Pacific Current Group Ltd Annual Report 2012

FY2012 Annual Report · Pacific Current Group Ltd

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Treasury Group Ltd

ANNUAL REPORT 2012

TREASURY GROUP LTD
ANNUAL REPORT 2012

Contents

1 Results at a Glance
2 About Us
4 Chairman’s Report
6 CEO’s Report
10 Review of Boutiques
12 Introduction to Evergreen Capital
13 Treasuring Group Services

and Octis Asset Management

Income

Statement

Declaration

14 Directors’ Report
26 Auditor’s Independence
27 Corporate Governance
31 Income Statement
32 Statement of Comprehensive
33 Statement of Financial Position
34 Statement of Changes in Equity
35 Statement of Cash Flows
36 Notes to the Financial Statements
73 Directors’ Declaration
74 Independent Audit Report
76 ASX Additional Information
77 Corporation Information

ANNUAL REPORT 2012TREASURY GROUP LTD1

Results at a Glance
During 2012 we addressed
performance issues within
our portfolio of boutique
managers and improved the
efficiency and focus of Treasury
Group’s operations.

KEY FINANCIAL HIGHLIGHTS DURING THE YEAR:

Normalised net profit after tax (NPAT)

$8.1m

Total funds under management

Full year dividend (fully franked)

$16.4bn

34 cents per

Year End FUM ($bn)
Aggregate Boutique Management Fees ($m)
Reported NPAT ($m)
Underlying NPAT ($m)
Final Dividend (cps)
Full Year Dividend (cps)

16.4
71.0
6.8
8.1
20
34

% change

-2.3
-5.2
-32.5
-17.0
–
–

About Us
Treasury Group Ltd is an ASX-listed
investment management firm.
We partner with a number of
aligned boutique funds managers
in which we own equity interests
and provide support services.

Through our partners, we offer a range
of investment products and services to
investors across a variety of asset classes
and investment styles.

Multi-boutique model:
•
Superior alignment of investment team incentives to client outcomes
• Greater team stability addressing long-term career goals of managers
• Highest standards of compliance, corporate governance and service
•
• Capital for seeding and operations

Low bureaucracy, efficient service delivery

A year of consolidation and change as we refocus our strategy:

PURSUE EFFICIENCIES

• Headcount at Treasury Group

reduced by 24%, ongoing savings of
$1.3m per annum

•

Prioritise service delivery to boutique
partners in development phase

Selectively seek third party clients for
service offerings

EXPAND AND DIVERSIFY PORTFOLIO, ADDRESS ISSUES

• Minority stakes in two boutiques

acquired, Evergreen Capital and Octis
Asset Management
• Global Value Investors and
AR Capital restructured

FIX PREMIUM INVESTORS

• Restructure announced
•

Improved outcomes for Premium
Investors’ Shareholders (including
Treasury Group)

CONSIDER VALUE ENHANCING M&A OPPORTUNITIES

ANNUAL REPORT 2012TREASURY GROUP LTD2 – 3
2 – 3

Treasury
Group

11.5%

-7%

Treasury Group total shareholder
return was 11.5% versus -7.0% for
S&P/ASX 300 Index

19%

Amount
by which
Treasury
Group total
shareholder
return
exceeded
the S&P/ASX
300 Index
in 2012

S&P/
ASX 300

Chairman’s Report
2012 saw continued volatility
across global equities and
investment markets. This
market backdrop presented
challenging conditions for
investment managers.

2012 saw significant change
for Treasury Group. Following
his appointment as CEO at the
beginning of the year, Andrew
McGill led a detailed review of our
strategy in the context of current
market conditions. Coming out of
that review a number of actions were
taken to address issues at portfolio
and corporate levels. We did not
shirk from difficult decisions in
this process and have emerged as a
more efficient and better positioned
business at year end.

Our restructuring work did not distract

us from also pursuing growth initiatives
and investing in core capabilities. Since
last year’s Annual Report, we added
two new boutiques, Melbourne-based
Evergreen Capital and Singapore-based
Octis Asset Management. Both are
hedge fund managers and will help to
further diversify our portfolio from
its long-only equity bias. We invested
in our distribution capability with the
appointment of a senior London-based
executive plus Client Services staff
in Australia.

Global equities and investment markets
experienced continued volatility and
generally ended the year at lower levels.
The All Ordinaries Index lost 7% during
the year. In this environment, the
Australian Funds Management Industry
saw another year of funds outflows.
Investors continued to prefer lower risk
assets and tended to favour asset classes
other than equities. In particular, flows
from retail investors were subdued as
investors sought lower volatility and
capital preservation such as from bank
term deposits.

In the context of difficult market
conditions, a number of our boutique
partners delivered exceptional
performance for investors including
Investors Mutual and Celeste, both of
which were recognised with awards
during the year.

Fundamentally, the Australian funds

management industry is attractive
and growing, underpinned by
mandated increases to superannuation
contributions and a stable economic
and regulatory environment.

We are confident that investor
confidence will return in due course.
The restructuring and other strategic
work completed this year leaves Treasury
Group well placed to benefit when
this occurs. Our business model is
operationally ‘leveraged’ to the level of
equity markets and we anticipate earnings
will rebound strongly from any recovery
in equity markets.

FINANCIAL RESULT
Treasury Group’s underlying net profit
after tax fell to $8.1m, down 17.0% on the
prior year. Statutory net profit after tax
was $6.8m, a fall of 32.5%. Treasury Group
continues to maintain a strong balance
sheet with no external debt and a high
level of liquidity.

FUNDS UNDER MANAGEMENT
Funds under management fell by 2.3%
to $16.4 billion at year end. This result
reflects net inflows of $0.4bn offset by
market value decline of $0.8bn. It includes
some loss of funds at the boutiques
restructured during the year (Global
Value Investors and AR Capital).

ANNUAL REPORT 2012TREASURY GROUP LTDFunds Under Management
($ billions)

4 – 5

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DIVIDEND
In spite of the lower level of earnings this
year, the Board remains confident in the
outlook for the business. As such, a final
dividend of 20 cents per share was declared.
Total dividend for the year was 34 cents per
share fully franked. The dividend was paid
on 26 September 2012.

BOARD CHANGES
During the year, former CEO and
executive director David Cooper resigned
to pursue other opportunities. David
made a very significant contribution to
Treasury Group during his tenure and
I take this opportunity to again thank him
for his efforts.

As is our practice each year, we

reviewed the effectiveness of the Board
and considered the appropriate skills
and experience required. We particularly
sought a female director, as foreshadowed
at last year’s AGM. We were delighted to
appoint Ms Melda Donnelly to the Board
in March and Treasury Group will benefit
from her qualifications and experience
going forward.

SOCIAL RESPONSIBILITY
Treasury Group is proud to support a
number of very capable and hard working
organisations in their efforts to bring
about worthwhile social change. For a
number of years, we have supported
Social Ventures Australia and Third Link
Investment Managers via the provision
of investment and support services on a
pro-bono basis. Social Ventures Australia
invests in social change by increasing the
impact and sustainability of a range of
charities. It provides funding and strategic
support to carefully selected non-profit
partners. Third Link and Social Ventures
are wonderful organisations and I invite
you to learn more about their work by
visiting www.socialventures.com.au

OUTLOOK
Over the past 12 months Treasury Group
has become leaner and more focused.
Going forward, our emphasis will be
on growth. We will consider mergers
and acquisitions that deliver additional
value without exposing shareholders
to excessive risk. The current market
environment offers the potential to
acquire assets at relatively attractive prices
which would not be available in a more
bullish market.

With the addition of two new and the
restructuring of two existing boutiques,
our portfolio now has improved
balance between established successful
performers and younger businesses that
offer significant future growth potential.
None of our partners has yet reached
capacity limits and all can deliver earnings
growth to Treasury Group in future.

In short, Treasury Group is well placed

to earn higher profits as equities and
investment market conditions improve.

I would like to thank our staff, boutique

partners and clients for their support
during this year. We look forward to
continuing to work closely with you in
coming years.

Mike Fitzpatrick
Chairman

CEO’s Report
2012 was a year of
consolidation and change
as we refocus our strategy.
We did not shy from difficult
decisions as we sought
to improve outcomes for
Treasury Group shareholders.

BUSINESS PERFORMANCE

2012 was a year of continued
volatility across global equities
and investment markets, providing
a difficult operating environment
for some of our partner boutiques.
Our financial performance is
strongly correlated with the level of
listed equities markets because the
fees earned by our boutique partners
are based upon a percentage of
funds managed. When markets rise
in value, so do the fees earned by our
partner boutiques. During the year,
global equities markets fell and this
was reflected in a lower level of
Treasury Group’s earnings.

2012 was also a year of consolidation
and change as we refocus our strategy.
We did not shy from difficult decisions
as we sought to improve outcomes for
Treasury Group shareholders. During the
year, the businesses of two of our partner
boutiques were restructured to address
performance and other business issues.
We applied the same discipline to our
own business and took action to lower
ongoing costs and improve operating
efficiency at Treasury Group. A significant
amount of one-off and abnormal cost
was incurred during the year as a result
of these actions.

During the second half of the year,
Treasury Group initiated a review of the
structure and performance of

Premium Investors Limited. Since
2003, Treasury Group has provided
investment management and support
services to Premium Investors. Apart
from a modest level of annual income,
a more important aspect of the original
relationship with Premium Investors was
that it provided Treasury Group with
control of an amount of capital for seed
funding purposes. Unfortunately, the
strategic value of the Premium Investors
relationship has diminished over time
due to increased restrictions on the
investment mandate. The proposed
restructure of Premium Investors will
include changes to the investment
mandate and restore strategic value in the
relationship for Treasury Group. It will
also address various structural and other
issues faced by Premium Investors.
Our restructuring work did not

distract Treasury Group from pursuing
our perennial goal of further growth
and diversification of our portfolio of
boutiques. During the year we acquired
minority stakes in two boutique funds
management businesses. Both are hedge
funds within the alternative asset class.
Evergreen Capital is a Melbourne-based
absolute return manager of Australian
equities. Octis Asset Management is a
Singapore-based multi-strategy manager
of global equities. Further information
in relation to both of our new partners is
included later in this report.

OPERATIONAL AND FINANCIAL
PERFORMANCE
• Total funds under management fell
by 2.3% during the year to finish at
$16.4bn. In addition to adverse market
value movement, this reflected a
modest level of net funds outflows
across the aggregate funds managed
by our partner boutiques. Funds
inflows were experienced at RARE
Infrastructure, Investors Mutual and
Celeste. Outflows were experienced at
Orion and GVI.

• Average net margin earned by our

boutique partners on managed funds
was flat, a welcome improvement in
the trend of prior years.

• Treasury Group partner boutiques

have historically delivered
outperformance (i.e. net investment
returns in excess of benchmark)
for their investors. During the year,
this trend continued with Investors
Mutual and Celeste performance
being of particular note. Both of
these managers were recognised
with nominations for industry
awards. Investors Mutual was
awarded Fund Manager of the Year
for Large Cap Australian Equities
by both Morningstar and Money
Management/Lonsec.

• Normalised net profit after tax was

$8.1 million, down 17.0% versus prior
year, reflecting the performance of
global equities markets as well as a
changing mix of contributions from
partner boutiques.

ANNUAL REPORT 2012TREASURY GROUP LTDFinancial Performance

Treasury Group Financial Performance
S&P/ASX 300

6 – 7

Treasury Group financial
performance is strongly
correlated with the level
of listed equities markets.

The S&P/ASX 300 Index declined
by 11% during 2012.

Source: Treasury Group & Bloomberg

2008

2009

2010

2011

2012

Source: Treasury Group & Bloomberg

•

Expenses at Treasury Group were
well controlled. During the year,
headcount was reduced by six (24%)
which will deliver $1.3m per annum of
ongoing savings. Expense levels were
controlled at our partner boutiques
and fell 8.5% versus prior year on a
normalised basis.

Statutory net profit after tax was
$6.8 million, down 32.5% compared to
last year. This reflected the normalised
result as well as the impact of one-off
abnormal expenses associated with
the restructuring actions.

• Capital levels are surplus to regulatory
requirements and provide some
scope for growth opportunities.
At year end, cash available-for-sale
investments and loans to partner
boutiques totalled $21.7m. There was
no outstanding debt. Operating cash
flow during the year was $6.7m.
• The value of Treasury Group’s

investment in partner boutiques is
carried at $30.0m which represents
historical cost plus our share of
undistributed earnings over time. In
reality, a significant proportion of this
carrying value is reflected in cash and
liquid assets held at boutique level.
At 30 June, the aggregate cash and
liquid assets held by Treasury Group
boutiques was $33.3m and Treasury
Group’s proportionate share of that
amount was $15.2m.

MARKET ENVIRONMENT
2012 saw continued volatility across global
investment markets. Major international
listed equity markets were down at
year end reflecting investor concerns
about the pace of growth in corporate
earnings and the potential impacts of
well publicised global macro risks such as
higher European sovereign debt risks and
the slower rate of growth in China. The
Australian economy remained relatively
strong by global standards. However,
there have been marked differences
evident in conditions within different
industry sectors. The Australian dollar
lost 4.9% versus the US dollar during the
year. Indices of major traded Australian
commodities declined (typical decline
was around 9% in Australian dollar
terms). This market backdrop presented
challenging conditions for investment
managers.

Treasury Group witnessed the impact

of these conditions in various ways.

We saw investors continue to favour
defensive asset classes and investment
styles. Retail investors in particular
remain cautious in relation to equities
and this affects Treasury Group given our
weighting to equities managers. However,
the impact on us is not universally
negative as RARE Infrastructure
continues to be well placed in this
environment given the defensive nature of
infrastructure assets. Due to their strong
long term performance, they experienced
funds inflows and increased revenue
during the year. Market conditions

pushed investors towards defensive
investment styles. Strong investment
performance across all time periods
by Investors Mutual was rewarded
during the year with funds inflows from
institutional investors.

Treasury Group’s business operates in a
regulated environment that is frequently
subject to review and, in recent years,
regular change. During the year, Treasury
Group staff provided a range of services to
our partner boutiques including preparing
their businesses for implementation of
the new short-form Product Disclosure
Statement regime which took effect
towards the end of the year. In Europe, we
worked to meet the simplified prospectus
(KIIDs) and other requirements of the
UCITs IV regulations that apply to TG
Investments. Looking forward, our Risk
and Compliance staff are working to
ensure Treasury Group’s compliance
with new financial requirements for
Responsible Entities, the Foreign Account
Tax Compliance Act (FATCA) and Future
of Financial Advice Reforms Act (FoFA).
The annual compliance burden on funds
management businesses is significant
and is a key area in which Treasury
Group delivers value to its partner
boutiques, relieving them of much of
that load and allowing them to focus on
investment management.

TREASURY GROUP LTD
ANNUAL REPORT 2012

CEO’S Report cont.

Treasury Group, via our wholly-
owned subsidiary Treasury
Group Investment Services
Limited, provides a full suite of
business support services to our
partner boutiques and selected
external clients.

