A N N U A L
R E P O R T
2 0 2 0
FULLY FRANKED DIVIDEND
FULLY FRANKED DIVIDEND YIELD
DIVIDENDS PAID SINCE INCEPTION
ANNUALISED PORTFOLIO RETURN SINCE INCEPTION
1. As at 30 June 2020
0.6CENTS
1
3.5%
$41.8m
1
7.3%
OZGROWTH LIMITED
CONTENTS
PAGE
CORPORATE DIRECTORY
CORPORATE DIRECTORY
CHAIRMAN’S REPORT
INVESTMENT MANAGER’S REPORT
2020 FINANCIAL REPORT
1
2
4
7
REGISTERED OFFICE
Level 18, Alluvion
58 Mounts Bay Road
PERTH WA 6000
Telephone:
Facsimile:
Website:
(08) 9321 7877
(08) 9321 8288
www.ozgrowth.com.au
AUDITORS
Ernst & Young
11 Mounts Bay Road
PERTH WA 6000
BANKERS
Westpac Banking Corporation
109 St George’s Terrace
PERTH WA 6000
SHARE REGISTRY
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
PERTH WA 6000
Telephone: 1300 732 012
BOARD OF DIRECTORS
Jay Hughes
Non-Executive Chairman
Simon Joyner
Independent Non-Executive Director
Michael Jefferies
Independent Non-Executive Director
Anthony Hewett
Company Secretary
ANNUAL RE PORT 2020
1
C H A I R M A N ’ S
R E P O R T
ON BEHALF OF MY FELLOW
DIRECTORS, I AM PLEASED TO
PROVIDE THE 2020 ANNUAL
REPORT FOR THE COMPANY.
Significant results of the year include:
•
•
•
•
•
•
A net profit after tax of
$3,095,216. This compares to a
net loss after tax in the prior year
of $5,342,998.
A 20% increase in the annual
dividend to 0.6 cents per share.
A final dividend of 0.3 cents per
share has been provided for in
respect of the 2020 financial
year. An interim dividend of
0.3 cents per share was paid in
February 2020.
The Company ended the 2020
financial year with $24,846,450
in profit reserve.
At 30 June 2020, net assets of
the Company were $71,355,366,
or 20.2 cents per share1.
Since inception Ozgrowth has
bought back and cancelled
over 54 million shares through
its buybacks.
For more detailed information on the
investment performance and portfolio
of the Company, I refer you to the
Investment Manager’s Report on page 4.
The 2020 financial year began positively
with markets rallying off the back of
falling interest rates and eventually, a
US China trade deal. In February, the
Australian share market reached an
all-time high. This was short lived as the
spread of Coronavirus intensified and an
accompanying collapse in the oil price
resulted in the market falling 36% from
its February peak to its trough in March.
In response to the Coronavirus shock,
global central banks cut interest rates and
Governments announced huge support
and stimulus packages which have
buoyed share markets.
The ASX All Ordinaries Accumulation
Index ended FY2020 down 7.2%. Smaller
capitalisation companies fared slightly
better with their Index falling 5.7%.
The Ozgrowth investment portfolio
outperformed the market to record a very
respectable return of 7.0% over the 2020
financial year, calculated on a comparable
basis to the market indices. Pleasingly,
our portfolio has made a great start to
the new financial year rising 15.7% at the
end of August, taking its average return
to 8.4% per annum since inception. Our
investment strategy remains consistent
as we continue to focus on identifying
attractive investment opportunities from
our base in Western Australia.
1 This figure is calculated by dividing the net assets as set out in the Statement of Financial Position by the number of ordinary shares on issue as at the reporting date and is after allowance for dividends and all costs.
2
OZGROWTH LIMITED
“
Ozgrowth’s objective is to generate a positive return over the
medium to long-term typically from stocks having a connection
to Western Australia and provide shareholders with a consistent
“
stream of dividends
To date, the West Australian economy has
proven relatively resilient to the negative
impacts of the Coronavirus. Our mining
sector is powering ahead supported by
strong iron ore and gold prices. State and
Federal support measures and stimulus
incentives should also assist in supporting
and ultimately growing the local economy.
The financial statements in this report
demonstrate our Company’s reserves
and franking credit balance. With these
in mind the Ozgrowth Directors have
released a target dividend of 0.6 cents per
share for the 2021 financial year.
I encourage shareholders and other
interested parties to participate in our
shareholder communication program. If
you have not already done so, you can
register for our regular email updates at
our website: www.ozgrowth.com.au. We
hope to provide useful information on
our activities throughout the year and
welcome feedback to enhance this.
I look forward to reporting on results as
we move forward.
Yours sincerely
JAY HUGHES
Non-Executive Chairman
ABOUT OZGROWTH
•
•
•
•
Ozgrowth Limited is a listed
investment company (ASX
code: OZG) that focuses on
producing a positive return on
funds invested.
It was formed on 9 July 2007
and raised its initial capital for
investment in December 2007.
As at 30 June 2020, it had
$71,306,706 of assets in its
investment portfolio.
Ozgrowth Limited intends on
paying a consistent stream of
dividends to shareholders. The
level of dividend payments
will be set after considering
the level of realised net profits
after tax, retained earnings and
availability of franking credits.
To date, the Company has
paid cumulative fully franked
dividends of $11.4 cents
per share.
The Company has appointed
Westoz Funds Management Pty
Ltd as manager to oversee the
investment of its portfolio of
assets. This manager is a wholly
owned subsidiary of Euroz
Limited, a listed company that
also operates as a diversified
financial services company
based in Western Australia.
•
•
•
The investment mandate is
to identify undervalued
companies listed on the
Australian Stock Exchange
and to invest to produce a
positive return. Because of
the geographic location of
the manager, it is anticipated
that the majority of situations
identified will have a connection
to Western Australia.
Ozgrowth Limited will
consider investments in small
companies, as well as suitable
unlisted opportunities.
The manager is paid a base
fee of 1% per annum of funds
managed. In addition, a
performance fee is payable
where the increase in the
portfolio value exceeds 7% over
a twelve month period to the
end of June and is calculated at
20% of the increase exceeding
the threshold. The starting
point for the calculation of the
threshold is the greater of the
starting portfolio value and
the number of shares on issue
multiplied by $0.20.
ANNUAL RE PORT 2020
3
I N V E S T M E N T
M A N A G E R ’ S R E P O R T
Portfolio Return
The Company invests in small to mid-
sized companies, generally listed on the
Australian Securities Exchange and with
some connection to Western Australia.
The portfolio of assets is managed to
generate a positive return regardless of
movements in the broader equity market.
To assist in an assessment of performance,
the rate of return before fees and taxes
is calculated. The figure is calculated
by dividing the gain (or loss) in value
of the portfolio, net of external flows,
by the average portfolio value over the
period of measurement. Portfolio value
is determined by reference to current
market value of underlying investments.
Monthly periods are used and then
geometrically linked to arrive at an annual
return. This figure is not audited.
The last twelve months of investment
activity generated an investment return of
7.0% before allowance for fees and taxes
(2019: -9.3%).
It is the objective of the manager to
produce positive investment returns
over the medium to long term, thereby
boosting the net asset backing per share
(NTA) and allowing for the payment
of dividends.
The figures presented for information
regarding NTA are on a per share basis
and after allowance for all realised and
unrealised costs, dividends and deferred
tax assets. These figures are included
as they provide an indication of the
underlying impact of the investment
strategy on shareholders after all costs
associated with the corporate structure.
At 30 June 2020, the net assets per share
was 20.2 cents (2019: 19.9 cents).
At 30 June 2020, a provision for payment
of 0.30 cents per share by way of
dividend was made. This dividend was
paid in August 2020. At 30 June 2019,
a provision for a 0.25 cents per share
dividend was made.
Asset Allocation
Cash levels increased over the 2020
financial year, closing at 12% of assets from
a starting point of 5%. Resources exposure
remains the largest allocation, closing the
year at 45% of total assets.
At year end, investments were held in
28 separate companies. One of these
holdings was unlisted at 30 June 2020.
Outlook
Share market returns post the initial
bounce back from the nadir of March
2020 have been driven by a relatively
narrow sector of the market. It seems
reasonable to expect returns to be
broader based going forward with the
direction in a given time period likely to be
dictated by events related to Coronavirus.
We would expect that a shift in market
drivers and the upcoming US Federal
election will result in a lift in market
volatility from currently benign levels.
Highly stimulatory monetary policy is
likely to be increasingly accompanied by
further stimulatory Government policies.
Ultimately, as science prevails over disease
we believe this stimulus backdrop will
provide favourable conditions for many
companies and associated sectors in
the stock market. We would caveat this
positive outlook by saying overall global
stock market returns may be impacted by
an increase in the cost of money.
Buoyant times in several commodity
markets, accompanied by effective virus
prevention measures, have ensured the
West Australian economy has proved
relatively resilient to the economic turmoil
inflicted elsewhere by the Coronavirus
outbreak. Resumption to a more normal
global trading environment should
see WA well placed to enjoy a period
of economic growth from a relatively
low base.
We would encourage shareholders
and prospective shareholders to
utilise our shareholder communications
channels, which include: weekly
emails; monthly video updates; and,
periodic presentations.
