Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
ABN 17 110 777 056
Annual Report - 30 June 2018
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Contents
30 June 2018
Chief Executive Officer's report
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Microequities Asset Management Group Limited
Corporate directory
Shareholder information
2
4
15
16
17
18
19
20
44
45
49
50
1
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Chief Executive Officer's report
30 June 2018
Dear Fellow Shareholders,
This year saw several operating, financial and strategic achievements for your Group. Across the set of management’s key
performance indicators, it is pleasing to report that:
• Fee earning funds under management increased by +18.4% year-on-year;
• Number of clients increased by +9.1% year-on-year; and
• Ongoing operating expenses as a percentage of recurring revenue reduced from 51.6% to 45.1%.
Financially, operating profit from recurring revenue increased by +61.3% whilst recurring revenue increased +42.0% year-
on-year.
Summary Profit or Loss Statement ($000's unless stated)
Funds Under Management ($m)
2018
432.4
2017 % change
365.3
18.4%
Operating profit from investment management
Recurring revenue (1)
Ongoing operating expenses(2)
Operating profit from recurring revenue
Reconciliation to reported net profit after tax
Performance fee income
Other revenue
Other income and gains/(loss) on investments
Initial public offering costs
Employee share based payment expense
Tax expense
Profit attributable to non-controlling interests
Profit from ordinary activities after tax attributable to the owners of
Microequities Asset Management Group Limited
Client Numbers (units)
Ongoing operating expenses to recurring revenue
7,014.4
-3,160.1
3,854.3
4,938.0
-2,547.9
2,390.1
3,503.2
10,205.5
289.4
413.0
297.6
77.8
42.0%
24.0%
61.3%
-65.7%
-2.8%
430.8%
-447.7 - -
-327.6 - -
-1,804.0
-266.1
-3,475.7
-202.8
5,214.5
9,292.5
839
45.1%
769
51.6%
-48.1%
31.2%
-43.9%
9.1%
-12.7%
(1) Represents management fees
(2) Excludes costs related to the initial public offering and employee share based payment expense
From an investment perspective, all the open-ended funds managed by the Group recorded positive absolute returns for the
year. The investment management team has continued to exercise due care in applying a strict value doctrine that we
believe will not only deliver superior long term returns but also protect capital and help mitigate fundamental risk. This year
also saw the successful launch of the Microequities Pure Microcap Value Fund. This fund, which traces back to the
microcap heritage of the Group, has resonated well with investors and the investment management team has built a high-
quality portfolio of profitable, growing and undervalued industrial businesses that we expect will deliver strong long-term
returns. The financial year also saw our flagship investment Fund, the Deep Value Fund reopen to new investors as the
investment management team identified an array of attractive investment opportunities at deep value price points. During
the year, Nanocap 6 (one of our close-ended funds) realised the investment held by it and generated a compound annual
return since inception of 52% as well as a performance fee for the Group of over $800,000.
The Group’s balance sheet, like so many of our investee companies, reflects our financial principles. We believe that a
company should have a strong financial backbone that provides it enough capital to withstand external shocks. Net tangible
assets of the Group rose by $2.9million to $8.8millon.
2
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Chief Executive Officer's report
30 June 2018
This year also marked the significant milestone of the Company listing on the Australian Securities Exchange. The initial
public offering was successfully completed in an expedient manner, with relatively minimal costs to the entity. Importantly,
management remains highly focused on its principal activity; that is to allocate and invest capital within optimal long-term
risk/reward metrics. The successful execution of the former, will provide a sustainable platform to building shareholder value
and generating wealth for shareholders. The unrelenting focus on our core purpose has meant that the transition from an
unlisted public company to a publicly listed company has been seamless. We know our pathway to growing shareholder
wealth is intimately tied to our investment outcomes. Our existence as a publicly listed entity will not drive our investment
outcomes, rather it will be our investment outcomes that ultimately drive our shareholders’ returns.
Dividends
The board of Microequities Asset Management Group Limited has declared a 1 cent per share fully franked dividend. This is
consistent with the dividend policy of the Group, which is to pay between 70% and 100% of the operating profit from
investment management.
Operations
Operationally, we continue to invest resources in servicing our clients with service levels that surpass their expectations. Our
dedication to provide a superior customer experience that they are unlikely to receive from other financial service providers,
is a tenet of our business. It also provides us with a sustainable competitive advantage that larger companies cannot
necessarily match. Many organisations profess to be customer centric, few exert a culture and service delivery that upholds
that claim. Our team are working on various projects that will help further improve the entire customer experience and make
investing in our Funds easier.
Looking ahead
Looking beyond this year, the Group will seek to expand its distribution reach beyond the direct wholesale investor market.
That market currently represents the core distribution pathway for our products but makes up only a small component of the
overall market for investment funds. We will look to expand our distribution of some of our investment products to make
them accessible to the broader market. We are conscious that penetrating the broader market is a long journey, but it would
be remiss of us not to bring our investment products to a wider and bigger addressable market. This represents a strategic
growth pathway that we believe will provide an additional source of long term growth to the Group.
We take this opportunity to thank our clients, shareholders and colleagues who work tirelessly alongside us as we
endeavour to achieve our objectives.
_________________________
Carlos Gil
Chief Executive Officer, Chief investment Officer
23 August 2018
3
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Microequities Asset Management Group Limited (referred to hereafter as the 'Company' or
'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of Microequities Asset Management Group Limited during the whole of the financial
year and up to the date of this report, unless otherwise stated:
Leslie Szekely - Chairman
Craig Shapiro
Carlos Gil
Samuel Gutman
Principal activities
During the financial year the principal continuing activities of the Group consisted of the management of investment funds.
Dividends
Dividends paid/payable during the financial year were as follows:
Consolidated
2018
$
2017
$
Interim dividend for the year ended 30 June 2018 of 2.009 cents per ordinary share
(2017: Interim dividend for the year ended 30 June 2017 of 4.662 cents per ordinary share)*
2,645,000
6,138,484
Final dividend for the year ended 30 June 2017 of 1.745 cents per ordinary share*
-
2,300,000
Final dividend declared after the year end and not yet paid
1,329,381
-
3,974,381
8,438,484
*
Dividend per share referred above are calculated after share-split.
On 23 August 2018, the directors declared a fully franked final dividend for the year ended 30 June 2018 of 1 cent per
ordinary share, to be paid on 13 September 2018 to eligible shareholders on the register as at 29 August 2018. This
equates to a total estimated distribution of $1,329,381, based on the number of ordinary shares on issue as at 30 June
2018. The financial effect of dividends declared after the reporting date are not reflected in the financial statements and will
be recognised in subsequent financial statements.
Review of operations
The profit for the Group after providing for income tax and non-controlling interest amounted to $5,214,479 (30 June 2017:
$9,292,556).
Refer to Chief Executive Officer's report for further commentary on the review of operations.
Significant changes in the state of affairs
Microequities Asset Management Group Limited was listed on Australian Securities Limited ('ASX') and commenced
trading from 30 April 2018 with the ASX code: MAM.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2018 that
has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's
state of affairs in future financial years.
Likely developments and expected results of operations
Likely developments in the operations of the Group and the expected results of those operations are contained in the Chief
Executive Officer's report.
4
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Leslie Szekely
Non-Executive Director and Chairman
Bachelor of Arts, Bachelor of Law from the University of New South Wales and
Master of Law from Sydney University
Leslie worked as a solicitor before teaching commercial and revenue law at the
University of New South Wales, and Sydney University. He was a tax consulting
partner with Horwath Chartered Accountants for 20 years, until Horwath merged with
Deloitte, when he became Director of Taxation in Deloitte Growth Solutions. Leslie
has authored numerous books and articles on taxation law. Since leaving Deloitte in
2008 Leslie has dedicated his time to angel and venture capital ('VC') investing. He is
Chairman of the Investment Committee for the Microequities VC Fund and sits on the
Boards of several unlisted companies. His focus is the development of business
strategy in sectors undergoing digital disruption.
