
Ending
2006
2007
2008
2009
2010
2011
Average
Katana Gross
Investment
Return
9.95%
49.03%
-6.41%
-23.57%
24.54%
19.10%
12.11%
All Ords
Index
Out
Performance
6.90%
25.36%
-15.49%
-25.97%
9.55%
7.75%
1.35%
44.20%
93.34%
58.62%
9.24%
156.96%
146.45%
84.80%
The following bar chart clearly summarises this continuous track record
of out-performance by the Manager.
Katana outperformance over All Ords Index
25.00%
20.00%
15.00%
10.00%
5.00%
E
c
n
A
m
R
O
F
R
E
P
t
u
O
%
YEAR
2006
2007
2008
2009
2010
2011
02
The continuous yearly out-performance has contributed to a
significant cumulative outperformance when taken across this
period. As the following chart indicates, even against the
All Ordinaries Accumulation index (i.e. All Ordinaries index
including dividends), the Manager has achieved nearly 3 times
the performance of the general market.
Katana Performance versus All Ordinaries
Accumulation Index as at 30th June 2011
100%
80%
60%
40%
20%
0%
-20%
-40%
Katana
All Ordinaries
A
p
r
L
I
2
0
0
6
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2
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6
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r
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J
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L
Y
2
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0
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O
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T
O
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A
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Y
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8
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r
L
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1
1
2011 Financial Year Review
The All Ordinaries index started the 2011 FY at 4325 and enjoyed a
solid rally until early March testing the 5,000 level. During this period
the Manager took advantage of the positive market sentiment
to exit and/or trim some illiquid and small capitalized companies
and increase positions in companies for which the Manager has a
greater conviction. As a result, the number of companies held in the
portfolio reduced from 72 to 64.
The market experienced its first decent pullback for the year when
the tragic events of an earthquake/ tsunami/ nuclear disaster hit
Japan which then triggered a mini correction. During this relatively
small correction the Manager moved from circa 20% cash holdings
to under 10% cash. The subsequent rally that followed witnessed the
Manager reversing the low cash position back to approximately 20%
in the month of April.
The Manager held an above average cash balance for much of the
year due to macro concerns, most of which still remain and in fact
have heightened at the time of this report. In particular the rapid
appreciation of the AUD over the last 12 months - from $0.84 to
AUD $1.07 - has had a pronounced impact on a cross-section of
industries. Furthermore the Manager remained concerned regarding
European sovereign debt issues, US economic growth slowing and
US National debt starting to concern global markets, whilst the
previously impervious Chinese economy experienced an escalating
bout of inflation. Domestically, Australia experienced the split effects
of a two speed economy with residential housing, retail, education,
manufacturing, tourism and finance suffering whilst miners, mining
services and oil and gas businesses continued to enjoy boom times.
These issues were exacerbated by a minority Federal Government
which caused great anxiety amongst investors through a raft of
ill-conceived and poorly reviewed policy announcements.
Katana Capital limited 2011 AnnuAl RepoRt
top 10 current Holdings
O
I
l
O
F
t
R
O
P
l
A
t
O
t
F
O
%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
ASX cOdE
MIN
bHp
rIO
WpL
GCS
FMG
IMF
bFG
IMFG
WbC
The Fund still has maintained a large position in Mineral resources
Limited (MIN). The MIN position returned over 42% for the financial
year however the position has been capped at 12% of the portfolio
in accordance with the Manager’s investment guidelines. In essence
the Manager has been reducing the position of MIN as the share price
has appreciated but maintaining a similar percentage position in the
portfolio. The Manager still believes the MIN story is in a strong growth
phase backed by exceptional management. However, prudent risk
management dictates mandatory portfolio limits.
It is worth mentioning that during the financial year the Fund held
less than 3% exposure to the discretionary retail sector and has
remained significantly underweight the banking sector. The only
notable exposure to the retail sector has been with the Automotive
Holding Ltd position which currently is trading on a yield of over
7% fully franked.
The Manager’s continued outperformance has been partly due
to solid company analysis which assists in not only finding sound
investments but also avoiding companies which may detract
value from the portfolio. The robust company filter tests which
the Manager overlays with the macro environment have helped
enhance the quality of the portfolio.
The ongoing bias towards the resource sector contributed to the
Fund’s out performance over the All Ordinaries index. This bias is
reflected in the Funds top ten holdings which include bHp Ltd,
rio Tinto Ltd, Fortescue Metals Groups Ltd and Mineral resources
Ltd. The Manager until recently has believed that the resource
sector and the resource-servicing sector would continue to provide
investors with superior returns. This is based on the view that
Chinese economic growth continues to be driven by the ongoing
urbanisation and industrialisation of the rural population. This view
which the Manager has held since the Fund’s inception in 2005 is
currently under review.
As at the close of the 2011 financial year, cash reserves totalled
approximately 20% of the value of the portfolio.
Outlook
Looking forward the Manager believes the consumer is still
deleveraging which is supported by the data illustrating that the
national savings rate is at a 20 year high. This trend has a material
impact on consumer spending and credit growth and hence the
manager’s underweight positions in retail companies and the
bank sector.
Despite current weak US economic data, the manager believes the
US recovery (albeit tepid) remains intact and expects the data to
improve in the second half of this year. This recovery will be assisted by
lower oil prices and an extended period of record low interest rates.
The rebuilding of the Japanese economy post the earthquake/tsunami
will put further demand side pressures on commodities such as iron ore,
coal (coking & thermal) and copper. The Chinese inflationary pressures
have largely been the result of food prices (temporary) and housing
(policy responses addressing developments). However, the Manager is
currently reviewing their long held bullish thesis on China. If inflation in
Asia has peaked then there will be a case for holding back any further
interest rate rises. This would be positive for economic growth in Asia.
Europe will continue to be a cause of significant problems.
The undercapitalized banks, anaemic economic growth in some
European countries and the ongoing default concerns with the pIIGS
(portugal, Ireland, Iceland, Greece and Spain) will plague investor and
consumer confidence and hamper world economic growth.
The manager is reminded that at times like these patience is truly a
virtue and that sometimes the best thing to do is to do nothing at all.
While valuations remain at historically cheap levels on a number of
measures the manager will look for greater certainty before deploying
fresh capital.
corporate
During the 2011 financial year the company bought back 1,162,154
KAT shares under the share buyback scheme. This reduced the number
of share on issue from 40,703,119 shares to 39,540,965 shares over the
period. The average price at which the shares were purchased was
77 cents. This will increase the underlying value for all new and
remaining shareholders.
The Fund has also moved towards paying dividends on a quarterly basis.
For the 2010/11 financial year Katana Capital Ltd paid 4.25 cents fully
franked. It is encouraging for the Manager that approximately 46% of
shareholders have registered to participate in the dividend reinvestment
program (Drp).
Much has been written about the discount to NTA for many Listed
Investment Companies (LICs). However it is worth highlighting many of
the benefits of Listed Investment Companies. These include:
•
•
•
•
LICs can provide a steady flow of franked dividends
the ongoing management expense ratios (MERs) are typically lower
than managed funds
LICs trade on the ASX and hence provide daily liquidity and
Because LICs are a ‘closed ended’ fund, the fund managers is never a
forced seller due to redemptions.
This last point in particular is very important.
Brad Shallard
Romano Sala Tenna
Investment Managers
Katana Asset Management Limited
03
Katana Capital limited 2011 AnnuAl RepoRt
DIreCTOrs’
repOrT
yOur DIreCTOrs presenT TheIr repOrT wITh
respeCT TO The resuLTs Of KATAnA CApITAL
LIMITeD (The “COMpAny” Or “KATAnA CApITAL”)
AnD ITs COnTrOLLeD enTITIes (The “grOup”)
fOr The yeAr enDeD 30 June 2011 AnD The sTATe
Of AffAIrs Of The COMpAny AT ThAT DATe.
04
directors
The following persons were directors of Katana Capital Limited during
the whole of the financial year and up to the date of this report:
Information on directors
Dalton Leslie Gooding BBus, FCA.
(Non-Executive Chairman)
Mr Gooding was appointed to the board on 11 November 2005.
Mr Gooding, formerly a long-standing partner at Ernst & Young, is
a Fellow of the Institute of Chartered Accountants in Australia. He
is currently the managing partner of Gooding partners and advises
to a wide range of businesses with particular emphasis relating
to taxation and accounting issues, due diligence, feasibilities and
general business advice. Mr Gooding also has a number of other
directorships of companies in many different segments of business.
During the past four years Mr Gooding has also served as a director
of the following other listed companies:
Anatolia Energy Limited - appointed 29 November 2002
(resigned March 2011)
SIpA resources Limited - appointed 1 May 2003
Avita Medical Limited - appointed 14 November 2002
brierty Limited - appointed 26 October 2007
Peter Wallace SF Fin, FAICD, AFAIM.
(Non-Executive Director)
Mr Wallace was appointed to the board on 19 September 2005.
Mr Wallace has had 43 years in the banking and Finance industry
with experience gained in all aspects of debt and equity raising.
past Executive positions held include COO of a major regional
bank as well as Chief Credit Officer and other General Management
roles. Most recently as Head of Corporate Advisory for bell potter
Securities Ltd and directed the capital raisings for several large public
companies as well as providing a variety of Corporate Advisory
services to a wide range of companies, both private and publicly
owned. During the past three years Mr Wallace has also served as a
director of the following other listed companies:
paladio Group Limited - appointed 25 October 2005,
resigned 23 April 2009
ruralAus Investments Limited - appointed 12 July 2005,
resigned 20 November 2009
Neptune Marine Services Limited - appointed 8 July 2011
Giuliano Sala Tenna BCom, FFIN, GAICD.
(Non-Executive Director)
Mr Sala Tenna was appointed to the board on 19 September 2005.
Mr Sala Tenna has worked in the Finance Industry for over 14 years in
various fields and is currently on the Institutional Equity Desk at bell
potter Securities, one of Australia’s largest full service stockbroking firms.
Mr Sala Tenna has completed a bachelor of Commerce degree at
Curtin University of Technology with a double major in Economics
and Finance graduating with Distinctions, the Graduate Diploma in
Financial planning at the Financial Services Institute of Australasia,
the Company Directors Course at the Australian Institute of
Company Directors and is an ASX Derivatives Accredited Adviser.
Mr Sala Tenna is a Member of the Golden Key National Honour
Society, a Graduate Member of the Australian Institute of Company
Directors and a Fellow of the Financial Services Institute of Australasia.
Katana Capital limited 2011 AnnuAl RepoRt company Secretary
Gabriel Chiappini BBus, GAICD, CA
Mr Chiappini has been Company Secretary since 14 November 2005.
Mr Chiappini has worked in Chief Financial Officer and Company
Secretarial roles in both local and international environments and
also holds the position of Company Secretary with several ASX
listed and unlisted companies. Mr Chiappini has experience in
diverse and varied industry sectors including Investment banking
(UK), property Development & Investment (UK), Oil & Gas (Australia),
Telecommunications (Australia) and biotechnology (Australia).
committee membership
As at the date of this report the Company had an Audit and
Compliance Committee.
Members acting on the Audit and Compliance Committee of the
board at the date of this report are:
peter Wallace (Chairman of Committee)
Dalton Gooding
Giuliano Sala Tenna
directors’ meetings
The numbers of meetings of the Company’s board of Directors and
of each board Committee held during the year ended 30 June 2011,
and the numbers of meetings attended by each director were:
Meetings of coMMittees
directors’
meetings
Audit and
compliance
Dalton Gooding
peter Wallace
Giuliano Sala Tenna
no. Shares
30 June 2011
100,000
300,000
100,000
directors’ interest in Shares and Options
As at the date of this report, the interest of the directors in the shares
and options of the Company are
Dalton Gooding
peter Wallace
Giuliano Sala Tenna
A = Number of meetings attended
A
7
7
7
B
7
7
7
A
2
2
2
B
2
2
2
b = Number of meetings held during the time the director held office or was a member
of the committee during the year
Earnings Per Share
(a) Basic earnings per share
Earnings from continuing operations attributable to the
ordinary equity holders of the company
There are no options outstanding as at 30 June 2011.