4
OZGROWTH LIMITED
PORTFOLIO PERFORMANCE
INVESTMENT MIX
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
Jun 2017
Jun 2018
Jun 2019
Jun 2020
DIVIDEND AND FRANKING CREDIT RETURN
18c
16c
14c
12c
10c
8c
6c
4c
2c
0c
Jun 2017
Jun 2018
Jun 2019
Jun 2020
Cash
Industrials
Resources
4.9c
11.4c
8
0
0
2
9
0
0
2
1
0
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Dividends
Franking Credits
INVESTMENT PORTFOLIO
Industrials
Number of
Shares
Fair Value at
30 June 2020
Resources
Zenith Energy Limited
11,000,000
10,890,000
Emerald Resources NL
Macmahon Holdings Ltd
15,000,000
3,825,000
Orecorp Limited
Number of
Shares
Fair Value at
30 June 2020
12,750,000 6,693,750
12,000,000
4,620,000
Finbar Group Limited
4,500,000
3,150,000
Cedar Woods Properties Ltd
600,000
3,144,000
Autosports Group Limited
2,500,000
2,800,000
Empired Limited
8,550,000
2,778,750
Swick Mining Services Ltd
15,000,000
1,875,000
SRG Global Limited
7,730,000
1,584,650
Kingsgate Consolidated Limited
11,000,000
4,235,000
West African Resources Limited
4,000,000
3,600,000
Equatorial Resources Limited
11,050,000
2,983,500
Carnarvon Petroleum Limited
11,500,000
2,185,000
Cooper Energy Limited
Oklo Resources Limited
Neometals Ltd
5,050,000
1,868,500
4,000,000
1,180,000
6,350,000
984,250
1,500,000
900,000
7,750,000
356,500
Karoon Energy Ltd
1,102,916
-
Lucapa Diamond Company Ltd
17,000,000
New Century Resources Limited
4,000,000
30,403,900
Berkeley Energia Limited
1,000,000
748,000
620,000
430,000
Dacian Gold Limited
Alta Zinc Limited
Red Hill Iron Limited
Legend Mining Limited
Comet Ridge Limited
800,000
352,000
82,000,000
328,000
1,955,000
2,000,000
2,322,935
Cash, outstanding settlements and funds due
from accrued dividends
Total
312,800
280,000
204,418
32,525,218
8,377,587
71,306,706
5
Tempo Australia Ltd
Moboom Limited
ANNUAL RE PORT 2020
6
OZGROWTH LIMITED
2 0 2 0
F I N A N C I A L
R E P O R T
For the year ended 30 June 2020
CONTENTS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
ADDITIONAL INFORMATION
PAGE
8
13
14
15
16
17
18
34
35
42
ANNUAL RE PORT 2020
7
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Your Directors submit their report for the year ended 30 June 2020.
DIRECTORS
The names of the Directors of the Company in office during the financial period and until the date of this report are as follows. Directors
were in office for this entire period unless otherwise stated.
Jay Hughes
Michael Jefferies
Simon Joyner
Mr Jay Hughes, Non-Executive Chairman
Mr Hughes is a Non-Executive Director of the Company and serves on the Company’s Audit Committee. He is an Executive Director of
Euroz Limited, Euroz Securities Limited, Westoz Funds Management Pty Ltd, Prodigy Investment Partners Limited and Non-Executive
Chairman of Westoz Investment Company Limited. Mr Hughes holds a Graduate Diploma in Applied Finance and Investment from FINSIA.
He was recognised as an affiliate of ASX in December 2000 and is a Master Member (MSAFAA) of the Stockbrokers and Financial
Advisors Association of Australia (SAFAA).
Mr Michael Jefferies, Independent Non-Executive Director
Mr Jefferies is a Non-Executive Director of the Company and serves on the Company’s Audit Committee. He was formerly a Non-
Executive Director of Afterpay Touch Group Limited (resigned 16 January 2018) having been Chairman of Touchcorp Holdings Limited
(appointed 28 June 2004) prior to its merger with Afterpay Holdings Limited. He was also formerly Non-Executive Chairman of Pantoro
Limited (appointed 5 October 2016, resigned 4 August 2020) and a Non-Executive Director of Resimac Group Limited (appointed
November 2016, resigned 26 November 2019), and Afterpay Holdings Limited (appointed 26 August 2015, resigned 6 April 2017). Mr
Jefferies is a Chartered Accountant and holds a Bachelor of Commerce Degree.
Mr Simon Joyner, Independent Non-Executive Director
Mr Joyner was appointed as an Independent Non-Executive Director of the Company on 5 July 2016 and serves on the Company’s Audit
Committee. He is also a Non-Executive Director of Ozgrowth Limited. Mr Joyner has a Bachelor of Commerce Degree, a Graduate Diploma
in Applied Finance and Investment and a Diploma of Financial Planning. He is also a Fellow of FINSIA, the Financial Services Institute of
Australia. Mr Joyner has been involved in the Financial Services Industry since 1985. He established Keysbrook Financial Services which was
a founding firm of Shadforth Financial Group that was subsequently purchased by IOOF in 2014. Mr Joyner is now Managing Director of
management consulting firm Aberfoyle Partners, assisting businesses across the financial services industry.
Mr Anthony Hewett, Company Secretary
Mr Hewett was appointed as Company Secretary on 20 June 2017. Mr Hewett is a Chartered Secretary and holds a Master of Business
Law (MBusLaw) from Curtin University and a Graduate Diploma in Applied Corporate Governance (GradDipACG) from the Governance
Institute of Australia. Mr Hewett is a Fellow of the Institute of Chartered Secretaries and Administrators (FCSA), a Fellow of the
Governance Institute of Australia (FGIA), a Master Member (MSAFAA) of SAFAA and a member of the Australian Institute of Company
Directors (AICD).
DIRECTORS’ MEETINGS
The number of meetings of Directors (including meetings of committees of Directors) held during the year ended
30 June 2020 and the numbers of meetings attended by each Director were as follows:
Director
Jay Hughes
Simon Joyner
Michael Jefferies
Directors’ Meeting
Audit Committee Meetings
Number eligible
to attend
Number attended
Number eligible
to attend
Number attended
14
14
14
14
14
14
2
2
2
2
2
2
Due to the size of the Board and the nature of the Company’s operations, it does not have a separate Remuneration Committee or
Nomination Committee. Matters normally considered by these committees are addressed by the full board.
Board of Directors’ and Audit Committee meetings require that any two Directors or members be present to form a quorum.
PRINCIPAL ACTIVITY AND NATURE OF OPERATIONS
During the year, the principal activity of the economic entity was as an investment company.
OPERATING RESULTS
For the year ended 30 June 2020, the Company made an operating profit after tax of $3,095,216 (2019: loss of $5,342,998).
8
OZGROWTH LIMITED
DIVIDENDS
An interim dividend of $1,061,982 (0.30 cents per share) was paid on 21 February 2020 (2019: $890,031).
The Board of Directors has provided for the payment of a final dividend of $1,057,646 (0.30 cents per share) be paid in respect of the 2020
financial year. This amount is provided in the 30 June 2020 financial statements (2019: $889,826).
REVIEW OF OPERATIONS
The financial results of the Company are driven by the gain or loss on its investment portfolio, which consists primarily of securities listed
on the Australian Securities Exchange and short term cash deposits. Whilst the investment objective for the portfolio is to generate
positive returns over the medium to long term, short term fluctuations in the broader equity market will influence results.
Apart from movements in the broader equity market, the key driver of income for the Company is the manager’s ability to select
appropriate investments. The majority of expenses are directly linked to the value of the portfolio managed and the level of
return achieved.
There has been negligible impact on the working operations of the Company from the Coronavirus (COVID-19) pandemic.
STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Company.
SUBSEQUENT EVENTS
There has not been any matter or circumstance that has arisen since the balance date that has affected or may significantly affect the
operations of the Company, the results of those operations or the state of affairs of the Company in subsequent periods.
LIKELY DEVELOPMENTS AND FUTURE RESULTS
Future results will be driven by the outcome of the Company’s investment strategy, which will in turn be influenced by the overall direction
of equity markets. These returns are uncertain and are expected to vary significantly from year to year. The key risk to market returns will
be influenced by a range of factors that cannot be predicted with any certainty and include the outlook for growth, inflation, commodity
prices, interest rates, general economic conditions, natural disasters and government regulation. Market risk is managed by periodically
moving into and out of equity positions.
Our investment strategy remains consistent and is to identify investment opportunities from our base in Western Australia. We believe this
focus will continue to deliver attractive returns.
The West Australian economy, as per the GFC, has proven relatively resilient to the current challenging economic circumstances. This
resilience, and economic stimulus initiatives by Governments, leaves the local economy well positioned to grow once the global economic
environment normalises. Ozgrowth Limited Directors have determined to target a dividend payment of 0.6 cents per share in respect of
the 2021 financial year. It is anticipated that the payment of this dividend would occur in February (0.30 cents) and August (0.30 cents) of
the 2021 calendar year.