Other current directorships:
No other listed entity directorships
Former directorships (last 3 years): No other listed entity directorships
Special responsibilities:
Chairperson of the Nomination and Remuneration Committee and Member of the
Audit and Risk Management Committee
18,317,357 ordinary shares
Interests in shares:
Experience and expertise:
Name:
Title:
Qualifications:
Craig Shapiro
Independent Non-Executive Director
Bachelor of Science from the University of Sydney, a Diploma from the Securities
Institute of Australia and is a member of the Australian Institute of Company Directors
Craig is a financial services expert with more than 30 years of experience. He spent
22 years at Macquarie Group where he was the Global Group Treasurer and
Executive Director. Prior to joining Macquarie, Craig worked for the State Bank of
NSW and Mitsui Trust Finance Australia. In 2015 he co-founded and is currently the
Co-Chief Executive Officer of Blue River Group Pty Limited, an impact investment
services firm based in Sydney. Craig is currently a director and honorary treasurer of
The Sydney Institute and a director of The Jewish Care Foundation.
Other current directorships:
No other listed entity directorships
Former directorships (last 3 years): No other listed entity directorships
Special responsibilities:
Chairperson of the Audit and Risk Management Committee and Member of the
Nomination and Remuneration Committee
2,662,376 ordinary shares
Interests in shares:
Experience and expertise:
Name:
Title:
Qualifications:
Carlos Gil
Managing Director, Chief Executive Officer and Chief Investment Officer
Bachelor of Economics from Sydney University, a Graduate Diploma in Applied
Finance and Investment Analysis from the Australian Securities Institute and a Master
in Applied Finance and Investment Analysis from the Financial Services Institute of
Australia.
Carlos has worked in stockbroking, funds management, and investment research for
over 20 years, and has been an individual investor in Australian Microcaps since he
was a teenager. Carlos has held various senior management positions in Europe,
including roles as Head of International Securities at BM Securities, and at Banesto
Bank (Santander Group). Upon his return to Australia, he founded the Company with
a long-term vision of creating a value-driven specialist Microcap and Small Cap Fund
Manager.
No other listed entity directorships
Other current directorships:
Former directorships (last 3 years): No other listed entity directorships
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Member of the Nomination and Remuneration Committee
53,634,560 ordinary shares
None
1,905,516 performance rights
5
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Experience and expertise:
Name:
Title:
Qualifications:
Samuel Gutman
Executive Director and Company Secretary
Bachelor of Arts from the University of Newcastle (Australia) and has a Graduate
Diploma of Applied Finance and Investments from the Financial Services Institute of
Australia
Samuel brings a wealth of invaluable pragmatic business experience to the
management team, obtained through a successful career in the Information
Technology industry. Samuel has been a long time personal investor in the Microcap
asset class and adamantly shares the investment philosophy of the Microequities
team.
Other current directorships:
No other listed entity directorships
Former directorships (last 3 years): No other listed entity directorships
Special responsibilities:
Interests in shares:
Interests in options:
Member of the Audit and Risk Management Committee
22,955,539 ordinary shares inclusive of 580,232 loan funded shares
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Samuel Gutman is the company secretary. Samuel's experience is detailed in the 'Information on directors' section above.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2018, and
the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee*
Audit and Risk Management
Committee*
Attended
Held
Attended
Held
Attended
Held
Leslie Szekely
Craig Shapiro
Carlos Gil
Samuel Gutman
12
11
12
12
12
12
12
12
-
-
-
-
-
-
-
-
1
1
-
1
1
1
-
1
Held: represents the number of meetings held during the time the director held office.
*
The sub-committees were only formed towards the end of the year.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration ('KMP') arrangements for the Group, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional disclosures relating to KMP
6
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract,
motivate and retain high performance and high quality personnel.
The Board has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the Group.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-Executive directors remuneration
Non-Executive directors each have a letter of appointment with the Group. Fees and payments to non-executive directors
reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by
the Board. The Board may, from time to time, receive advice from independent remuneration consultants to ensure non-
executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined
independently to the fees of other non-executive directors based on comparative roles in the external market. The
chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors
do not receive share options or other incentives.
As prescribed by the Listing Rules of the ASX, the aggregate remuneration of non-executive directors is determined from
time to time by shareholders at general meeting. Non-executive directors’ fees (including statutory superannuation) are
determined within an aggregate directors’ fee pool limit. The pool currently stands at a maximum of $300,000 per annum in
total, which was approved by shareholders on 16 February 2018.
On Listing, the annual base non-executive director fees payable by the Group are $45,000 to the Chairman and $40,000 to
other non-executive directors, including for any committee roles. These amounts comprise fees paid in cash and are
inclusive of statutory superannuation contributions. In subsequent years, these figures may vary.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components.
7
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board based on individual and business unit performance, the overall performance of the Group and comparable market
remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits.
Short-term incentive (‘STI’) payments that were discretionary in nature were made to a KMP during the financial year.
The long-term incentives ('LTI') include long service leave and share-based payments. Shares, options or performance
rights are awarded to executives over a period of 3 to 4 years based on long-term incentive measures. These include
increase in shareholder value, increase in funds under management, performance of the funds and financial performance
of the business. The options, performance rights and loan shares vest between 3 and 4 years and are contingent upon
employment or service with the Group on the vesting date and the satisfaction of certain vesting conditions.
On 9 November 2015, the Group issued 2,713,022 options (after adjusting for the share split) to Paul Kaplan, the Chief
Operating Officer, for $nil. Each option is exercisable for one share in the Company. The options vest on the earlier of the
sale of 100% of the Company or its business or 36 months from the date of issue (being 9 November 2018). The exercise
price for the options is $0.267 per share. The vesting of the options is conditional on the option holder being employed by
the Group on the vesting date. If for any reason whatsoever, the option holder ceases to be employed prior to the vesting
date, then all unvested options will immediately lapse and option holder will not be entitled to any compensation in respect
of the lapsed options.
On 28 February 2018, the Group granted 1,905,516 performance rights to Carlos Gil, the Chief Executive Officer and Chief
Investment Officer, to pay a bonus in February 2022 if certain performance hurdles relating to the Funds and service
conditions of the KMP are met. The Group can elect to settle the bonus in cash or by way of an issue of shares. The fair
value of the performance rights are accounted over the vesting period as an equity settled share-based payment. The
amount of the bonus will be calculated in accordance with a formula based on the market price of the shares at the time
the bonus is payable multiplied by the vesting percentage (which will range from 0% to 100% depending on the number of
Funds that meet the performance hurdle). Each Fund has its own performance hurdles which are all 5% above the
compound annual return of the relevant benchmark.
Loan Funded Share Plan ('LFSP')
The Group has an equity scheme pursuant to which certain KMP's may access a LFSP. On 26 November 2015, in
accordance with the terms of the plan Samuel Gutman was issued 580,232 shares. The acquisition of shares under this
LFSP is fully funded by the Company through the granting of a limited recourse loan. The LFSP shares are restricted until
the loan is repaid. Interest is charged on the outstanding amount of the loan at the Benchmark Interest Rate as defined in
section 109N2 of the Income Tax Assessment Act 1936. The loan together with interest must be repaid in full on the date
that is two years after Listing.
Group performance and link to remuneration
LTI comprising of share-based payments are directly linked to the performance of the Group. Performance rights, loan
shares and options have various vesting conditions including a continuous period of service with the Group and
performance of underlying Funds.
The Board is of the opinion that the continued improved results can be attributed in part to the adoption of performance
based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over
the coming years.