30 June 2011
cents
30 June 2010
Cents
9.78
12.89
The weighted average number of ordinary shares on issue used in the calculation of basic earnings per share was 40,278,811 (2010: 41,177,638).
There are no dilutive securities on issue as at 30 June 2011.
dividends
The following dividends have been paid by the Company or declared by the directors since the commencement of the financial year ended
30 June 2010:
Final ordinary dividend for the year ended 30 June 2010 of 1.25 cents (2009 - 0.005 cents)
per fully paid share paid on 4 October 2010
Interim ordinary dividend for the year ended 30 June 2011 of 1.00 cents (2010 - 1.5 cents
per fully paid share paid paid 6 December 2010
Interim ordinary dividend for the year ended 30 June 2011 of 1.00 cents
per fully paid share paid paid 28 February 2011
Interim ordinary dividend for the year ended 30 June 2011 of 1.00 cents
per fully paid share paid paid 4 May 2011
30 June 2011
$
30 June 2010
$
505,700
404,560
401,382
397,752
1,709,394
202,472
614,024
-
-
816,496
05
Katana Capital limited 2011 AnnuAl RepoRt
Directors’ report
30 JuNE 2011
corporate Information
The Company was incorporated on 19 September 2005. During
the 30 June 2007 financial year it incorporated a wholly owned
subsidiary Kapital Investments (WA) pty Ltd.
Katana Capital Limited is incorporated and domiciled in Australia.
The registered office is located at 2 The Esplanade, perth, WA 6000,
Australia.
Principal activity
The principal activity of the Group is that of an Investment Company
with an ‘all opportunities’ investment strategy.
Employees
As at 30 June 2011, the Group did not have any full time employees
(2010: Nil).
Operating and Financial Review
company overview
Katana Capital was incorporated in September 2005 as a listed
investment company providing shareholders with access to the
investment services of Katana Asset Management Limited (“Fund
Manager”). The Fund Manager employs a benchmark unaware long
only Australian Equities investment philosophy with active use of
cash holdings as a defensive mechanism within the portfolio to
deploy into market weakness. The portfolio does not incorporate
gearing, derivatives or short selling of securities.
The Fund Manager was encouraged with the performance of
Katana throughout the 2011 financial year. In percentage terms,
the portfolio yielded a gross investment return of 19.1% before
operating expenses and tax. The Company’s stated benchmark - the
All Ordinaries index – returned 7.75% over the same period. This is a
significant relative out performance of 146%.
Operating results for the year
The profit before tax for the year was $5,135,547 (2010: $7,158,111)
and profit after tax for the year was $3,940,477 (2010: $5,308,691).
Operating costs for the year were kept to a minimum, with
administration costs (exclusive of Fund Manager’s fees) coming in at
1.81% of funds under management (2010: 1.53%).
Investments for future performance
The Fund Manager will continue to:
remain overweight mining and mining services while taking some
select overweight positions in wealth management companies.
Continue to use cash as a defensive holding within the portfolio to
deploy into market weakness
be prepared to remain very active regarding stock turnover within
the portfolio. The Fund Manager remains of the view that we are in
a range bound market and hence should continue to buy the dips
and sell the peaks.
debt issues may ultimately play out in Europe, what the United
States continual growth in debt means along with inflationary
expectations and monetary policy considerations.
capital structure
There were no listed options converted into fully paid ordinary
shares during the year.
cash from operations
Net cash flows from operations was $709,207 during the year which
reflects the Group’s investment from the Australian equities market.
Net cash flows for the financial year ending 30 June 2012 are
expected to increase subject to the Group continuing to take
advantage of opportunities within the Australian equities market
and the general performance of the market.
liquidity and funding
The Company foresees no need to raise additional equity and will use
its remaining cash reserves to invest into the Australian equities market
along with continuing dividend payments and share buybacks.
Risk management
The board is responsible for overseeing the establishment and
implementation of an effective risk management system and
reviewing and monitoring the Group’s application of that system.
Implementation of the risk management system and day to day
management of risk is the responsibility of the Fund Manager. The
Fund Manager is primarily responsible for all matters associated
with risk management associated with the Equity Markets and
Investment of the Group’s funds and has formalised an Investment
Committee that meets on a regular basis to review the Group’s
investments.
Significant changes in state of affairs
In the opinion of the directors, there were no significant changes in
the state of affairs of the consolidated entity that occurred during
the year.
Significant changes after balance date
A final fully franked dividend of 1.25 cents for the 30 June 2011
financial year was declared on 29 August 2011 by the Group.
Following 30 June 2011 the Australian and Global Equity markets
experienced it’s most volatile period since the 2008 Global
Financial Crisis. The Company is happy to report that it entered
this period with approximately 25% of the portfolio in cash which
was subsequently deployed into the market weakness as attractive
valuations appeared. The Company remains comfortable with its
current cash reserves to meet all dividend and operating expenses.
Other than the above, the Directors are not aware of any other
matter or circumstance that has arisen since 30 June 2011 that has
significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years, or
The Fund Manager believes now more than ever that macro events
are driving individual stock returns and hence is spending more time
in consideration of the future prospects for China, how Sovereign
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
06
Katana Capital limited 2011 AnnuAl RepoRt Environmental regulation and performance
The principal activities of the Group are not subject to any significant
environmental regulations.
Share options
unissued shares
There were no options outstanding as at 30 June 2011.
Shares issued on the exercise of options
There were no options exercised during the financial year to acquire
fully paid ordinary shares in the Group.
Options granted as remuneration
There were no options granted as remuneration.
07
Katana Capital limited 2011 AnnuAl RepoRt Directors’ report
30 JuNE 2011
Remuneration Report (Audited)
This remuneration report outlines the director and executive
remuneration arrangements of the Company and Group in
accordance with the requirements of the Corporations Act 2001 and
its regulations. For the purposes of this report, key management
personnel (KMp) of the Group are defined as those persons having
authority and responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly, including
any director (whether executive or otherwise) and includes the five
executives in the Group and group receiving the highest remuneration.
This report outlines the remuneration arrangements in place for
directors of Katana Capital. Katana Capital at this early stage of its
development does not employ executive directors and does not
have a Managing Director or a Chief Executive Officer. The Company
has outsourced the management of the investment portfolio to
the Fund Manager, Katana Asset Management Ltd. Katana Asset
Management Ltd reports directly to the board and is invited to
attend all board meetings to present its investment strategy and to
discuss and review the financial performance of the Group.
(a) Details of Key Management Personnel
The following persons were directors of Katana Capital Limited
during the financial year:
(i) Chairman ‑ non‑executive
Dalton Gooding
(ii) Non‑executive directors
peter Wallace
Giuliano Sala Tenna
(b) Other key management personnel
In addition to the Directors noted above, Katana Asset
Management Limited, the Fund Manager for the Group, is
considered to be Key Management personnel with the authority
for the strategic direction and management of the investments
of the Group. The directors of Katana Asset Management
Limited are brad Shallard and romano Sala Tenna.
Officer
The company secretary is an officer of the Company but is not
considered to be a key management person as he does not have
the authority and responsibility for planning, directing or controlling
the activities of the Group and is not involved in the decision making
process, with his main duties being aligned to his compliance function.
Remuneration philosophy
The performance of the Group depends upon the quality of its
directors. To prosper, the Group must attract, motivate and retain
skilled non-executive directors.
As a result of the independence and separation of Non
Executive Directors’ role of providing guidance and overview, the
remuneration policy of the directors is not linked to company
performance. However, Katana Asset Management Ltd’s
performance fees and management fees are linked directly to the
performance of the Company.
The Company does not have a remuneration committee.
The board of Directors acts as the remuneration Committee
and is responsible for determining and reviewing compensation
08
arrangements for the Company. The board will assess the
appropriateness of the nature and amount of emoluments of such
officers on a periodic basis, by reference to relevant employment
market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality board.
The Company does not have a policy that prohibits Directors
and Executives from entering into arrangements to protect the
value of unvested options. This includes entering into contracts to
hedge their exposure to options or shares granted as part of their
remuneration package.
Remuneration structure
In accordance with best practice corporate governance, the
structure of non-executive director and senior management
remuneration is separate and distinct.
(i) Non‑executive director remuneration
Objective
The board seeks to set aggregate remuneration at a level
which provides the Group with the ability to attract and retain
Directors of the highest calibre, whilst incurring a cost which is
acceptable to shareholders.
Structure
The constitution and the ASX listing rules specify that the
aggregate remuneration of non-executive directors shall be
determined from time to time by a general meeting. An amount
not exceeding the amount determined is then divided between
the directors as agreed. At present the aggregate remuneration
totals $200,000 per year in respect of fees payable to non
executive directors. This amount was approved by shareholders
at the annual general meeting held on the 10 November 2005.
The amount of aggregate remuneration, including the issue of
options sought to be approved by shareholders and the manner
in which it is apportioned amongst directors, is reviewed
annually. The board considers advice from external consultants
as well as the fees paid to non-executive directors
of comparable companies when undertaking the annual
review process.
The board considers that the majority of the Group’s
performance lies with the fund manager.
Each director receives a fee for being a director of the Group and
includes attendance at board and Committee meetings. Any
additional services provided are charged at a daily rate agreed in
advance by the Chairman.
The remuneration of non-executive directors for the year ended
30 June 2011 is detailed in Table 1 of this report.
(ii) Senior manager and executive director remuneration
As previously noted the Company at present does not employ
any executive directors or senior management. If the Company
chooses in the future to employ executive directors the
Company will review the remuneration packages.
Employment contracts
As noted above the Group does not currently employ any
executive directors or senior management, it does however
have an agreement in place with Katana Asset Management Ltd
to provide the Group with investment management services.
Katana Capital limited 2011 AnnuAl RepoRt
(iii) Compensation by other Key Management Personnel
No amount is paid by the Group directly to the Directors
of Katana Asset Management Limited. Consequently, no
compensation is paid by the Group to the Directors of Katana
Asset Management Limited as Key Management personnel.
Compensation is paid to the Fund Manager in the form of fees
and the significant terms of the agreement and the amount of
compensation is disclosed below.
The Company has entered into the Management Agreement
with the Fund Manager with respect to the management of the
portfolio. The main provisions of the Management Agreement
are summarised below.
The Management Agreement is for an initial period of 10
years from its commencement date (Initial Term) unless earlier
terminated in accordance with its terms. The commencement
date (Commencement Date) is the date on which the company
listed on the Australian Stock Exchange - 23 December 2005.
The Management Agreement will renew for a further period of
10 years on expiry of the Initial Term if the following conditions
are satisfied:
(1) the Shareholders of the Company approve such renewal by
ordinary resolution
(2) the Fund Manager is not in breach of the Management
Agreement; and
(3) the Fund Manager has not in the reasonable opinion of the
board materially breached the Management Agreement
during the Initial Term.
The Fund Manager may terminate the Management Agreement
at any time by providing a written notice at least three months
prior to termination, if:
(1) at any time during the term:
(a) the Company fails to make payment of the
remuneration in accordance with the Management
Agreement and the failure continues for 21 days from
the delivery of a written notice by the Fund Manager to
the Company requesting payment;
(b) the Company enters into liquidation (except voluntary
liquidation for the purpose of reconstruction);
(c ) the Company is guilty of any gross default, breach, non
observance or non performance of any of the terms and
conditions contained in the Management Agreement; or
(d) a receiver or receiver and manager is appointed to the
whole or part of the undertakings of the Company; and
(2) such notice is given not less than two years after the
commencement of the Initial Term.