DIRECTORS’ INTERESTS
At the date of this report the interests of the Directors in the shares and options of the Company and related bodies corporate are:
Director
Jay Hughes
Held directly or indirectly
Simon Joyner
Held directly or indirectly
Michael Jefferies
Held directly or indirectly
SHARE OPTIONS
Ordinary Shares
3,750,000
1,345,353
500,000
At the beginning of the period, the Company had 35,466,231 options on issue with a strike price of 19.0 cents and an expiry date of
31 August 2019. The 2019 19.0 cent options were granted pursuant to the Bonus Issue prospectus issued on 29 September 2017 to all
shareholders. The offer made a bonus issue of one option for every 10 shares held by shareholders at the record date. These options were
exercisable into new ordinary shares in the Company that rank equally with other ordinary shares by the payment of 19.0 cents per option
at any time up until expiry date of 31 August 2019. Of these options, 3,325 were exercised during the period resulting in 3,325 new ordinary
shares and the remaining options expired. As at 30 June 2020, the Company had no options on issue.
ANNUAL RE PORT 2020
9
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS’ REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Ozgrowth Limited has a deed of indemnity for all the Directors and Officers of the Company against all losses or liabilities incurred by each
Director and Officer in their capacities as Directors and Officers of the Company. The Company agreed to indemnify and keep indemnified
the Directors and Officers against all liabilities by the Directors and Officers as a Director and Officer of the Company to the extent
permitted under the Corporations Act 2001.
During the financial year, the Company paid an insurance premium in respect of a contract insuring each of the Directors and Officers of
the Company. The amount of the premium is, under the terms of the insurance contract, confidential. The liabilities insured include costs
and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as
Directors and Officers of the Company.
REMUNERATION REPORT (AUDITED)
The Board of Directors is responsible for determining and reviewing compensation arrangements for the executive team. The Board
will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant
employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and executive team.
The Company had no employees during the year ended 30 June 2020 or 30 June 2019. Details of Key Management Personnel (KMP) are
as follows:
Jay Hughes
Simon Joyner
Chairman (Non-Executive)
Appointed 9 July 2007
Director (Non-Executive)
Appointed 5 July 2016
Michael Jefferies
Director (Non-Executive)
Appointed 31 October 2007
Westoz Funds Management Pty Ltd provides services in the nature of the role of Key Management Personnel to Ozgrowth Limited as it
has the authority for the management of the investment portfolio of Ozgrowth Limited.
The share and option holdings of KMP as at 30 June 2020 are as follows:
Director
Jay Hughes
Balance 1 July 2019
Net Change
Balance 30 June 2020
Shares
Aug 2019
$0.19
Options1
Shares
Aug 2019
$0.19
Options1
Shares
Aug 2019
$0.19
Options1
Held directly or indirectly
3,550,000
355,000
200,000
-355,000
3,750,000
Simon Joyner
Held directly or indirectly
1,345,353
134,535
Michael Jefferies
Held directly or indirectly
500,000
50,000
-
-
-134,535
1,345,353
-50,000
500,000
-
-
-
1 The Aug 2019 $0.19 options were issued pursuant to the Bonus Issue prospectus issued on 29 September 2017 to all shareholders and
are exercisable up until 31 August 2019. The offer made a bonus issue of one Option for every 10 Shares held by shareholders at the
record date.
The share and option holdings of KMP as at 30 June 2019 are as follows:
Director
Jay Hughes
Balance 1 July 2018
Net Change
Balance 30 June 2019
Shares
Aug 2019
$0.19
Options1
Shares
Aug 2019
$0.19
Options1
Shares
Aug 2019
$0.19
Options1
Held directly or indirectly
3,550,000
355,000
Simon Joyner
Held directly or indirectly
1,345,353
134,535
Michael Jefferies
Held directly or indirectly
500,000
50,000
-
-
-
-
-
-
3,550,000
355,000
1,345,353
134,535
500,000
50,000
1 The Aug 2019 $0.19 options were issued pursuant to the Bonus Issue prospectus issued on 29 September 2017 to all shareholders and are
exercisable up until 31 August 2019. The offer made a bonus issue of one Option for every 10 Shares held by shareholders at the record date.
10
OZGROWTH LIMITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS’ REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (AUDITED) (CONT’D)
A Director’s services may be terminated by them at any time and otherwise by shareholder vote. Details of remuneration for the years
ended 30 June 2020 and 30 June 2019 is as follows:
S Joyner
M Jefferies
Short-term Post-employment
Fee ($)
Superannuation ($)
2020
2019
2020
2019
50,228
50,228
50,228
50,228
4,772
4,772
4,772
4,772
Total ($)
55,000
55,000
55,000
55,000
The elements of emoluments have been determined on the basis of the cost to the Company. Emoluments of Directors are not
directly related to the performance of the Company. The maximum remuneration paid to Directors’ is currently set to not exceed
$250,000 per annum.
The Directors of Ozgrowth Limited during the year were Mr Jay Hughes, Mr Simon Joyner and Mr Michael Jefferies.
Westoz Funds Management Pty Ltd, a company of which Mr Hughes is a Director, provides Key Management Personnel services
to Ozgrowth Limited as it has the authority for the management of the investment portfolio of Ozgrowth Limited. Westoz Funds
Management Pty Ltd received management fees from the Company for the management of its assets. Total management fees (inclusive
of performance fees where applicable) of $753,017 (2019: $777,004) were charged in the period for these services. A $15,375 performance
fee was paid in respect of the 2020 financial year (2019: $nil). There is $65,349 (2019: $65,097) accrued for management fees payable as
at 30 June 2020.
These fees were charged in accordance with a management agreement. The management fee is calculated at 1% per annum of funds
managed. The performance fee as specified in the management agreement is payable where performance exceeds 7% over a twelve
month period to end of June and is calculated at 20% of the performance exceeding the threshold. The manager is required to give three
months written notice to terminate the agreement. The performance fee is based on the above performance condition to be able to link
the performance of the Company to the services provided by the fund manager.
No amount is paid by Ozgrowth Limited directly to the Directors of Westoz Funds Management Pty Ltd.
Euroz Securities Limited, a company of which Mr Hughes is a Director, received brokerage fees for transactions undertaken by the
Company in respect of its investments. An amount of $243,423 (2019: $251,608) was paid in the year as brokerage to Euroz Securities
Limited. Of this brokerage, $468 was outstanding as at 30 June 2020 (2019: $721). The above transactions were entered into on normal
commercial terms.
The short term incentive provided by the performance fee is payable once a nominated level of profitability is achieved in a financial year.
The level of profitability is ultimately determined by the investment return on funds invested and is reflected in the earnings per share
figure. The following table shows the link between company performance and shareholder wealth over the last 5 years:
Financial Year
2016
2017
2018
2019
2020
EPS
(cents)
0.2
2.1
3.4
(1.5)
0.9
Dividend per Share
(cents)
Share price at balance date
(cents)
0.5
0.5
0.5
0.5
0.6
13.5
16.0
18.0
15.0
17.0
There are no long term incentives payable.
(End of remuneration report)
ANNUAL RE PORT 2020
11
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Ozgrowth Limited support
and have adopted a corporate governance plan. Details of the Corporate Governance Practices can be found at www.ozgrowth.com.au.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to
indemnify Ernst & Young during or since the financial year.
AUDITOR INDEPENDENCE
The auditor’s independence declaration under section 307C of the Corporations Act 2001 is included on page 13 and forms part of the
Ozgrowth Limited’s Directors’ report for the year ended 30 June 2020.
NON- AUDIT SERVICES
The following non-audit services were provided by the Company’s auditor, Ernst & Young. The Directors are satisfied that the provision
of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The
nature and scope of each type of non-audit service provided means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:
Tax compliance services
$
12,000
Signed for and on behalf of the Directors in accordance with a resolution of the Board.
JAY HUGHES
Non-Executive Chairman
Dated: 19 August 2020
Perth, Western Australia
12
OZGROWTH LIMITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s independence declaration to the directors of Ozgrowth
Limited
As lead auditor for the audit of the financial report of Ozgrowth Limited for the financial year ended 30
June 2020, I declare to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
Robert A Kirkby
Partner
19 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:008
ANNUAL RE PORT 2020
13
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Note
2020
$
2019
$
Revenue
Interest revenue
Dividend revenue
Other
Total revenue
Changes in the fair value of investments at fair value through profit or loss
4
Total income
Expenses
Management and performance fees
Director fees
Professional fees
ASX fees
Other expenses
Total expenses
Profit / (loss) before income tax expense
Income tax (expense) / benefit
15(b)
15(a)
6
7
38,004
945,110
10,600
993,714
121,405
1,578,100
31,544
1,731,049
4,157,292
5,151,006
(8,961,206)
(7,230,157)
(753,017)
(110,000)
(78,587)
(49,285)
(84,948)
(777,004)
(110,000)
(77,549)
(51,084)
(97,707)
(1,075,837)
(1,113,344)
4,075,169
(8,343,501)
(979,953)
3,000,503
Net profit / (loss) attributable to members of the company
3,095,216
(5,342,998)
Other comprehensive income
-
-
Total comprehensive income for the period
3,095,216
(5,342,998)
Earnings / (loss) per share (cents)
Basic and diluted
16
0.9
(1.5)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
14
OZGROWTH LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
ASSETS
Cash and cash equivalents
Other assets
Financial assets at fair value through profit or loss:
•
•
Listed Equities
Unlisted Equities
Deferred tax assets
TOTAL ASSETS
LIABILITIES
Trade and other payables
Income tax payable
Dividend payable
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Profit reserve
Accumulated loss
TOTAL EQUITY
The above statement of financial position should be read in conjunction with the accompanying notes.