Use of remuneration consultants
During the financial year ended 30 June 2018, the Group did not engage any remuneration consultants.
8
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Details of remuneration
Prior to the ASX listing on 30 April 2018, Microequities Asset Management Group Limited was not required to prepare a
Remuneration report in accordance with the Corporations Act 2001. As such, Remuneration report information is presented
only for 2018.
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the directors of Microequities Asset Management Group Limited
and the following person:
●
Paul Kaplan - Chief Operating Officer
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
6,849
19,818
464,404
141,583
-
-
-
-
281,007
913,661
90,000
90,000
-
-
-
-
-
-
651
1,883
-
-
-
-
7,500
21,701
20,049
13,014
9,046
2,602
73,796
15,103
567,295
172,302
20,049
55,646
-
11,648
169,012
560,068
257,911 1,328,866
2018
Non-Executive Directors:
Leslie Szekely - Chairman
Craig Shapiro
Executive Directors:
Carlos Gil
Samuel Gutman
Other Key Management
Personnel:
Paul Kaplan
Non-Executive Directors' salaries are 100% fixed. The fixed proportion and the proportion of remuneration linked to
performance of Executive Directors and KMP are as follows:
Name
Executive Directors:
Carlos Gil
Samuel Gutman
Other Key Management Personnel:
Paul Kaplan
Fixed
remuneration
2018
At risk - STI
2018
At risk - LTI
2018
87%
91%
-
-
13%
9%
54%
16%
30%
Service agreements
The Group enters into employment agreements with its executives. The agreements are continuous, that is, not of a fixed
duration, and includes notice period ranging from four weeks to three months on the part of the employee and the Group.
The employment agreements contain substantially the same terms which include usual statutory entitlements, typical
confidentiality and intellectual property provisions intended to protect the Group’s intellectual property rights and other
proprietary information and non-compete clauses.
9
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
Particulars
Expiry date
Exercise price at grant date
Fair value
per option
09/11/2015
26/11/2015
9/10/2020
26/11/2022
Paul Kaplan: 2,713,022 options which
vest on 36 months of continuous service
with the Group. The vesting of the
options is conditional on Paul being
employed by the Group on the vesting
date. There are no performance
conditions in relation to the options.
Samuel Gutman: 580,232 loan funded
shares. The acquisition of shares under
LFSP is fully funded by the Company
through the granting of a limited
recourse loan. The loan together with
interest must be repaid in full on the date
that is two years after Listing. The LFSP
shares are restricted until the loan is
repaid.
$0.267
$0.070
$0.267
$0.070
Options granted carry no dividend or voting rights.
There were no options over ordinary shares granted to or vested by directors and other KMP as part of compensation
during the year ended 30 June 2018.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and
other KMP in this financial year or future reporting years are as follows:
10
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Grant date
Particulars
28/02/2018
Carlos Gil 1,905,516 rights: The Group has agreed to pay Carlos
Gil a bonus in February 2022 if certain performance hurdles
relating to the Funds are met and he is still employed by the
Group. The Group can elect to settle the bonus in cash or by way
of an issue of shares. The amount of the bonus will be calculated
in accordance with a formula based on the market price of the
shares at the time the bonus is payable multiplied by the vesting
percentage (which will range from 0% to 100% depending on the
number of Funds that meet the performance hurdle). Each Fund
has its own performance hurdles which are all 5% above the
compound annual return of the relevant benchmark. In calculating
the share-based payment expense for performance rights, the
Board has reviewed the historical performance of the funds which
have at least 2 years track record. Based on the review, the Board
has applied an 80% probability of meeting the performance
conditions.
Expiry date
Fair value
per right
at grant date
28/02/2022
$0.581
Performance rights granted carry no dividend or voting rights.
The number of performance rights over ordinary shares granted to and vested by directors and other key management
personnel as part of compensation during the year ended 30 June 2018 are set out below:
Name
Carlos Gil
Additional disclosures relating to KMP
Number of
Number of
rights
granted
rights
vested
during the
during the
year
2018
year
2018
1,905,516
-
Shareholding
The number of shares in the Company held during the financial year by each director and other members of KMP of the
Group, including their personally related parties, is set out below:
Balance at Received
as part of
the start of
the year
remuneration Additions
Ordinary shares
Leslie Szekely
Craig Shapiro
Carlos Gil
Samuel Gutman*
22,896,696
2,662,376
67,043,200
28,694,424
121,296,696
-
-
-
-
-
Disposals/
other
Balance at
the end of
the year
-
-
-
-
-
-
(4,579,339) 18,317,357
2,662,376
(13,408,640) 53,634,560
(5,738,885) 22,955,539
(23,726,864) 97,569,832
*
Samuel Gutman's shareholding above includes 580,232 shares issued under the LFSP.
11
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of KMP of the Group, including their personally related parties, is set out below:
Options over ordinary shares
Paul Kaplan
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
2,713,022
2,713,022
-
-
-
-
-
-
2,713,022
2,713,022
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each director and
other members of KMP of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Carlos Gil
Balance at
the start of
the year
Granted
Expired/
forfeited/
other
Balance at
the end of
the year
Vested
-
-
1,905,516
1,905,516
-
-
-
-
1,905,516
1,905,516
Loans to key management personnel and their related parties
Loans attached to the LFSP total $114,736 and are reported as a reduction in issued capital, due to the operability of the
LFSP being accounted for as share-based payments, similar in nature to options.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Microequities Asset Management Group Limited under option at the date of this report are as
follows:
Grant date
9/11/2015
26/11/2015
Expiry date
09/10/2020
26/11/2022
Exercise
price
Number
under option
$0.267
$0.267
2,713,022
1,367,432
4,080,454
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Microequities Asset Management Group Limited issued on the exercise of options during
the year ended 30 June 2018 and up to the date of this report.
Shares under performance rights and loan funded share plan
Ordinary shares of Microequities Asset Management Group Limited under performance rights at the date of this report are
as follows:
Grant date
28/02/2018
28/02/2018
Expiry date
28/02/2022
28/02/2022
12
Exercise
price
Number
under rights
$0.000
$0.000
1,905,516
1,270,344
3,175,860
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate
in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of performance rights
There were no ordinary shares of Microequities Asset Management Group Limited issued on the exercise of performance
rights during the year ended 30 June 2018 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 22 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 22 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Prosperity Advisers Audit Services Pty Ltd
There are no officers of the Company who are former partners of Prosperity Advisers Audit Services Pty Ltd.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Prosperity Advisers Audit Services Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
13
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' report
30 June 2018
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Leslie Szekely
Chairman
23 August 2018
___________________________
Carlos Gil
Chief Executive Officer
14
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MICROEQUITIES ASSET MANAGEMENT GROUP
LIMITED AND CONTROLLED ENTITIES
I declare that, to the best of my knowledge and belief, during the year ended 30
June 2018 there have been:
(i) no contraventions of the auditor independence requirements as set
out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct
in relation to the audit.
PROSPERITY AUDIT SERVICES
LUKE MALONE
Partner
23 August 2018
Sydney
Sydney
Level 11
309 Kent Street
Sydney NSW 2000
PO Box 20726
World Square NSW 2002
T 02 8262 8700
F 02 8026 8377
Newcastle
Hunter Mall Chambers
2nd Floor, 175 Scott Street
Newcastle NSW 2300
PO Box 234
Newcastle NSW 2300
T 02 4907 7222
F 02 8026 8376
Brisbane
Level 22
333 Ann Street
Brisbane QLD 4000
GPO Box 2246
Brisbane QLD 4001
T 07 3839 1755
F 07 3839 1037
mail@prosperityadvisers.com.au
prosperityadvisers.com.au
Prosperity Advisers Audit Services Pty Ltd
ABN 90 147 151 228
Chartered Accountants
Liability limited by a Scheme approved under
the Professional Standards Legislation.