The Company may immediately terminate the Management
Agreement if:
(1) the Fund Manager or any of its directors or servants are
found guilty of grave misconduct in relation to the affairs of
the Company;
(2) the Fund Manager’s AFSL is suspended or cancelled at any
time for any reason;
(3) the Fund Manager commits a fundamental default
or breach of its obligations under the Management
Agreement or is in breach of any conditions of its AFSL
and such default or breach is not remedied within 30 days
after the Company has notified the Fund Manager in writing
to remedy that default or breach;
(4) the Fund Manager enters into liquidation (except voluntary
liquidation for the purpose of reconstruction);
(5) a receiver or receiver and manager is appointed to the
whole or part of the undertaking of the Fund Manager;
(6) a change in control of the Fund Manager occurs without
the Fund Manager obtaining at least 30 days prior written
consent from the Company;
(7) the Fund Manager is guilty of any gross default, breach, non
observance or non performance of any of the terms and
conditions contained in the Management Agreement;
(8) the Fund Manager fails to remedy a breach of the
Management Agreement within the time period reasonably
specified in a notice from the Company requiring it to do so;
(9) the Fund Manager persistently fails to ensure that
investments made on behalf of the Company are consistent
with the investment strategy applicable to the Company at
the time the relevant investment is made; or
(10) the Fund Manager is not lawfully able to continue to
provide services to the Company pursuant to the terms of
the Management Agreement.
The Company may, by written notice to the Fund Manager at
any time within six months after the end of any five year period
during the term, terminate the Management Agreement if
Shareholders pass an ordinary resolution to terminate and
the average portfolio return for the five 12 month periods
comprising the relevant five year period is less than the average
percentage increase in the ASX All Ordinaries Index for those
five 12 month periods.
The board on a regular basis reviews the Management
Agreement and Mandate to ensure compliance with the terms
of the agreement.
management and performance fees
Total management and performance fees paid by the Group to
Katana Asset Management Ltd for the year ended 30 June 2011 was
$1,325,709 (30 June 2010: $637,011) as follows:
(1) Management fee
The Fund Manager receives a monthly management fee equal
to 0.104167% of the portfolio value calculated at the end of each
month. The fee for 2011 was $526,598 (2010: $497,511). The
Directors and shareholders of Katana Asset Management Ltd are
also shareholders in Katana Capital Limited.
(2) Performance fee
performance fee to be paid in respect of each performance
calculation period of 18.5% of the amount by which the
Fund Manager outperforms the ASX All Ordinaries during the
calculation period (calculated annually for the 12 month period
ending 30 June). The Fund Manager qualified to receive a
performance fee for the financial year ended 30 June 2011
of $799,111 (2010: $139,500). For the financial year ended
30 June 2010, the Fund Manager qualified to receive a
performance fee but chose to forgo 85% of their performance
fee and accrued only 15% of the total fee payable for the Fund
Manager’s analyst.
09
Katana Capital limited 2011 AnnuAl RepoRt Directors’ report
30 JuNE 2011
company performance
The profit/(loss) after tax for the group from 2007 is as follows:
profit/(loss) after tax expense
Earnings/(Loss) per Share - cents
Share price 30 June
2011
$3,940,477
9.78
$0.84
2010
$5,308,691
12.89
$0.66
2009
2008
($7,711,901)
(18.53)
$0.53
($2,766,949)
(6.64)
$0.96
2007
$7,510,531
30.38
$1.04
Remuneration of directors and Key management personnel of the company and the Group
2011
name
SHORt‑tERm EmPlOYEE BEnEFItS
Salary and fees
Otheri
cash StI
POSt
EmPlOYmEnt
BEnEFItS
lOnG
tERm
BEnEFItS
SHARE
BASEd
PAYmEntS
Super- termination
benefits
annuation
Options
total
Non‑executive directors
Dalton Leslie Gooding
peter Wallace
Giuliano Sala Tenna
Total non-executive directors
Company Secretary
Gabriel Chiappini
Key Management Personnel (KMP)
Katana Asset Management Ltd
Total non-executive directors,
officers & KMp
$
70,000
40,000
40,000
150,000
-
39,000
1,325,709
1,514,709
$
-
-
-
-
-
-
-
-
i Insurance premiums have not been included in other remuneration.
$
-
-
-
-
-
-
-
-
$
6,930
3,600
3,600
14,130
-
-
-
14,130
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
2010
Name
SHOrT‑TErM EMpLOYEE bENEFITS
Salary and fees
Otheri
Cash STI
pOST
EMpLOYMENT
bENEFITS
LONG
TErM
bENEFITS
SHArE
bASED
pAYMENTS
Super- Termination
benefits
annuation
Options
Total
Non‑executive directors
Dalton Leslie Gooding
peter Wallace
Giuliano Sala Tenna
Total non-executive directors
Company Secretary
Gabriel Chiappini
Key Management Personnel (KMP)
Katana Asset Management Ltd
Total key management
personnel compensation
$
70,000
40,000
40,000
150,000
37,500
637,011
824,511
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
6,930
3,600
3,600
14,130
-
-
14,130
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
i Insurance premiums have not been included in other remuneration.
End of remuneration report (audited).
10
% of
remuneration
which is
performance
based
%
-
-
-
-
-
-
$
76,930
43,600
43,600
164,130
-
39,000
1,325,709
100%
1,528,839
-
% of
remuneration
which is
performance
based
%
-
-
-
-
-
$
76,930
43,600
43,600
164,130
37,500
637,011
100%
838,641
Katana Capital limited 2011 AnnuAl RepoRt
Indemnification of directors andOfficers
The total amount of insurance contract premiums paid was $36,741
(2010: $39,650). This amount has not been included in Directors and
Executives remuneration.
Auditor Independence and
non-Audit Services
The Directors have obtained an independence declaration from the
Company’s auditors Ernst & Young as presented on page 12 of this
Annual report.
non-Audit Services
Ernst & Young did not receive any amounts for the provision of
non-audit services.
Signed for and on behalf of the Directors in accordance with a
resolution of the board.
Dalton Gooding
Chairman
27 September 2011
perth, Western Australia
11
Katana Capital limited 2011 AnnuAl RepoRt Directors’ report
30 JuNE 2011
Auditor’s Independence Declaration to the Directors of Katana Capital
Limited
In relation to our audit of the financial report of Katana Capital Limited for the financial year ended 30
June 2011, 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.
Ernst & Young
P McIver
Partner
Perth
27 September 2011
12
PM:MN:KATAN:007
Liability limited by a scheme approved
under Professional Standards Legislation
-12-
Katana Capital limited 2011 AnnuAl RepoRt
fInAnCIAL
sTATeMenTs
for the year ended 30 June 2011
14 ConsoliDAteD stAtement
oF CompRehensive inCome
15 ConsoliDAteD bAlAnCe sheet
16 ConsoliDAteD stAtement
oF ChAnGes in equity
17 ConsoliDAteD stAtement oF CAsh Flow
18 notes to the FinAnCiAl stAtements
38 DiReCtoRs’ DeClARAtion
39
inDepenDent AuDitoR’s RepoRt
to the membeRs
41 CoRpoRAte GoveRnAnCe stAtement
50 ADDitionAl AsX inFoRmAtion
13
Katana Capital limited 2011 AnnuAl RepoRt Consolidated statement
of comprehensive income
FOR THE YEAR ENDED 30 JuNE 2011
Investment income
Dividends
Interest
Investment income
total investment income
Expenses
Fund manager’s fees
Legal and professional
Directors’ fees and expenses
Administration
performance fee
total expenses
Profit before income tax
Income tax (expense)
profit from continuing operations after income tax
Profit for the year attributable to members of Katana capital limited
Other comprehensive income, net of tax
total comprehensive income for the year
attributable to the members of Katana capital limited
Earnings/(loss) per share attributable to the
ordinary equity holders of the company:
basic earnings/diluted per share
consolidated
Notes
30 June 2011
$
30 June 2010
$
3
13(a)
13(a)
4
1,237,135
394,406
5,604,804
7,236,345
(526,598)
(91,383)
(170,500)
(485,555)
(799,111)
(2,073,147)
5,163,198
(1,222,721)
3,940,477
3,940,477
-
1,135,699
375,652
6,887,065
8,398,416
(497,511)
(92,033)
(170,500)
(340,761)
(139,500)
(1,240,305)
7,158,111
(1,849,420)
5,308,691
5,308,691
-
3,940,477
5,308,691
cents
Cents
18
9.78
12.89
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
14
Katana capital liMited 2011 AnnuAl RepoRt
Consolidated Balance sheet
AS AT 30 JuNE 2011
ASSETS
current assets
Cash and cash equivalents
Trade and other receivables
Investments - held for trading
Other assets
total current assets
non-current assets
Deferred tax assets
total assets
LIABILITIES
current liabilities
Trade and other payables
Dividends payable
total current liabilities
non-current liabilities
Deferred tax liabilities
total liabilities
net assets
EQUITY
Issued capital
Option premium reserve
retained earnings / (Accumulated losses)
total equity
at
consolidated
Notes
2011
$
2010
$
5
6
7
8
9
5,594,058
846,409
34,695,404
52,576
41,188,447
7,488,660
227,537
30,675,449
87,194
38,478,840
-
41,188,447
834,334
39,313,174
1,347,352
3,316
1,350,668
1,197,133
3,316
1,200,449
10
388,428
-
1,739,096
39,449,393
1,200,449
38,112,725
11
12(a)
12(b)
38,632,578
101,100
715,715
39,449,393
39,526,993
101,100
(1,515,368)
38,112,725
The above consolidated balance sheet should be read in conjunction with the accompanying notes
15
Katana capital liMited 2011 AnnuAl RepoRt
Consolidated statement
of changes in equity
FOR THE YEAR ENDED 30 JuNE 2011
consolidated
Balance at 1 July 2009
profit for year
Other comprehensive income
total comprehensive income for the year
buy-back of shares
Dividends provided for or paid
Balance at 30 June 2010
Balance at 1 July 2010
profit/(loss) for year
Other comprehensive income
total comprehensive income for the year
buy-back of shares
Dividends provided for or paid
Balance at 30 June 2011
Notes
11
12
11
12
Issued
capital
$
40,081,234
-
-
-
(554,241)
-
39,526,993
39,526,993
-
-
-
(894,415)
-
38,632,578
Option
premium
reserve
$
101,100
-
-
-
-
-
101,100
101,100
-
-
-
-
-
101,100
Retained
earnings
$
(6,002,563)
5,308,691
-
5,308,691
-
(821,496)
(1,515,368)
(1,515,368)
3,940,477
-
3,940,477
-
(1,709,394)
715,715
total
$
34,179,771
5,308,691
-
5,308,691
(554,241)
(821,496)
38,112,725
38,112,766
3,940,477
-
3,940,477
(894,415)
(1,709,394)
39,449,393
The above statements of changes in equity should be read in conjunction with the accompanying notes.
16
Katana capital liMited 2011 AnnuAl RepoRt
Consolidated statement
of cash flows
FOR THE YEAR ENDED 30 JuNE 2011
Cash flows from operating activities
proceeds on sale of financial assets
payments for purchases of financial assets
payments to suppliers and employees
Interest received
Dividends received
Other revenue
Tax paid
net cash inflow from operating activities
Cash flows from financing activities
Dividends paid
payments for shares bought back
net cash outflow from financing activities
net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
cash and cash equivalents at end of year
consolidated
Notes
30 June 2011
$
30 June 2010
$
60,317,302
(59,891,098)
(1,363,595)
373,012
1,233,485
5,338
(34,763)
709,207
(1,709,394)
(894,415)
(2,603,809)
(1,894,602)
7,488,660
5,594,058
49,304,572
(47,934,000)
(1,059,687)
372,080
1,100,965
2,002
4,982
1,790,914
(821,496)
(554,241)
(1,375,737)
415,177
7,073,483
7,488,660
15
5
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
17
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
1 corporate information
The financial report of Katana Capital Limited (“the Company”) and its subsidiaries (“the Group” or the “Consolidated Entity”) for the year
ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors on 27 September 2011.