STRATEGY
Following my appointment as CEO in
July 2011, Treasury Group’s strategy
was subjected to careful and considered
review. In last year’s annual report, I
commented broadly on some of the
elements of our business strategy and
nominated various opportunities for us.
2012 was a year of consolidation and
change as we addressed some of these
opportunities and refocused our efforts.
Expansion and diversification

of Treasury Group portfolio of
boutiques: Acquired minority stakes
in two hedge fund managers, taking our
portfolio of partner boutiques to eight.

Invest in Distribution and

Marketing capabilities: We increased
our distribution capabilities with the
addition of a London-based Director
of Distribution and a Sydney-based
Client Services Manager. In addition, we
improved the balance of our Australian-
based team with the recruitment
of a Melbourne-based Director of
Distribution.

Pursue efficiency from support

services: We reduced staff costs
by $1.3m on an annualised basis via

redundancies and decisions not to replace
other staff who resigned. In spite of this
headcount reduction, our capabilities
to deliver quality services to partner
boutiques and selected third party clients
remain strong. Going forward, our
priority will be to allocate our servicing
capability to clients that value it most
highly including boutique managers in
earlier stages of development.

The strategic focus of our support

services remains with our partner
boutiques. However, we recognise the
income and cost recovery advantages that
result from the provision of services to
third party clients. For this reason, we plan
to purse a limited number of third party
clients for both distribution and other
support services.

Currently, we are reviewing TG
Investments, our Dublin-based UCITs
platform. Facilitating the availability
of a UCITs platform for our boutique
partners is a valuable service provided
by Treasury Group and is one that we
wish to continue to offer. However, the
optimal method of delivering this service
is debatable and this question is the focus
of our review.

Proactive management of our
investments in boutiques: During the
year, the businesses of two of our partner
boutiques were restructured to address
performance and other business issues.

In November 2011, Global
Value Investors was restructured
with responsibility for investment
management outsourced to Aubrey
Capital Management and Global Value
Investors became a wholly-owned
subsidiary of Treasury Group. The
restructuring followed an extended period
of investment and business performance
issues. It is pleasing to report that post
restructure investment performance has
been strong and the retention of funds has
exceeded our expectations to date.
In December 2011, we suffered

from successive ‘key man’ events at AR
Capital with both investment principals
separately deciding to resign within a
short period. These resignations were
not sought by Treasury Group and were
extremely disappointing to us. Treasury
Group’s response was to swiftly identify,
approach and conclude negotiations with
the best available hedge fund manager to
assume responsibility for management of

8 – 9

pursue such opportunities. These types
of opportunities are potentially risky
and difficult to forecast. However, with a
disciplined approach and the assistance of
our professional advisers we will continue
to assess such opportunities as they arise.
I expect coming years to be exciting
and prosperous times for Treasury Group
as we benefit from the restructuring work
and investment decisions taken during
the past year.

Andrew McGill
Chief Executive Officer

the Ascot Fund. We were initially pleased
to secure the services of Evergreen Capital
Partners on an outsourced basis and then
delighted with our subsequent success in
acquiring an equity stake in Evergreen.
Our proactivity was not confined to
management of our boutique portfolio
and during the year we initiated a review
of the structure of Premium Investors to
address legacy issues faced by Premium
Investors including its inability to pass
through dividend and distributions in
certain circumstances and its history of
trading at a persistently large discount to
net tangible asset backing.

Work towards our strategic goals

remains unfinished and ongoing.

Potentially the most significant strategic

impact for our business may come from
merger or acquisition opportunities at
a corporate level. Market conditions in
recent years have presented consolidation
and acquisition opportunities for Treasury
Group that were previously unavailable
or unattractively priced. Our sound
capital position and strong cash flow from
our portfolio of boutique investments
leaves Treasury Group well placed to

TREASURY GROUP LTD
ANNUAL REPORT 2012

Review of Boutiques
Treasury Group boutiques
have delivered strong
investment returns for
clients and outperformed
their market benchmarks
over medium and long-term
time horizons.

INVESTORS MUTUAL
Led by Anton Tagliaferro and Hugh
Giddy, Investors Mutual has a
conservative investment style with a
long-term focus, and aims to deliver
consistent returns for clients. It achieves
this through the disciplined application of
a fundamental and value-based approach
to investing.

In 2012, funds under management rose

to $2.8bn, representing a 9.5% increase.
Investment performance was very
strong. For example, Investors Mutual’s
Australian Share Fund returned +1.3%
for the year which was 8.3% ahead of
benchmark. Investors Mutual’s ratings
were upgraded by two ratings agencies.

During the year, Investors Mutual was
recognised as Fund Manager of the Year
for Large Cap Australian Equities by each
of Morningstar, Money Management/
Lonsec and Smart Investor.

ORION ASSET MANAGEMENT
Orion Asset Management Limited is
a specialist Australian equities fund
manager led by Tim Ryan. Orion seeks
to invest in attractively priced companies
that have the potential to grow their
earnings and sustain profitability. It is
an active, bottom-up stock picker, and
is considered to be a moderate growth
style manager.

Orion has an alliance with US-based
Trilogy Global Advisors, whereby Orion
acts as distribution agent for Trilogy’s
services in Australia. Orion has raised
significant funds for Trilogy within

Australia and earns fees for distribution

and other services provided.

At year end, funds under management

by Orion were $3.6 billion which was
down 31% versus the prior year. The
investment performance of Orion during
the year was impacted by the drag on the
market by the materials sector. However,
since inception Orion has delivered alpha
for its investors relative to its benchmarks.

RARE INFRASTRUCTURE
Led by Richard Elmslie and Nick Langley,
RARE Infrastructure Limited specialises
in the investment and management
of securities in the global listed
infrastructure sector, including airports,
gas, electricity, water and roads.

During the year, RARE’s funds
under management increased by 16%
to $4.9 billion. RARE funds remain
ranked within the top quartile of
their peer groups. During the year,
investment performance was generally
strong but the Australian dollar
hedged Infrastructure Value Fund
was behind its one year benchmark by
3.5% at year end. RARE Infrastructure
has delivered outperformance for its
clients since inception.

CELESTE FUNDS MANAGEMENT
Celeste Funds Management is an
Australian long-only equities manager
with a focus on listed smaller companies.
The Celeste team is process centric and
has worked together since 2002.

The Celeste team continues to be highly

rated among small cap managers. It was

nominated for a number of industry
awards during the year.

During the year, Celeste grew its
funds under management from both
institutional and retail sources by 30%
to $532m by year end. Investment
performance during the year was very
strong with the Celeste Australian Small
Companies fund beating its benchmark
by 12.5%. Celeste has delivered alpha for
its clients over all reported time periods
since inception.

AUBREY CAPITAL MANAGEMENT
Aubrey Capital Management is a
global growth equity thematic manager
based in Edinburgh, Scotland. Led by
Andrew Dalrymple, the Aubrey team
are experienced global equity investor
focused on concentrated portfolios of
growth stocks.

During the year, Aubrey was appointed

as sub-manager of the GVI Global
Industrial Fund following the restructure
of GVI. Recently Aubrey has received a
recommended rating from Zenith for its
Australian pooled fund.

By year end, Aubrey’s funds under

management had increased by 63%
to $355m, including funds within the
GVI funds. Aubrey has delivered strong
investment performance for investors
since inception. However, for the 2012
financial year, returns for the Aubrey
Global Conviction Fund were behind its
benchmark by 6.6%. Investors in the GVI
funds have received strong performance
from Aubrey since it assumed
responsibility for those funds.

10 – 11

By year end, RARE’s funds under
management had increased by

16%

TREASURY ASIA ASSET
MANAGEMENT
With offices in Sydney and Singapore,
Treasury Asia Asset Management
specialises in investing in Asia Pacific
equity securities.

During the year, TAAM made a
number of senior appointments in the
investment and back office teams along
with other changes to the team structure
and responsibilities. As a result, the
business is beginning to see improved
investment performance which should
place the company in a better position to
grow funds under management over the
next 12 – 18 months.

During the year, funds under
management decreased by 9.2% to
finish the year at $649m. Investment
performance for the TAAM New Asia
Fund was 1.6% behind its benchmark
for the year.

EVERGREEN CAPITAL PARTNERS
Led by Tim Hannon, Evergreen is a
Melbourne-based absolute return fund
manager that targets returns of over the
medium to long term with lower volatility
than the Australian equity market.

Evergreen won the Best Emerging
Manager award at the Australian Hedge
Fund Awards in 2011.

In the first half of the 2012 financial

year, Evergreen was appointed sub-
manager of the AR Capital Ascot Fund.
At year end, Evergreen funds under
management were approximately $170m
including its absolute return funds
and property fund joint venture. Since
inception, returns to investors in the
Evergreen Equity Returns Fund have been
strong, ahead of its benchmark by 15.7%
per annum.

OCTIS ASSET MANAGEMENT
Led by Jerome Ferracci, Octis Asset
Management Pte Ltd is an Asian multi-
strategy hedge fund manager based in
Singapore. The investment team aims
to achieve capital gains for investors
with a low level of volatility. Octis trades
equities, futures, options, commodities
and foreign exchange securities utilising
a number of different strategies.

Octis currently manages approximately

$50m. Since inception, the Octis Asia
Pacific Fund has outperformed the MSCI
Asia Pacific index by 12.5% per annum.

Introduction
to Evergreen Capital
and Octis Asset
Management

OCTIS ASSET MANAGEMENT
Founded by Jerome Ferracci, Octis Asset
Management (Octis) is a Singapore-based
manager specialising in Asian alternative
strategies. Octis commenced operations
in 2007 and now has an impressive
four year track record of investment
performance and $50 million in funds
under management.

We believe that Octis is well placed for
a period of strong growth in funds under
management. The Octis team, investment
process and performance to date present
an attractive alternative for investors
seeking exposure to the growth of
Asian economies.

Jérôme has a total of 27 years
experience in equity and equity
derivatives trading business, during
which he ran several proprietary trading
books, dealing with equity cash, futures,
options, arbitrages and convertible
bonds. He has also accumulated strong
organisational skills and management
experience in Paris, London and Hong
Kong in organisations such as Credit
Commercial de France (CCF) as well
as HSBC. He has a post graduate in
Economics and Financial Management
from the Conservatoire National des Arts
et Métiers (CNAM) of Paris.

Treasury Group acquired a 20% equity
stake in Octis in July 2012 plus an option
to increase our equity stake by a further
10% if hurdles linked to new funds flow
are satisfied.

EVERGREEN CAPITAL PARTNERS
Founded in 2009 by Tim Hannon,
Evergreen is a boutique funds
management business with a focus on
management of ASX listed equities via an
absolute return style. Evergreen’s flagship
fund is the Evergreen Australian Equities
Return Fund through which it seeks
to generate investment performance
via systematic exploitation of market
inefficiencies whilst also seeking to
preserve capital.

Tim was a partner of Goldman Sachs
JBWere and during his 14 year tenure at
the firm had senior experience across
all areas of equities investing. Tim was
Head of Australian Equities, Head of Real
Estate and Co-Manager of Global Real
Estate Securities portfolios with Goldman
Sachs LLP. Tim was also founder and co-
manager of the Goldman Sachs JBWere
Australian Infrastructure Securities Fund,
and co-manager of the award winning
Goldman Sachs JBWere Emerging
Leaders Fund. Tim has won numerous
industry awards, including S&P Fund
Manager of the Year and Morningstar
Fund Manager of the Year.

In addition to its core equities focus,

Evergreen has a joint venture with
Freehold Investment Management. The
JV manages Australian real estate and
infrastructure securities. This business
is operated separately from the equities
business and is led by Andrew Smith.
Andrew has over 15 years’ experience
in the securities markets and portfolio
management. He previously worked at
Goldman Sachs Asset Management and
was responsible for portfolio management
and analysis for the Global Real Estate
Securities Fund and the Global Real Estate
Securities Hedge Fund.

Currently, Evergreen manages
approximately $100m in funds on
behalf of high net worth individuals,
family offices and institutions. The
property JV currently has $70m in funds
under management.

Treasury Group acquired a 30% stake

in Evergreen Capital in May 2012. The
relationship between Treasury Group
and Evergreen commenced in December
2011 when Evergreen was appointed
as the sub-manager for the AR Capital
Ascot fund. Treasury Group’s investment
comprised an upfront payment plus a
further deferred amount contingent upon
the achievement by Evergreen of business
performance hurdles prior to 30 June
2014. Evergreen adds to the growth of
alternative managers in the Treasury
Group stable.

30%

Treasury Group acquired a 30% stake
in Evergreen Capital in May 2012.
The relationship between Treasury
Group and Evergreen commenced in
December 2011 when Evergreen was
appointed as the sub-manager for the
AR Capital Ascot fund.

ANNUAL REPORT 2012TREASURY GROUP LTD12 – 13
PB – 13

Treasury Group Services
Treasury Group, via our
wholly-owned subsidiary
Treasury Group Investment
Services Limited, provides a
full suite of business support
services to our partner
boutiques and selected
external clients.

THE SERVICES OFFERED INCLUDE:

•

distribution and sales

acting as Responsible Entity for pooled investment funds

risk management

legal and regulatory compliance

accounting and finance

company secretarial and corporate governance oversight

human resources management

investment operations oversight

business administration and office logistics

information technology and automation solutions

We are able to provide these services
through our team of experienced and
professional staff.

Services provided by Treasury
Group allow investment staff to
focus on their area of specialisation –
delivering strong investment returns
on the funds they manage.
Treasury Group provides these
services to clients via different

pricing models including fixed fee
arrangements, variable hourly rates
and commission or success-based fees.
During their development phase,

Treasury Group boutiques often
benefit from provision of services
by Treasury Group at less than
market-based rates. Pricing for mature
boutiques and third party clients
is based on market rates.

TREASURY GROUP LTD
ANNUAL REPORT 2012

Directors’ Report

3. Peter Kennedy (Non-Executive
Director), B. Ec. L.L.M.
Mr Kennedy joined the Board on
4 June 2003, is the Managing Partner
with Madgwicks lawyers and has over
30 years experience in commercial
law. He is the Chairman of the Audit
Committee and the Remuneration
Committee. Mr Kennedy has also served
as a Chairman of Australian Value Funds
Management Limited (now called Prime
Financial Group Ltd).

He is the Chairman of the Audit and

Remuneration Committee.

4. Reubert Hayes (Non-Executive
Director), SF Fin, FAICD
Reubert Hayes joined the Board on
22 February 2007. Mr Hayes has over
40 years experience in investment
management and stockbroking research,
and was a founder and CEO of Ausbil
Dexia Limited, a specialist wholesale
boutique asset management operation.
Mr Hayes was also a joint founder of
Barclays Bank’s investment operations
in Australia in 1984, and was CEO of
that business for 12 years until 1996.
Prior to this, Mr Hayes held senior
investment roles with AMP and Westpac.
Mr Hayes is a Senior Fellow of the
Financial Services Institute of Australia
and a Fellow of the Australian Institute
of Company Directors. Mr Hayes has also
been a Director of Premium Investors
Limited (a listed investment company)
since 18 February 2009.

He is the Chairman of the

Nomination Committee and sits on the
Audit and Remuneration Committees.