15
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Consolidated
Note
2018
$
2017
$
5
10,806,986 15,441,161
Other income and gain/(loss) on investments
6
413,022
77,801
Expenses
Employee benefits expenses
Legal and professional expenses
Advertising expenses
Occupancy expenses
Listing expenses
Other expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Microequities Asset Management Group Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Microequities Asset Management Group Limited
(2,518,191)
(120,624)
(257,347)
(288,924)
(447,735)
(302,569)
(1,769,155)
(44,238)
(189,210)
(192,766)
-
(352,533)
7,284,618 12,971,060
8
(1,804,019)
(3,475,741)
5,480,599
9,495,319
-
-
5,480,599
9,495,319
266,120
5,214,479
202,763
9,292,556
5,480,599
9,495,319
266,120
5,214,479
202,763
9,292,556
5,480,599
9,495,319
Cents
Cents
Basic earnings per share
Diluted earnings per share
Refer to note 2 for reclassification of comparatives
29
29
4.00
3.90
7.13
7.13
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
16
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Consolidated statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Other
Total current assets
Non-current assets
Financial assets at fair value through profit or loss
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax
Employee benefits
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to the owners of Microequities Asset Management Group Limited
Non-controlling interest
17
18
Total equity
Refer to note 2 for reclassification of comparatives
Consolidated
Note
2018
$
2017
$
9
10
11
12
13
8
14
8
15
16
6,562,576
784,866
-
82,182
7,429,624
3,715,138
3,852,787
950,983
53,601
8,572,509
2,876,277
92,730
2,969,007
1,842,883
32,824
1,875,707
10,398,631 10,448,216
634,886
766,409
216,586
-
1,617,881
670,449
1,434,088
210,381
2,300,000
4,614,918
1,617,881
4,614,918
8,780,750
5,833,298
2,706,045
327,597
5,747,098
8,780,740
10
2,655,669
-
3,177,619
5,833,288
10
8,780,750
5,833,298
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
17
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Consolidated statement of changes in equity
For the year ended 30 June 2018
Consolidated
Issued
capital
$
Reserves
$
Retained
earnings
$
Non-
controlling
interest
$
Total equity
$
-
-
-
-
-
-
-
-
-
-
-
-
-
2,323,547
-
4,644,934
9,292,556
202,763
9,495,319
-
-
-
9,292,556
202,763
9,495,319
-
10
10
-
-
(8,438,484)
-
(202,763)
-
334,282
(202,763)
(8,438,484)
3,177,619
10
5,833,298
Retained
earnings
$
Non-
controlling
interest
$
Total equity
$
3,177,619
10
5,833,298
5,214,479
266,120
5,480,599
-
-
-
5,214,479
266,120
5,480,599
Balance at 1 July 2016
2,321,387
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 17)
Repayments under loan funded share plan
(note 17)
Distribution of profits to non-controlling interest
Dividends paid (note 19)
Balance at 30 June 2017
-
-
-
-
334,282
-
-
2,655,669
Consolidated
Issued
capital
$
Reserves
$
Balance at 1 July 2017
2,655,669
-
-
-
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 17)
Share-based payments (note 30)
Repayments under loan funded share plan
(note 17)
Distribution of profits to non-controlling interest
Dividends paid (note 19)
1
-
-
327,597
-
-
-
-
1
327,597
50,375
-
-
-
-
-
-
-
(2,645,000)
-
(266,120)
-
50,375
(266,120)
(2,645,000)
Balance at 30 June 2018
2,706,045
327,597
5,747,098
10
8,780,750
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
18
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Consolidated statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Dividends and distributions received
Interest received
Income taxes paid
Consolidated
Note
2018
$
2017
$
14,962,395 14,035,546
(3,664,363)
(4,746,431)
10,215,964 10,371,183
77,910
130,321
(2,684,623)
41,966
151,981
(2,531,604)
Net cash from operating activities
28
7,878,307
7,894,791
Cash flows from investing activities
Payments for investments
Proceeds from disposal of investments
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Contributed capital by Equity Venture Partners Pty Ltd
Repayments under loan funded share plan
Dividends paid
Distribution of profits to non-controlling entity
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
17
17
(1,000,000)
1,129,875
(172,493)
140,697
129,875
(31,796)
1
-
50,375
(4,945,000)
(266,120)
-
10
334,282
(6,855,350)
(202,763)
(5,160,744)
(6,723,821)
2,847,438
3,715,138
1,139,174
2,575,964
Cash and cash equivalents at the end of the financial year
9
6,562,576
3,715,138
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
19
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 1. General information
The financial statements cover Microequities Asset Management Group Limited as a Group consisting of Microequities
Asset Management Group Limited and the entities it controlled at the end of, or during, the year. The financial statements
are presented in Australian dollars, which is Microequities Asset Management Group Limited's functional and presentation
currency.
Microequities Asset Management Group Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
Suite 3105, Level 31 Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 23 August 2018. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, financial assets at fair value
through profit or loss.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 31.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Microequities Asset
Management Group Limited ('Company' or 'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year
then ended. Microequities Asset Management Group Limited and its subsidiaries together are referred to in these financial
statements as the 'Group'.
20
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Management fees
Management fees are recognised on an accruals basis based on the portfolio managed, net of any fund manager rebates.
Performance fees
Performance fees are recognised when the right to receive payment has been established. Performance fees which are
contingent upon performance to be determined at future dates have not been recognised as revenue or as a receivable at
the reporting date as they are not able to be estimated or measured reliably and may change significantly.
Dividends and distributions
Dividends and distributions are recognised when received or when the right to receive payment is established.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
21
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Microequities Asset Management Group Limited (the 'head entity') and its wholly-owned Australian subsidiaries have
formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the
tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
22
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 7 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are either: (i) held for trading, where they are acquired for the purpose of
selling in the short-term with an intention of making a profit; or (ii) designated as such upon initial recognition, where they
are managed on a fair value basis or to eliminate or significantly reduce an accounting mismatch. Except for effective
hedging instruments, derivatives are also categorised as fair value through profit or loss. Fair value movements are
recognised in profit or loss.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or
group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a
breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable
data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the current market rate of return for similar
financial assets.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
23
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease
term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares (including performance rights and loan funded
shares), that are provided to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken
of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
24
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Microequities Asset Management
Group Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
financial year.
25
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Comparatives
Comparatives have been reclassified in line with the current year presentation. Certain profit or loss items have been
reclassified where necessary with no net effect on profit or loss. Non-recourse loans that were previously classified as
receivables have been reclassified as treasury shares in the statement of financial position. Deferred tax liabilities have
been offset against deferred tax assets in the statement of financial position.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2018. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The Group expects to adopt this standard from 1 July 2018 and the adoption of this standard is not
expected to have a material impact for the Group.
26
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will
adopt this standard from 1 July 2018, using the transitional modified retrospective method as detailed in paragraph C3(b)
of the standard. The impact assessment of this standard is substantially complete and based on the work performed to the
date of this report, no material impact is expected on the financial statements of the Group from adopting this standard.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expense associated with the lease under AASB 16 will be higher when
compared to lease expense under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases. The Group expects to adopt this standard
from 1 July 2019 and the impact of its adoption will be that operating leases, such as those detailed in note 24, will be
brought onto the statement of financial position at the present value with a corresponding liability. The actual amount will
depend on the operating leases held on the date of adoption and any transitional elections made.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the IASB and is applicable for annual reporting periods on or after
1 January 2020. The Australian equivalent is yet to be published. The application of the new definition and recognition
criteria may result in future amendments to several accountings standards. Furthermore, entities who rely on the
conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise
dealt with under Australian Accounting Standards may need to revisit such policies. The Group will apply the IASB revised
conceptual framework from 1 July 2020 and is yet to assess its impact.