The Company was incorporated on 19 September 2005. In July 2006 it incorporated a wholly owned subsidiary - Kapital Investments
(WA) pty Ltd.
Katana Capital Limited is a company limited by shares, incorporated and domiciled in Australia and whose shares are publicly traded on
the Australian Stock Exchange.
The nature of the operations and principle activities are described in the Directors’ report.
2 Summary of significant accounting policies
(a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards board. The financial report has also been prepared on a historical cost basis except for the investments held for trading
and derivative financial instruments, which have been measured at fair value.
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial report comprises the financial statements of
Katana Capital Limited and its subsidiaries.
The financial report is presented in Australian dollars.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial reporting Standards (“IFrS”) as
issued by the International Accounting Standards board.
New Accounting Standards and Interpretations
The Group has adopted all of the new and amended Australian Accounting Standards and AASb Interpretations. The adoption of
these did not have a material impact on the financial report.
A number of Australian Accounting Standards and Interpretations have been issued or amended but are not yet effective.
These have not been adopted by the Group for the annual reporting period ending 30 June 2011. The impact of these new or
amended Accounting Standards whilst not expected to give rise to material changes in the Group’s financial statements, are yet
to be assessed.
(c) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of the subsidiary of Katana Capital Limited as at 30 June
2011 and the results of the subsidiary for the year then ended. Katana Capital Limited and its subsidiary together are referred to in
this financial report as the “Group” or the “Consolidated Entity”.
The subsidiary is the entity (including a special purpose entity) over which the Company has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls
another entity.
The subsidiary is fully consolidated from the date on which control is transferred to the Company. It is de-consolidated from the
date that control ceases.
The financial statements of the subsidiary are prepared for the same reporting period as the parent company using consistent
accounting policies.
18
Katana capital liMited 2011 AnnuAl RepoRt 2 Summary of significant accounting policies (continued)
(d) Investments and other financial assets
Financial assets are classified as either financial assets held for trading, loans and receivables, held to maturity investments or
available for sale investments, as appropriate.
When financial assets are initially recognised they are recorded at fair value, plus in the case of investments not held for trading,
directly attributable transaction costs. The Fund Manager determines the classification of its financial assets after initial recognition
and when allowed and appropriate, re-evaluates this designation at each financial year end.
(i) Financial assets held for trading
After initial recognition investments which are classified as held for trading are measured at fair value, gains and losses on
these investments are recognised in the profit and loss. For financial assets that are actively traded in organised financial
markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the
balance sheet date.
For financial assets where there is no quoted market price, fair value is determined by reference to the current market value of
another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net
asset base of the financial assets. The fair value of options is determined using an appropriate option pricing model.
purchases and sales of financial assets that require delivery of assets within the time frame generally established by regulation or
convention in the market place are recognised on the trade date i.e. the date that the Company commits to purchase the asset.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets with fixed and determinable payments that are not quoted in an active
market. Such assets are carried at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition. For financial assets carried
at amortised cost, gains and losses are recognised in the income statement when the financial assets are derecognised or
impaired, as well as through the amortisation process.
(iii) Derecognition of financial assets
A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised when:
the rights to receive cash flows from the asset have expired;
the company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full
without material delay to a third party lender under a “pass-through” arrangement; or
the company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
(e) Revenue recognition
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of the Group’s activities as described below.
(i)
Interest income
Interest income is recognised on an accruals basis using the effective interest method, which is the rate that exactly discounts
estimated future cash flows through the expected life of the financial instrument to the net carrying amount of the financial
instrument. Interest on cash on deposit is recognised in accordance with the terms and conditions that apply to the deposit.
(ii) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
19
Katana capital liMited 2011 AnnuAl RepoRt notes
30 JuNE 2011
2 Summary of significant accounting policies (continued)
(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current 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
and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(g) cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original
maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents includes deposits held at call with banks or
financial institutions.
(h) trade and other receivables
receivables may include amounts for dividends, interest and securities sold where settlement has not yet occurred. receivables are
recognised and carried at the original invoice amount and interest accrues (using the effective interest rate method, which is the
rate that discounts estimated future cash receipts through the effective life of the financial instrument) to the net carrying amount
of the financial asset. Amounts are generally received within 30 days of being recorded as receivables.
Collectibility of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to
be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the
Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days
overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount
compared to the present value of estimated future cash flows, discounted at the original effective interest rate.
(i) trade and other payables
Liabilities for creditors and other amounts are carried at amortised cost, which is the fair value of the consideration to be paid in the
future for goods and services received, whether or not billed to the Company.
payables include outstanding settlements on the purchase of investments and distributions payable. The carrying period is dictated
by market conditions and is generally less than 30 days.
(j) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised.
20
Katana capital liMited 2011 AnnuAl RepoRt 2 Summary of significant accounting policies (continued)
(k) Goods and Services tax (GSt)
Incomes, expenses and assets, with the exception of receivables and payables, are recognised net of the amount of GST, to the
extent that GST is recoverable from the Australian Tax Office (ATO). Where GST is not recoverable it is recognised as part of the cost
of the asset or as part of the expense item as applicable.
reduced input tax credits (rITC) recoverable by the Company from the ATO are recognised as receivables in the balance Sheet.
Cash flows are included in the cash flow statement on a gross basis and the GST component of the cash flows arising from investing
and financing activities, which is recoverable from or payable to the taxation authority are classified as operating cash flows.
(l) Earnings per share
basic earnings per share (EpS) is calculated as net profit attributable to shareholders divided by the weighted average number
of shares.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
costs of servicing equity (other than dividends) and preference share dividends;
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any
bonus element.
(m) derivative financial instruments
The Group uses derivative financial instruments such as exchange traded options to manage its risks associated with share price
fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is positive and as
liabilities when their fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to net profit or loss for the year.
Exchange traded options
The Group writes and then trades Exchange Traded Options (‘ETO’s’), the Company’s policy for managing its risk for ETO’s is to
ensure it only writes ETO’s against shares that it physically holds. ETO’s are governed by the Australian Stock Exchange (“ASX”) and
are traded on the ASX.
ETO’s are recognised as liabilities at fair value. Any gains or losses arising from changes in the fair value of ETO’s, are taken directly to
net profit or loss for the year.
(n) contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
(o) Pension benefits
Defined contribution plan
Contributions to superannuation funds are charged to the statement of comprehensive income when due.
21
Katana capital liMited 2011 AnnuAl RepoRt notes
30 JuNE 2011
2 Summary of significant accounting policies (continued)
(p) Share based payments
Equity settled transactions
The Group can provide benefits to its employees (including key management personnel) in the form of share based payments,
whereby employees render services in exchange for shares or rights over shares (equity settled transactions).
There are currently no formal plans in place to provide these benefits.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value is determined by an external valuer using a binomial model.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than (if applicable):
- Non-vesting conditions that do not determine whether the Group or Company receives the services that entitle the employees
to receive payment in equity or cash, and
-
Conditions that are linked to the price of the shares of Katana Capital Limited (market conditions).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees
become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the
product of:
(a) The grant date fair value of the award.
(b) The current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee
turnover during the vesting period and the likelihood of non-market performance conditions being met.
(c) The expired portion of the vesting period.
The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the
amounts already charged in previous periods. There is a corresponding entry to equity. Equity-settled awards granted by Katana
Capital Limited to employees of subsidiaries are recognised in the parent’s separate financial statements as an additional investment
in the subsidiary with a corresponding credit to equity. As a result, the expense recognised by Katana Capital Limited in relation to
equity-settled awards only represents the expense associated with grants to employees of the parent. The expense recognised by
the Group is the total expense associated with all such awards.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were
originally anticipated to do so. Any award subject to a market condition or non-vesting condition is considered to vest irrespective
of whether or not that market condition or non-vesting condition is fulfilled, provided that all other conditions are satisfied.
If a non-vesting condition is within the control of the Group, Company or the employee, the failure to satisfy the condition is treated
as a cancellation. If a non-vesting condition within the control of neither the Group, Company nor employee is not satisfied during
the vesting period, any expense for the award not previously recognised is recognised over the remaining vesting period, unless the
award is forfeited.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated
as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings
per share.
Shares in the Group reacquired on-market are classified and disclosed as reserved shares and deducted from equity.
(q) Parent entity financial information
The financial information for the parent entity, Katana Capital Limited, disclosed in note 22 has been prepared on the same basis as
the consolidated financial statements, except as set out below.
(r) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the strategic steering committee.
22
Katana capital liMited 2011 AnnuAl RepoRt 2 Summary of significant accounting policies (continued)
(s) Significant accounting judgements, estimates and assumptions
The determination of fair value of unlisted securities requires the application of a discounted cashflow valuation model. A
discounted cashflow model requires that certain judgements and assumptions are made, including an estimate for the discount
rate applied and an estimation of future uncertain cashflows.
The Company determines the fair value of unlisted options using the black-Scholes formula, taking into account the terms and
conditions upon which the instruments were granted. The black-Scholes formula requires the estimation of certain assumptions
including the volatility of the underlying shares and an estimation as to the anticipated date at which the option will be exercised.
3
Investment income
realised gains on investments held for trading
Unrealised gains on investments held for trading
Changes in fair value of options
Other income
4
Income tax expense
(a) Income tax expense/(benefit)
Current tax expense/(benefit)
Deferred tax
Deferred income tax(benefit)/expense included in income tax expense comprises:
Increase in deferred tax assets (note 8)
(Increase)/decrease in deferred tax liabilities (note 10)
(b) numerical reconciliation of income tax expense to prima facie tax payable
profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2010 - 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-deductible expenses
Franking credits
Franking rebate
Income tax expense
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after more than 12 months
Deferred tax liabilities expected to be recovered within 12 months
Deferred tax liabilities expected to be recovered after more than 12 months
Year ended
consolidated
30 June 2011
$
30 June 2010
$
4,101,913
1,497,553
-
5,338
5,604,804
2,040,048
4,777,296
67,719
2,002
6,887,065
Year ended
consolidated
30 June 2011
$
30 June 2010
$
-
1,222,761
1,222,761
1,314,175
(91,414)
1,222,761
5,163,198
1,548,959
369
139,958
(466,525)
1,222,761
493,064
-
493,064
881,492
-
881,492
-
1,849,420
1,849,420
1,655,799
193,621
1,849,420
7,157,632
2,147,290
291
127,784
(425,945)
1,849,420
1,626,437
180,803
1,807,240
972,906
-
972,906
23
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
5 current assets - cash and cash equivalents
Cash at bank
Short term bank bills
Term deposits
6 current assets - trade and other current receivables
Unsettled trades - listed equities
Interest receivable
Dividend receivable
at
consolidated
30 June 2011
$
30 June 2010
$
2,599,562
-
2,994,496
5,594,058
2,523,639
4,965,021
-
7,488,660
at
consolidated
30 June 2011
$
30 June 2010
$
766,976
26,233
53,200
846,409
173,148
4,839
49,550
227,537
There are no receivables past due or impaired.
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
7 current assets - Investments
Equity securities- classified as held for trading
Convertible notes
at
consolidated
30 June 2011
$
30 June 2010
$
33,799,196
896,208
34,695,404
30,675,449
-
30,675,449
Held for trading investments consist of investments in ordinary shares and therefore have no fixed maturity date or coupon rate.
For fair value measurements refer to note 16(e).