5. Melda Donnelly (Non-Executive
Director), B.C., appointed 28 March 2012
Melda Donnelly is the Founder and
former Chairman of the Centre for
Investor Education (CIE), a specialist
education and consultancy firm
for Executives in Australian and
superannuation funds, institutional
investment bodies and the financial
services markets. Ms Donnelly’s previous
work experience includes CEO of the
Queensland Investment Corporation,
Deputy Managing Director of ANZ
Funds Management and Managing
Director of ANZ Trustees.

Ms Donnelly is a former Deputy

Chairperson of the Victorian Funds
Management Corporation and a current
Non-Executive Director of Ashmore
Group plc and a current Non-Executive
Director of UniSuper Ltd. In addition,
Ms Donnelly is a member of the Advisory
Committee of the Oxford University
Centre for Ageing.

COMPANY SECRETARY
6. Reema Ramswarup
BA (Justice Administration)
Ms Ramswarup commenced with
Treasury Group Ltd in March 2008. She
has worked in company secretarial roles
at Wattyl and AMP and has secretariat
experience in local government and
professional services. Ms Ramswarup
has completed the Graduate Diploma
in Applied Corporate Governance
and is a member of Chartered
Secretaries Australia.

Your Directors submit their report for
the year ended 30 June 2012.

DIRECTORS
The names and details of the Company’s
Directors in office during the financial
year and until the date of this report are
listed below. Directors were in office for
this entire period unless otherwise stated.

Names, qualifications, experience
and special responsibilities
1. Michael Fitzpatrick (Chairman),
B. Eng, B (Oxon) Honours
Mr Fitzpatrick joined the Board on
5 October 2004. He was the founder
and Managing Director of Hastings
Funds Management Limited. Prior to
establishing Hastings in 1994, he was
a Director of Credit Suisse First Boston.
He is also a Director of Rio Tinto Ltd,
Rio Tinto plc, Chairman of the Australian
Football League and former Chairman
of the Australian Sports Commission.
Mr Fitzpatrick is also a member of
the Audit Committee, Remuneration
Committee and Nomination Committee.

2. David Cooper (Non-Executive
Director), B. Ec./Fin, resigned 14
December 2011 Mr Cooper joined the
Board on 8 August 2005, and was the
Chief Executive Officer (CEO) of the
Company from July 2004 until October
2008, having resigned in December 2010.
Mr Cooper joined Treasury Group Ltd
in July 2002 as Strategic Investments
Manager. Prior to joining the Company,
he was the Head of the Institutional
Division at Perpetual Investments Ltd.
When the previous CEO resigned on
24 March 2011, Mr Cooper stepped in
and provided interim executive support
until 12 July 2011, resuming his role
as a non-executive director until his
resignation on 14 December 2011.

Directors’ Report cont.

14 – 15

Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the Directors in the shares and options/performance rights of Treasury
Group Ltd were:

M. Fitzpatrick

R. Hayes

P. Kennedy

M. Donnelly

EARNINGS PER SHARE

Basic earnings per share

Diluted earnings per share

DIVIDENDS

Final dividend recommended:

•

on ordinary shares (fully franked)

Dividend paid in the year:

Interim for the year

•

on ordinary shares (fully franked) paid on 26 March 2012

Final for 2011 shown as recommended in the 2011 report

•

on ordinary shares (fully franked) paid on 28 September 2011

CORPORATE INFORMATION

Ordinary
shares

2,701,285

–

211,200

–

Options over
ordinary
shares

–

Cents

29.3

Cents

4,614,151

3,229,907

4,614,151

Corporate structure
Treasury Group Ltd is a company limited by shares and is incorporated and domiciled in Australia. Treasury Group Ltd has
prepared a consolidated financial report incorporating the entities that it controlled and jointly controlled during the financial year.
The Group’s corporate structure as at the date of this report is as follows:

TREASURY GROUP LTD

Treasury Group Investment Services Limited (100%)

Global Value Investors (100%)

AR Capital Management Pty Ltd (91.5%)

Investors Mutual Ltd (47.5%)

IML Investment Partners Pty Ltd (40%)

Treasury Asia Asset Management Ltd (43.96%)

Orion Asset Management (Aust) Pty Ltd (41.99%)

RARE Infrastructure Ltd (40%)

RARE IP Trust (40%)

Celeste Funds Management Limited (39.17%)

Evergreen Capital Partners Pty Ltd¹ (30%)

Octis Asset Management Pte Ltd² (20%)

Aubrey Capital Management Ltd (20%) see page 16

1 Treasury Group holdings are held via Treasury Evergreen Pty Limited.
2 Treasury Group holdings are held via Treasury Octis Pty Limited.

Directors’ Report cont.

Nature of operations and principal activities
The principal activities of the consolidated entity during the financial year were:

Provision of funds management services to:

•

institutions;

• master funds and wraps;

•

retail investors; and

private clients.

There have been no significant changes in the nature of those activities during the year.

Employees
The consolidated entity employed 19 full time equivalent employees as at 30 June 2012 (2011: 23 employees). The consolidated
entity includes Treasury Group Ltd (parent entity), Treasury Group Investment Services Limited, Global Value Investors Ltd
and AR Capital Management Pty Ltd.

OPERATIONS AND FINANCIAL REVIEW
Group Overview
Funds Management

Australian Equities
Investors Mutual Limited (IML) provides a funds management capability to both institutional and retail investors. The consolidated
entity holds 47.5% of the issued capital of IML. Investors Mutual Limited is considered a jointly controlled entity of the Group.
IML Investment Partners Limited, a jointly controlled entity of Treasury Group Ltd, undertakes a sub-advisory role to
exclusively manage funds for Investors Mutual Limited and its institutional clients. Treasury Group Ltd has a 40% interest in the
sub-advisory business with the investment team holding the remaining 60% of equity.

Orion Asset Management Ltd, a wholly-owned controlled entity of Orion Asset Management (Aust) Pty Ltd, provides funds
management services to a range of institutions. Orion Asset Management Ltd is considered a jointly controlled entity of the Group.
Celeste Funds Management Limited is an Australian equity manager with a smaller companies focus. Treasury Group Ltd
acquired 39.17% equity with the majority of ownership being held by the investment team of Celeste Funds Management Limited.
Celeste Funds Management Limited is considered a jointly controlled entity of the Group.

International Equities
Global Value Investors Ltd invests in global industrial companies that exhibit recurring earnings, and a strong, stable and
competitive business. On 14 December 2011, Treasury Group Ltd acquired a further 47.5% equity interest in Global Value Investors
Ltd from Investors Mutual Ltd, effectively increasing the Group’s direct ownership from 25% to 72.5%. As a consequence of the
terms of the shareholders agreement relating to the ability of TRG to acquire minority interests, Treasury Group Ltd gained
control of Global Value Investors Limited as at 31 December 2011. Treasury Group Ltd has since 31 December 2011 acquired the
remaining minority interests, increasing the direct ownership to 100%.

Treasury Asia Asset Management Ltd is a boutique asset manager specialising in the Asia Pacific region. Treasury Asia Asset

Management Ltd is considered a jointly controlled entity of the Group.

Aubrey Capital Management is a global growth equity thematic manager based in Edinburgh, Scotland. Treasury Group

Ltd holds convertible preference shares that entitle Treasury Group Ltd to take 20% of the equity capital of Aubrey Capital
Management. The convertible preference shares are treated as available-for-sale assets by the Group. In addition, Treasury
Group Ltd was issued two options which will allow Treasury Group Ltd to acquire a further 10% if certain conditions are met.

Alternative Equities
RARE Infrastructure Ltd (RARE), a boutique asset manager, specialises in listed global infrastructure. Treasury Group Ltd owns
40% each of RARE and RARE IP Trust (RIP). RARE and RIP are considered as jointly controlled entities of the Group.

AR Capital Management Pty Limited is an Australian equity absolute return manager. During the year, Treasury Group
Ltd increased its interest by 61.5% in AR Capital Management Pty Ltd through a selective share buyback offered to existing
shareholders of the company. As a consequence, Treasury Group Ltd owns 91.5% of the issued capital of AR Capital Management
Pty Limited via which Treasury Group Ltd has gained control of the company.

Evergreen Capital Partners Pty Ltd is an Australian equity absolute return manager. It focuses on management of ASX listed
equities via an absolute return style. Treasury Group Ltd owns 30% via its subsidiary Treasury Evergreen Pty Limited. Evergreen
Capital Partners Pty Ltd is considered a jointly controlled entity.

Octis is an Asian multi-strategy equity manager based in Singapore. Treasury Group owns 20% via its subsidiary Treasury

Octis Pty Limited with an option to increase that by a further 10% if certain hurdles linked to new funds flows are satisfied.

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Report cont.

16 – 17

Funds Management, Administration and Compliance Services

Treasury Group Investment Services Limited, a wholly-owned controlled entity of Treasury Group Ltd, is the manager of a listed
investment company, Premium Investors Limited (PRV). PRV was listed on the Australian Securities Exchange on 27 November 2003.

Operating Results for the Year

The consolidated profit for the year attributable to members of Treasury Group Ltd amounted to $6,751,757 (2011: $10,005,104).
The net profit after tax of the Group as reported in the current year has decreased compared to the 30 June 2011 comparative result
as shown in the table below, reconciling the underlying profit as follows:

Net profit attributable to members of the parent

Add back:

—

Impairment of AR Capital Management Pty Ltd

— Net effect of GVI restructuring costs

— TRG redundancies

— Realised loss/(gain) on sale of investments

Less:

— Reversal of option amortisation

Underlying profit

CONSOLIDATED

2012
$

2011
$

6,751,757

10,005,104

361,201

770,616

106,806

85,158

–

(61,944)

8,075,538

9,943,160

–

8,075,538

215,731

9,727,429

During the year, Treasury Group Ltd acquired units in Orion Sirius Fund for $1,000,000. Treasury Group Ltd also redeemed its
units in Global Industrial Share Fund Unhedged and subsequently invested the proceeds for units in Global Opportunities Fund
Hedged and Global Opportunities Fund Unhedged which were also redeemed during the period. These investments represent seed
capital to assist in the growth and marketing of these products.

Treasury Group has since 31 December 2011 acquired the remaining minority interests in Global Value Investors, increasing
the direct ownership to 100%. Treasury Group Ltd also acquired additional 61.5% equity interest in AR Capital Management Pty
Ltd through a selective share buyback offered to existing shareholders of the company, effectively increasing Treasury Group Ltd’s
equity ownership to 91.5%. Treasury Group also acquired a 30% equity ownership in Evergreen Capital Partners Pty Ltd, through its
subsidiary Treasury Evergreen Pty Limited for an amount of $1,400,000 with a deferred amount contingent upon the achievement
by Evergreen of business performance hurdles prior to 30 June 2014 which would be up to a cap of $2,000,000 (including the
$1.4m already paid).

As a result of his giving notice to resign on 7 March 2012, in accordance with the terms of the Employee Option Plan,
Mr Sullivan’s 140,000 performance rights lapsed and have been terminated. This resulted in a positive recharge to share-based
payment expense relating to current year charges for these long term incentives in the amount of $74,227.

Earnings Per Share

The earnings for the last financial year reflect the volatile and turbulent global financial markets experienced during the last
12 months.

Basic earnings per share (cents)

Diluted earnings per share (cents)

REVIEW OF FINANCIAL CONDITIONS
Capital Structure

2012

29.3

2011

43.4

The Group has a sound capital structure. This is evident from the Company’s positive cash flow position and there has been
no existing borrowing facilities that were required to date to fund the growth activities of the Group.

Treasury Group Investment Services Limited, a wholly-owned subsidiary of the Group, is required to retain Net Assets
of $5m for regulatory capital requirements as a holder of an Australian Financial Services Licence with ASIC and operating
as a Responsible Entity of Managed Investment Schemes.

During the financial year, the Company did not conduct any buy-back schemes to reduce its share capital (2011: nil).

Directors’ Report cont.

Cash Flow from Operations

Net cash flow from operating activities decreased by $1.1m to $6.7m or by 14% over the year. Net operating cash flows from
receipts from customers and payments to suppliers are lower in the current year due to the impact of restructuring costs of the
acquired subsidiaries during the year.

During the year, the Company paid $7,844,058 in dividends. Consolidated cash balance as at 30 June 2012 is $8,194,805.

Risk Management

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities,
are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified
by the Board.

The Group believes that it is important for all Board members to be a part of this process, and as such the Board has not
established a separate risk management committee. Instead all Board members are involved in the risk management process.

The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the

risks identified by the Board. These include the following:

•

implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets,
including the monitoring of key performance indicators of both a financial and non-financial nature; and

the establishment of an investment review process with the express purpose of examining new asset management opportunities
for the Group.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 12 July 2011, Mr Andrew McGill commenced in his capacity as Chief Executive Officer of Treasury Group Ltd. On 28 March
2012, Ms Melda Donnelly was appointed as Non-Executive Director.

On 11 May 2012, AR Capital Management Pty Ltd completed a buyback offer to other shareholders of the company. As a

consequence of the buyback, Treasury Group Ltd effectively increased its percentage of ownership 91.5%. On 23 May 2012,
Treasury Group Ltd acquired the remaining minority interests in Global Value Investors, increasing the direct ownership to
100%. Treasury Group Ltd also acquired a 30% equity ownership in Evergreen Capital Partners Pty Ltd for an upfront payment
of $1,400,000 plus a further deferred amount of $600,000 contingent upon the achievement by Evergreen of business performance
hurdles prior to 30 June 2014.

Other than the information provided above, there have been no other significant changes in the state of affairs of the Company

during the financial year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 10 July 2012, Treasury Group Ltd acquired 20% equity ownership in Octis Asset Management Pte Ltd with an option to
increase it by further 10% if certain hurdles linked to new fund flows are satisfied. Octis is an Asia multi-strategy equity manager
based in Singapore. Cost of the initial 20% acquisition was $225,395.

On 22 August 2012, the Board of Premium Investors Limited (PRV) resolved to undertake an off market buyback of up to 75%
of the ordinary shares on issue subject to approval by PRV shareholders. This is likely to have an effect on the results of the Group
in the coming financial year, the extent of which is yet to be determined as the outcomes of this process are yet to occur.

On 22 August 2012, the Directors of Treasury Group Ltd declared a final dividend on ordinary shares in respect of the 2012

financial year. The total amount of the dividend is $4,614,151 which represents a fully franked dividend of 20 cents per share.
The dividend has not been provided for in the 30 June 2012 financial statements.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the opinion of the Directors, disclosure of information regarding likely developments in the operations of the Group and the
expected results of those operations, other than matters referred to in the Chairman’s report and other ASX disclosures would
prejudice the consolidated entity’s interests. Accordingly, no further information is included in this report.

SHARE OPTIONS
Unissued shares

As at the date of this report, there were no unissued ordinary shares under options (30 June 2011: 275,000) held by employees
of the Group and its jointly controlled entities. Further details of the options outstanding to employees of the Group are included
in Note 22 to the financial report.

Shares issued as a result of the exercise of options

During the financial year, no options were exercised to acquire fully paid ordinary shares of Treasury Group Ltd. No options were
exercised since the end of the financial year.

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Report cont.