27
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
The Group can elect to settle performance rights in the form of a bonus in cash or by way of an issue of shares. The fair
value of such performance rights are accounted over the vesting period as an equity settled share-based payment based
on the current expectation of settlement.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on
the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
Note 4. Operating segments
The main business activities of the Group are the provision of funds management services. The Board of Directors are
identified as the Chief Operating Decision Makers ('CODM'), and they consider the performance of the main business
activities on an aggregated basis to determine the allocation of resources.
Other activities undertaken by the Group, including investing activities, are incidental to the main business activities.
Based on the internal reports that are used by the CODM the Group has one operating segment being the provision of
funds management services with the objective of offering investment funds to wholesale and sophisticated investors. There
is no aggregation of operating segments.
The operating segment information is the same information as provided throughout the financial statements and are
therefore not duplicated.
The information reported to the CODM is on a monthly basis.
Note 5. Revenue
Management fees
Performance fees
Other revenue
Revenue
Consolidated
2018
$
2017
$
7,014,414
4,938,006
3,503,215 10,205,518
297,637
289,357
10,806,986 15,441,161
28
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 6. Other income and gain/(loss) on investments
Dividends and distributions
Interest
Realised gain on investments
Unrealised gain/(loss) on investments
Other income and gain/(loss) on investments
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Note 8. Income tax
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Contributions to employee share scheme
Taxable distributions
Tax impact of franked dividends received
Non-taxable income attributable to non-controlling interest
Prior year over/under accrual
Sundry items
Income tax expense
29
Consolidated
2018
$
2017
$
55,423
158,770
55,848
142,981
474,202
135,212
-
(531,613)
413,022
77,801
Consolidated
2018
$
2017
$
288,924
192,766
144,384
112,231
Consolidated
2018
$
2017
$
1,863,925
(59,906)
3,659,432
(183,691)
1,804,019
3,475,741
(59,906)
(183,691)
7,284,618 12,971,060
2,003,270
3,567,042
90,089
(264,000)
68,838
(21,132)
(73,183)
-
137
-
-
-
(37,145)
(55,759)
2,298
(695)
1,804,019
3,475,741
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 8. Income tax (continued)
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Accrued expenses
Listing expenses
Unrealised gain on investments
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss
Closing balance
Provision for income tax
Provision for income tax
Note 9. Current assets - cash and cash equivalents
Cash at bank and on hand
Cash on deposits
Note 10. Current assets - trade and other receivables
Trade receivables
Trust distribution receivable
Other receivables
Interest receivable
30
Consolidated
2018
$
2017
$
59,740
9,034
95,532
(71,576)
58,267
6,813
-
(32,256)
92,730
32,824
32,824
59,906
(150,867)
183,691
92,730
32,824
Consolidated
2018
$
2017
$
766,409
1,434,088
Consolidated
2018
$
2017
$
4,472,042
2,090,534
3,424,604
290,534
6,562,576
3,715,138
Consolidated
2018
$
2017
$
743,912
25,651
3,621
11,682
3,465,335
382,559
-
4,893
784,866
3,852,787
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 11. Current assets - financial assets at fair value through profit or loss
Shares in listed companies - designated at fair value through profit or loss
-
950,983
Refer to note 21 for further information on fair value measurement.
Note 12. Current assets - other
Consolidated
2018
$
2017
$
Prepayments
Other assets
Note 13. Non-current assets - financial assets at fair value through profit or loss
Consolidated
2018
$
2017
$
33,091
49,091
53,601
-
82,182
53,601
Consolidated
2018
$
2017
$
Investment in unlisted Australian unit trusts - designated at fair value through profit or loss
2,876,277
1,842,883
Refer to note 21 for further information on fair value measurement.
Note 14. Current liabilities - trade and other payables
Consolidated
2018
$
2017
$
92,575
542,311
85,078
585,371
634,886
670,449
Consolidated
2018
$
2017
$
216,586
210,381
Trade payables
Accruals and other payables
Refer to note 20 for further information on financial instruments.
Note 15. Current liabilities - employee benefits
Employee benefits
31
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 16. Current liabilities - provisions
Dividends
Consolidated
2018
$
2017
$
-
2,300,000
Dividends
The provision represents dividends declared, being appropriately authorised and no longer at the discretion of the
Company, on or before the end of the financial year but not distributed at the reporting date.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2018
Carrying amount at the start of the year
Payments
Carrying amount at the end of the year
Note 17. Equity - issued capital
Dividends
$
2,300,000
(2,300,000)
-
Consolidated
2018
Shares
2017
Shares
2018
$
2017
$
Ordinary shares - fully paid
Less: Treasury shares
132,938,073
(2,637,776)
401,426
(4,169)
3,930,646
(1,224,601)
2,970,645
(314,976)
130,300,297
397,257
2,706,045
2,655,669
Movements in ordinary share capital
Details
Balance
Date
Shares
$
1 July 2016
401,426
2,970,645
Balance
Share-split
Issue of shares under employee share trust plan
Issue of shares
30 June 2017
16 February 2018
28 February 2018
24 April 2018
401,426
131,266,302
1,270,344
1
2,970,645
-
960,000
1
Balance
30 June 2018
132,938,073
3,930,646
32
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 17. Equity - issued capital (continued)
Movements in Treasury shares
Details
Balance
Repayment of loan
Date
Shares
$
1 July 2016
(4,169)
-
(649,258)
334,282
Balance
Share-split
Issue of shares under employee share trust plan
Repayment of loan
30 June 2017
16 February 2018
28 February 2018
(4,169)
(1,363,263)
(1,270,344)
-
(314,976)
-
(960,000)
50,375
Balance
30 June 2018
(2,637,776)
(1,224,601)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Treasury shares
Treasury shares comprise of 1,367,432 shares issued under a Loan Funded Share Plan and 1,270,344 shares issued
under an Employee Share Trust Plan.
Loan Funded Share Plan ('LFSP')
The Company has an equity scheme pursuant to which certain employees may access a LFSP. The acquisition of shares
under this LFSP is fully funded by the Company through the granting of a limited recourse loan. The LFSP shares are
restricted until the loan is repaid. These shares are recorded as treasury shares representing a deduction against issued
capital. These have been accounted for as a share-based payment. Refer to note 30 for further details. When the loans are
settled the treasury shares are reclassified as ordinary shares and the equity will increase by the amount of the loan
repaid.
Employee Share Trust Plan ('ESTP').
The Company has established the ESTP to deliver long-term incentives to eligible employees. The trustee of the Share
Trust is a wholly owned subsidiary of the Company. The acquisition of the shares under the ESTP is fully funded by the
Company. These shares are recorded as treasury shares representing a deduction against issued capital. The eligible
employees are issued with units in the Share Trust. Each unit in the Share Trust is converted to one share in the Company
upon satisfaction of the relevant vesting conditions. The issue of units in the Share Trust have been accounted for as a
share-based payment. Refer to note 30 for further details.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
33
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 17. Equity - issued capital (continued)
The Group holds an Australian Financial Services License and is subject to regulatory financial requirements that include
maintaining a minimum level of net tangible assets. The directors believe the Group has adequate capital as at 30 June
2018 to maintain the Group's existing business activities and facilitate growth.
Note 18. Equity - reserves
Share-based payments reserve
Consolidated
2018
$
2017
$
327,597
-
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Balance at 30 June 2017
Share-based payments
Balance at 30 June 2018
Note 19. Equity - dividends
Dividends
Dividends paid/payable during the financial year were as follows:
Share-based
payments
$
-
-
327,597
327,597
Consolidated
2018
$
2017
$
Interim dividend for the year ended 30 June 2018 of 2.009 cents per ordinary share
(2017: Interim dividend for the year ended 30 June 2017 of 4.662 cents per ordinary share)*
2,645,000
6,138,484
Final dividend for the year ended 30 June 2017 of 1.745 cents per ordinary share*
-
2,300,000
Final dividend declared after the year end and not yet paid
1,329,381
-
3,974,381
8,438,484
*
Dividend per share referred above are calculated after share-split.