Note
19(a)
9
5
5
7
10
8
11
12
13
2020
$
8,362,936
157,038
2019
$
5,577,731
180,755
62,929,118
67,153,499
-
1,130,376
110,291
2,112,327
72,579,468
75,134,603
166,456
-
1,057,646
1,224,102
2,120,267
1,212,510
889,826
4,222,603
71,355,366
70,912,000
72,198,956
72,731,178
24,846,450
21,290,340
(25,690,040)
(23,109,518)
71,355,366
70,912,000
ANNUAL RE PORT 2020
15
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Dividends received
Payments to suppliers (inclusive of GST)
Income tax paid
Note
2020
$
2019
$
38,004
891,360
(1,340,068)
(884,896)
121,405
1,578,100
(936,595)
(486,864)
Net cash flows (used in) / from operating activities
19(b)
(1,295,600)
276,046
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments at fair value through profit or loss
38,587,891
35,559,123
Payments for purchases of investments at fair value through profit or loss
(32,023,056)
(41,678,008)
Net cash flows from / (used in) investing activities
6,564,835
(6,118,885)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares, net of issue costs
Share buyback
Dividends paid
633
(532,855)
(1,951,808)
2,191
(99,500)
(1,781,329)
Net cash flows used in financing activities
(2,484,030)
(1,878,638)
Net increase / (decrease) increase in cash held
Cash and cash equivalents at the beginning of the period
2,785,205
5,577,731
(7,721,477)
13,299,208
Cash and cash equivalents at the end of the period
19(a)
8,362,936
5,577,731
The above statement of cash flows should be read in conjunction with the accompanying notes.
16
OZGROWTH LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
At 1 July 2019
Profit for the period
Total comprehensive income for the period
Transfer from retained earnings to profit reserve
Transactions with owners in their capacity as owners:
Issued capital
Share buyback
Dividends for the year
Contributed
Equity
Profit
Reserve
Accumulated
Loss
$
$
$
Total
Equity
$
72,731,178
21,290,340
(23,109,518)
70,912,000
-
-
-
-
-
3,095,216
3,095,216
3,095,216
3,095,216
5,675,738
(5,675,738)
633
(532,855)
-
-
-
(2,119,628)
-
-
-
-
633
(532,855)
(2,119,628)
At 30 June 2020
72,198,956
24,846,450
(25,690,040)
71,355,366
At 1 July 2018
Loss for the period
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Issued capital
Share buyback
Dividends for the year
Contributed
Equity
Profit
Reserve
Accumulated
Loss
$
$
$
Total
Equity
$
72,828,487
23,070,197
(17,766,520)
78,132,164
-
-
2,191
(99,500)
-
-
-
-
-
(1,779,857)
(5,342,998)
(5,342,998)
(5,342,998)
(5,342,998)
-
-
-
2,191
(99,500)
(1,779,857)
At 30 June 2019
72,731,178
21,290,340
(23,109,518)
70,912,000
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL RE PORT 2020
17
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.
CORPORATE INFORMATION
The financial report of Ozgrowth Limited (the ‘Company’) for the year ended 30 June 2020 was authorised for issue in accordance
with a resolution of the Directors on 19 August 2020.
Ozgrowth Limited is a company limited by shares that is incorporated and domiciled in Australia whose shares are listed on the
Australian Securities Exchange. The registered office is located at Level 18, 58 Mounts Bay Road Perth, Western Australia 6000.
Ozgrowth Limited does not control any entities at 30 June 2020 (2019: None).
The Company had no employees as at 30 June 2020 (2019: None).
The nature of the operations and principal activities of the Company are as an investment company.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general purpose financial report which has been prepared in accordance with the requirements
of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board.
For the purposes of preparing the financial statements the Company is a for-profit entity.
The financial report for the year ended 30 June 2020 has been prepared on a historical cost basis, except for certain
investments, which have been measured at fair value.
The Company’s functional and presentation currency is the Australian dollar ($).
(b) Statement of Compliance
The accounting policies adopted are consistent with those of the prior years except as follows:
The Company has adopted new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2019.
The nature and effect of the changes as a result of adoption of these new accounting standards are described below:
•
AASB 2017-4 Uncertainty over Income Tax Treatments: The Interpretation clarifies the application of the recognition
and measurement criteria in AASB 112 Income Taxes when there is uncertainty over income tax treatments. The
Interpretation specifically addresses the following:
-
-
-
-
Whether an entity considers uncertain tax treatments separately
The assumptions an entity makes about the examination of tax treatments by taxation authorities
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
How an entity considers changes in facts and circumstances.
The adoption of these new and amended standards has not had any financial impact on the financial position or results of
the Company.
Compliance with International Financial Reporting Standards (IFRS)
The financial report also complies with IFRS as issued by the International Accounting Standards Board.
(c) New standards issued or amended but not yet effective
Applicable Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet effective have not been adopted for the financial reporting period ended 30 June 2020. These are included in the
following table:
18
OZGROWTH LIMITED
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Reference
Conceptual
Framework
AASB 2019-1
Title
Conceptual
framework
for financial
reporting
Amendments
to Australian
Accounting
standards -
Reference
to the
Conceptual
Framework
AASB 2018-7 Amendments
to Australian
Accounting
Standards -
Definition of
Material
Summary of the accounting standard or amendment
The revised conceptual framework includes some
new concepts, provides updated definitions and
recognition criteria for assets and liabilities and
clarifies some important concepts. It is arranged in
eight chapters, as follows:
•
•
•
•
•
•
•
•
Chapter 1 - The objective of financial reporting
Chapter 2 - Qualitative characteristics of useful
financial information
Chapter 3 - Financial statements and the
reporting entity
Chapter 4- The elements of financial statements
Chapter 5 – Recognition and derecognition
Chapter 6 – Measurement
Chapter 7 - Presentation and disclosure
Chapter 8 - Concepts of capital and capital
maintenance
AASB 2019 – 1 has also been issued, which sets out
the amendments to Australian Accounting standards,
Interpretations and other pronouncements in order
to update references to the revised Conceptual
Framework. The changes to the Conceptual
Framework may affect the application of accounting
standards in situations where no standard applies
to a transaction or event. In addition, relief has
been provided in applying AASB 3 and developing
accounting policies for regulatory account balances
using AASB 108, such that entities must continue
to apply the definitions of an asset and a liability
(and supporting concepts) in the Framework for the
Preparation and Presentation of Financial Statements
(July 2004), and not the definitions in the revised
Conceptual Framework.
This Standard amends AASB 101 Presentation of
Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and
Errors to align the definition of ‘material’ across
the standards and the clarify certain aspects of the
definition. The amendments clarify that materiality will
depend on the nature or magnitude of information.
An entity will need to assess whether the information,
either individually or in combination with other
information, is material in the context of the financial
statements. A misstatement of information is material
if it could reasonably be expected to influence
decisions made by the primary users.
Application
date of
standard
1 January 2020
Application
date for the
Company
1 July 2020
Impact on
Company
The Company
does not
expect a
material
impact from
the adoption
of this
amendment.
1 January 2020
1 July 2020
The Company
does not
expect a
material
impact from
the adoption
of this
amendment.
ANNUAL RE PORT 2020
19
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 Application
date of
standard
1 January 2023
Application
date for the
Company
1 July 2023
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Reference
Title
Summary of the accounting standard or amendment
Impact on
Company
AASB 2020-1 Amendments
to Australian
Accounting
Standards –
Classification
of Liabilities
as Current or
Non-current
A liability is classified as current if the entity has no right
at the end of the reporting period to defer settlement
for at least 12 months after the reporting period. The
AASB recently issued amendments to AASB 101 to
clarify the requirements for classifying liabilities as
current or non-current. Specifically:
The Company
is in the
process of
assessing the
impact of the
amendments.
•
•
•
The amendments specify that the conditions
which exist at the end of the reporting period are
those which will be used to determine if a right to
defer settlement of a liability exists.
Management intention or expectation does not
affect classification of liabilities.
In cases where an instrument with a conversion
option is classified as a liability, the transfer of
equity instruments would constitute settlement
of the liability for the purpose of classifying it as
current or non-current.
(d) Financial assets and liabilities
(i)
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of a financial assets not at fair value through
profit or loss, transaction costs. Financial assets within the scope of AASB 9 are classified as debt instruments at
amortised cost or financial assets at fair value through other comprehensive income or financial assets at fair value
through profit or loss as appropriate. The Company determines the classification of its financial assets at initial
recognition. The classification of debt instruments is based on two criteria: the Company’s business model for
managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal
and interest’ on the principal amount outstanding. The assessment if the Company’s business model was made as
of the date of initial application, 1 July 2018. The assessment of whether contractual cash flows on debt instruments
are solely comprised of principal and interest was made based on the facts and circumstances as at the initial
recognition of the assets.
The Company may make short sales in which borrowed security is sold in anticipation of a decline in the market value
of the security. Short sales are classified as current financial liabilities at fair value through profit and loss.
(ii) Subsequent measurement
The subsequent measurement of financial assets and financial liabilities depends on their classification as
described below:
Financial assets and liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets mandatorily required to be measured at
fair value. Financial assets with cash flows that are not solely payments of principal and interest are classified and
measured at fair value through profit or loss, irrespective of the business model.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or loss. These are listed equity investments which the
Company had not irrevocably elected to classify at fair value through OCI.