18 – 19

PERFORMANCE RIGHTS
During the year, Treasury Group Ltd issued 816,749 performance rights to executives and certain employees as part of their long
term incentives. These performance rights were granted on 12 July 2011 and have a vesting date of 11 July 2014. The performance
rights on issue were valued by RSM Bird Cameron using a hybrid monte-carlo/binomial option pricing model. The value of each
right at issue was $1.64. Due to resignation or redundancy of employees, 154,517 issued performance rights lapsed and have
been terminated. Total value of the remaining performance rights is $1,109,868 amortised over three years from the grant date.
The amount of performance rights amortisation expense for the period was $351,109.

As at the date of this report, there were no unissued ordinary shares under performance rights (30 June 2011: nil) held by
employees of the Group. Further details of the performance rights outstanding to employees of the Group are included in Note 22
to the financial report.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has entered into an agreement for the purpose of indemnifying Directors and officers of the Company in certain
circumstances against losses and liabilities incurred by the Directors or officers on behalf of the Company.

The following liabilities, except for a liability for legal costs, are excluded from the above indemnity:

(a) a liability owed to the Company or related body corporate;

(b) a liability for pecuniary penalty order under section 1317G or a compensation order under section 1317H of the

Corporations Act 2001;

(c) a liability owed to someone other than the Company or a related body corporate and did not arise out of conduct in good faith;

(d) any other liability against which the Company is precluded by law from indemnifying the Director.

The insurance contract prohibits the disclosure of the insurance premium for insuring officers of the Company against a liability
which may be incurred in that person’s capacity as an officer of the Company.

REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements for Directors and Executives of Treasury Group Ltd in accordance with
the requirements of the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by
paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 ‘Related Party Disclosures’, which have been transferred to the Remuneration
Report in accordance with Corporations Regulation 2M.6.04. For the purposes of this report, Key Management Personnel (KMP)
of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major
activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the
parent company, and includes the three executives in the Parent and the Group receiving the highest remuneration.

For the purposes of this report, the term ‘Executive’ encompasses the senior executives of the Parent and the Group.

Remuneration Philosophy

The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract,
motivate and retain highly skilled Directors and Executives.

To this end, the Company embodies the following principles in its remuneration framework:

•

provide competitive rewards to attract high calibre Executives;

link Executive rewards to shareholder value; and

significant portion of Executive remuneration ‘at risk’, dependent upon meeting pre-determined performance benchmarks.

Remuneration Committee

The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing
compensation arrangements for the Directors and the Executive team. The Remuneration Committee assesses 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.

Remuneration Structure

In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration
is separate and distinct.

Non-Executive Director Remuneration

Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain
Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Directors’ Report cont.

REMUNERATION REPORT (AUDITED) CONT.

Structure
In accordance with the ASX Listing Rules the aggregate remuneration of Non-Executive Directors is determined from time to time
by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest
determination was at the General Meeting held on 15 November 2006 when shareholders approved an aggregate remuneration of
$650,000 per year for services of Directors as directors of the Company and its subsidiaries.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst

Directors is reviewed annually. Non-Executive Directors do not receive performance-based bonuses from Treasury Group Ltd.

Executive Remuneration

Objective
The Company aims to reward Executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:

•

reward Executives for company, business unit and individual performance targets set by reference to appropriate benchmarks;

align the interests of Executives with those of shareholders;

link reward with the strategic goals and performance of the Company; and

ensure total remuneration is competitive by market standards.

Structure
Remuneration consists of the following key elements:

•

Fixed Remuneration

• Variable Remuneration

— Short Term Incentive (STI); and
— Long Term Incentive (LTI).

The proportion of fixed remuneration and variable remuneration is established by the Remuneration Committee.

Fixed Remuneration

Objective
The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and
is competitive in the market.

Fixed remuneration is reviewed annually by the Remuneration Committee and the process consists of a review of performance,

relevant comparative remuneration in the market and advice on policies and practices.

Variable Remuneration – Short Term Incentive (STI)

Objective
The objective of the STI plan is to link the achievement of the Company’s operational targets with the remuneration received by
the Executives charged with meeting those targets. The STI is fully discretionary in the hands of the Remuneration Committee.
The Remuneration Committee receives a recommendation from the Chief Executive Officer (CEO) on Executive performance.
The CEO bases his report on a number of tailored Key Performance Indicators (KPI) for each Executive. The total potential STI
available is set at a level so as to provide sufficient incentive to the Executive to achieve the operational targets such that the cost
to the Company is reasonable.

Structure
Actual STI payments granted to each Executive depend on the achievement of annual corporate profitability measures and each
Executive exceeding expectation on their KPIs. Secondary consideration is given to their general value add to the business.
The aggregate of annual STI payments available for Executives across the Company is subject to the approval of the

Remuneration Committee. Payments are usually delivered as a cash bonus.

Variable Remuneration – Long Term Incentive (LTI)

Objective
The objective of the LTI plan is to reward Executives in a manner which aligns this element of remuneration with the creation of
shareholder wealth. The awarding of the LTIs is fully discretionary in the hands of the Remuneration Committee and granted under
the same governance process as detailed for STIs above.

Structure
LTI grants are delivered in the form of options, performance rights or shares.

The Company uses Total Shareholder Return (including both dividends and share price movements) relative to market and

peer group benchmarks as the performance hurdle for the long term incentive plan to ensure alignment between shareholder
return and reward for Executives.

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Report cont.

20 – 21

REMUNERATION REPORT (AUDITED) CONT.
Details of the nature and amount of each element of the remuneration of each Director of the Company and each of the Key
Management Personnel of the Company and the consolidated entity for the financial year are as follows:

SHORT TERM

POST
EMPLOYMENT

SHARE-BASED PAYMENTS

OTHER

TOTAL

PERFORMANCE
RELATED

Salary
& fees
$

Cash
bonus ¹
$

Super-
annuation
$

Options/
Performance
rights ²
$

Shares
$

Others ³
$

Directors
M. Fitzpatrick – Chairman

2012

2011

114,679

110,321

D. Cooper – Non-Executive Director

2012

2011

116,302

349,707

P. Kennedy – Non-Executive Director

2012

2011

120,000

113,750

R. Hayes – Non-Executive Director

2012

2011

68,808

67,660

M. Donnelly – Non-Executive Director

2012

2011

14,397

–

100,000

–

M. Burgess – Managing Director (resigned 24 June 2011)

10,321

9,929

3,396

12,160

–

6,192

6,089

1,296

–

2012

2011

–

428,234

100,000

15,199

Executives
A. McGill – Chief Executive Officer

2012

2011

421,422

–

– ×
–

15,775

–

J. Ferragina – Treasury Group Ltd – Chief Financial Officer

2012

2011

284,225

284,801

121,000

150,000

15,775

15,199

C. Feldmanis – Treasury Group Investment Services Ltd –
Managing Director (resigned 17 August 2011)

2012

2011

112,532

284,801

–

200,000

15,775

15,199

R. Sullivan – Treasury Group Ltd – Head of Distribution
(resigned 7 March 2012)

2012

2011

284,225

284,801

396,941 *

442,443 *

15,775

15,199

Total remuneration:
Key Management and Highest Paid Personnel

2012

2011

1,520,815

1,924,075

517,941

992,443

84,305

88,974

–

(150,466) ≠

265,096

–

74,227

26,943

–

13,443

–

33,805

–

21,865

–

125,000

120,250

119,698

461,867

120,000

113,750

75,000

73,749

15,693

–

392,967

702,293

–

517,092

476,943

128,307

513,443

681,166

776,248

339,323

(76,275)

21,865

2,484,249

–

2,929,217

–

22%

–

25%

38%

–

38%

37%

–

45%

58%

57%

35%

34%

Directors’ Report cont.

REMUNERATION REPORT (AUDITED) CONT.

1 Cash bonuses paid to Executives are performance-based with the exception of Mr Sullivan and paid every July in the following financial year.

The table below shows the maximum potential bonus of each of the Executives:

Executives

A. McGill

M. Burgess

J. Ferragina

C. Feldmanis

MAXIMUM POTENTIAL INCOME

2012

450,000

–

240,000

–

2011

–

450,000

240,000

2 Refer to Note 22 for the vesting conditions of options and performance rights granted to Executives.
3 There were no termination payments paid during the year.
≠ In the prior year, as a result of his giving notice to resign on 24 June 2011, in accordance with the terms of the Employee Option Plan, Mr Burgess’
remaining 1,000,000 options lapsed and have been terminated. This resulted in a positive recharge to share-based payment expense relating to
prior period charges for these options during the prior year. This is not included in the determination of performance related ratio as per above.

× This year’s cash bonus was waived by Mr McGill.
* Mr Sullivan earned commissions based on percentage of FUM for confirmation of new mandates and clients to boutiques. These commissions
are recovered from the boutiques who have received these new mandates and the distribution services that are provided for them which results
in a neutral profit and loss impact to Treasury Group Ltd.

The table below indicates the relative performance of the Company, wealth created for shareholders and total Key Management
Personnel bonus pool. Bonuses are paid on individual and Company performance. The Remuneration Committee has ultimate
discretion in determining the bonus pool:

2012
$

2011
$

2010
$

2009
$

2008
$

Net profit after tax

6,751,757

10,005,104

11,676,131

4,945,543

17,244,317

Share price at start of year ($)

Share price at end of year ($)

Interim dividend (cps)

Final dividend (cps)

EPS

KMP bonuses ($)

3.96

4.09

29.3

5.06

3.96

43.4

4.11

5.06

50.6

9.21

4.11

21.4

15.52

9.21

75.3

517,941

992,443

1,421,527

560,384

858,650

During the year, Treasury Group Ltd issued 816,749 performance rights to executives and certain employees as part of their long
term incentives. These performance rights were granted on 12 July 2011 and have a vesting date of 11 July 2014. The performance
rights on issue were valued by RSM Bird Cameron using a hybrid monte-carlo/binomial option pricing model. The value of
each right at issue was $1.64. Due to resignation or redundancy of employees, issued performance rights lapsed and have been
terminated. Total value of the remaining performance rights is $1,109,868 amortised over three years from the grant date.
The amount of performance rights amortisation expense for the period was $351,109.

During the year ended 30 June 2012 no options (2011: nil) were granted as equity compensation benefits to Key Management

Personnel. No options were issued to the non-executive members of the Board of Directors under this scheme.

During the year ended 30 June 2012, 275,000 options (2011: 1,230,000) held by Key Management Personnel lapsed or

were cancelled.

Remuneration options: Granted and vested during the year

During the year ended 30 June 2012, no options were granted as equity compensation benefits to certain Key Management
Personnel (2011: nil). No options were issued to the non-executive members of the Board of Directors under this scheme.

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Report cont.

22 – 23

REMUNERATION REPORT (AUDITED) CONT.

Options granted/forfeited as part of remuneration

2012

J. Ferragina

R. Sullivan

Value of options
granted during
the year
$

Value of options
exercised during
the year
$

Value of options
forfeited during
the year
$

Total value of options
granted, exercised and
lapsed during the year
$

Remuneration
consisting of
options for the year
%

–

(115,450)

(144,312)

(115,450)

(144,312)

–

Options granted/forfeited as part of remuneration

Value of options
granted during
the year
$

Value of options
exercised during
the year
$

Value of options
forfeited during
the year
$

Total value of options
granted, exercised and
lapsed during the
year
$

Remuneration
consisting of
options for the year
%

–

(402,620)

(100,585)

(214,420)

(60,351)

(402,620)

(100,585)

(214,420)

(60,351)

–

2011

M. Burgess

J. Ferragina

R. Sullivan

C. Feldmanis

Shares issued on exercise of remuneration options (Consolidated)

During the current financial year ended 30 June 2012 and the prior financial year ended 30 June 2011 the Company did not issue
any shares to Key Management Personnel on exercise of remuneration options.

From 1 July 2003, options granted as part of Director and Executive emoluments have been valued using a binomial option
pricing model, which takes account of factors including the option exercise price, the current level and volatility of the underlying
share price, the risk-free interest rate, expected dividends on the underlying share, current market price of the underlying share
and the expected life of the option. Further details in relation to the issuance and value of options are contained in Note 22 to the
financial report.

Remuneration long term incentives – performance rights granted and vested during the year

During the year ended 30 June 2012, Treasury Group Ltd issued 816,749 performance rights to Executives and certain employees
as part of their long term incentives.

Long term incentives – performance rights granted/forfeited as part of remuneration

Value of LTIs –
performance rights
granted during
the year
$

Value of LTIs –
performance rights
exercised during
the year
$

Value of LTIs –
performance rights
forfeited during
the year
$

Total LTIs –
performance rights
granted, exercised and
lapsed during the year
$

Remuneration
consisting of LTIs-
performance
rights for the year
%

820,000

229,600

60,628

–

(229,600)

(23,808)

–

(229,600)

(23,808)

–

2012

A. McGill

J. Ferragina

R. Sullivan

Other employees

Shares issued on vesting of performance rights (Consolidated)

2012
During the year ended 30 June 2012, the Company did not issue any shares to the Key Management Personnel on the vesting
of performance rights (2011: nil).

Shares granted as part of a deferred share plan (Consolidated)

2012
During the year ended 30 June 2012, the Company issued no deferred shares during the year (2011: nil).

Directors’ Report cont.

REMUNERATION REPORT (AUDITED) CONT.

EMPLOYMENT CONTRACTS
The Chief Executive Officer, Mr Andrew McGill, is employed under contract. His employment contract commenced on 12 July
2011 with a base salary package of $450,000 (gross including superannuation) and has no pre-determined termination date. Under
the terms of the contract, Mr McGill or Treasury Group may terminate the contract giving six months written notice with no
termination benefits.

As a long term incentive, Mr McGill was awarded 500,000 performance rights on 12 July 2011 with each right at the time of
grant representing one Treasury Group Ltd share if it vests. The performance rights have been issued in two equal 50% tranches
which have vesting conditions that are based on Treasury Group Ltd’s total shareholder return (TSR) compared to the ASX 300
index in tranche 1 and for tranche 2 in comparison to selected competitor TSRs. Should Treasury Group Ltd’s TSR rank below
the 50th percentile for each of these tranches, no performance rights will vest, in the 50th percentile 50% will vest, or at above the
75th percentile, 100% will vest and for TSR between 50th and 75th percentile, a pro-rata of rights will vest (2%) for every percentile
increase above the 50th percentile.

Mr McGill is also eligible for a short term incentive based on a number of clearly defined Key Performance Indicators.
The short term incentive is for up to 100% of base salary and paid in three equal instalments over a three year period. Any bonus
payment is at the sole discretion of the Remuneration Committee.

The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination
with cause occurs, Mr McGill is only entitled to that portion of remuneration which is fixed, and only up to the date of termination.
On termination with cause, any unvested performance rights will immediately be forfeited.

Where employment is terminated with notice, no further payments will be paid by the Company except unpaid salary accrued
to the date of termination and accrued annual leave. Where employment is terminated with notice, deferred short term incentives
will also be paid. However, the Board retains the discretion to determine that some or all unvested performance rights vest or lapse
with effect from or after the cessation date.