On 23 August 2018, the directors declared a fully franked final dividend for the year ended 30 June 2018 of 1 cent per
ordinary share, to be paid on 13 September 2018 to eligible shareholders on the register as at 29 August 2018. This
equates to a total estimated distribution of $1,329,381, based on the number of ordinary shares on issue as at 30 June
2018. The financial effect of dividends declared after the reporting date are not reflected in the financial statements and will
be recognised in subsequent financial statements.
34
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 19. Equity - dividends (continued)
Franking credits
Consolidated
2018
$
2017
$
Franking credits available for subsequent financial years based on a tax rate of 27.5%
1,503,314
818,252
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
●
●
●
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Note 20. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. Given the long-term
nature of the investments, the Group’s overall risk management program focuses on the underlying value of the
investments rather than short-term fluctuations in market price. The Group regularly reviews the investment case and
performance of the investments as well as other different methods to measure different types of risk to which it is exposed,
including sensitivity analysis.
In particular, the Group manages the investments of certain funds where it is entitled to receive management fees and fees
contingent upon performance of the portfolio managed. These fees are exposed to significant risk associated with the
funds’ performance, including market risks and liquidity risk as detailed below.
Risk management is carried out by the investment management team in accordance with the investment mandate of each
fund.
Market risk
Foreign currency risk
Foreign exchange risk arises from recognised financial assets and financial liabilities denominated in a currency that is not
the entity’s functional currency. The Group is not exposed to any significant foreign currency risk.
Price risk
Price risk is the risk that the fair value of investments decreases as a result of changes in market prices, whether those
changes are caused by factors specific to the individual equity securities or managed investment funds or factors affecting
all financial instruments in the market. Price risk exposure arises from the Group's investment portfolio.
Price risk is managed by monitoring the underlying value of the investments in relation to the price of the investments and
also taking a long-term investment time frame into account.
The Group is exposed to direct equity price risk on its financial assets that are at fair value. The table below summarises
the impact of a 10% movement in the market value of these assets:
Consolidated - 2018
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
Average price increase
Effect on
Average price decrease
Effect on
Investment in unlisted
Australian unit trusts
10%
287,628
208,530
(10%)
(287,628)
(208,530)
35
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 20. Financial instruments (continued)
Consolidated - 2017
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
Average price increase
Effect on
Average price decrease
Effect on
Shares in listed companies
10%
95,098
68,946
(10%)
(95,098)
(68,946)
Investment in unlisted
Australian unit trusts
10%
184,288
133,609
(10%)
(184,288)
(133,609)
279,386
202,555
(279,386)
(202,555)
Interest rate risk
The Group’s exposure to interest rate risk is not significant and limited to interest on cash at bank.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net
of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The Group does not hold any collateral.
The Group has a credit risk exposure with the cash at bank, trade and distribution receivable from funds under
management. The funds under management as at 30 June 2018 owed the Group 94% (2017: 99%) of trade receivables
and accrued income. The balance was within its terms of trade and no impairment was made as at the reporting date.
These receivables represent management fees and performance fees that are accrued and paid monthly by the Funds.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by monitoring actual and forecast cash flows and
matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
92,575
92,575
-
-
-
-
-
-
92,575
92,575
36
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 20. Financial instruments (continued)
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Dividend payable
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
-
85,078
2,300,000
2,385,078
-
-
-
-
-
-
-
-
-
85,078
2,300,000
2,385,078
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 21. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2018
Assets
Investment in unlisted Australian unit trusts
Total assets
Consolidated - 2017
Assets
Shares in listed entities
Investment in unlisted Australian unit trusts
Total assets
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
2,876,277
2,876,277
-
-
2,876,277
2,876,277
Level 1
$
Level 2
$
Level 3
$
Total
$
950,983
-
950,983
-
1,842,883
1,842,883
-
-
-
950,983
1,842,883
2,793,866
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables approximate their fair values due to
their short-term nature.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Investments in unlisted Australian unit trusts
The investments are recorded at fair value determined on the basis of the published unit prices of those unlisted managed
investment funds at the reporting date, adjusted where deemed appropriate, to reflect values based on recent actual
market transactions.
37
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 22. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Prosperity Advisers Audit
Services Pty Ltd, the auditor of the Company, and its network firms:
Audit services - Prosperity Advisers Audit Services Pty Ltd
Audit or review of the financial statements
Other services - network firm - Prosperity Advisers (Sydney) Pty Ltd
Tax compilation and related services
Other compliance services
Note 23. Contingent liabilities
The Group had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Note 24. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2018
$
2017
$
32,500
11,000
6,400
1,200
6,300
600
7,600
6,900
Consolidated
2018
$
2017
$
282,783
408,754
327,394
691,537
691,537
1,018,931
Operating lease commitments includes contracted amounts for office premises under non-cancellable operating leases
expiring within 1 to 3 years.
There is a sublease agreement in place relating to the operating lease expiring on 14 October 2018. The amounts shown
in the table above do not reflect any reduction in net operating lease commitments as a consequence of this sublease
arrangement.
Note 25. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
38
Consolidated
2018
$
2017
$
1,003,661
55,646
11,648
257,911
826,509
47,083
90,668
-
1,328,866
964,260
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 26. Related party transactions
Parent entity
Microequities Asset Management Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 25 and the remuneration report included in the
directors' report.
Transactions with related parties
Management fees and performance fees disclosed in note 5 are from Funds for which the Group is a Trustee.
Receivable from and payable to related parties
Trade receivables disclosed in note 10 are predominantly from Funds for which the Group is a Trustee.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 27. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Microequities Asset Management Pty Ltd
Microequities Venture Capital Pty Ltd
Microequities Venture Capital Fund Managing
Partnership LP*
Australia
Australia
Australia
Ownership interest
2017
2018
%
%
100%
100%
100%
100%
50%
50%
*
Leslie Szekely, the Chairman, holds 50% of the shares in Equity Venture Partners Pty Ltd ACN 600 735 626 ('EVP')
through Bellite Pty Ltd ACN 056 441 386, a company controlled by him. EVP (as trustee for the EVP Trust) is a limited
partner of Microequities Venture Capital Managing Partnership LP which acts as general partner of the Microequities
Venture Capital Fund LP.
39
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 28. Cash flow information
Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Net fair value loss/(gain) on other financial assets
Share-based payments
Dividend income- non-cash
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in deferred tax assets
Decrease in prepayments
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase in employee benefits
Net cash from operating activities
Non-cash investing and financing activities
Consolidated
2018
$
2017
$
5,480,599
9,495,319
(182,106)
327,597
(30,180)
531,613
-
-
3,067,921
(59,906)
20,510
(49,091)
(35,563)
(667,679)
6,205
(3,474,407)
(183,691)
-
-
415,709
974,809
135,439
7,878,307
7,894,791
Consolidated
2018
$
2017
$
Additions to investment by reinvestment of dividends
30,180
-
Note 29. Earnings per share
Profit after income tax
Non-controlling interest
Consolidated
2018
$
2017
$
5,480,599
(266,120)
9,495,319
(202,763)
Profit after income tax attributable to the owners of Microequities Asset Management Group
Limited
5,214,479
9,292,556
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
130,300,296 130,300,296
Options over ordinary shares
Performance rights over ordinary shares
2,513,759
794,037
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share 133,608,092 130,300,296
Number
Number
40
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 29. Earnings per share (continued)
Basic earnings per share
Diluted earnings per share
Cents
Cents
4.00
3.90
7.13
7.13
The weighted average number of ordinary shares for year ended 30 June 2018 does not include 2,637,776 treasury shares
(2017:1,367,432).