24
Katana capital liMited 2011 AnnuAl RepoRt
8 non-current assets - deferred tax assets
the balance comprises temporary differences attributable to:
Tax losses
Other
Share issue costs
provisions
Other
Investments
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions (note 10)
Net deferred tax assets
at
consolidated
30 June 2011
$
30 June 2010
$
180,803
1,703,532
-
311,884
377
-
493,064
(493,064)
-
41
92,747
426
10,494
1,807,240
(972,906)
834,334
movements - consolidated
At 30 June 2009
(Charged)/credited directly to statement of comprehensive income
At 30 June 2010
At 30 June 2010
(Charged)/credited directly to statement of comprehensive income
At 30 June 2011
tax losses
$
3,387,592
(1,684,060)
1,703,532
1,703,532
(1,522,729)
180,803
Share issue
costs
$
35,835
(35,794)
41
41
(41)
-
Other
total
$
39,612
64,055
103,667
103,667
208,594
312,261
$
3,463,039
(1,655,799)
1,807,240
1,807,240
(1,314,176)
493,064
The deferred tax asset is being carried forward as an asset due to the company’s view that the tax asset will be utilised as global stock
exchanges correct themselves, global economic activity increases and the company realises profits.
9 current liabilities - trade and other payables
Unsettled trades - listed equities
Accrual - Katana Asset Management pty Ltd management fee
Trade creditors
performance fee payable
Employee pay as you go tax instalments
Custody fees payable
at
consolidated
30 June 2011
$
30 June 2010
$
292,302
133,994
43,405
799,111
5,280
73,260
1,347,352
851,780
135,451
40,063
139,500
5,280
25,059
1,197,133
Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.
25
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
10 non-current liabilities - deferred tax liabilities
the balance comprises temporary differences attributable to:
Deferred tax liabilities
Investments
Dividends receivable
Other
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax liabilities
movements – consolidated
At 1 July 2009
Charged/(credited) to the statement of comprehensive income
At 30 June 2010
At 30 June 2010
Charged/(credited) to the statement of comprehensive income
At 30 June 2011
11 Issued capital
at
consolidated
30 June 2011
$
30 June 2010
$
848,699
15,960
16,833
881,492
(493,064)
388,428
Other
$
4,825
11,492
16,317
16,317
-
16,317
956,589
14,865
1,452
972,906
(972,906)
-
total
$
779,285
193,621
972,906
972,906
-
972,906
Investments
$
774,460
182,129
956,589
956,589
-
956,589
Ordinary shares
Fully paid
(a) movements in ordinary share capital:
date
details
1 July 2009
30 June 2010
1 July 2010
30 June 2011
Opening balance
buy-back of shares
balance
Opening balance
buy-back of shares
balance
at
consolidated entitY
at
consolidated entitY
30 June 2011
Shares
30 June 2010
Shares
30 June 2011
$
30 June 2010
$
39,540,965
40,703,119
38,632,578
39,526,993
number of shares
41,494,313
(791,194)
40,703,119
40,703,119
(1,162,154)
39,540,965
$
40,081,234
(554,241)
39,526,993
39,526,993
(894,415)
38,632,578
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
During the period from July 2010 to June 2011, 1,162,154 shares were bought back on market and were subsequently cancelled.
The shares were acquired at an average price of $0.77 with the price ranging from $0.61 to $0.89 per share.
(b) capital management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain opti-
mal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures
the lowest cost of capital available to the entity. Management is constantly adjusting the capital structure to take advantage of
favourable costs of capital or high returns on assets. The Company defines its Capital as the total funds under management, being
$41,188,447 at 30 June 2011 (30 June 2010: $38,478,840), including equities and cash reserves. The Company does not have any
additional externally imposed capital requirements however has as a goal the ability to continue to grow assets under management
and maintain a sustainable dividend return to shareholders. To assist with meeting its internal guidelines, Katana Asset Management
Limited holds regular Investment Committee meetings to assess the equity portfolio.
26
Katana capital liMited 2011 AnnuAl RepoRt
12 Reserves and retained earnings / (accumulated losses)
(a) Reserves
Option premium reserve
The option premium reserve is used to record the value of share based payments
provided to employees, including KMp, as part of their remuneration.
(b) Retained profits/(accumulated losses)
Movements in retained earnings / (accumulated losses) were as follows:
balance 1 July
Net profit after tax attributable to members of the Company
Dividends
balance 30 June
13 Key management personnel disclosures
(a) Key management personnel compensation
Short-term employee benefits
post-employment benefits
Management fee to Fund Manager
performance fee to Fund Manager
at
consolidated
30 June 2011
$
30 June 2010
$
101,100
101,100
(1,515,368)
3,940,477
(1,709,394)
715,715
(6,002,563)
5,308,691
(821,496)
(1,515,368)
Year ended
consolidated
30 June 2011
$
30 June 2010
$
150,000
14,130
526,598
799,111
1,489,839
150,000
14,130
497,511
139,500
801,141
27
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
13 Key management personnel disclosures (continued)
(b) Equity instrument disclosures relating to key management personnel
(i) Option holdings
2011
There were no options held by directors or Key Management personnel during Financial Year 2011.
2010
Name
balance at Granted as
compen-
sation
start of
the year
Exercised
Expired
balance
at end
of the year
Vested
and
exercisable
Unvested
directors of Katana capital limited
Dalton Leslie Gooding
peter Wallace
Guiliano Sala Tenna
Other key management personnel
of the company
brad Shallard
romano Sala Tenna
Katana Asset Management Ltd
250,000
250,000
250,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(250,000)
(250,000)
(250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(ii) Shareholdings
The numbers of shares in the Company held during the financial year by each director of Katana Capital Limited and other key
management personnel of the Group, including their personally related parties, are set out below.
All equity transactions with key management personnel, other than those arising from the exercise of remuneration options, have been
entered into under terms and conditions no more favourable that those the Group would have adopted if dealing at arm’s length.
2011
name
Balance at the
start of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the
end of the year
Directors of Katana Capital Limited
Ordinary shares
Dalton Leslie Gooding
peter Wallace
Giuliano Sala Tenna
Other key management personnel of the Company
Ordinary shares
brad Shallard
romano Sala Tenna
Katana Asset Management Ltd
100,000
300,000
100,000
2,095,395
2,298,107
-
-
-
-
-
-
-
-
-
-
100,000
300,000
100,000
91,214
95,811
-
2,186,609
2,393,918
-
2010
Name
balance at the
start of the year
received during
the year on the
exercise of options
Other changes
during the year
balance at the
end of the year
Directors of Katana Capital Limited
Ordinary shares
Dalton Gooding
peter Wallace
Giuliano Sala Tenna
Other key management personnel of the Company
Ordinary shares
brad Shallard
romano Sala Tenna
Katana Asset Management Ltd
100,000
300,000
100,000
2,040,125
2,267,870
-
-
-
-
-
-
-
-
-
-
55,270
30,237
-
100,000
300,000
100,000
2,095,395
2,298,107
-
28
Katana capital liMited 2011 AnnuAl RepoRt
13 Key management personnel disclosures (continued)
(c) Other transactions and balances with key management personnel
There were no transactions or balances with key management personnel other than those disclosed in the remuneration report of
the Director’s report.
14 Related party transactions
(a) directors
The names of persons who were Directors of the Katana Capital Limited at any time during the financial year and up to the date of
this report are as follows: Mr Dalton Gooding, Mr Giuliano Sala Tenna and Mr peter Wallace.
(b) Related party transactions
Transactions between the parent Company and related parties noted above during the year are outlined below:
Dalton Gooding is a partner of Gooding partners Chartered Accounting firm and as part of providing taxation advisory services,
Gooding partners received $33,664 (2010: $21,847) for tax services provided.
All related party transactions are made in arms length transactions on normal commercial terms and conditions.
Outstanding balances at period end are unsecured and settlement occurs in cash.
Wholly owned group transactions
There are no transactions with companies within the wholly owned group.
15 Reconciliation of profit/(loss) after income tax to net cash inflow from operating
activities
profit/(loss) for the year
(Gains)/losses recognised on measurement to fair value of held for trading investments
(Increase)/decrease in trade and other receivables
(Increase)/decrease in financial assets held for trading
(Increase) decrease in deferred tax assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in current tax liabilities
(Decrease)/increase in deferred tax liabilities
Net cash inflow (outflow) from operating activities
Year ended
consolidated
30 June 2011
$
30 June 2010
$
3,940,477
(1,497,553)
(3,940,858)
834,334
150,219
-
-
388,428
709,207
5,308,691
(4,777,295)
524,051
(1,901,297)
-
756,777
30,567
1,849,420
1,790,914
29
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
16 Financial risk management
The Group activities expose it to a variety of financial risks: market risk (including price risk and interest rate risk), credit risk and
liquidity risk.
The Group overall risk management programme focuses on ensuring compliance with the Company’s Investment Mandate and seeks
to maximise the returns derived for the level of risk to which the Company is exposed.
The Group uses derivative financial instruments to alter certain risk exposures. Financial risk management is carried out by the
Investment Manager under policies approved by the board of Directors (the board).
The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate, foreign exchange and other price risks and ratings analysis for credit risk.
mandate
The Fund Manager must manage the portfolio in accordance with guidelines for management set out in the Mandate, which may
be amended by written agreement between the Company and the Fund Manager from time to time. The Mandate provides that the
portfolio will be managed with the following investment objectives:
to achieve a pre tax and pre expense return which outperforms the ASX All Ordinaries Index; and
the preservation of capital invested. The Mandate permits the Fund Manager to undertake investments in:
(1) listed securities;
(2) rights to subscribe for or convert to listed securities (whether or not such rights are tradeable on a securities exchange);
(3) any securities which the Fund Manager reasonably expects will be quoted on the ASX within a 24 month period from the date
of investment;
(4) listed securities for the purpose of short selling;
(5) warrants or options to purchase any investment and warrants or options to sell any investment;
(6) discount or purchase of bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed
by any bank or by the Commonwealth of Australia, any State or Territory of Australia, or by any corporation of at least an
investment grade credit rating granted by a recognised credit rating agency in Australia;
(7) deposits with any bank or corporation declared to be an authorised dealer in the short term money market;
(8) debentures, unsecured notes, loan stock, bonds, promissory notes, certificates of deposit, interest bearing accounts, certificates
of indebtedness issued by any bank or by the Commonwealth of Australia, any State or Territory of Australia, or any Australian
government authority, or a corporation of at least an investment grade credit rating granted by a recognised credit rating
agency in Australia;
(9) units or other interest in cash management trusts;
(10) underwriting or sub underwriting of securities as and where permitted by relevant laws and regulations and the Fund
Manager’s AFSL; and
(11) any other investment, or investment of a particular kind, approved by the Company in writing as and where permitted by the
Fund manager’s AFSL.
The Mandate specifies the following risk control features:
The portfolio may comprise securities in up to 80 companies from time to time.
no investment may represent more than 10.0% of the issued securities of a company at the time of investment.
total cumulative gearing on the portfolio may not exceed 50% of the total value of the net tangible assets of the Group after tax
the Fund Manager will adhere to the parameters on a per stock basis as set out in the table below unless the prior approval of the
board is received to do otherwise.
30
Katana capital liMited 2011 AnnuAl RepoRt 16 Financial risk management (continued)
Portfolio composition and management
The aim of the Fund Manager is to build for the Group a portfolio of 20 to 60 companies, with an emphasis towards holding a larger
number of smaller positions. Under the current Mandate, the Group’s portfolio may vary from between 0 to 80 securities, depending
upon investment opportunities and prevailing market conditions. The Fund Manager may construct a portfolio comprising of any
combination of cash, investment and debt, subject to the gearing limits in the Mandate. Under the Mandate, total cumulative gearing
on the portfolio may not exceed 50% of the total value of the net tangible assets of the Group after tax.
The capacity to short sell securities, as well as employ debt, is designed to ensure the Fund Manager has flexibility to implement an
absolute return strategy. It should also be noted that, despite the focus on emerging and green chip companies, in periods of overly
negative market or stock sentiment, the best investment opportunities on a risk return basis are often found in the ASX S&P Index Top
20 and ASX S&P Index Top 100 stocks by market capitalisation. Often the larger stocks rebound first, hence providing not just safer
returns, but quicker returns.