The Chief Financial Officer, Mr Ferragina, is employed under contract. The current employment contract has no

predetermined termination date. Under the terms of the contract Mr Ferragina may terminate the contract by giving three months
written notice with no termination benefits.

As a long term incentive, Mr Ferragina was awarded 140,000 performance rights on 12 July 2011 with each right at the time

of grant representing one Treasury Group Ltd share if it vests.

DIRECTORS’ MEETINGS
The number of meetings of Directors (including meetings of Committees of Directors) held during the year and the number
of meetings attended by each Director were as follows:

DIRECTORS’ MEETINGS

AUDIT COMMITTEE MEETINGS

REMUNERATION
COMMITTEE MEETINGS

NOMINATION
COMMITTEE MEETINGS

Meetings
eligible to
attend

Meetings
attended

Meetings
eligible to
attend

Meetings
attended

Meetings
eligible to
attend

Meetings
attended

Meetings
eligible to
attend

Meetings
attended

D. Cooper

M. Fitzpatrick

P. Kennedy

R. Hayes

M. Donnelly

Committee membership

As at the date of this report, the Company had an Audit Committee, a Remuneration Committee and a Nomination Committee
of the Board of Directors.

Members acting on the Committees of the Board during the year were:

AUDIT

REMUNERATION

NOMINATION

P. Kennedy (Chairman)

M. Fitzpatrick

R. Hayes

M. Fitzpatrick

R. Hayes

R. Hayes (Chairman)

M. Fitzpatrick

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Report cont.

24 – 25

TAX CONSOLIDATION
Effective 1 July 2003, for the purposes of income taxation, Treasury Group Ltd and its 100% owned entities have formed a tax
consolidated group.

CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Treasury Group Ltd
support the Principles of Corporate Governance. The Company’s Corporate Governance Statement is contained in the following
section of this annual report.

ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s operations are not presently subject to significant environmental regulation under the law of the Commonwealth
and State.

NON-AUDIT SERVICES
The Directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001.

AUDITOR INDEPENDENCE
The Directors received an independence declaration from the auditor of Treasury Group Ltd. A copy of the declaration is set out
on page 26.

Signed in accordance with a resolution of the Directors.

M. Fitzpatrick
Chairman
22 August 2012

Auditor’s Independence Declaration

ANNUAL REPORT 2012TREASURY GROUP LTDCorporate Governance Statement

26 – 27

The ASX Corporate Governance Council has published
Corporate Governance Principles and Recommendations
(‘ASX Principles’) on what it considers to be best practice in
conducting the business of a listed company. The ASX Listing
Rules require companies to disclose their compliance with the
guidelines on an ‘if not, why not’ basis in their annual report
to shareholders.

The Guidelines set out recommended practice in the form

of eight principles:

1. Lay solid foundations for management and oversight

2. Structure the Board to add value

3. Promote ethical and responsible decision-making

4. Safeguard integrity in financial reporting

5. Make timely and balanced disclosure

6. Respect the rights of shareholders

7. Recognise and manage risk

8. Remunerate fairly and responsibly

Treasury Group Ltd’s (the Company) adherence to each of
these principles, together with details of the policies adopted
by the Board to ensure compliance is described on a principle
by principle basis below.

In accordance with the ASX Principles the Company
has posted copies of its governance policies, charters and
procedures on its website www.treasurygroup.com

PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT

The Board’s role is to govern the Company rather than to
manage it. The Board recognises the importance of clearly
delineating between its roles and the roles of management, and
has adopted a formal statement of matters reserved to itself and
a list of delegations to management. It is the responsibility of
the Board to oversee the activities of management in carrying
out these delegated duties.

In carrying out its governance role, the main task of the

Board is to drive the performance of the Company. The Board
must also ensure that the Company complies with all of
its contractual, statutory and any other legal obligations,
including the requirements of any regulatory body. The Board
is accountable to shareholders for the successful operations
of the Company.

Full details of the Board’s role and responsibilities are
contained in the Board Charter, a copy of which is contained in
the Corporate Governance section on the Company’s website.

Role of senior executives

It is the role of senior executives to manage the Company in
accordance with the direction and delegations of the Board
and the responsibility of the Board to oversee the activities
of senior executives in carrying out these delegated duties.
The Board conducts an annual review of the performance
of senior executives against pre-determined qualitative and
quantitative key performance indicators. Senior executives
undergo an induction program to gain an understanding of
the Company’s financial position, its strategies, operations
and risk management policies as well as the rights, duties,
responsibilities and roles of the Board and senior executives.

PRINCIPLE 2: STRUCTURE THE BOARD
TO ADD VALUE

The Board considers independent decision-making as
critical to effective governance, and the Company recognises
the importance of independent directors and the external
perspective and advice that they can offer. The names of the
Directors and their qualifications and experience are included
in the profiles in the Directors’ Report, along with the term of
office held by each of the Directors.

The Board is made up entirely of Non-Executive Directors

with a majority of independent directors as recommended by
the ASX Principles. Mr Kennedy, Mr Hayes and Ms Donnelly
are Non-Executive Directors, and meet the ASX Principles’
criteria for independence.

Mr Fitzpatrick is a Non-Executive Director and Chairman

of the Company, but is a major shareholder of the Company
and as such he does not meet the ASX Principles’ criteria for
independence. However, his experience and knowledge of the
Company make his contribution to the Board such that it is
appropriate for him to remain as Chairman of the Board.

The Board size is considered appropriate for the size of the

Company’s operations.

The Company’s Chief Executive Officer is Mr Andrew
McGill. He was appointed as CEO of the Company on 12 July
2011. The Company’s Chairman and CEO have separate roles.
The division of responsibilities between the Chairman and the
CEO are set out in the Board Charter.

All Directors bring an independent judgment to bear in

Board deliberations.

The Board established a Nomination Committee in 2004, to
help achieve a structured Board that adds value to the Company
by ensuring an appropriate mix of skills are present in Directors
on the Board at all times.

Whilst the ASX Principles suggest a minimum of three

members, the Company believes that the present Committee
structure is adequate to perform its duties. The members of
the Nomination Committee are Mr Hayes (Chairman) and
Mr Fitzpatrick.

The Nomination Committee’s Charter and a description
of the process for selection and appointment of new directors
are available on the Company’s website.

The Board Charter provides for the undertaking of
annual Board and Committee performance evaluation.
The Board’s performance is measured against both
qualitative and quantitative indicators. The objective of this
evaluation is to provide best practice Corporate Governance
to the Company. The Nomination Committee oversees
management succession plans including the CEO and his
direct reports and evaluates the Board, Committee and
executives’ performance and makes recommendations for the
appointment and removal of Directors.

In order to achieve continuing improvement in Board
performance, all Directors are encouraged to undergo continual
professional development. Specifically, Directors are provided
with the resources and training to address skills gaps where they
are identified.

In order to provide a specific opportunity for performance
matters to be discussed with each Director, each year the Board
Chairman conducts a formal Director review process. Self
and peer evaluations are completed and the Chairman meets

Corporate Governance Statement cont.

with each Director individually to discuss issues including
performance and discusses with the Board as a whole the
effectiveness of the Board and its Committees. Given the nature
of the Company’s activities, the Board believes that there is
sufficient formality in the process of evaluation of the Board,
individual Directors and the Chairman.

New Directors undergo an induction process in which they

are given a full briefing on the Company. Where possible, this
includes meetings with key executives, tours of the premises,
an induction package and presentations. Information conveyed
to new directors includes:

•

details of the role and responsibilities of a director;

formal policies on director appointment as well as conduct
and contribution expectations;

details of all relevant legal requirements;

access to a copy of the Board and Committee Charters;

guidelines on how the Board processes function;

details of past, recent and likely future developments relating
to the Board;

background information on and contact information for
key people in the organisation;

an analysis of the Company;

a synopsis of the current strategic direction of the Company
including a copy of the current strategic plan and annual
budget; and

•

a copy of the Constitution of the Company.

Each Director has the right of access to all Company
information and to the Company’s executives. The Board
collectively and each Director, subject to informing the
Chairman, has the right to seek independent professional
advice from a suitably qualified adviser, at the Company’s
expense, up to specified limits, to assist them to carry out their
responsibilities. Where appropriate, a copy of this advice is to
be made available to all other members of the Board.

PRINCIPLE 3: PROMOTE ETHICAL AND
RESPONSIBLE DECISION-MAKING

To ensure that the Company maintains the highest standards of
integrity, honesty and fairness in its dealings with all stakeholders,
the Board has established a formal Code of Conduct for
management and employees and also a Code of Ethical Conduct
for the Board. These Codes act as a guide for compliance with
legal and other obligations that the Company has to stakeholders
which include customers, clients, government authorities,
creditors, employees and the community as whole. These Codes
govern all the Company’s commercial operations and the conduct
of the Board, employees, consultants, contactors, advisers and all
other people when they represent the Company.

These Codes also outline the responsibility and

accountability of individuals for reporting and investigating
unethical practices and can be viewed in the Corporate
Governance section on the Company’s website.

The Company has a Securities Trading Policy under
which Directors and employees and their associates may
only trade in the Company’s securities during specific period
trading windows. This policy can be viewed in the Corporate
Governance section of the Company’s website.

The Board established a Diversity Policy in 2011. The Board’s
measurable objectives for achieving gender diversity are:

•

a minimum of one female Director by AGM 2013;

at least 20% of senior executives to be female; and

at least 35% of managers to be female.

Currently the proportion of women at different levels within
the organisation is as follows:

•

Board – 25%

Senior executives – 0%

• Managers – 29%

•

Employees – 80%

The representation of women across the organisation
as a whole is 53%.

PRINCIPLE 4: SAFEGUARD INTEGRITY IN
FINANCIAL REPORTING

The Board established an Audit Committee in 2004. The Audit
Committee has a formal charter, which can be found in the
Corporate Governance section of the Company’s website.

The Audit Committee comprises of three non-executive
directors, two of whom are independent, and the Committee is
also chaired by an independent director. During the year under
review, the members of the Audit Committee were Mr Kennedy
(Chairman), Mr Fitzpatrick and Mr Hayes. Whilst Mr Fitzpatrick
is not independent, the Company believes that the Committee
structure is adequate to perform its duties independently.
All members can critically evaluate financial statements and are
financially literate. Mr Kennedy, the Chairman, has a commerce
background with experience in financial and accounting matters.
Details of members’ qualifications may be found in the director
profiles in the Directors’ Report.

The Audit Committee held four meetings for the year and
details of attendance of the members of the Audit Committee
are contained in the Directors’ Report.

Information on procedures for the selection and
appointment of the external auditor and for the rotation of
external audit engagement partners may be found in the
Corporate Governance section of the Company’s website.

PRINCIPLE 5: MAKE TIMELY AND BALANCED
DISCLOSURE

The Board has established a Continuous Disclosure Policy for
ensuring compliance with the ASX Listing Rule disclosure
requirements. This policy is located in the Corporate
Governance section of the Company’s website.

The Board has designated the Company Secretary as the

person responsible for overseeing and coordinating disclosure
of information to the ASX as well as communicating with the
ASX. In accordance with the ASX Listing Rules, the Company
immediately notifies the ASX of information:

•

concerning the Company that a reasonable person would
expect to have a material effect on the price or value of the
Company’s securities; and

that would, or would be likely to, influence persons who
commonly invest in securities in deciding whether to acquire
or dispose of the Company’s securities.

ANNUAL REPORT 2012TREASURY GROUP LTDCorporate Governance Statement cont.

28 – 29

Upon confirmation of receipt from the ASX, the Company posts
all information disclosed in accordance with this policy on the
Company’s website in an area accessible by the public.
To enhance clarity and balance of reporting and to
enable investors to make an informed assessment of the
Company’s performance, financial results are accompanied
by a commentary.

Details of payments to executives for the 2011/12 financial
year are disclosed in the Directors’ Report. Core entitlements of
any new executives will be disclosed at the time when they are
agreed as well as at the time the actual payment is made.

PRINCIPLE 6: RESPECT THE RIGHTS OF
SHAREHOLDERS

The Company respects the rights of its shareholders and to
facilitate the effective exercise of those rights the Company is
committed to:

•

communicating effectively with shareholders through
releases to the market via ASX, the Company’s website,
information mailed to shareholders and the general meetings
of the Company;

giving shareholders ready access to balanced and
understandable information about the Company and
corporate proposals;

• making it easy for shareholders to participate in general

meetings of the Company; and

•

requesting the external auditor to attend the annual general
meeting and be available to answer shareholder questions
about the conduct of the audit and the preparation and
content of the auditor’s report.

The Shareholder Communications Policy is published on the
Company’s website in its Corporate Governance section.

PRINCIPLE 7: RECOGNISE AND MANAGE RISK

The Board’s Charter clearly establishes that it is responsible
for ensuring that there is a sound system for overseeing and
managing risk. The Audit Committee is also responsible
for establishing policies on risk oversight and management.
A summary of the Company’s Risk Management and internal
compliance and control system is available on the Company’s
website in its Corporate Governance section.

Due to the size and scale of operations of the Company,

there is no separate internal audit function or Risk
Management Committee.

In accordance with Recommendation 7.3 of the
ASX Principles, the CEO and CFO have stated in writing
to the Board:

‘That
•

the statement given in accordance with section 295A of
the Corporations Act is founded on a sound system of risk
management and internal compliance and control which
implements the policies adopted by the Board; and

•

the Company’s risk management and internal compliance
and control system is operating efficiently and effectively in
all material respects in relation to financial reporting risks.’

The Company’s Risk and Compliance Services team has
designed and implemented a risk management and internal
control system to manage Treasury Group’s material business
risks. Risk is managed on an enterprise wide basis, with risks
being reviewed across the whole group of companies, as
well as risks arising from key stakeholder relationships and
external events.

The Company has an online governance, risk and
compliance software system which allows material business
risks to be linked to mitigating controls so that the performance
of Treasury Group’s enterprise risk and compliance programs
can be monitored continuously.

Management provides monthly board reports on the

effectiveness of managing the Company’s business risks.

PRINCIPLE 8: REMUNERATE FAIRLY AND
RESPONSIBLY

The Board has established a Remuneration Committee to assist
the Board in making appropriate decisions about incentive
schemes and superannuation arrangements. The role of the
Remuneration Committee is to assist the Board in fulfilling
its responsibilities in respect of establishing appropriate
remuneration levels and incentive policies for employees.

Mr Kennedy, Mr Fitzpatrick and Mr Hayes are the current

members of the Remuneration Committee. Mr Kennedy, the
Chairman of the Remuneration Committee, is an Independent
Director. The Remuneration Committee held two meetings
throughout the year and details of attendance of the members
of the Committee are contained in the Directors’ Report.
The Remuneration Committee has a formal charter which
is available on the website of the Company in the Corporate
Governance section.

The Board has endorsed the following Senior Executive

Remuneration Policy and the Non-Executive Director
Remuneration Policy.