The weighted average number of ordinary shares has been adjusted to give effect to share-split which occurred during the
financial year.
Note 30. Share-based payments
The share-based payment expense for the year was $327,597.
Options
On 9 November 2015, the Group issued 2,713,022 options for $nil. Each option is exercisable for one share in the
Company. The options vest on the earlier of the sale of 100% of the Company or its business or 36 months from the date
of issue (being 9 November 2018). The exercise price for the options is $0.267 per share, being the market value of a
share at the time of issue of the options. The vesting of the options is conditional on the option holder being employed by
the Group on the vesting date. If for any reason whatsoever, the option holder ceases to be employed prior to the vesting
date, then all unvested options will immediately lapse and option holder will not be entitled to any compensation in respect
of the lapsed options. Any unexercised options will lapse 59 months from their issue date.
Loan Funded Share Plan ('LFSP')
As detailed in note 17, the Group has an equity scheme pursuant to which certain employees may access a LFSP. On 26
November 2015, the Group granted limited recourse loans to certain employees to enable them to subscribe 1,367,432
shares in the Company. The LFSP shares are restricted until the loan is repaid. These shares are recorded as treasury
shares representing a deduction against issued capital. These have been accounted for as a share-based payment.
Set out below are summaries of options and loan funded shares granted under the plan:
2018
Grant date
Expiry date
price*
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
09/11/2015
26/11/2015
09/10/2020
26/11/2022
$0.267
$0.267
2,713,022
1,367,432
4,080,454
-
-
-
-
-
-
-
-
-
2,713,022
1,367,432
4,080,454
Weighted average exercise price
$0.267
$0.000
$0.000
$0.000
$0.267
*
**
Exercise price and number of options have been adjusted for share-split.
The above includes 1,367,432 loan funded shares which is accounted as a share-based payment.
The weighted average share price during the financial year was $0.749.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.33 years
(2017: 1.33 years).
Outstanding options vested and exercisable as at 30 June 2018 Nil (2017: Nil).
41
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 30. Share-based payments (continued)
Performance rights
On 28 February 2018, the Group granted 1,905,516 performance rights to pay a bonus in February 2022 if certain
performance hurdles relating to the Funds and service conditions of the employee are met. The Group can elect to settle
the bonus in cash or by way of an issue of shares. The amount of the bonus will be calculated in accordance with a formula
based on the market price of the shares at the time the bonus is payable multiplied by the vesting percentage (which will
range from 0% to 100% depending on the number of Funds that meet the performance hurdle). Each Fund has its own
performance hurdles which are all 5% above the compound annual return of the relevant benchmark.
Units under the Employee Share Trust Plan ('ESTP')
On 28 February 2018, the Group granted 1,270,344 share units (unvested) under the ESTP. The units vest if certain
performance hurdles relating to the Funds and service conditions of the employees are met. The number of shares that will
vest will be calculated based on the vesting percentage (which will range from 0% to 100% depending on the number of
Funds that meet the performance hurdle). Each Fund has its own performance hurdles which are all 5% above the
compound annual return of the relevant benchmark.
Set out below are summaries of performance rights and share units granted under the plan:
2018
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
28/02/2018
28/02/2018
28/02/2022
28/02/2022
$0.000
$0.000
-
-
-
1,905,516
1,270,344
3,175,860
-
-
-
-
-
-
1,905,516
1,270,344
3,175,860
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3.67
years.
For the performance rights and share units under ESTP granted during the current financial year, the valuation model
inputs used to determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
28/02/2018
28/02/2018
28/02/2022
28/02/2022
$0.800
$0.800
$0.000
$0.000
56.80%
56.80%
8.00%
8.00%
3.25%
3.25%
$0.581
$0.581
In calculating the share-based payment expense for performance rights, the Board has reviewed the historical performance
of the funds which have at least 2 years track record. Based on the review, the Board has applied an 80% probability of
meeting the performance conditions.
Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
42
Parent
2018
$
2017
$
153,067
8,435,398
153,067
8,435,398
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Notes to the consolidated financial statements
30 June 2018
Note 31. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Retained earnings/(accumulated losses)
Total equity
Parent
2018
$
2017
$
4,509,547
5,504,504
7,314,358
7,347,497
3,854,091
2,405,673
3,854,091
2,405,673
3,666,045
(205,778)
2,655,669
2,286,155
3,460,267
4,941,824
Issued capital
Issued capital disclosed above includes $960,000 issue of shares under employee share trust plan that was funded by
another Group entity.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
Note 32. Events after the reporting period
Apart from the dividend declared as disclosed in note 19, no other matter or circumstance has arisen since 30 June 2018
that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the
Group's state of affairs in future financial years.
43
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2018 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Leslie Szekely
Chairman
23 August 2018
___________________________
Carlos Gil
Chief Executive Officer
44
INDEPENDENT AUDITOR’S REPORT
TO THE OWNERS OF MICROEQUITIES ASSET MANAGEMENT
GROUP LIMITED AND CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
Report on the Financial Report
Opinion
We have audited the financial report of Microequities Asset Management Group
Limited and Controlled Entities (the Group), which comprises the consolidated
statement of financial position as at 30 June 2018, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and
notes comprising a summary of significant accounting policies and other explanatory
information, and the directors’ declaration.
In our opinion:
a.
the accompanying financial report of Microequities Asset Management
Group Limited and Controlled Entities is in accordance with the Corporations
Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at
30 June 2018
complying with Australian Accounting Standards and
Corporations Regulations 2001; and
the
b.
the financial report also complies with International Financial Reporting
Standards as disclosed in Note 1.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independence
in accordance with
independent of
requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
the auditor
the Group
We confirm that the independence declaration required by the Corporations Act
2001, which has been given to the directors of Microequities Limited and Controlled
Entities, a copy of which is included on page 15 of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of
most significance in our audit of the financial report for the year ended 30 June
2018. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
45
Sydney
Level 11
309 Kent Street
Sydney NSW 2000
PO Box 20726
World Square NSW 2002
T 02 8262 8700
F 02 8026 8377
Newcastle
Hunter Mall Chambers
2nd Floor, 175 Scott Street
Newcastle NSW 2300
PO Box 234
Newcastle NSW 2300
T 02 4907 7222
F 02 8026 8376
Brisbane
Level 22
333 Ann Street
Brisbane QLD 4000
GPO Box 2246
Brisbane QLD 4001
T 07 3839 1755
F 07 3839 1037
mail@prosperityadvisers.com.au
prosperityadvisers.com.au
Prosperity Advisers Audit Services Pty Ltd
ABN 90 147 151 228
Chartered Accountants
Liability limited by a Scheme approved under
the Professional Standards Legislation.
INDEPENDENT AUDITOR’S REPORT
TO THE OWNERS OF MICROEQUITIES ASSET MANAGEMENT
GROUP LIMITED AND CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
How our audit addressed the key audit matter
Key audit matter
Existence and valuation of financial assets
Refer note 13: $2,876,277
Financial assets primarily consist of managed
investment funds which invest in listed Australian and
international equities. They are valued by multiplying
the quantity of units held in the investment fund by the
market price.
Whilst there is no significant judgement in determining
the valuation of the financial assets, these investments
represent a significant portion of total assets in the
statement of financial position. The fluctuations in the
carrying value of financial assets will also impact the
gains/losses recognised in the statement of profit or
loss. Given the overall impact financial assets have on
the financial statements, we have determined the
existence and valuation of financial assets to be a key
audit matter.