Financial liabilities designated upon initial recognition at fair value through profit and loss are designated at their initial
recognition date only if the criteria under AASB 9 are satisfied.
All financial assets and liabilities at fair value through profit or loss are equity instruments that are managed through
making purchase and sales decisions based on their fair value in accordance with the Company’s investment strategies.
The financial information about these financial assets and liabilities is provided internally on that basis to the Investment
Manager, Westoz Funds Management Pty Ltd and to the Board of Directors.
For investments that are actively traded in organised financial markets, fair value is determined by reference to the
Securities Exchange quoted market bid prices (offer prices for liabilities) at the close of business on the Statement of
Financial Position date, without any deduction for transaction costs.
20
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(d) Financial assets and liabilities (cont’d)
(ii)
Subsequent measurement (cont’d)
When the fair value of financial assets and financial liabilities recorded in the Statement of Financial Position cannot
be derived from active markets, they are determined using a variety of valuation techniques that include the use of
mathematical models. The inputs to these models are taken from observable markets where possible, but where this is
not feasible, a degree of judgment is required in establishing fair values.
The judgments include considerations of liquidity and model inputs such as credit risk (both own and counterparty’s),
correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial
instruments. The models are calibrated regularly and tested for validity using prices from any observable current
market transactions in the same instrument (without modification or repackaging) or based on any available
observable market data.
Gains and losses on investments at fair value through profit and loss are recognised in the Statement of Comprehensive
Income.
Purchases and sales of financial assets that require delivery of assets within the time frame generally established by
regulation or convention in the market place are recognised on the trade date i.e. the date that the Company commits
to purchase/sell the asset.
Changes in the fair value of investments – net gains or losses on investments at fair value through profit or loss are
calculated as the difference between the fair value at sale (or purchase in the case of liabilities) or fair value at reporting
date and the fair value at the previous valuation point. This includes both realised and unrealised gains and losses but
does not include dividend.
Financial assets at amortised cost (debt instruments)
The Company measures financial assets at amortised cost if both of the following conditions are met:
•
•
The financial asset is held within a business model with the objective to hold financial assets to collect
contractual cashflows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject
to impairment. Expected credit losses (ECL’s) on financial assets at amortised costs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash flows that the Company
expects to receive, discounted at an approximation of the original effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the
exposure, irrespective of the timing of the default (a lifetime ECL). This is further discussed in note 20.
The Company considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Company may also consider a financial asset to be in default when internal or external information
indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
Gains and losses are recognised in the Statement of Comprehensive Income when the asset is derecognised, modified
or impaired.
ANNUAL RE PORT 2020
21
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(d) Financial assets and liabilities (cont’d)
(iii) De-recognition of financial assets and liabilities
A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised when:
•
•
The rights to receive/contribute cash flows from the asset/liability have expired; or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement;
and either
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
(e) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and short term deposits, including
bank bills with a maturity 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.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consists of cash and cash equivalents as
defined above.
(f)
Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted by the balance date.
Deferred income tax is recognised on all temporary differences at the balance date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all temporary differences except where the deferred income tax liability
arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax assets and unused tax losses can be utilised except where the deferred
income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to
be utilised.
Unrecognised deferred tax assets are re-assessed at each balance date and are recognised to the extent that it has become
probable that future taxable profit will allow all or part of the deferred income tax to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or liability is settled, based on tax rate (and tax laws) that have been enacted or substantively enacted at the
balance date.
Income taxes relating to items recognised directly in other comprehensive income are recognised in other comprehensive
income and not in profit or loss.
(g) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
•
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
•
receivables and payables are stated with the amount of GST included.
22
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(g) Other taxes (cont’d)
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the
taxation authority.
(h) Revenue recognition
Interest revenue
Interest is recognised as interest accrues using the effective interest rate method which is the rate that exactly discounts
estimated future cash flows through the expected life of the financial investment to the gross carrying amount of the
financial asset.
Dividend revenue
Dividend is recognised when the Company’s right to receive the payment is established. This is taken to be the date the share
is quoted ex-dividend.
Other
The Company recognises revenue from sub-underwriting services on completion of the service.
This revenue from contract with customers is recognised when control of the services is transferred to the customer at an
amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. These
fees are recognised as the related services are performed.
(i)
Trade and other payables
Liabilities for trade creditors and other amounts are initially measured at fair value of the consideration to be paid on goods
and services received and then subsequently carried at amortised cost, whether or not billed to the entity. They represent
liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise
when the Company is obliged to make future payments in respect of the purchase of these goods and services.
Payables include outstanding settlements on the purchase of investments and dividends payable. The carrying period is
dictated by market conditions and generally less than 30 days.
Payables to related parties are carried initially measured at fair value of the consideration to be paid on goods and services
received and then subsequently carried at amortised cost. Interest, when charged by the lender, is recognised as an expense
on an accrual basis.
(j) Contributed equity
Ordinary share capital is recognised at the fair value of the consideration received by the Company and is classified as equity.
Any incremental costs that are directly attributable to the issue of ordinary shares are recognised directly in equity as a
reduction of the share proceeds received.
(k) Earnings Per Share
Basic earnings per share (EPS) is calculated as net profit attributed to ordinary equity holders divided by the weighted
average number of ordinary shares outstanding during the year adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to ordinary equity holders, adjusted for:
•
•
•
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any
bonus element.
ANNUAL RE PORT 2020
23
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(l) Receivables
Receivables are recognised at fair value and subsequently measured at amortised cost using the effective interest rate
method, less any allowance for uncollectible debts. Bad debts are written off when identified. Amounts are normally received
within 30 days of being recorded as receivable. An estimate of expected credit loss is made when there is objective evidence
that the Company will not be able to collect the debt.
Under AASB 9, the Company recognises an allowance for ECL for receivables using a general approach. Refer to note 2(d) for
the accounting policy on measurement of ECL.
(m) Dividends
Provision is made for the amount of any dividend declared by the Directors on or before the end of the financial year, but not
distributed at balance date.
(n) Management fees
Management fees, including performance fees, are calculated in accordance with contractual arrangements and are payable
in the year in which the returns are generated.
(o) Due to and from brokers
Amounts due to brokers are payables for securities purchased (in a regular way transaction) that have been contracted for
but not yet delivered on the reporting date. Refer to the accounting policy for ‘trade and other payables’ for recognition and
measurement of these amounts.
Amounts due from brokers include margin accounts and receivables for securities sold (in a regular way transaction)
that have been contracted for but not yet delivered on the reporting date. Refer to accounting policy for ‘Receivables’ for
recognition and measurement of these amounts.
(p) Presentation of comparative information
Prior year amounts in the financial report have been reclassified to ensure consistency with presentation of current
year amounts.
(q) Significant Accounting Judgements, Estimates and Assumptions
(i)
Taxes
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that
can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning
strategies. Deferred tax assets relate to unrealised losses on investments in financial assets and recognised tax losses.
Future taxable profits depend on the success of the Company’s investment strategy which in turn will be influenced by the
overall direction of equity markets. The markets are influenced by a number of factors such as outlook for growth, inflation,
commodity prices, interest rates, general economic conditions, natural disasters & government regulation. Management has
estimated future taxable profits based on an analysis that historic returns (per annum, since inception) on the investment
portfolio of Ozgrowth Limited. Market estimates of long term Australian equity market returns are anticipated to be
higher than the return that will be required to be generated by Ozgrowth Limited in order to utilise the deferred tax asset.
Changes in assumptions & estimates may affect the ability to recognise deferred tax assets.
There are no other significant accounting judgments, estimates and assumptions during the financial year.
3.
SEGMENT INFORMATION
For management purposes, the Company is organised into one operating segment, which invests in equity securities on the
Australian Securities Exchange. All of the Company’s activities are interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from
this segment are equivalent to the financial statements of the Company as a whole.
The Company operated in one geographical area being Australia.
24
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 4. CHANGES IN FAIR VALUE OF INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Net realised (loss) / gain on disposal of investments
Net unrealised gain / (loss) on investments
2020
$
2019
$
(2,019,534)
6,647,640
6,176,826
(15,608,846)
4,157,292
(8,961,206)
The total number of contract notes that were issued for transactions during the financial year was 635 (2019: 614). The total
brokerage paid on these contract notes was $246,137 (2019: $263,341).
5.
FAIR VALUE OF FINANCIAL INSTRUMENTS
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
•
•
•
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
The following table shows financial instruments recorded at fair value, analysed between those whose fair value is based on quoted
market prices, those involving valuation techniques where model inputs are observable in the market and those where the valuation
technique involves the use of non-market observable inputs.
30 June 2020
Financial assets at fair value through profit or loss
(i) Listed equities
(ii) Unlisted Equities – Moboom Limited1
Valued at Quoted
market price
(Level 1)
$
Valuation
Technique market
observable inputs
(Level 2)
$
Valuation technique
non – market
observable inputs
(Level 3)
$
Total
$
62,929,118
-
62,929,118
-
-
-
-
-
-
62,929,118
-
62,929,118
1 The Moboom Limited shareholding was revalued from $110,291 to zero in accordance with resolutions of the Board of Directors
dated 24 June 2020.