Under the current Mandate, the following parameters will apply to individual investments unless the prior approval of the Directors is
received to do otherwise:
Size of company
ASX S&P Top 20
ASX S&P Top 100/Cash Hybrids
ASX S&P Top 500
Outside of ASX S&P Top 500/Other Instruments
Asset allocation
MiniMuM
investMent
indicative
benchMarK
MaxiMuM
investMent
per security
Investment
per security
per security
1%
1%
No minimum
No minimum
As a percentage
of total portfolio
5%
3%
2%
1%
12.5%
10%
7.5%
5%
The Fund Manager’s allocation of the portfolio will be weighted in accordance with various macro economic factors. These factors will
invariably impact the medium and long term performance of the Group. These factors include:
global economy;
Australian economy and positioning within the economic cycle;
sectors within the Australian market;
phase of the interest rate cycle; and
state of the property market (eg comparative investment merit).
The Fund Manager may form views on the factors outlined above, and may re weight the portfolio accordingly.
31
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
16 Financial risk management (continued)
(a) market risk
(i) Price risk
The Company is exposed to equity securities, convertible notes and derivative securities price risk. This arises from investments
held by the Company for which prices in the future are uncertain. paragraph (ii) below sets out how this component of price
risk is managed and measured. They are classified on the statement of financial position as held for trading. All securities
investments present a risk of loss of capital. Except for equities sold short, the maximum risk resulting from financial instruments
is determined by the fair value of the financial instruments. possible losses from equities sold short can be unlimited.
The Investment Manager mitigates this price risk through diversification and a careful selection of securities and other financial
instruments within specified limits set by the board. The mandate specifies that following risk control features:
The portfolio may comprise securities in up to 80 companies from time to time:
no investment may represent more than 10.0% of the issued securities of a company at the time of investment
total cumulative gearing on the portfolio may not exceed 50% of the total value of the net tangible assets of the Company
after tax
the Fund Manager will adhere to the parameters on a per stock basis as set out in the table below unless the prior approval
of the board is received to do otherwise.
The aim of the Fund Manager is to build for the Company a portfolio of 20 to 60 companies, with an emphasis towards holding
a larger number of smaller positions. Under the current Mandate, the Company’s portfolio may vary from between 0 to 80
securities, depending upon investment opportunities and prevailing market conditions. The Fund Manager may construct a
portfolio comprising of any combination of cash, investment and debt, subject to the gearing limits in the Mandate. Under
the Mandate, total cumulative gearing on the portfolio may not exceed 50% of the total value of the net tangible assets of the
Company after tax.
The capacity to short sell securities, as well as employ debt, is designed to ensure the Fund Manager has flexibility to implement
an absolute return strategy. It should also be noted that, despite the focus on emerging and green chip companies, in periods
of overly negative market or stock sentiment, the best investment opportunities on a risk return basis are often found in the
ASX S&P Index Top 20 and ASX S&P Index Top 100 stocks by market capitalisation. Often the larger stocks rebound first, hence
providing not just safer returns, but quicker returns.
The table on page 36 summarises the impact of an increase/decrease in the Australian Securities Exchange All Ordinaries Index
on the Company’s net assets attributable to shareholders at 30 June 2011. The analysis is based on the assumptions that the
index increased/decreased by 10% (2010 - 10%) with all other variables held constant and that the fair value of the Company’s
portfolio of equity securities and derivatives moved according to the historical correlation with the index. The impact mainly
arises from the possible change in the fair value of listed equities, unlisted unit trusts and equity derivatives.
Foreign exchange risk
The Company does not hold any monetary and non-monetary assets denominated in currencies other than the
Australian dollar.
(ii) Interest rate risk
The Company’s interest bearing financial assets expose it to risks associated with the effects of fluctuations in the prevailing
levels of market interest rates on its financial position and cash flows. The risk is measured using sensitivity analysis.
Compliance with the Company’s policy is reported to the board on a monthly basis. The Company may also enter into
derivatives financial instruments to mitigate the risk of future interest rate changes.
The table below summarises the Company’s exposure to financial assets/liabilities at the balance sheet date.
Financial Assets
Cash and short term deposits - floating
weighted
average
interest
Year ended
consolidated
rate (% pa)
30 June 2011
30 June 2010
4.68%
5,594,058
7,488,660
32
Katana capital liMited 2011 AnnuAl RepoRt
16 Financial risk management (continued)
(b) Summarised sensitivity analysis
The table below summarises the impact of an increase/decrease of interest rates on the Company’s operating profit and net assets
attributable to shareholders through changes in fair value or changes in future cash flows. The analysis is based on the assumption
that interest rates changed by +/- 50 basis points (2010: +/- 50 basis points) from the year end rates with all other variables held
constant. The impact mainly arises from changes in the fair value of fixed interest securities.
The following table summarises the sensitivity of the Company’s operating profit and other comprehensive income to interest rate
risk and price risk. The reasonably possible movements in the risk variables have been determined based on management’s best
estimate, having regard to a number of factors, including historical levels of changes in interest rates and historical correlation of the
Company’s investments with the relevant benchmark and market volatility. However, actual movements in the risk variables may be
greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the
performance of the economies, markets and securities in which the Company invests. As a result, historic variations in risk variables
are not a definitive indicator of future variations in the risk variables.
price risK
-10%
+10%
-50bps
+50bps
Impact on Operating Profit
Impact on other
comprehensive income
(3,469,540)
(3,067,545)
3,469,540
3,067,545
-
-
-
-
interest rate risK
-50bps
+50bps
-50bps
+50bps
Impact on Operating Profit
Impact on other
comprehensive income
(47,498)
(85,516)
47,498
85,516
-
-
-
-
30 June 2011
30 June 2010
30 June 2011
30 June 2010
(c) credit risk
Credit risk primarily arises from investments in debt securities and from trading derivative products. Other credit risk arises from cash
and cash equivalents, deposits with banks and other financial institutions and amounts due from brokers. None of these assets are
impaired nor past due but not impaired.
As at 30 June 2011 the Company does not hold any debt securities (30 June 2010: Nil).
The Company does trade in Exchange Traded Options. The Investment Manager has established limits such that, at any time,
such that options are not traded without holding the physical security in the portfolio and contracts are with counterparties
included in the board’s Approved Counterparties list. As at 30 June 2011 the Company did not hold any Exchange Traded Options
(30 June 2010: Three).
Compliance with the Company’s policy is reported to the board on a monthly basis.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets.
The majority of cash assets are held with one bank.
(d) liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial
instruments. Cash flow interest rate risk is the risk that future cash flows on a financial instrument will fluctuate because of changes
in the market interest rates.
To control liquidity and cash flow interest rate risk, the Company invests in financial instruments which under normal market
conditions are readily convertible to cash. In addition the Company invests within the Mandate guidelines to ensure that there is no
concentration of risk.
The Company does not hold derivatives at 30 June 2011 (30 June 2010: Nil).
Financial liabilities of the Company comprise trade and other payables, distributions payable to shareholders. Trade and other
payables have no contractual maturities but are typically settled within 30 days.
33
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
16 Financial risk management (continued)
(e) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) 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 2),and
(c)
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3)
The following table presents the Company’s assets and liabilities measured and recognised at fair value at 30 June 2011.
Comparative information has not been provided as permitted by the transitional provisions of the new rules.
Group - as at 30 June 2011
Assets
Held for trading financial assets -
Equity securities
Convertible notes
total assets
Group - as at 30 June 2010
Assets
Held for trading financial assets -
Equity securities
total assets
level 1
$
level 2
$
level 3
$
total
$
33,532,264
896,208
34,428,472
-
-
-
Level 1
$
Level 2
$
266,932
-
266,932
Level 3
$
33,799,196
896,208
34,695,404
Total
$
30,408,517
30,408,517
-
-
266,932
266,932
30,675,449
30,675,449
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 end of the reporting period. The quoted market price used for financial assets
held by the Company is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, unlisted investments) is determined
using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions
existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used to estimate fair
value for long-term debt for disclosure purposes. Other techniques, such as estimated discounted cash flows, are used to determine
fair value for the remaining financial instruments.
The following tables present the changes in level 3 instruments for the year ended 30 June 2011:
Group
Opening balance
Transfer into level 3
Other increases
Gains recognised in other comprehensive income
Loss recognised in profit or loss
Closing balance
Total gains for the period included in profit or loss that relate to
assets held at the end of the reporting period
2011
$
266,932
-
-
-
-
266,932
2010
$
406,932
-
-
-
(140,000)
266,932
-
(140,000)
34
Katana capital liMited 2011 AnnuAl RepoRt
17 Segment information
For management purposes, the Group is organised into one main operating segment, which invests in equity securities, debt
instruments, and related derivatives. All of the Group’s activities are interrelated, and each activity is dependent on the others.
Accordingly, all significant operating disclosures are based upon analysis of the Group as one segment. The financial results from this
segment are equivalent to the financial statements of the Group as a whole.
The Group operates from one geographic location, being Australia, from where its investing activities are managed.
The Group does not derive revenue of more than 10% from any one of its investments held.
18 Earnings per share
(a) Basic earnings per share
profit from continuing operations attributable to
the ordinary equity holders of the company
There are no dilutive securities on issue as at 30 June 2011 (30 June 2010: Nil).
(b) Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
profit from continuing operations
profit attributable to the ordinary equity holders of the company
used in calculating basic earnings per share
(c) 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
Adjustments for calculation of diluted earnings per share:
Options
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share
Year ended
consolidated
30 June 2011
cents
30 June 2010
Cents
9.78
12.89
Year ended
consolidated
30 June 2011
$
30 June 2010
$
3,940,477
5,308,691
3,940,477
5,308,691
Year ended
consolidated
30 June 2011
number
30 June 2010
Number
40,278,811
41,177,638
-
-
40,278,811
41,177,638
basic earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted
average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted
average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would
be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
There are no dilutive securities on issue as at 30 June 2011 (30 June 2010: Nil)
35
Katana capital liMited 2011 AnnuAl RepoRt
notes
30 JuNE 2011
19 Events occurring after the reporting period
A final fully franked dividend of 1.25 cents per share for the 30 June 2011 financial year has been declared by the Company.
The Directors note that other than the dividend declaration, the Directors are not aware of any matter or circumstance that has
significantly or may significantly affect the operations of the company or the results of those operations, or the state of affairs of the
company in subsequent financial years.
20 Remuneration of auditors
(a) Audit services
Ernst & Young Australia
Audit and review of financial reports
total remuneration for audit and other assurance services
(b) non-audit services
Other services
Other services
total remuneration for audit and other assurance services
total auditors’ remuneration
21 dividends
Final dividend for the year ended 30 June 2010 of 1.25 cents (2009 - 0.005 cents)
per fully paid share paid on 4 October 2010 (2009 - 17 December 2009)
Fully franked (2009 - fully franked ) per share
Interim dividend for the year ended 30 June 2011 of 1.00 cents (2010 - 1.00 cents)
per fully paid share paid 6 December 2010 (2010 - paid 19 April 2010)
Interim dividend for the year ended 30 June 2011 of
1.00 cents per fully paid share paid 28 February 2011
Interim dividend for the year ended 30 June 2011 of
1.00 cents per fully paid share paid 4 May 2011
Total dividends provided for or paid
Franking credits available for subsequent financial years
based on a tax rate of 30% (2010: 30%)
Year ended
consolidated
30 June 2011
$
30 June 2010
$
49,000
49,000
45,500
45,500
-
-
-
-
49,000
45,500
Year ended
parent entitY
30 June 2011
$
30 June 2010
$
505,700
404,560
401,382
397,752
1,709,394
207,472
614,024
-
-
821,496
Year ended
consolidated
30 June 2011
$
30 June 2010
$
264,732
530,805
The above amounts represent the balance of the franking account as at the reporting date, adjusted for:
(a) franking credits that will arise from the payment of the amount 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 subsidiaries
were paid as dividends.