Senior Executive Remuneration Policy

The Company is committed to remunerating its senior
executives in a manner that is market-competitive and
consistent with best practice as well as supporting the interests
of shareholders. Consequently, under the Senior Executive
Remuneration Policy the remuneration of senior executives may
be comprised of the following:

•

fixed salary that is determined from a review of the
market and reflects core performance requirements and
expectations;

a performance bonus designed to reward actual achievement
by the individual of performance objectives and for
materially improved Company performance;

participation in the Performance Rights Plan, Officer and
Employee Option Plan and Share Purchase Plan; and

statutory superannuation.

By remunerating senior executives through performance
and long term incentive plans in addition to their fixed
remuneration, the Company aims to align the interests of
senior executives with those of shareholders and enhance
Company performance. The amount of remuneration,

Corporate Governance Statement cont.

including both monetary and non-monetary components,
for each of the Key Management Personnel during the year
(discounting accumulated entitlements) is detailed in the
Directors’ Report.

The value of shares, performance rights and options

granted to senior executives has been calculated using
the binomial method.

The objective behind using this remuneration structure

is to drive improved Company performance and thereby
increase shareholder value as well as aligning the interests
of executives and shareholders.

The Board may use its discretion with respect to the

payment of bonuses, stock options and other incentive
payments. This discretion is exercised on the following basis:

•

retentions and motivation of key executives;

attraction of quality management to the Company; and

performance incentives which allow executives to share
the rewards of the success of the Company.

The Company has a Long Term Incentive Plan: Performance
Rights, Share Purchase Plan and an Officer and Employee
Option Plan that have been approved by shareholders in which
executives may participate. The number of shares, performance
rights and options issued under the plans are reasonable in
relation to the existing capitalisation of the Company and
all payments under the plans are made in accordance with
thresholds set in plans approved by shareholders.

Non-Executive Director Remuneration Policy

Non-Executive Directors are paid their fees out of the
maximum aggregate amount approved by shareholders for
the remuneration of Non-Executive Directors. Non-Executive
Directors do not receive performance-based bonuses and
do not participate in the option scheme of the Company.
Non-Executive Directors are entitled to statutory
superannuation.

The payment to Directors is based on a workload criterion.

Consequently, all Non-Executive Directors, except the Chairman,
receive a fixed amount plus a load for Committee membership and
Committee chairing. The Chairman receives an extra loading given
the duties and extra time associated with the position.

Current Director remuneration

The aggregate amount of remuneration paid to Non-Executive
Directors is approved by shareholders and is currently $650,000.
Further information in relation to the remuneration of

Directors can be found in the Directors’ Report.

ANNUAL REPORT 2012TREASURY GROUP LTDIncome Statement

FOR THE YEAR ENDED 30 JUNE 2012

REVENUES
(Loss)/gains on investments

Salaries and employee benefits expenses

Other expenses

Share of net profits of equity accounted investments

PROFIT BEFORE INCOME TAX
Income tax benefit

PROFIT FOR THE YEAR

ATTRIBUTABLE TO:

NON-CONTROLLING INTEREST

MEMBERS OF THE PARENT

Earnings per share (cents per share)
•

basic for profit for the year attributable to ordinary equity holders of the parent

•

diluted for profit for the year attributable to ordinary equity holders of the parent

Franked dividends paid per share (cents per share) for the financial year

The above income statement should be read in conjunction with the accompanying notes.

30 – 31

CONSOLIDATED

2012
$

2011
$

3,944,594

4,492,981

(69,756)

(5,202,287)

(3,741,651)

61,944

(5,741,261)

(2,938,871)

Notes

5(a)

5(b)

5(c)

13(c)(iv )

11,484,896

14,014,687

7(c)

6,415,796

338,432

9,889,480

115,624

6,754,228

10,005,104

2,471

–

19(f )

6,751,757

10,005,104

29.3

43.4

Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2012

PROFIT FOR THE YEAR

Other Comprehensive Income
Reversal of previous revaluation of available-for-sale investments sold during the year

Net unrealised (losses)/gains on available-for-sale investments taken to equity

Income tax relating to components of other comprehensive income

Share of after-tax gain on available-for-sale investments of jointly controlled entities

Other comprehensive (loss) for the year (net of tax)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

ATTRIBUTABLE TO:

NON-CONTROLLING INTEREST

MEMBERS OF THE PARENT

CONSOLIDATED

2012
$

2011
$

6,754,228

10,005,104

(6,050)

(420,298)

(898,998)

269,699

105,161

(2,545)

764

11,090

(530,188)

(410,989)

6,224,040

9,594,115

2,471

–

6,221,569

9,594,115

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

ANNUAL REPORT 2012TREASURY GROUP LTDStatement of Financial Position

AS AT 30 JUNE 2012

32 – 33

CURRENT ASSETS
Cash and cash equivalents

Trade and other receivables

Other assets

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS

Trade and other receivables

Available-for-sale investments

Loans and other receivables

Deferred tax assets

Investments accounted for using the equity method

Plant and equipment

Intangibles

Goodwill

TOTAL NON-CURRENT ASSETS

TOTAL ASSETS

CURRENT LIABILITIES
Trade and other payables

Provisions

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES
Provisions

Deferred tax liabilities

Financial liability

TOTAL NON-CURRENT LIABILITIES

TOTAL LIABILITIES

NET ASSETS

EQUITY
Equity attributable to equity holders of the parent

Contributed equity

Reserves

Retained profits

Non-controlling interest

TOTAL EQUITY

Notes

9(a)

7(d)

CONSOLIDATED

2012
$

2011
$

8,194,805

4,648,822

692,175

10,088,968

6,590,789

237,729

13,535,802

16,917,486

891,713

9,514,834

4,002,406

3,771,359

233,638

8,925,097

5,086,720

2,861,454

29,697,032

29,269,020

91,712

34,357

583,888

111,620

45,087

–

48,587,301

46,532,636

62,123,103

63,450,122

2,823,671

143,131

2,966,802

3,205,017

295,889

3,500,906

77,194

562,726

600,000

132,433

631,493

–

1,239,920

763,926

4,206,722

4,264,832

57,916,381

59,185,290

19(a)

19(g)

19(f )

29,594,265

2,530,961

2,710,040

25,788,684

26,880,985

2,471

–

57,916,381

59,185,290

The above statement of financial position should be read in conjunction with the accompanying notes.

Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2012

CONSOLIDATED

Ordinary
shares
$

Share options
reserve
$

Net unrealised
gains reserve
$

Retained
earnings
$

Non-controlling
interest
$

Total
$

AS AT 1 JULY 2011

Total comprehensive income for the year
Share-based payments

Consolidation of subsidiaries acquired
during the year

Dividends paid

AT 30 JUNE 2012

29,594,265
–

–

2,722,698
–

351,109

–

(12,658)
(530,188)

26,880,985
6,751,757

–
2,471

59,185,290
6,224,040

–

(7,844,058)

–

351,109

–

(7,844,058)

29,594,265

3,073,807

(542,846)

25,788,684

2,471

57,916,381

The above statement of changes in equity should be read in conjunction with the accompanying notes.

AS AT 1 JULY 2010

Total comprehensive income for the year
Share-based payments

Dividends paid

AT 30 JUNE 2011

CONSOLIDATED

Ordinary
shares
$

Share options
reserve
$

Net unrealised
gains reserve
$

Retained
earnings
$

Total
$

29,594,265
–

–

2,798,973
–

(76,275)

–

398,331
(410,989)

23,335,695
10,005,104

56,127,264
9,594,115

–

(76,275)

(6,459,814)

29,594,265

2,722,698

(12,658)

26,880,985

59,185,290

The above statement of changes in equity should be read in conjunction with the accompanying notes.

ANNUAL REPORT 2012TREASURY GROUP LTDStatement of Cash Flows

FOR THE YEAR ENDED 30 JUNE 2012

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers

Payments to suppliers and employees

Dividends and distributions received

Interest received

Income tax refund

34 – 35

CONSOLIDATED

2012
$

2011
$

Notes

5,278,541

5,764,689

(12,175,058)

(11,353,612)

12,750,418

12,573,964

780,596

96,381

817,905

–

NET CASH FLOWS FROM OPERATING ACTIVITIES

9(b)

6,730,878

7,802,946

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment

Purchase of intangible assets

Purchase of investment accounted for under the equity method

Purchase of available-for-sale investments

Proceeds from disposal of available-for-sale investments

Advance to jointly controlled entities

Repayment of loans by jointly controlled entities

Net cash acquired on acquisition of subsidiaries

NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid on ordinary shares

NET CASH FLOWS (USED IN) FINANCING ACTIVITIES

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year

(43,489)

(10,133)

(1,400,000)

(30,178)

(4,978)

–

(2,372,933)

(4,147,311)

984,926

(604,710)

1,675,839

989,517

395,439

(100,000)

1,683,677

–

(780,983)

(2,203,351)

(7,844,058)

(1,894,163)

10,088,968

(6,459,812)

(860,217)

10,949,185

10,088,968

CASH AND CASH EQUIVALENTS AT END OF YEAR

9(a)

8,194,805

The above statement of cash flows should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2012

1. CORPORATE INFORMATION
The financial report of Treasury Group Ltd (the ‘Company’ or the ‘Group’) for the year ended 30 June 2012 was authorised for issue
in accordance with a resolution of the Directors on 22 August 2012.

Treasury Group Ltd is a company limited by shares incorporated in Australia whose shares are publicly traded on the

Australian Securities Exchange (ASX).

The nature of operations and principal activities of the Group are disclosed in the Directors’ Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report has also been prepared on a historical cost basis, except for financial assets held at fair value
through profit and loss, and available-for-sale investments, which have been measured at fair value, and loans and receivables,
which are measured at amortised cost.

The financial report is presented in Australian dollars.

(b) Compliance with IFRS

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the
amounts reported in these financial statements. Details of other Standards and Interpretations adopted in these financial
statements but have had no effect on the amounts reported are set out below:

Amendments to AASB 7 ‘Financial
Instruments: Disclosure’

Amendments to AASB 101 ‘Presentation of
Financial Statements’

The amendments (part of AASB 2010-4 ‘Further Amendments to Australian
Accounting Standards arising from the Annual Improvements Project’) clarify the
required level of disclosures about credit risk and collateral held and provide relief
from disclosures previously required regarding renegotiated loans.

The amendments (part of AASB 2010-4 ‘Further Amendments to Australian
Accounting Standards arising from the Annual Improvements Project’1) clarify
that an entity may choose to present the required analysis of items of other
comprehensive income either in the statement of changes in equity or in the notes
to the financial statements.

Standards and Interpretations adopted with no effect on financial statements

The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption
has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future
transactions or arrangements.

AASB 1054 ‘Australian Additional Disclosures’
and AASB 2011-1 ‘Amendments to Australian
Accounting Standards arising from Trans-
Tasman Convergence Project’

AASB 1054 sets out the Australian-specific disclosures for entities that have adopted
Australian Accounting Standards. This Standard contains disclosure requirements
that are in addition to IFRSs in areas such as compliance with Australian Accounting
Standards, the nature of financial statements (general purpose or special purpose),
audit fees, imputation (franking) credits and the reconciliation of net operating cash
flow to profit (loss).
AASB 2011-1 makes amendments to a range of Australian Accounting Standards
and Interpretations for the purpose of closer alignment to IFRSs and harmonisation
between Australian and New Zealand Standards. The Standard deletes various
Australian-specific guidance and disclosures from other Standards (Australian-
specific disclosures retained are now contained in AASB 1054), and aligns the
wording used to that adopted in IFRSs.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

36 – 37

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Standards and Interpretations adopted with no effect on financial statements

AASB 124 ‘Related Party Disclosures’
(revised December 2009)

AASB 2009-12 ‘Amendments to Australian
Accounting Standards’

AASB 2010-5 ‘Amendments to Australian
Accounting Standards’

AASB 2010-6 ‘Amendments to Australian
Accounting Standards – Disclosures on
Transfers of Financial Assets’

The application of AASB 1054 and AASB 2011-1 in the current year has resulted in
the simplification of disclosures in regard to audit fees, franking credits and capital
and other expenditure commitments as well as an additional disclosure on whether
the Group is a for-profit or not-for-profit entity.
AASB 124 (revised December 2009) has been revised on the following two aspects:
(a) AASB 124 (revised December 2009) has changed the definition of a related party
and (b) AASB 124 (revised December 2009) introduces a partial exemption from the
disclosure requirements for government-related entities.
The Company and its subsidiaries are not government-related entities. The application
of the revised definition of related party set out in AASB 124 (revised December 2009)
in the current year has resulted in the identification of related parties that were not
identified as related parties under the previous Standard. Specifically, associates of
the Company are treated as related parties of the Group under the revised Standard
whilst such entities were not treated as related parties of the Group under the previous
Standard. The related party disclosures set out in Note 27 to the consolidated
financial statements have been changed to reflect the application of the revised
Standard. Changes have been applied retrospectively.

The application of AASB 2009-12 makes amendments to AASB 8 ‘Operating
Segments’ as a result of the issuance of AASB 124 ‘Related Party Disclosures’
(2009). The amendment to AASB 8 requires an entity to exercise judgement in
assessing whether a government and entities known to be under the control of that
government are considered a single customer for the purposes of certain operating
segment disclosures. The Standard also makes numerous editorial amendments to
a range of Australian Accounting Standards and Interpretations. The application of
AASB 2009-12 has not had any material effect on amounts reported in the Group’s
consolidated financial statements.

The Standard makes numerous editorial amendments to a range of Australian
Accounting Standards and Interpretations. The application of AASB 2010-5 has
not had any material effect on amounts reported in the Group’s consolidated
financial statements.

The application of AASB 2010-6 makes amendments to AASB 7 ‘Financial
Instruments – Disclosures’ to introduce additional disclosure requirements for
transactions involving transfer of financial assets. These amendments are intended
to provide greater transparency around risk exposures when a financial asset is
transferred and derecognised but the transferor retains some level of continuing
exposure in the asset.
To date, the Group has not entered into any transfer arrangements of financial
assets that are derecognised but with some level of continuing exposure in the asset.
Therefore, the application of the amendments has not had any material effect on the
disclosures made in the consolidated financial statements.