30 June 2019
Financial assets at fair value through profit or loss
(i) Listed equities
(ii) Unlisted Equities
Valued at Quoted
market price
(Level 1)
$
67,153,499
-
67,153,499
Valuation
Technique market
observable inputs
(Level 2)
Valuation technique
non – market
observable inputs
(Level 3)
$
-
-
-
Total
$
67,153,499
$
-
110,291
110,291
110,291 67,263,790
The level in which instruments are classified in the hierarchy is based on the lowest level input that is significant to the fair value
measurement in its entirety. Assessment of the significance of an input requires judgement after considering factors specific to
the instrument.
The fair value of listed equity is based on quoted market prices at the reporting date (bid price for long positions), without any
deduction for transaction costs.
For instruments for which there is currently no active market, the Company uses valuation methods generally accepted in the
industry. Some of the inputs to those method may not be market observable and are therefore estimated based on assumptions.
In the case of unlisted equities, recent transactional evidence has been obtained that supported the current valuation. If, in the future,
similar transactions occur at significantly different values, the fair value of unlisted equities will be revised appropriately.
ANNUAL RE PORT 2020
25
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 6. OTHER EXPENSES
Marketing
Share registry costs
Other
7.
INCOME TAX
The major components of income tax expense are:
Statement of comprehensive income
Current Income Tax
Current income tax charge
Prior year under / (over accrual)
Deferred income tax
Recognition of prior year deferred tax asset
Relating to origination and reversal of temporary differences
Income tax expense / (benefit) reported in statement of
comprehensive income
2020
$
9,433
25,172
50,343
84,948
2019
$
2,600
30,968
64,139
97,707
-
(1,998)
1,745,148
-
-
(45,773)
981,951
(4,699,878)
979,953
(3,000,503)
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Company’s
applicable tax rate is as follows:
Accounting profit / (loss) profit before tax
Tax at the statutory income tax rate of 30% (2019: 30%)
Tax effect of franking credits
Prior year under / (over accrual)
Non-taxable income
4,075,169
1,222,551
(8,343,501)
(2,503,050)
(237,600)
(451,680)
(1,998)
(3,000)
-
-
Utilisation of prior year unrecognised deferred tax asset
-
(45,773)
Income tax expense / (benefit)
979,953
(3,000,503)
Deferred income tax at 30 June relates to the following:
Deferred Tax Assets
Tax loss (recognised) / utilised
Unrealised loss on investments in financial assets
Total DTA
Deferred Tax Liabilities
Unrealised gain on investments in financial assets
Total DTL
Net (DTL)/DTA
Statement of
financial position
Statement of
comprehensive income
2020
$
871,097
259,279
2019
$
-
2020
$
(871,097)
2019
$
6,118
2,112,327
1,853,048
(2,112,327)
1,130,376
2,112,327
981,951
(2,106,209)
-
-
-
-
-
-
(2,593,669)
(2,593,669)
1,130,376
2,112,327
981,951
(4,699,878)
Deferred tax assets relate to unrealised losses on investments in financial assets and current year tax losses. Based on long term
movements in the Australian market equity returns, it is probable that the Company will make future taxable profits and such losses
will be utilised.
26
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020
8. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
Ordinary Shares
Interim dividend of 0.30 cents per share paid on
21 February 2020 (2019: 0.25 cents per share)
Final dividend of 0.30 cents per share declared and
provided for at 30 June 2020 (2019: 0.25 cents per share
per fully paid ordinary share).
Fully franked based on tax paid or payable at 30%
Franking Credit Balance
Franking credits available at the end of the financial year at
30% (2019: 30%)
Franking debits that will arise by the payment of dividends
as at the end of the financial year
Franking credits that will arise from the payment of income
tax payable as at the end of the financial year
9. OTHER ASSETS
Outstanding sale settlement
Accrued dividends
Bank refund
GST receivable
2020
$
2019
$
1,061,982
890,031
1,057,646
889,826
2,119,628
1,779,857
1,472,897
759,493
(453,277)
(381,354)
-
325,617
1,019,620
703,756
68,689
53,750
7,920
26,679
156,228
-
-
24,527
157,038
180,755
Note: GST receivable is non-interest bearing and is generally claimed from the Australian Tax Office on a quarterly basis. The
bank refund was paid in July 2020. Dividends are generally received within 60 days of their ex date, however due to COVID-19
one portfolio company deferred payment of its interim dividend beyond 30 June 2020. Sale settlements are normally settled
on 2 day terms.
The carrying value of other assets is approximately equal to its fair value.
10. TRADE AND OTHER PAYABLES
Trade payables
Outstanding purchase settlements
118,119
48,337
118,933
2,001,334
166,456
2,120,267
Total trade payables are non-interest bearing and normally settled on 30 day terms. Purchase settlements are normally settled on
2 day terms.
The carrying value of trade and other payables is approximately equal to its fair value.
ANNUAL RE PORT 2020
27
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 11. CONTRIBUTED EQUITY
(a) Contributed Equity
352,548,713 fully paid ordinary shares
(2019: 355,930,586)
2020
$
2019
$
72,198,956
72,731,178
(b)
Movements in ordinary shares
on issue
Number
of Shares
$
Number
of Shares
$
Beginning of the financial period
355,930,586
72,731,178
356,519,055
72,828,487
•
•
Option exercise
Share buyback
3,325
633
11,531
2,191
(3,385,198)
(532,855)
(600,000)
(99,500)
352,548,713
72,198,956
355,930,586
72,731,178
(c) Terms and conditions of contributed equity
The Company does not have an authorised capital nor par value in respect of its issued capital.
Ordinary fully paid shares have the right to receive dividends as declared and, in the event of winding up the Company,
to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on
shares held.
Ordinary fully paid shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(d) Options
At the beginning of the period, the Company had 35,466,231 options on issue with a strike price of 19.0 cents and an expiry
date of 31 August 2019. The 2019 19.0 cent options were granted pursuant to the Bonus Issue prospectus issued on
29 September 2017 to all shareholders. The offer made a bonus issue of one option for every 10 shares held by shareholders
at the record date. These options were exercisable into new ordinary shares in the Company that rank equally with other
ordinary shares by the payment of 19.0 cents per option at any time up until expiry date of 31 August 2019. Of these options,
3,325 were exercised during the period resulting in 3,325 new ordinary shares and the remaining options expired. As at
30 June 2020, the Company had no options on issue.
(e) Capital Management
For the purpose of the Company’s capital management, capital includes issued equity share capital, accumulated losses and
profit reserve.
The primary objective of the Company’s capital management is to produce positive return on funds, regardless of the
general direction of the listed share market and that is consistent with acceptable risk parameters in order to maximise the
shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain
or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders
or issue new shares.
As far as possible, the Company intends to pay out a consistent stream of dividends to investors, having regard to availability
of franking credits and the balance in the profit reserve.
The Company was ungeared at year end and not subject to any externally imposed capital requirement.
28
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 12. RESERVES
Profit reserve
2020
$
2019
$
24,846,450
21,290,340
24,846,450
21,290,340
The profit reserve is made up of amounts allocated from retained earnings that are preserved for future dividend payments.
Movement in profit reserve
Balance at beginning of the year
Transferred from retained earnings (a)
Dividend paid
21,290,340
23,070,197
5,675,738
(2,119,628)
-
(1,779,857)
24,846,450
21,290,340
(a)
The amount transferred to profit reserve in the 2020 financial year is the profit for the period 1 July 2019 to 30 September
2019 in accordance with resolutions of the Board of Directors dated 30 October 2019.
13. ACCUMULATED LOSS
Balance at beginning of the year
Transferred to profit reserve
Profit / (loss) for the year attributable to members
14. AUDITOR’S REMUNERATION
Total of all remuneration received or due and receivable by Ernst & Young in
connection with:
•
•
an audit or review of a financial report of the Company
services in relation to tax compliance for the Company
15. RELATED PARTY DISCLOSURES
(a) Remuneration of Directors and Executives
(23,109,518)
(17,766,520)
(5,675,738)
-
3,095,216
(5,342,998)
(25,690,040)
(23,109,518)
57,900
12,000
57,500
11,000
69,900
68,500
The Board of Directors is responsible for determining and reviewing compensation arrangements for the executive team.
The Board will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from
the retention of a high quality Board and executive team.
Mr Jefferies and Mr Joyner were the only paid Directors of the Company. The total remuneration payable for the financial year
is $110,000 (2019: $110,000) of which $100,456 was a short term benefit (2019: $100,456) and $9,544 was post-employment
benefit (2019: $9,544).
(b)
Transactions with Directors or Director Related Entities
The Directors of Ozgrowth Limited during the year or part thereof were Mr Simon Joyner, Mr Jay Hughes and
Mr Michael Jefferies.
Westoz Funds Management Pty Ltd, a company of which Mr Hughes is a Director, is considered to be providing Key
Management Personnel (“KMP”) services as it has the authority for the management of the investment portfolio
of Ozgrowth Limited. Westoz Funds Management Pty Ltd received management fees from the Company for the
management of its assets. Total management fees (inclusive of performance fees where applicable) of $753,017 (2019:
$777,004) were charged in the period for these services. A $15,375 performance fee was paid in respect of the 2020 financial
year (2019: $nil). There was $65,349 (2019: $65,097) accrued for management fees payable as at 30 June 2020.