36
Katana capital liMited 2011 AnnuAl RepoRt
22 Parent entity financial information
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Option premium reserve
Accumulated loss
Profit or loss for the year
total comprehensive income
Investment in controlled entity at cost
at
parent entitY
2011
$
2010
$
41,188,567
-
41,188,567
1,378,318
656,811
2,035,129
38,632,578
101,100
419,760
39,153,438
3,940,477
3,940,477
38,478,836
834,334
39,313,170
1,200,449
-
1,200,449
39,526,993
101,100
(1,515,290)
38,112,803
5,308,690
5,308,690
The investment in the controlled entity is for 100% of the issued capital of Kapital Investments (WA) pty Ltd.
Tax consolidation legislation
Katana Capital Limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation from
1 July 2007.
(i) Members of the tax consolidated Group and the tax sharing arrangement.
Katana Capital Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated Group from 1 July 2007.
Katana Capital Limited is the head entity of the tax consolidated Group. Members of the Group have entered into a tax sharing
agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that
the possibility of default is remote. (see note 4).
(ii) Tax effect accounting by members of the tax consolidated Group
Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differenced are recognised in the
separate financial statements of the members of the tax consolidated Group using the Group allocation method. Current
tax liabilities and assets and deferred tax assets arising from the unused tax losses and tax credits of the members of the tax
consolidated Group are recognised by Katana Capital Limited, the head entity of the tax consolidated Group.
Members of the tax consolidated Group has entered into a tax funding agreement. Amounts are recognised as payable to or
receivable by the Company and each member of the consolidated Group in relation to tax contribution amounts paid or payable
between the parent entity and other members of the tax consolidated Group in accordance with this agreement. Where the tax
contribution amount recognised by each member of the tax consolidated Group for a particular period is different to the aggregate
of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period,
the distribution is recognised as a contribution from (or distribution to) equity participants.
23 commitments and contingencies
There are no contingent liabilities or commitments as at 30 June 2011 (2010: nil).
37
Katana capital liMited 2011 AnnuAl RepoRt
Directors’ declaration
30 JuNE 2011
In accordance with a resolution of the directors of Katana Capital Limited, I state that:
(a) The financial statements and notes of the consolidated entity set out on pages 14 to 37 are in accordance with the Corporations Act 2001,
including:
(i) Giving a true and fair view of the financial position as at 30 June 2011 and the performance for the year ended on that date of the
consolidated entity.
(ii) Complying with Australian Accounting Standard (including the Australian Accounting Interpretations) and the Corporations
regulations 2001;
(b) the financial statements and notes also comply with International Financial reporting Standards as disclosed in note 2 (b)
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
(d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of
the Corporations Act 2001 for the financial year ending 30 June 2011
On behalf of the board
Katana Capital Limited
Dalton Gooding
Chairman
27 September 2011
perth, Western Australia
38
Katana capital liMited 2011 AnnuAl RepoRt Independent auditor’s report to the members
30 JuNE 2011
Independent auditor's report to the members of Katana Capital Limited
Report on the financial report
We have audited the accompanying financial report of Katana Capital Limited (“Katana”), which
comprises the consolidated statement of financial position as at 30 June 2011, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors' declaration of the consolidated
entity comprising the company and the entities it controlled at the year's end or from time to time during
the financial year.
Directors' responsibility for the financial report
The directors of 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 controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
also state, 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 judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. 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. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
PM:MB:KATANA:008
-42-
Liability limited by a scheme approved
under Professional Standards Legislation
39
Katana capital liMited 2011 AnnuAl RepoRt
Independent auditor’s report to the members
30 JuNE 2011
Opinion
In our opinion:
a.
the financial report of Katana Capital Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2011
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 6 to 10 of the directors' report for the year
ended 30 June 2011. 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.
8
Opinion
In our opinion, the Remuneration Report of Katana Capital Limited for the year ended 30 June 2011,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
P McIver
Partner
Perth
27 September 2011
40
PM:MB:KATANA:008
-43-
Katana capital liMited 2011 AnnuAl RepoRt
Corporate governance statement
The board of Directors of Katana Capital Limited (Katana) is responsible for the corporate governance of the consolidated entity.
The board guides and monitors the business and affairs of Katana on behalf of the shareholders by whom they are elected and to whom
they are accountable.
In accordance with the ASX Corporate Governance Council’s corporate governance guidelines contained in Corporate Governance Principles
and recommendations (Second Edition Corporate Governance Guidelines), the Katana Corporate Governance Statement contains certain
specific information and discloses the extent to which the Company has followed the guidelines during the period. Where a recommendation
has not been followed it is disclosed together with reasons for the departure.
The Katana Corporate Governance Statement is structured with reference to the Second Edition Corporate Governance Guidelines,
which are as follows:
Principle 1
Lay solid foundations for management and oversight
Principle 2
Structure the board to add value
Principle 3
promote ethical and responsible decision making
Principle 4
Safeguard integrity in financial reporting
Principle 5
Make timely and balances disclosure
Principle 6
respect the rights of shareholders
Principle 7
recognise and manage risk
Principle 8
remunerate fairly and responsibly
For further information on corporate governance policies adopted by Katana, refer to our website www.katanacapital.com.au
41
Katana capital liMited 2011 AnnuAl RepoRt Corporate governance statement
Principle
corporate Governance
best practice recommendation
1
1.1
lay solid foundations for management
and oversight
Establish and disclose the functions
reserved to the board and those delegated
to senior executives
compliance
How we comply
✓
The board has a Corporate Governance Statement which outlines
the role and duties of the board.
The Company considers that the primary responsibility of the board
is to oversee the Company’s business activities and management for
the benefit of the shareholders by:
(a) supervising the Company’s framework of control and
accountability systems to enable risk to be assessed and
managed which includes but is not limited to the points
noted below:
(b) ensuring the Company is properly managed by:
(i) setting and communicating clear objectives;
(ii) appointing and removing the Managing Director of
the Company;
(iii) ratifying the appointment and, where appropriate,
the removal of the Chief Financial Officer and the
Company secretary;
(iv) input into and final approval of management’s development
of corporate strategy and performance objectives;
(v) reviewing and ratifying systems of risk management
and internal compliance and control, codes of conduct,
and legal compliance;
(vi) monitoring senior management’s performance and
implementation of strategy, and ensuring appropriate
resources are available;
(c) approving and monitoring the progress of major
capital expenditure, capital management, and acquisitions
and divestitures;
(d) approval of the annual budget;
(e) monitoring the financial performance of the Company;
(f ) approving and monitoring financial and other reporting;
(g) overall corporate governance of the Company, including
conducting regular reviews of the balance of responsibilities
within the Company to ensure division of functions remain
appropriate to the needs of the Company;
(h) liaising with the Company’s external auditors either directly or
via the Audit Committee as appropriate; and
(i) monitoring, and ensuring compliance with, all of the Company’s
legal obligations, in particular those obligations relating to the
environment, native title, cultural heritage and occupational
health and safety.
Katana does not employ a Chief Executive Officer or Managing
Director, but instead has a Fund Manager that is responsible for
the Investment risk Management and management of the equity
portfolio. The Fund Manager is responsible for running the affairs
of the Company under delegated authority from the board and to
implement the policies and strategy set by the board. In carrying
out their responsibilities the Fund Manager must report to the
board in a timely manner and ensure all reports to the board present
a true and fair view of the Company’s financial condition and
operational results.
Matters which are not covered by the delegations require
board approval.
The Corporate Governance Statement is available on the Company’s
website in the Corporate Governance section.
42
Katana capital liMited 2011 AnnuAl RepoRt Principle
1.2
corporate Governance
best practice recommendation
Disclose the process for evaluating the
performance of senior executives
1.3
1.3.1
1.3.2
2
2.1
2.2
2.3
2.4
provide the following information in the
annual report:
An explanation of any departure from
recommendations 1.1, 1.2 and 1.3
Whether a performance evaluation for senior
executives has taken place in the reporting
period and whether it was in accordance with
the process disclosed.
Structure of the Board to add value
A majority of the board should be
independent directors
The chairperson should be an
independent director
The roles of chairperson and chief
executive officer should not be exercised
by the same individual
The board should establish a
nomination committee
2.5
The process for evaluating the performance
of the board, its committees and individual
directors should be disclosed.
compliance
How we comply
✓
✓
✓
✗
✓
✗
✓
There are no senior executives in the Company, however the board
reviews the performance of the Fund Manager in accordance with
the Mandate. refer to Annual report for Katana’s mandate with the
Fund Manager.
Not applicable.
refer 1.2, performance of the Fund Manager is reviewed by the
board in accordance with the Fund Manager’s Mandate.
The majority of the board is independent where an independent
director is a non-executive director who meets the criteria for
independence included in the ASX Best Practice Recommendations.
The company currently has 2 out 3 of its directors classified as
independent directors.
The Chairman, Mr Gooding as noted above in 2.1 does not meet the
Governance Council’s independence criteria, however the board
believes that Mr Gooding will at all times act independently and
discharge his duties for the benefit of all shareholders.
Mr Gooding is not strictly independent as noted above due to him
being a partner of Chartered Accounting firm Gooding partners,
which from time to time provides professional tax advice as required
on a commercial basis, for further information refer to the related
party note in the accounts. This is not considered to be a material
transaction for Mr Gooding.
As noted in 1.1 & 1.2 above Katana does not employ a Chief
Executive Officer but instead has a Mandate with the Fund Manager
which covers some of the functions a traditional Chief Executive
Officer would ordinarily perform. The Chairman, Mr Dalton Gooding,
facilitates the relationship between the board and the Fund Manager.
The board does not have a Nomination Committee. The duties
of such committee have been considered and adopted by the
full board.
The Company does not have a documented procedure for the
selection and appointment of directors. The board informally reviews
the skill set of and market expectations for its directors on a regular
basis and considers these factors when appointing / re-electing
directors. The board invites persons with relevant industry experience
and financial experience to assist it in its appointment of directors.
The Company does not have a documented procedure for
the evaluating the performance of the board, its committees
and directors.
An evaluation of the performance of the board and its directors is
undertaken informally each year. The Chairman of the board is the
driver of this process. This year the Chairman conducted interviews
with each director.
The evaluation of the performance of the board’s various committees
is undertaken on an exception basis. This is also an informal process
which is driven by the Chairman of the board.
43
Katana capital liMited 2011 AnnuAl RepoRt Corporate governance statement
Principle
corporate Governance
best practice recommendation
compliance
How we comply
2.6
2.6.1
2.6.2
2.6.3
2.6.4
2.6.5
2.6.6
2.6.7
2.6.8
provide the following information in the
annual report:
The skills, expertise and experience
relevant to the position of director held by
each director in office at the date of the
annual report
The names of the directors considered by the
board to be independent directors and the
Company’s materially thresholds
A statement as to whether there is a
procedure agreed by the board of directors to
take independent professional advice at the
expense of the Company
The board should state its reasons if it
considers a director to be independent
notwithstanding that the director does
not meet the definition of independence
contained in the ASX Guidelines
The period of office held by each director in
office at the date of the annual report
The names of members of the nomination
committee and their attendance at meetings
of the committee
Whether a performance evaluation for the
board, its committees and directors has taken
place in the reporting period and whether it
was in accordance with the process disclosed
An explanation of any departure from
recommendations 2.1, 2.2, 2.3, 2.4 and 2.5
The following material should be made
publicly available, ideally on the Company’s
website in a clearly marked corporate
governance section:
(a) a description of the procedure for the
selection and appointment of new
directors to the board
(b) the charter of the nomination
committee or a summary of the role,
rights, responsibilities and membership
requirements for the committee
(c) the nomination committee’s policy for
the appointment of directors
✓
✓
✓
✓
✓
✓
✓
✗
✗
✗
provided in the Annual report.
provided in the Annual report.