Notes to the Financial Statements cont.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Standards and Interpretations in issue not yet adopted

Standard/Interpretation

AASB 9 ‘Financial Instruments’, AASB 2009-11 ‘Amendments
to Australian Accounting Standards arising from AASB 9’ and
AASB 2010-7 ‘Amendments to Australian Accounting Standards
arising from AASB 9 (December 2010)’

Effective for annual reporting
periods beginning on or after

Expected to be initially applied
in the financial year ending

1 January 2013

30 June 2014

AASB 10 ‘Consolidated Financial Statements’

AASB 11 ‘Joint Arrangements’

AASB 12 ‘Disclosure of Interests in Other Entities’

AASB 127 ‘Separate Financial Statements’ (2011)

1 January 2013

AASB 128 ‘Investments in Associates and Joint Ventures’ (2011)

1 January 2013

AASB 13 ‘Fair Value Measurement’ and AASB 2011-8
‘Amendments to Australian Accounting Standards arising from
AASB 13’

1 January 2013

30 June 2014

AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10
‘Amendments to Australian Accounting Standards arising from
AASB 119 (2011)’

1 January 2013

30 June 2014

AASB 2010-8 ‘Amendments to Australian Accounting Standards
– Deferred Tax: Recovery of Underlying Assets’

1 January 2012

30 June 2013

AASB 2011-4 ‘Amendments to Australian Accounting
Standards to Remove Individual Key Management Personnel
Disclosure Requirements’

AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the Consolidation and Joint
Arrangements Standards’

1 July 2013

30 June 2014

1 January 2013

30 June 2014

AASB 2011-9 ‘Amendments to Australian Accounting Standards
– Presentation of Items of Other Comprehensive Income’

1 January 2012

30 June 2013

Offsetting Financial Assets and Financial Liabilities
(Amendments to IAS 32)

Disclosures – Offsetting Financial Assets and Financial
Liabilities (Amendments to IFRS 7)

1 January 2014

30 June 2015

1 July 2013

30 June 2014

Mandatory Effective Date of IFRS 9 and Transition Disclosures
(Amendments to IFRS 9 and IFRS 7)

1 January 2015

30 June 2016

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

38 – 39

2. SUMMARY OF SIGNIFICANT ACCOUNTING

(f) Trade and other receivables

POLICIES (CONT.)
(c) Revenue recognition

Revenue is recognised and measured at the fair value of
the consideration received or receivable to the extent it is
probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. The following
specific recognition criteria must also be met before revenue
is recognised:

Service fees
Fees charged for providing administrative services to related
companies are recognised as revenue as services are provided.

Management fees
Management fees on asset management activities are accrued
as services are provided.

Interest income
Revenue is recognised as interest accrues using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net
carrying amount of the financial asset.

Dividends and distributions
Revenue is recognised when the Group’s right to receive the
payment is established.

(d) Basis of consolidation

The consolidated financial statements comprise Treasury Group
Ltd and its subsidiaries as at 30 June each year (the Group).
Interests in jointly controlled entities and associates are equity
accounted and are not part of the consolidated Group (see notes
(i) and (j) below).

Subsidiaries are all those entities over which the Group
has the power to govern the financial and operating policies
so as to obtain benefits from their activities. The existence and
effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether a group
controls another entity.

The financial statements of the subsidiaries are prepared

for the same reporting period as the parent company.

In preparing the consolidated financial statements, all
intercompany balances and transactions, income and expenses
and profit and losses resulting from intra-group transactions
have been eliminated in full.

(e) Cash and cash equivalents

Cash and short-term deposits in the Statement of Financial
Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less, that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of change in value.

For the purposes of the Statement of Cash Flows, cash
and cash equivalents consist of cash and cash equivalents as
defined above.

Trade receivables, which are generally on 30 day terms, are
recognised at fair value and subsequently valued at amortised
cost using the effective interest method, less any allowance
for uncollectible amounts. Cash flows relating to short-
term receivables are not discounted as any discount would
be immaterial.

Trade receivables, which are generally on 30 day terms,

are recognised at fair value and subsequently valued at
amortised cost using the effective interest method, less any
allowance for uncollectible amounts. Cash flows relating to
short-term receivables are not discounted as any discount
would be immaterial.

Collectibility of trade receivables is reviewed on an ongoing

basis. Debts that are known to be uncollectible are written off
when identified. An allowance for doubtful debts is raised when
there is objective evidence that the Group will not be able to
collect the debt. Financial difficulties of the debtor or default
payments are considered objective evidence of impairment.
The amount of the impairment loss is the receivable carrying
amount compared to the present value of estimated future cash
flows, discounted at the original effective interest rate.

The Group did not have any impaired trade receivables

(2011: nil).

(g) Impairment of available-for-sale

financial assets

The Group assesses at each balance date whether a financial
asset or group of financial assets is impaired.

If there is objective evidence that an available-for-sale
investment is impaired, an amount comprising the difference
between its cost (net of any principal repayment and
amortisation) and its current fair value, less any impairment loss
previously recognised in the Income Statement, is transferred
from equity to the Income Statement. Reversals of impairment
losses for equity instruments classified as available-for-sale are
not recognised in profit. The Group would consider that there
was objective evidence of impairment if there was a significant
or prolonged decline in market value to below cost.

(h) Investments in associates

The Group’s investments in its associates are accounted for
using the equity method of accounting in the consolidated
financial statements. The associates are entities in which
the Group has significant influence and which are neither
a subsidiary nor a joint venture.

Under the Accounting Standards, significant influence is
the power to participate in the financial and operating policy
decisions of the investee, but is not control or joint control of
those policies.

The Group generally deems they have significant influence

if they have over 20% of the voting rights or potential voting
rights or Board representation.

Under the equity method, the investments in the associates

are carried in the Statement of Financial Position at cost plus
post-acquisition changes in the Group’s share of net assets of
the associates.

Notes to the Financial Statements cont.

2. SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (CONT.)
Goodwill acquired in a business combination represents

payment made by the acquirer in anticipation of future
economic benefits from assets that are not capable of
being individually identified and separately recognised. It is
initially measured as cost being the excess of the cost of the
business combination over the Group’s interest in the net
fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities. Goodwill relating to the associates is
included in the carrying amount of the investments and is not
amortised. After application of the equity method, the Group
determines whether it is necessary to recognise any additional
impairment loss with respect to the Group’s net investment
in the associates.

The Group’s share of its associates’ post-acquisition
profits or losses is recognised in the Income Statement,
and its share of post-acquisition movements in reserves
is recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment. Dividends receivable from associates in the
consolidated financial statements reduce the carrying amount
of the investment.

The reporting dates of the associates and the Group are
identical and the associates’ accounting policies conform to
those used by the Group for like transactions and events in
similar circumstances.

The requirements of AASB 139 are applied to determine

whether it is necessary to recognise any impairment loss
with respect to the Group’s investment in an associate. When
necessary, the entire carrying amount of the investment
(including goodwill) is tested for impairment in accordance with
AASB 136 ‘Impairment of Assets’ as a single asset by comparing
its recoverable amount (higher of value in use and fair value
less costs to sell) with its carrying amount. Any impairment
loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised
in accordance with AASB 136 to the extent that the recoverable
amount of the investment subsequently increases.

When a group entity transacts with its associate, profits
and losses resulting from the transactions with the associate
are recognised in the Group’s consolidated financial statements
only to the extent of interests in the associate that are not
related to the Group.

(i) Investments in jointly controlled entities

Interests in jointly controlled entities in which the Group has
joint control are accounted for under the equity method in the
consolidated financial statements similar to investments in
associates as described in Note 2(h).

( j) Goodwill

Goodwill arising on an acquisition of a business is carried at
cost as established at the date of the acquisition of the business
less accumulated impairment losses, if any. For the purposes of
impairment testing, goodwill is allocated to each of the Group’s
cash-generating units (or groups of cash-generating units) that
is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been

allocated is tested for impairment annually, or more frequently
when there is indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than
its carrying amount, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro rata based on
the carrying amount of each asset in the unit. Any impairment
loss for goodwill is recognised directly in profit or loss in the
consolidated [Statement of Comprehensive Income/Income
Statement]. An impairment loss recognised for goodwill is not
reversed in subsequent periods.

On disposal of the relevant cash-generating unit,
the attributable amount of goodwill is included in the
determination of the profit or loss on disposal. The Group’s
policy for goodwill arising on the acquisition of an associate
is described at note (h).

(K) Plant and equipment

Plant and equipment is stated at historical cost less accumulated
depreciation and any accumulated impairment losses.
Major depreciation methods and periods are:

2012 and 2011

Furniture and fittings:

5 – 10 years

diminishing value

Office equipment:

3 – 10 years

diminishing value

Leasehold improvements:

1 – 6 years

straight line

The assets’ residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at each
financial year end.

Disposal
An item of plant and equipment is derecognised upon disposal
or when no further future economic benefits are expected from
its use or disposal.

Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in profit or
loss in the year the asset is derecognised.

(l) Intangibles

Intangible assets acquired separately are initially measured at
cost. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and any accumulated
impairment losses. Internally generated intangible assets,
excluding capitalised development costs, are not capitalised and
expenditure is recognised in profit or loss in the year in which
the expenditure is incurred.

Intangible assets with finite lives are amortised over
the useful life and tested for impairment whenever there
is an indication that the asset may be impaired. The
amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least
at each financial year end.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

40 – 41

2. SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (CONT.)

(m) Investments and other financial assets

Financial assets in the scope of AASB 139: ‘Financial
Instruments: Recognition and Measurement’, are classified
as either financial assets at fair value through profit and
loss, loans and receivables, held-to-maturity investments, or
available-for-sale investments. The classification depends on the
purpose for which the investments were acquired. Designation
is re-evaluated at each financial year end, but there are
restrictions on reclassifying to other categories.

When financial assets are recognised initially they are
measured at fair value, plus, in the case of assets not at fair value
through profit or loss, directly attributable transaction costs.
All regular way purchases of sales of financial assets are

recognised on the trade date, i.e. the date that the Group
commits to purchase the asset. Regular way purchases or sales
are purchases or sales of financial assets under contracts that
require delivery of the assets within the period established
generally by regulation or convention in the market place.
Financial assets are derecognised when the right to receive cash
flows from the financial assets have expired or been transferred.

(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in
the category ‘financial assets at fair value through profit and
loss’. Financial assets are classified as held for trading if they are
acquired for the purpose of selling in the near term with the
intention of making a profit.

Derivatives are also classified as held for trading unless they

are designed as effective hedging instruments. Gains or losses
on financial assets held for trading are recognised in profit or
loss and the related assets are classified as current assets in the
Statement of Financial Position.

The fair value of financial assets at fair value through profit

or loss is determined by reference to quoted market bid prices
at the close of business on that balance date.

(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an
active market. Such assets are carried at amortised cost using
the effective interest method. Gains or losses are recognised in
profit or loss when the loan and receivables are derecognised or
impaired, as well as through the amortisation process.

For loans and receivables carried at amortised cost, the
amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate.

(iii) Available-for-sale investments
Available-for-sale investments are those non-derivative
financial assets that are designated as available-for-sale or are
not classified as any of the three other categories. After initial
recognition, available-for-sale investments are measured at
fair value with gains or losses being recognised as a separate
component of equity until the investment is derecognised or
until the investment is determined to be impaired, at which
time the cumulative gain or loss previously reported in equity
is recognised in profit or loss.

The fair value of investments that are actively traded
in organised financial markets is determined by reference
to quoted market bid prices at the close of business on that
balance date.

(n) 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. 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 provided 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 taxable

temporary differences except:

• when the deferred income tax liability 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.

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 credits and
unused tax losses can be utilised, except:

• when 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; or

• when the deductible temporary difference is associated
with investments in subsidiaries, jointly controlled
entities or associates, in which case a deferred tax asset
is only recognised to the extent that it is probable that
the temporary difference will reverse in the foreseeable
future and taxable profit will be available against which the
temporary difference can be utilised.

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 income tax assets are assessed
at each balance date and are recognised to the extent that it
has become probable that future taxable profit will allow the
deferred tax asset to be recovered.

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 the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted
at the balance date.

Income taxes relating to items recognised directly in equity

are recognised in equity and not in profit or loss.

Notes to the Financial Statements cont.

2. SUMMARY OF SIGNIFICANT ACCOUNTING

(q) Trade and other payables

POLICIES (CONT.)
(n) Income tax (cont.)

Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets
and liabilities relate to the same taxable entity and the same
taxation authority.

Tax consolidation
Effective 1 July 2003, for the purposes of income taxation,
Treasury Group Ltd and its 100% owned entities have formed a
tax consolidated group. Treasury Group Ltd is the head entity
of the tax consolidated group. Members of the tax consolidated
group have entered into a tax sharing arrangement in order to
allocate income tax expense to the wholly-owned entities on a
pro-rata basis. Under a tax funding agreement, each member of
the tax consolidated group is responsible for funding their share
of any tax liability. In addition, the agreement provides for the
allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations. At the
balance date, the possibility of default is remote.

(o) Other taxes

Revenues, expenses and assets are recognised net of the amount
of GST except:

• when 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, which are stated with the amount
of GST included.

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.

(p) Impairment of non-financial assets other

than goodwill

Amortising intangible assets and property, plant and equipment
are tested for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are tested for possible
reversal of the impairment whenever events or changes in
circumstances indicate that the impairment may have reversed.

Trade payables and other payables are carried at amortised cost
and due to their short-term nature they are not discounted.
They represent liabilities for goods and services provided to
the Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obliged to make future
payments in respect of the purchase of the goods and services.
The amounts are unsecured and are usually paid within 30 days
of recognition.

(r) Provisions

Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle the obligation,
and a reliable estimate can be made of the amount of the
obligation.

The amount recognised as a provision is the best estimate

of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the
risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value
of those cash flows.

When some or all of the economic benefits required to
settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually
certain that reimbursement will be received and the amount
of the receivable can be measured reliably.

(s) Employee leave benefits

(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulated sick leave expected to be
settled within 12 months of the reporting date are recognised in
provisions in respect of employees’ services up to the reporting
date. They are measured at the amounts expected to be paid
when the liabilities are settled. Liabilities for non-accumulating
sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.

(ii) Long service leave
The liability for long service leave is recognised in the provision
for employee benefits and measured as the present value of
expected future payments, including on-costs, to be made in
respect of services provided by employees up to the reporting
date. Consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of
service. Expected future payments are discounted using market
yields at the reporting date on national government bonds
with terms to maturity and currencies that match, as closely as
possible, the estimated future cash outflows.

(t) Contributed equity

Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

42 – 43

2. SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (CONT.)

(u) Leases

The determination of whether an arrangement is or contains a
lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.

Operating leases
Operating lease payments are recognised as an expense in the
Income Statement on a straight-line basis over the lease term.
Operating lease incentives are recognised as a liability when
received and subsequently reduced by allocating lease payments
between rental expense and reduction of the liability.

(v) Earnings per share

Basic earnings per share is calculated as net profit attributable
to members of the parent, adjusted to exclude costs of servicing
equity (other than dividends), divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit

attributable to members of the parent, adjusted for:
•

costs of servicing equity (other than dividends), if any;

•

the after tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised
as expenses;

other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of
potential ordinary shares; and

divided by the weighted average number of ordinary shares
and dilutive potential ordinary shares, adjusted for any bonus
element, if any.

(w) Share-based payments

Equity-settled transactions
The Group provides benefits to employees (including Senior
Executives and Directors) of the Group in the form of share-
based payment transactions, whereby employees render
services in exchange for shares or rights over shares (equity-
settled transactions).

During the year, there were three plans in place to provide

these benefits:
(i) The Officer and Executive Option Plan, which provides
benefits to Directors, Senior Executives and employees.

(ii) The Officer and Executive Long Term Incentive Plan, which
provides the performance rights incentives to the Senior
Executives and Managerial employees of Treasury Group Ltd
and Treasury Group Investment Services Limited.

(iii) The Employee Share Plan, which provides the opportunity
to the employees (including Directors) of the Group to
purchase shares in the parent company at a discount.

In valuing equity-settled transactions, no account is taken

of any performance conditions, other than conditions linked
to the price of the shares of Treasury Group Ltd (market
conditions), if applicable.