Share based payment transactions
Refer to note 2, 17, 18, 30: $327,597
The Group provides benefits to employees and others
in the form of share-based payment transactions,
whereby officers and employees render services and
receive rights over shares. The Group provides these
benefits via direct options, performance rights, loan
funded share plans and an employee share trust plan.
1.
2.
3.
1.
2.
3.
share-based payment
These
transactions are
classified by the Group as equity settled share-based
payment transactions.
4.
5.
the expense
judgement and
The accounting for share-based payments was a key
recognised
audit matter because
incorporates
the use of a
management’s expert. The Group valued the options
assisted by an external expert, considered
the
probability of employees meeting performance
conditions and through use of the Black Scholes
model, where inputs such as volatility, dividend yield
and risk-free rate require judgement.
6.
7.
46
the
from
opening
Performed a reconciliation of the financial assets
balance
balance,
addition/subtractions of purchases, sales and
other transactions and agreeing the reconciliation
to the closing balance.
Agreed all the financial asset holdings at 30 June
2018
the
investment statements
to
underlying funds.
Agreed all the managed investment fund unit
prices to independent market pricing sources.
from
Compared the terms and conditions for the
options issued with appropriate Board minutes
and agreements with employees.
Compared the option grant date used in the
expense calculations to supporting data.
Obtained the Group’s expert’s options valuation
report and assessed the reasonableness of
selected inputs used in valuation of the share
options using available supporting data.
Assessed the competency of the Group’s expert
including their experience and qualifications.
Assessed attributes, on a sample basis,
in
respect of the valuation of the share options.
these attributes were
Ascertained whether
the share option
appropriately
valuation model, and the expense is recognised
over the appropriate vesting period.
Assessed the reasonableness of the fair value
calculation through re-performing the calculation
using the Black Scholes model.
Evaluated the adequacy of disclosures made by
the Group in the financial report in view of the
requirements
Accounting
Standards.
Australian
included
of
in
INDEPENDENT AUDITOR’S REPORT
TO THE OWNERS OF MICROEQUITIES ASSET MANAGEMENT
GROUP LIMITED AND CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
Key audit matter
Accuracy and completeness of revenue recognition
Refer to note 5: $10,806,986
The Group has two primary revenue streams being
management fees and performance fees associated
with the management of investment funds. These fees
are calculated in accordance with the information
memorandum relevant to each fund.
Whilst there is no significant judgement in calculating
the management fees and performance fees, they
represent a key measure of the Group’s performance.
The fluctuations in these fees have an impact on the
Group’s reported profit or loss.
How our audit addressed the key audit matter
1.
2.
3.
4.
to
Assessed the Group’s controls around revenue
recognition focussing on the timely and accurate
calculation of revenue transactions.
Obtained the independent audit reports over
each fund and compared the net asset valuations
used by management
the
management fees and performance fees.
Recalculated
fees and
the management
performance fees based upon independently
sourced net asset valuations and the information
memorandum relevant to each fund.
Considered
occurring within
proximity of the reporting date and obtained
evidence to support the appropriate timing of
revenue recognition.
transactions
calculate
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information included in
the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our
auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we
do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors
are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit.
47
INDEPENDENT AUDITOR’S REPORT
TO THE OWNERS OF MICROEQUITIES ASSET MANAGEMENT
GROUP LIMITED AND CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Report on the Remuneration Report
We have audited the remuneration report included in pages 6 to 12 of the directors’ report for the year ended 30
June 2018. The directors of the company are responsible for the preparation and presentation of the remuneration
report in accordance with s.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.
Auditor’s Opinion on the Remuneration Report
In our opinion, the remuneration report of Microequities Asset Management Group Limited, for the year ended 30
June 2018, complies with s.300A of the Corporations Act 2001.
PROSPERITY AUDIT SERVICES
LUKE MALONE
Partner
23 August 2018
Sydney
48
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Corporate directory
30 June 2018
Directors
Leslie Szekely - Non-Executive Chairman
Craig Shapiro - Non-Executive Director
Carlos Gil - Executive Director, Chief Executive Officer and Chief Investment Officer
Samuel Gutman - Executive Director and Company Secretary
Company secretary
Samuel Gutman
Registered office and
Principal place of business
Suite 3105, Level 31 Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000
Telephone: +61 2 9009 2900
Share register
Auditor
Solicitors
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Telephone: 1300 554 474
Prosperity Advisers Audit Services Pty Ltd
Level 11, 309 Kent Street
Sydney NSW 2000
Mills Oakley
Level 12, 400 George Street
Sydney NSW 2000
Stock exchange listing
Microequities Asset Management Group Limited shares are listed on the Australian
Securities Exchange (ASX code: MAM)
Website
http://microequities.com.au/
Corporate Governance Statement
The directors and management are committed to conducting the business of
Microequities Asset Management Group Limited in an ethical manner and in
accordance with the highest standards of corporate governance. Microequities Asset
Management Group Limited has adopted and has substantially complied with the
ASX Corporate Governance Principles and Recommendations (Third Edition)
('Recommendations') to the extent appropriate to the size and nature of the Group’s
operations.
The Corporate Governance Statement, which sets out the corporate governance
practices that were in operation during the financial year and identifies and explains
any Recommendations that have not been followed, which is approved at the same
time as the Annual Report can be found at:
http://microequities.com.au/governance-policies/
49
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 22 August 2018.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
GIL INVESTMENT COMPANY PTY LTD
GUTMAN INVESTMENT PARTNERS PTY LTD
SZEKELY SMSF PTY LTD
BELLITE PTY LTD
DESIGN MANGEMENT INVESTMENT PTY LTD
MICROEQUITIES VENTURE CAPITAL
BARANA CAPITAL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR SHUO YANG
IME HOLDINGS PTY LTD
PORTLAND 41 PTY LIMITED
I M E INVESTMENTS PTY LTD
OZSUN INVESTMENTS PTY LTD
TREPLO PTY LIMITED
C & M LAVERS PTY LTD
ELYSIUM FAMILY SUPER PTY LIMITED
MANN SUPERANNUATION FUND PTY LTD
JMAS PTY LTD
LEWER CORPORATION PTY LTD
SELLMALL PTY LTD
50
Number
of holders of
options/
rights
over
Number
of holders
of ordinary ordinary
shares
shares
10
120
61
248
101
540
-
-
-
-
-
1
1
-
Ordinary shares
% of total
shares
issued
Number held
53,634,560
22,955,539
12,991,949
5,325,408
2,662,376
1,270,344
1,250,000
904,952
787,200
660,000
639,272
630,000
625,000
625,000
546,040
532,672
532,672
532,016
490,000
479,536
40.35
17.27
9.77
4.01
2.00
0.96
0.94
0.68
0.59
0.50
0.48
0.47
0.47
0.47
0.41
0.40
0.40
0.40
0.37
0.36
108,074,536
81.30
Microequities Asset Management Group Limited
(Formerly known as Microequities Ltd)
Shareholder information
30 June 2018
Unquoted equity securities
Options over ordinary shares issued
Rights over ordinary shares issued under loan funded share plan
Performance rights over ordinary shares
Awards under employee share trust plan
Substantial holders
Substantial holders in the Company are set out below:
GIL Investment Company Pty Ltd (GIL Family Trust)
Gutman Investment Partners Pty Ltd (Gutman Family A/c)
Szekely SMSF Pty Ltd (Szekely Super Fund A/c)
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
2,713,022
1,367,432
1,905,516
1,270,344
1
2
1
2
Ordinary shares
% of total
shares
issued
Number held
53,634,560
22,955,539
12,991,949
40.35
17.27
9.77
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
Restricted securities
Class
Ordinary shares
Expiry date
Number
of shares
Share issued under Loan Funded Share Plan
restricted until the related loan has been repaid
1,367,432
51