Individual directors have the right in connection with their duties
and responsibilities as directors to seek independent professional
advice at the Company’s expense. The engagement of an outside
adviser is subject to prior approval of the Chairman and this will not
be withheld unnecessarily. If appropriate, any advice so received will
be made available to all board members.
refer above at 2.2.
provided in the Annual report.
provided in the Annual report.
An evaluation of the board, its committees and directors was
undertaken and was in accordance with the process disclosed at 2.5.
refer to comments at 2.1 and 2.2.
refer 2.4 - The board informally reviews the skill set of and market
expectations for its directors on a regular basis and considers these
factors when appointing / re-electing directors. The board invites
persons with relevant industry experience and financial experience
to assist it in its appointment of directors.
refer 2.4
refer 2.4
44
Katana capital liMited 2011 AnnuAl RepoRt Principle
corporate Governance
best practice recommendation
compliance
How we comply
3
3.1
3.2
3.3
3.4
3.5
Promote ethical and responsible
decision making
Establish a code of conduct and disclose the
code or a summary of the code as to:
(a) the practices necessary to maintain
confidence in the Company’s integrity;
(b) the practices necessary to take into
account their legal obligations and
the reasonable expectations of
their stakeholders;
(c) the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices;
Companies should establish a policy
concerning diversity and disclose the policy
or a summary of that policy. The policy
should include requirements for the board to
establish measurable objectives for achieving
gender diversity for the board to assess
annually both the objectives and progress in
achieving them.
Companies should disclose in each annual
report the measurable objectives for
achieving gender diversity set by the board
in accordance with the diversity policy and
progress towards achieving them.
Companies should disclose in each annual
report the proportion of women employees
in the whole organisation, women in senior
executive positions and women in the board
provide related disclosures:
• An explanation of any departure from
recommendation 3
• Posting to the company’s web site any
applicable code of conduct or a summary
and the diversity policy or a summary of its
main provisions
✓
✓
✓
✓
✗
✗
✗
✗
The Company has implemented a suite of policies including a Code
of business Conduct which provides guidelines aimed at maintaining
high ethical standards and corporate behaviour. The principals of the
policies include:
• Respect the law and act in accordance with it;
• Respect confidentiality and not misuse company information,
assets or resources;
• Avoid real or perceived conflicts of interest;
• Act in the best interest of stakeholders; and
• Perform their duties in ways that minimise environmental impacts
and maximise workplace safety.
Directors and employees are expected to comply with all Company
policies and to act professionally with integrity, honesty and
responsibility at all times.
Diversity policy to be developed and once finalised will be made
available on the company’s website
This disclosure has not yet been made, future annual reports will
disclose the measureable objectives for achieving gender diversity
set by the board in accordance with the diversity policy and progress
in achieving them.
This disclosure has not yet been made, future annual reports will
disclose the measureable objectives for achieving gender diversity
set by the board in accordance with the diversity policy and progress
in achieving them.
Once the diversity policy has been developed the Company will
evaluate how this can be met in considering future board and key
executive appointments
45
Katana capital liMited 2011 AnnuAl RepoRt Corporate governance statement
Principle
corporate Governance
best practice recommendation
compliance
How we comply
4
4.1
Safeguard integrity in financial reporting
The board should establish an
audit committee
4.2
Structure the audit committee so that it
consists of:
4.3
4.4
a) only non-executive directors
b) majority of independent directors
c)
independent chairperson, who is not the
chairperson of the board
d) at least three members
The audit committee should have a
formal charter
provide the following information in the
annual report:
(a) Details of the names and qualifications
of those appointed to the audit
committee and their attendance at
meetings of the committee
(b) The number of meetings of the
audit committee
The following material should be made
publicly available, ideally on the Company’s
website in a clearly marked corporate
governance section:
(a) the audit committee charter
(b) information on procedures for the
selection and appointment of the
external auditor, and for the rotation of
external audit engagement partners
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
The Audit, Compliance and risk Committee assists the board to meet
its oversight responsibilities in relation to the Company’s financial
reporting, internal control structure, risk management procedures
and the internal and external audit function. In doing so, it is the
Audit and risk Committee’s responsibility to maintain free and open
communications between the Committee, the external auditors, the
internal auditors and the management of the Company.
The committee complies with the structure as required by the best
practice recommendation 4.2.
The Audit, Compliance and risk Committee Charter is available on
the Company’s website in the Corporate Governance section.
refer to Director’s report
refer to Director’s report
The charter of the Audit, Compliance and risk Committee is available
on the Company’s website in the Corporate Governance section.
The committee manages the relationship between the Company
and external auditor on behalf of the board. It recommends to
the board potential auditors for appointment, re-appointment or
replacement, the terms of engagement and remuneration of the
external auditor.
46
Katana capital liMited 2011 AnnuAl RepoRt Principle
corporate Governance
best practice recommendation
compliance
How we comply
5
5.1
5.2
6
6.1
make timely and balance disclosure
Establish written policies and procedures
designed to ensure compliance with ASX
Listing rule disclosure requirements and to
ensure accountability at a senior executive
level for that compliance. These policies or a
summary of the policies should be disclosed.
provide the following information in the
annual report:
An explanation of any departures from
recommendations 5.1and 5.2 and reasons for
the departure
Respect the rights of shareholders
Design and disclose a communications
strategy to promote effective communication
with shareholders and encourage effective
participation at general meetings
✓
✓
✓
The Company’s continuous disclosure policy has been adopted
to ensure compliance with obligations under the continuous
disclosure regime of the Corporations Law and the Listing rules
of the Australian Stock Exchange Limited and to ensure that all
Katana shareholders have access to material information about the
Company and its prospects.
The disclosure obligations include:
• All employees, Company officers and Directors must comply
with the ASX Listing Rules and Corporations Law provisions
relating to a timely disclosure of price sensitive information to
the ASX. The Company does this by releasing written
announcements to the ASX.
• The Fund Manager together with the board are accountable for
the establishment, communication and maintenance of this policy
and ensuring that material information is disclosed to the ASX.
Not applicable.
The Continuous Disclosure policy can be found on the
company’s website.
Not applicable.
The Company places considerable importance on effective
communications with shareholders and other stakeholders. Katana’s
communication strategy requires communication with shareholders
and other stakeholders in an open, regular and timely manner
so that the market has sufficient information to make informed
investment decisions on the operations and results of the company.
The strategy provides for the use of systems that ensure a regular
and timely release of information about the company is provided to
shareholders. Mechanisms employed include:
• Announcements lodged with ASX;
• Half Yearly Report
• Monthly Net Tangible Asset Backing ASX disclosure;
• Presentations at the Annual General Meeting;
• Annual Report
• Promote effective communication with shareholders; and
• Encourage shareholder participation at AGMs.
6.2
provide the following information in the
annual report:
An explanation of any departures
from recommendation and reasons for
the departure
Not applicable.
A description of how the company will
communicate with its shareholders publicly.
✓
The Company’s Shareholder Communications policy is available on
the Company’s website in the Corporate Governance section.
47
Katana capital liMited 2011 AnnuAl RepoRt Corporate governance statement
Principle
corporate Governance
best practice recommendation
compliance
How we comply
7
7.1
Recognise and manage risk
The Company should establish policies on risk
oversight and management.
✓
✓
✓
7.2
7.3
The board should require management to
design and implement the risk management
and internal control system to manage the
company’s material risks and report to it
on whether those risks are being managed
effectively. The board should disclose that
management has reported to it as to the
effectiveness of the company’s management
of its material business risks.
The board should disclose whether it has
received assurance from the Chief Executive
Officer and the Chief Financial Officer that
the declaration provided in accordance
with section 295A of the Corporations
Act is founded on a sound system of risk
management and internal control and
that the system is operating effectively in
all material respects in relation to financial
reporting risks
7.4
provide related disclosures:
The Company is committed to the identification; monitoring and
management of risks associated with its business activities and has
embedded in its management and reporting systems a number
of risk management controls. The Fund Manager is charged with
implementing appropriate risk management systems within the
Company and in particular with the investment process.
The board monitors and receives advice on areas from the Fund
Manager on operational and financial risk, and considers strategies
for appropriate risk management arrangements. The Fund Manager
has an Investment Committee that meets on a regular basis to
analyse, monitor and review the investment portfolio.
Specific areas of risk identified initially and which will be regularly
considered at board meetings include financial performance,
performance of portfolio, compliance within regulatory framework,
markets, statutory compliance and continuous disclosure
obligations. The Fund Manager has its own Investment Committee
that regularly reviews the Company’s portfolio and reviews the
performance of individual stocks. The Investment Committee also
makes recommendations on significant investments and conducts
its own research to assist with this process.
The annual report details material financial and investment
risks which arose during the reporting period (see notes to
financial statements).
As part of the reporting process the Fund Manager has provided
the board prior to the board approving the annual and half-yearly
accounts, a written statement that the integrity of the financial
statements (as per ASX Recommendation 4.1) are founded on a
system of risk management and internal compliance and control
which implements the board’s policies and the Company’s risk
management and internal control system is operating efficiently and
effectively in all material matters.
The board has received assurance from the Fund Manager that the
s295A declaration is founded on a sound system of risk management
and internal control and the system is operating effectively in all
material respects in relation to financial risks.
- An explanation of any departures from any
✓
principle 7 recommendation;
The company will provide explanation of any departures (if any) from
best practice recommendations in its future annual reports.
- Whether the board has received the
support from management under
recommendation 7.2;
- Whether the board has received assurance
from the Chief Executive Officer (or
equivalent) and the Chief Financial Officer
(or equivalent) under recommendation 7.3.
- A summary of the company’s policies on
risk oversight and management of material
business risks.
The information is disclosed in the annual report
The company’s risk management policies are available on the
company’s website (within Audit Committee Charter
Not applicable
48
Katana capital liMited 2011 AnnuAl RepoRt Principle
corporate Governance
best practice recommendation
compliance
How we comply
8
8.1
8.2
8.3
Remunerate fairly and responsibly
The board should establish a
remuneration committee
The remuneration committee should be
structured so that it:
• Consists of a majority of
independent directors
• Is chaired by the independent chair
• Has at least 3 members
Companies should clearly distinguish
the structure of non-executive director’s
remuneration from that of executive directors
and senior executives
✗
✗
As the company does not presently have any employees including
employment of a Managing Director and Senior Executives there is
no requirement for remuneration committee
remuneration Committee has not been established as the company
does not have any executives or employees
✓
refer Director’s report
8.4
provide related disclosures:
- The names of the members of the
✗
remuneration Committee and their
attendance at meetings of the committee,
or where a company does not have a
remuneration Committee, how the
functions of a remuneration Committee
are carried out;
- The existence and terms of any
schemes for retirement benefits,
other than superannuation,
for non-executive directors;
remuneration Committee has not been established as the company
does not have any executives or employees
Not applicable
- An explanation of any departures from any
Not applicable
principle 8 recommendation;
- The charter of the remuneration
Committee or a summary of the role,
rights, responsibilities and membership
requirements for that committee;
A summary of the company’s policy on
prohibiting entering into transactions
in associated products which limit the
economic risk of participating in unvested
entitlements under any equity-based
remuneration schemes.
Not applicable
Not Applicable – no equity based remuneration schemes
49
Katana capital liMited 2011 AnnuAl RepoRt Additional AsX Information
Ordinary Fully Paid Shares (Total) As of 30 Sep 2011
Range of units
Range
total holders
Shares % of Issued capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
rounding
Total
22
46
97
265
69
499
6,121
182,937
804,980
10,310,652
28,536,401
39,841,091
unmarketable Parcels
Minimum $ 500.00 parcel at $ 0.75 per unit
minimum Parcel Size
667
Holders
21
0.02
0.46
2.02
25.88
71.63
-0.01
100.00
units
5330
50
Katana capital liMited 2011 AnnuAl RepoRt
Top 20 Shareholders As at 5 October 2011
Rank name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
HOpErIDGE ENTErprISES pTY LTD
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