ANNUAL RE PORT 2020
29
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 15. RELATED PARTY DISCLOSURES (CONT’D)
(b)
Transactions with Directors or Director Related Entities (cont’d)
These fees were charged in accordance with a management agreement. The Management fee is calculated at 1% per annum
of funds managed. A Performance fee is payable where performance exceeds 7% over a twelve month period to end of June
and is calculated at 20% of the performance exceeding the threshold. The starting point for the calculation of the threshold is
the greater of the starting portfolio value and the number of shares on issue multiplied by $0.20.
No amount is paid by Ozgrowth Limited directly to the Directors of Westoz Funds Management Pty Ltd.
Euroz Securities Limited, a company of which Mr Hughes is a Director received brokerage fees for transactions undertaken
by the Company in respect of its investments. An amount of $243,423 (2019: $251,608) was paid in the year as brokerage
to Euroz Securities Limited. Of this amount, $468 of this brokerage was outstanding as at 30 June 2020 (2019: $721).
Euroz Securities also provides nominee and custodial services for the Company. No fees were paid in relation to these services
in the period (2019: nil).
The above transactions were entered into on normal commercial terms.
(c) Ultimate Parent
Ozgrowth Limited is the ultimate Australian parent company.
(d) Other Related Party Transactions
There are no other related party transactions other than those discussed above.
16. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity holders of
the Company by the weighted average number of ordinary shares outstanding during the year.
The Company has no dilutive securities on issue.
Net profit / (loss) attributable to ordinary equity holders of the Company used in
calculating basic earnings per share
3,095,216
(5,342,998)
Weighted average number of ordinary shares on issue used in the calculation of basic
and diluted earnings per share
354,536,680
356,247,258
Basic and diluted earnings per share (cents)
0.9
(1.5)
2020
$
2019
$
At the date of this report, the Company has no options on issue.
17. SUBSEQUENT EVENTS
No matters or events have occurred subsequent to 30 June 2020 which have significantly affected or may significantly affect the
operations of the Company, the results of its operations or the state of affairs of the Company in subsequent financial periods.
18. CONTINGENT LIABILITIES
The Company has no contingent liabilities as at 30 June 2020 (2019: $nil).
30
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 19. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of Cash
For the purpose of the financial report, cash and cash equivalents are expressed as follows:
Cash at bank and in hand
2020
$
2019
$
8,362,936
5,577,731
8,362,936
5,577,731
Cash at bank and in hand earns interest at floating rates based on daily deposit rates.
The fair value of cash and cash equivalents is $8,362,936 (2019: $5,577,731). Of the total cash and cash equivalents held
at 30 June 2020, $8,303,484 (2019: $5,512,809) was held in the investment portfolio.
(b) Reconciliation from the Net Profit after Income Tax to Net Cash flows (Used In)/Generated from Operating Activities
Net profit / (loss) after tax
3,095,216
(5,342,998)
Adjustment for Non-Cash Items:
Items classified as Investing
Unrealised (gain) / loss on shares
Realised loss / (gain) on shares
Changes in Assets and Liabilities:
(Decrease)/Increase in trade and other payables
(Increase)/Decrease in GST receivable
Increase/(Decrease) in tax payable
(Increase)/Decrease in deferred tax assets
(6,176,826)
15,608,845
2,019,534
(6,647,640)
(815)
(2,150)
(1,212,510)
1,194,337
163,380
-
981,951
(4,699,878)
Net Cash Flows (used in) / from Operating Activities
(1,295,600)
276,046
c)
Financing Facilities Available
At balance date, no financing facilities had been negotiated and none were available.
20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Risks arising from holding financial instruments are inherent in the Company’s activities, and are managed through a process of
ongoing identification, measurement and monitoring. The Company is exposed to credit risk, liquidity risk and market risk.
The Company’s principal financial instruments comprise listed equities, cash, short term deposits and outstanding sale and purchase
settlements. All securities investments present a risk of loss of capital. The maximum loss of capital on long equity securities is
limited to the fair value of those positions. On equities sold short, the maximum loss of capital can be unlimited. The Company has
other financial instruments such as trade creditors and distributions payable which arise directly from its operations. The Company
may also transact in other financial instruments, including derivatives, to achieve its target rate of return on assets. No derivatives are
held at 30 June 2020 (2019: $nil).
The Investment Manager is responsible for identifying and controlling the risks that arise from these financial instruments.
The Company has an established investment policy in place. Information about the total fair value of financial instruments
exposed to risk, as well as compliance with established investment policy, is monitored by the Investment Manager.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
This risk is controlled by the Company investing in financial instruments, which in normal market conditions can be easily
liquidated. In addition, the Company maintains sufficient cash and cash equivalents to meet normal operating requirements.
Maturity Analysis for Financial Liabilities
Financial liabilities of the Company comprise trade, other payables, amounts due to brokers and distribution payable, which
contractually mature within 30 days.
ANNUAL RE PORT 2020
31
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
Credit Risk
Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause
the Company to incur a financial loss. The Company’s maximum credit exposure is the carrying amounts in the statement of
financial position.
The Company applies a general approach to calculating ECLs, except for those financial assets that apply the low credit risk
exemption. Following the adoption of AASB 9, the Company considers the probability of default upon initial recognition of a
financial asset and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The general approach is described in the accounting policy section 2(d). To assess whether there is a significant increase in credit
risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date
of initial recognition. In making this assessment, the Company considers information that is reasonable and supportable, including
historical experience and forward-looking information. Forward-looking information considered includes consideration of external
sources of economic information. In particular, the Company takes into account the counterparties external credit rating (as far as
available), actual or expected significant changes in the operating results of the counterparty and macroeconomic when assessing
significant movements in credit risk.
The Company holds financial instruments with credit worthy third parties and as such applies the low credit risk simplification. At
each reporting period the Company evaluates whether the debt instrument is considered to have low credit risk using all reasonable
and supportable information that is available without undue cost or effort. In making this evaluation, the Company considers
whether there has been a significant increase in credit risk when contractual payments are more than 30 days past due.
At 30 June 2020, the Company held significant equities, cash balances and other current receivables in relation to outstanding sale
settlements. Cash deposits were held on an at call basis and term deposits have nominated maturity dates not greater than three
months forward with an institution covered under the Banking Act 1959 with a rating from Standard & Poors of AA- (long term)
and A-1+ (short term). Listed equities were held under a nominee arrangement with Euroz Securities Limited which operates and
maintains required prudential matters under an Australian Financial Services Licence. As at 30 June 2020, all receivables are current
with no balances that are past due nor credit-impaired.
Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables
such as interest rates and equity prices. The Company has delegated the management of these risks to Westoz Funds Management
Pty Ltd (AFSL No 285607) who has expertise in the management of such risk.
The following risk control features are in place:
•
•
•
•
•
•
No one stock will represent more than 20% of the total portfolio value at the time of acquisition;
The portfolio usually consists of between 10 and 25 securities, although more or less may be held depending on the number
of securities identified that are expected to meet the performance expectations;
Where suitable stocks cannot be identified, the portfolio may invest in cash. Whilst unlikely over the medium term, the
portfolio may consist from time to time of significant cash deposits;
Any short positions will not represent more than 20% of the total portfolio value; and
Leverage may be employed in the Portfolio, but total exposure will not exceed 120% of the portfolio value;
Any breach of these risk control measures will be reported to the Company by the Investment Manager and the Company will
determine the appropriate action to remedy the breach.
Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of
financial instruments.
The Company’s exposure to market risk for changes to interest rate risk relates primarily to its earnings on cash and short term
deposits, which have variable interest rates. The total cash balance at 30 June 2020 was $8,362,936 (2019: $5,577,731). The
Company manages interest rate risk by ensuring that cash balances are always deposited in interest-bearing accounts that provide
competitive interest rates.
As at 30 June 2020, cash deposits of $8,362,936 (2019: $5,577,731) were held at call. No term deposits with maturities of more than
three months (2019: $nil) were held. No interest was recorded as receivable (2019: $nil).
32
OZGROWTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
The following table demonstrates the sensitivity of the Company’s Statement of Comprehensive Income to a reasonably possible
change in interest rates, with all other variables constant. The change in basis points is derived from a review of historical movements
and management’s judgement of future trends. The analysis is performed on the same basis for 2019.
2020
2020
Change in Basis Points
Effect on Pre Tax Profit ($)
Effect on Equity
including retained earnings ($)
Increase
Decrease
50
50
Increase
42,000
Decrease
(42,000)
Increase
29,400
Decrease
(29,400)
2019
2019
Change in Basis Points
Effect on Pre Tax Profit ($)
Increase
Decrease
50
50
Increase
27,900
Decrease
(27,900)
Effect on Equity
including retained earnings ($)
Increase
19,530
Decrease
(19,530)
Equity Price Risk
Equity price risk is the risk that the fair value of equities decreases as a result of changes in market prices, whether those changes
are caused by factors specific to the individual stock or factors affecting all instruments in the market. Equity price risk arises from
the Company’s investment portfolio.
The effect on the statement of comprehensive income due to a reasonably possible change in market factors, as represented by the
equity indices, with all other factors held constant is indicated in the table below. The change in index level is derived from a review
of historical movements. The analysis is performed on the same basis for 2019.
Index
Change in Index
Effect on Pre Tax profit ($)
Effect on Equity
including retained earnings
($)
ASX Small Ordinaries Index
Increase 10%/ (Decrease 10%)
6,290,000/ (6,290,000)
4,405,000/ (4,405,000)
2020
2020
Index
Change in Index
Effect on Pre Tax profit ($)
Effect on Equity
including retained earnings
($)
ASX Small Ordinaries Index
Increase 10%/ (Decrease 10%)
6,700,000/ (6,700,000)
4,690,000/ (4,690,000)
2019
2019
ANNUAL RE PORT 2020
33
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020
In accordance with a resolution of the Directors of Ozgrowth Limited, the Directors declare that:
1.
In the opinion of the Directors:
(a)
the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s financial position as at 30 June 2020 and of its performance for the year
ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b); and
(c)
(d)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable;
this declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020.
On behalf of the Board
Jay Hughes
Non-Executive Chairman
Dated: 19 August 2020
34
OZGROWTH LIMITED
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of Ozgrowth Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Ozgrowth Limited (the Company), which comprises the
statement of financial position as at 30 June 2020, the statement of profit or loss and other
comprehensive income, statement of changes in equity and statement of cash flows for the year then
ended, notes to the financial statements, including a summary of significant accounting policies, and
the directors' declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the
Corporations Act 2001, including:
a)
giving a true and fair view of the Company's financial position as at 30 June 2020 and of its
financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Company in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
ANNUAL RE PORT 2020
35
INDEPENDENT AUDITOR’S REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
1. Investment valuation
Why significant
How our audit addressed the key audit matter
We assessed the fair value of significant investments in the
portfolio held at 30 June 2020 by reference to
independent pricing sources.
We assessed the adequacy of the associated disclosures in
Note 5 of the financial report.
The Company has a significant investment portfolio
consisting of listed equities. As at 30 June 2020, the
value of these financial assets, as set out in Note 5 of
the financial report, was $62.9 million, which
represents 87% of the total assets held by the
Company at that date.
The Company’s accounting policy, described in Note
2(d) of the financial report, recognises these financial
assets at fair value through profit or loss in
accordance with Australian Accounting Standards.
Volatility and other market drivers can have a
significant impact on the value of these financial
assets; therefore, valuation of the investment
portfolio was considered a key audit matter.
2. Management and performance fees
Why significant
How our audit addressed the key audit matter
We assessed the Company’s performance fee eligibility
calculations.
We recalculated management and performance fees in
accordance with contractual arrangements, assessing
whether contract rates were correctly applied.
We tested the inputs to the performance fee calculation by
ensuring the key inputs, including the investment portfolio
values and the number of shares on issue at the beginning
of the performance period and the movements in the
investment portfolio value during the year were consistent
with the financial report.
We assessed the adequacy of the disclosures in Note 15(b)
of the financial report.
Management and performance fees paid to the
investment manager, Westoz Funds Management Pty
Ltd, are the most significant expense for the
Company.
For the year ended 30 June 2020, management and
performance fees totalled $0.8 million which
represents 70% of total expenses.
The Company’s accounting policy for management
and performance fees is described in Note 2(n) of the
financial report. All expenses are recognised on an
accrual basis, with performance fees recognised in the
financial report if the performance hurdles for the
Company have been met at the end of the relevant
measurement period, which is the date where
certainty exists that the criteria has been met and the
liability has been crystallised.
The quantum of these expenses and the impact that
the volatility in the market prices of investments can
have on the recognition and payment of performance
fees resulted in this being a key audit matter. The
disclosure of these amounts is included in Note 15(b)
of the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
36
OZGROWTH LIMITED
INDEPENDENT AUDITOR’S REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
3. Income taxes – recognition and recoverability of deferred tax assets
Why significant
How our audit addressed the key audit matter
Our tax specialists were involved in the assessment of the
recognition of deferred tax balances based on local tax
regulations.
We analysed the recoverability of the deferred tax assets
by assessing the Company’s estimated future taxable
income. We considered the assumptions used in this
forecast and the historical accuracy of the Company’s
forecasting. We performed sensitivity analyses on the key
assumptions in the forecasts.
We assessed the adequacy of the disclosures in Note 7 of
the financial report.
The Company recognises deferred tax assets (DTA) to
the extent that it is probable that future taxable
profits will allow the deferred tax assets to be
recovered as disclosed in note 7 of the financial
report. At 30 June 2020, the Company has
recognised $1.1 million of net DTA consisting of
unrealised investment losses and current year tax
losses. The probability of recovery is impacted by
uncertainties regarding the likely timing and level of
future taxable profits.
The analysis of the recognition and recoverability of
the deferred tax assets was considered a key audit
matter due to the value of the asset and the
judgements involved in the assessment process as
assumptions are affected by expected future market
or economic conditions.
4. Dividend payment
Why significant
How our audit addressed the key audit matter
After providing for the dividend, as disclosed in Note 8
of the financial report, the Company had net assets of
$71.3 million which is lower than the contributed
equity (share capital) of $72.2 million at 30 June
2020.
We considered the legal advice obtained by the Company
to assess whether the proposed dividend complies with the
requirements of Corporations Act 2001, with particular
consideration given to the status of the dividend under the
Act.
The Company is required to ascertain that the
proposed dividend is in compliance with the
requirements of the Corporations Act 2001 (the
“Act”) and is not a return of capital.
This is considered a key audit matter due to the
judgement involved in interpretation of the legislation.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
Directors’ Report accompanying the financial report, but does not include the financial report and our
auditor’s report thereon.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
ANNUAL RE PORT 2020
37
INDEPENDENT AUDITOR’S REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Company 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
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
38
OZGROWTH LIMITED
INDEPENDENT AUDITOR’S REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
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 Company’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 Company 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.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 6 to 7 of the directors' report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Ozgrowth Limited for the year ended 30 June 2020,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
ANNUAL RE PORT 2020
39
INDEPENDENT AUDITOR’S REPORT (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Robert A Kirkby
Partner
Perth
19 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:DA:OZG:007
40
OZGROWTH LIMITED
ANNUAL RE PORT 2020
41
ADDITIONAL INFORMATION
AS AT 19 AUGUST 2020
A) DISTRIBUTION OF SHAREHOLDERS
Analysis of number of shareholders by size of holding.
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Rounding
Total
Number of holders holding less than a marketable parcel: 40 at $0.185 per unit
B) TOP HOLDERS
The twenty largest holders of ordinary fully paid shares are listed below.
Total Holders
32
46
68
272
166
Units
1,371
154,883
577,697
11,992,134
339,463,352
% Unit
0.00
0.04
0.16
3.41
96.39
0.00
584
352,189,437
100.00
Ordinary Shares
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
ZERO NOMINEES PTY LTD
CAPE BOUVARD EQUITIES PTY LTD
GOLD TIGER INVESTMENTS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ACRES HOLDINGS PTY LTD
REDBROOK NOMINEES PTY LTD
MR RICHARD HAMILTON BARTLETT
ICE COLD INVESTMENTS PTY LTD
ICE COLD INVESTMENTS PTY LTD
YANDAL INVESTMENTS PTY LTD
ONYX (WA) PTY LTD
MR JAY HUGHES + MRS LINDA HUGHES
NICKSON PTY LTD
CARMANT PTY LTD
ROLLASON PTY LTD
MR JAMES WILLIAM TONKIN + MRS SHARON KATHLEEN TONKIN
MR WILLEM BARTUS JOSEF SLOT
MR ANDREW MCKENZIE + MRS CATHERINE MCKENZIE
ACRES HOLDINGS PTY LTD
PIAMA PTY LTD
Total
Remainder
GRAND TOTAL
Units
149,894,093
40,000,000
14,000,000
8,377,376
6,900,000
6,800,000
6,236,185
6,000,000
5,410,151
4,885,000
4,447,000
3,750,000
3,580,758
3,259,833
3,000,000
3,000,000
2,883,561
2,500,000
2,177,928
2,172,451
279,274,336
72,915,101
352,189,437
%
42.56
11.36
3.98
2.38
1.96
1.93
1.77
1.70
1.54
1.39
1.26
1.06
1.02
0.93
0.85
0.85
0.82
0.71
0.62
0.62
79.30
20.70
100
42
OZGROWTH LIMITED
ADDITIONAL INFORMATION (CONT’D)
AS AT 19 AUGUST 2020
C) SHAREHOLDERS WITH GREATER THAN 5%
As at 19 August 2020, the Company had 2 shareholders with greater than 5% of the issued ordinary share capital:
Shareholder
Euroz Limited
Cape Bouvard Equities Pty Ltd
D) ON-MARKET BUY-BACK
The company has a current on-market buy-back.
E) VOTING RIGHTS
The voting rights for each class of security on issue as at 19 August 2020 are:
Ordinary fully paid shares
Each ordinary shareholder is entitled to one vote for each ordinary fully paid share held.
Units
144,713,502
40,000,000
%
40.58%
11.36%
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9321 7877
F: +61 8 9321 8288
Ozgrowth Limited
Ozgrowth.com.au
ACN 126 450 271
B
L
A
C
K
B
O
X
D
E
S
G
N
1
4
2
1
9
I