The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over the
period in which the performance conditions are fulfilled, ending
on the date on which the relevant employees become fully
entitled to the award (the vesting period).

The cumulative expense recognised for equity-based
transactions at each reporting date until vesting date reflects
(i) the extent to which the vesting period has expired and
(ii) the Group’s best estimate of the number of equity
instruments that will ultimately vest. No adjustment is made for
the likelihood of market performance conditions being met as
the effect of these conditions is included in the determination
of fair value at grant date. The Income Statement charge or
credit for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.

No cumulative expense is recognised for awards
that do not ultimately vest due to the non-fulfilment of a
non-market condition.

If the terms of an equity-settled award are modified,

as a minimum an expense is recognised as if the terms had
not been modified. In addition an expense is recognised for
any modification that increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial
to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as

if it has vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately.
However, if a new award is substituted for the cancelled award,
and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they
were a modification of the original award as described in the
previous paragraph.

The dilutive effect, if any, of outstanding options and
performance rights are reflected as additional share dilution
in the computation of earnings per share.

(x) Foreign currency translation

(i) Functional and presentation currency
Both the functional and presentation currency of Treasury
Group Ltd and its subsidiaries are Australian dollars ($).

(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the
functional currency by applying an average spot exchange rate
for the period. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling
at the balance date.

Non-monetary items are measured in terms of historical
cost in a foreign currency and are translated using the exchange
rate at the date the fair value was determined.

The cost of the equity-settled employee share option plan
is measured by reference to the fair value at the date at
which they are granted. The fair value is determined using
a Binomial model.

(y) Comparatives

Where necessary, comparative information has been
immaterially reclassified and repositioned for consistency
with current year disclosures.

Notes to the Financial Statements cont.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise of cash, short-term deposits, available-for-sale investments, investments
at fair value through profit and loss, receivables and payables.

Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement

and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument is disclosed in Note 2 to the financial statements.

Risk Exposures and Responses
Interest rate risk

The Group’s exposure to market interest rates relates primarily to the Group’s cash and short-term investments.

At balance date the Group had the following mix of financial assets exposed to Australian variable interest rate risk:

Financial Assets
Cash at bank and on hand

CONSOLIDATED

2012
$

2011
$

8,194,805

10,088,968

The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance date.

If interest rates had moved during the year as illustrated in the table below (using an average cash balance), with all other

variables held constant, post tax profit and reserves would have been affected as follows:

Consolidated
+0.75% [2011: 0.75%]/(75 basis points), [2011: 75 basis points]

-0.75% [2011: 0.75%]/(75 basis points), [2011: 75 basis points]

POST TAX PROFIT

HIGHER/(LOWER)

2012
$

2011
$

48,149

(48,149)

40,238

(40,238)

The movements in profit are due to higher/lower interest income from cash and short-term deposit balances.

The Group’s profit and reserves do not have any significant sensitivity to fixed interest rate risk as the loans made by
Treasury Group Ltd to its related parties, which are the only assets or liabilities exposed to fixed interest rate risk, are carried
at amortised cost.

Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables,
available-for-sale financial assets, investments at fair value through profit and loss, and loans receivable from related entities. The
Group’s exposure to credit risk arises from potential default of the counterparty, with the maximum exposure equal to the carrying
amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Group does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s

policy to securitise its trade and other receivables.

Receivables balances and loans made to related entities are monitored on an ongoing basis at Board level and remain within

approved levels, with the result that the Group’s exposure to bad debts is not significant.

It is a core part of Treasury Group Ltd’s policy to extend loans to new companies in the Group to provide them financing
until they reach profitability. As with all new start-ups there is a risk that a new venture will fail, in which case Treasury Group Ltd
would have to write the loan off. All loans made to new ventures are monitored on an ongoing basis at Board level to minimise the
risk of a write off occurring. The maximum exposure to credit risk is the value of the loans.

Liquidity risk

The Group does not have any external financing liabilities and has significant cash balances. As such management is of the opinion
that it does not face significant liquidity risks. Management prepares cash flow forecasts on a monthly basis to ensure that it has
sufficient liquid assets to meet its liabilities.

The Group’s objective is to maintain financial flexibility and only invests surplus funds in cash and short-term deposits.
Both in the current and preceding year all of the Group’s financial liabilities are due within six months or less.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

44 – 45

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
Price risk

Equity security price risk arises from investments in unlisted managed trusts, which mainly invest their funds in equities listed on
the ASX, except TG TAAM Asia Ex Japan 1 and Aubrey Conviction Fund which invest their fund on various global stock markets.
The investments are made by members of the Group for the purpose of seeding new products. Equity securities price risk also
arises from investments in equity markets made by any funds that are consolidated.

A simple analysis has been conducted to provide some perspective when considering the determination of a reasonably

possible change.

As at year end, the Group had the following exposure to equity security price risks:

Available-for-sale investments

— Shares in listed corporation

— Units in managed investment trusts

— Unlisted shares in other corporations

CONSOLIDATED

2012
$

2011
$

3,180,669

5,470,257

1,100

2,092,561

5,994,892

1,100

8,652,026

8,088,553

As at year end, if the price for the Group’s investments had moved, as illustrated in the table below, with all other variables held
constant, post tax profit and reserves would have been affected as follows:

Consolidated
ASX 200 +10%

ASX 200 -10%

MSCI World index +10%

MSCI World index -10%

RESERVES

HIGHER/(LOWER)

2012
$

2011
$

222,724

(222,724)

382,918

(382,918)

146,556

(146,556)

419,642

(419,642)

For the investments that are classified as available-for-sale, movements in market value are captured in an Unrealised Gains Reserve
and do not impact reported profit unless they are deemed to be impaired at reporting date.

As at 30 June 2012, the Group has no investments at fair value through profit or loss and only available-for-sale investments

with any potential gains or losses being taken to equity.

The Group does not have any significant transactional currency exposures.

Foreign Currency Risk

Investments in foreign currency funds are individually approved by the Board. The Group has not hedged its foreign
currency exposure.

A simple analysis has been conducted to provide some perspective when considering the determination of a reasonably

possible change.

The Group does not have any significant transactional currency exposures.
At year end, the Group had the following exposure to foreign currency:

Available-for-sale investments – US Dollar

Available-for-sale investments – British Pound

Other assets – Euro

CONSOLIDATED

2012
$

1,606,829

862,808

2,474

2011
$

1,849,191

836,544

2,706

2,472,111

2,688,441

As at year end, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant,

post tax profit and equity would have been affected as follows:

Notes to the Financial Statements cont.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)

Consolidated
AUD/US $ +10%

AUD/US$ -10%

AUD/GBP +10%

AUD/GBP -10%

EQUITY

HIGHER/(LOWER)

2012
$

2011
$

112,478

(112,478)

60,397

(60,397)

129,443

(129,443)

58,558

(58,558)

Fair value measurements recognised in the Statement of Financial Position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 on the degree to which the fair value is observable.

•

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets
or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as market prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).

There were no transfers between any levels.

Available-for-sale investments

Investment in Premium Investors Limited*

TG TAAM Asia Ex Japan 1**

Investment in Aubrey Conviction Fund**

Investment in Ascot Cayman Fund**

Investment in Orion Sirius Fund**

Aubrey Capital Management convertible preference shares***

Others

Total

Available-for-sale investments

Investment in Premium Investors Limited

TG TAAM Asia Ex Japan 1**

Investment in Global Industrial Share Fund – Unhedged**

Investment in Aubrey Conviction Fund**

Investment in Ascot Cayman Fund**

Aubrey Capital Management convertible preference shares***

Others

Total

Level 1

Level 2

Level 3

Total

30 JUNE 2012

3,180,669

–

1,606,829

2,033,877

838,522

991,029

–

1,100

–

862,808

–

3,180,669

1,606,829

2,033,877

838,522

991,029

862,808

1,100

3,180,669

5,471,357

862,808

9,514,834

Level 1

Level 2

Level 3

Total

30 JUNE 2011

2,092,561

–

1,849,191

1,000,772

2,148,229

996,700

–

1,100

–

836,544

–

2,092,561

1,849,191

1,000,772

2,148,229

996,700

836,544

1,100

2,092,561

5,995,992

836,544

8,925,097

* Listed available-for-sale investment.
The fair value of these investments was derived from the quoted price available from ASX as of 30 June 2012.
** Unlisted available-for-sale investments.

The fair value of the unlisted available-for-sale investments is based on the current price of the unit trusts which is determined by the fair value of
the underlying investments.
*** Convertible preference shares.

ANNUAL REPORT 2012TREASURY GROUP LTD
Notes to the Financial Statements cont.

46 – 47

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
Significant assumptions in determining fair value of financial assets and liabilities

The fair value of these convertible preference shares is estimated using a discounted cash flow model, which includes some
assumptions that are not supportable by observable market prices or rates. In determining the fair value, a revenue growth derived
from FUM growth factors ranging from 0-50% has been used with appropriate probabilities assigned to each. In addition expense
growth of 5% has been used and a risk adjusted discount factor of 18% has been applied. If these revenue and expense inputs to the
valuation model were 10% higher/lower while all the other variables were held constant, the carrying amount of the shares would
decrease/increase by $89,549.

Reconciliation of Level 3 fair value measurements of financial assets

Opening balance

Revaluation of convertible preference shares

Total

Opening balance

Revaluation of convertible preference shares

Total

30 JUNE 2012

AVAILABLE FOR SALE

Convertible preference shares

836,544

26,264

862,808

30 JUNE 2011

AVAILABLE FOR SALE

Convertible preference shares

985,749

(149,205)

836,544

Notes to the Financial Statements cont.

4. SIGNIFICANT ACCOUNTING JUDGMENTS,

ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires
management to make judgments, estimates and assumptions
that affect the reported amounts in the financial statements.
Management continually evaluates its judgments and estimates
in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgments and estimates
on experience and other factors, including expectations of
future events that may have an impact on the Group. All
judgments, estimates and assumptions made are believed to
be reasonable based on the most current set of circumstances
available to management. Actual results may differ from the
judgments, estimates and assumptions. Significant judgments,
estimates and assumptions made by management in the
preparation of these financial statements are outlined below:

(i) Significant accounting judgments

Taxation
The Group’s accounting policy requires management’s judgment
as to the types of arrangements considered to be a tax on
income in contrast to an operating cost. Judgment is also
required in assessing whether deferred tax assets and certain
deferred tax liabilities are recognised on the Statement of
Financial Position. Deferred tax assets, including those arising
from unrecouped tax losses, capital losses and temporary
differences, are recognised only where it is considered more
likely than not that they will be recovered, which is dependent
on the generation of sufficient future taxable profits.

Assumptions about the generation of future taxable
profits depend on management’s estimates of future cash
flows. These depend on estimates of future income, operating
costs, dividends and other capital management transactions.
Judgments are also required about the application of income
tax legislation. These judgments and assumptions are subject
to risk and uncertainty, hence there is a possibility that
changes in circumstances will alter expectations, which may
impact the amount of deferred tax assets and deferred tax
liabilities recognised on the Statement of Financial Position and
the amount of other tax losses and temporary differences not
yet recognised.

In such circumstances, some or all of the carrying amounts

of recognised deferred tax assets and liabilities may require
adjustment, resulting in a corresponding credit or charge to the
income statement.

Deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences to the extent that management considers that it is
probable that future taxable profits will be available to utilise
those temporary differences.

Classification of and valuation of investments
The Group classified investments in unit trusts as ‘available-for-
sale’ investments and movements in fair value are recognised
in unrealised reserves except the impairments are recognised
in profit and loss. The fair value of the investments has been
determined by reference to the published unit price.

The fair value of convertible securities has been determined

based on Directors’ valuation.

Impairment of non-financial assets
The Group assesses impairment of all assets at each reporting
date by evaluating conditions specific to the Group and
to the particular asset that may lead to impairment. These
include performance, technological, economic and political
environments and future product expectations. If an
impairment trigger exists, the recoverable amount of the asset
is determined. This involves value in use calculations, which
incorporate a number of key estimates and assumptions.

(ii) Significant accounting estimates and assumptions

Share-based payment transactions
The Group measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair
value is determined using a hybrid monte-carlo/binomial
option pricing model with the assumptions detailed in Note 22.
The accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual
reporting period but may impact expenses and equity.

Long service leave provision
The liability for long service leave is recognised and measured at
the present value of the estimated future cash flows to be made
in respect of all employees at balance date. In determining the
present value of the liability, attrition rates and pay increases
through promotion and inflation have been taken into account

Valuation and impairment of non-current loans
and receivables
The Group carries loans and receivables at amortised cost
with impairments for these loans and receivables recognised
in profit and loss. Determining whether non-current loans and
receivables are impaired requires an estimation of the future
cash flows expected from the loans and applying a suitable
discount rate in order to calculate present value. The carrying
amount of non-current loans and receivables at the balance date
was $4,002,406 (2011: $5,086,720). There was no impairment
loss during the year (2011: nil).

Goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units to
which goodwill has been allocated. The value in use calculation
requires the Directors to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value.

The carrying amount of goodwill at 30 June 2012 was
$583,888 (2011: nil). No impairment loss was recognised
during 2012 (2011: nil).

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

5. REVENUE AND EXPENSES

(a) Revenues from continuing operations

Fee income
Fund management fees

Service fees

—

jointly controlled entities

— other

Total fee income

Dividends and distributions
Dividends from other corporations

Unit trust distribution

Total dividends and distributions

Interest
Related parties

—

jointly controlled entities

Other persons/corporations

Total interest

Other income
Other income

Total revenues
(b) Gains/(losses) on investments

48 – 49

CONSOLIDATED

2012
$

2011
$

Note

639,931

327,815

2,121,649

323,389

3,084,969

2,768,743

353,156

3,449,714

116,573

8,665

125,238

358,932

363,016

721,948

180,775

15,262

196,037

418,755

428,475

847,230

12,439

–

3,944,594

4,492,981

Net (losses)/gains on disposal of available-for-sale investments

Impairment of equity investment in AR Capital

Net gain on purchase of a subsidiary

Foreign exchange (loss) on investments

Total (losses)/gains on investments

6(d)

(85,158)

(361,201)

376,603

–

(69,756)

210,931

–

(148,987)

61,944

Notes to the Financial Statements cont.

5. REVENUE AND EXPENSES (CONT.)

Salaries and employee benefits
Salaries and employee benefits

Employee share plan expenses

Share-based payment (reversal)/expense arising from equity-settled share-based
payment transactions

Depreciation and amortisation
Software

Furniture and fittings

Office equipment

Leasehold improvements

Total depreciation and amortisation of non-current assets

Other expenses
Accounting and audit fees

Operating lease rental – minimum lease payments

Marketing and communication expenses

Travel and accommodation costs

Payroll tax

Legal and compliance fees

Consulting fee and IT charges

Insurance charges

Directors’ fees (non-executives)

Share registry and ASX fees

Subscriptions and training expenses

Fund administration expenses

Other expenses

Total other expenses

CONSOLIDATED

2012
$

2011
$

Notes

15(a)

14(a)

4,851,178

5,753,070

–

64,466

351,109

5,202,287

(76,275)

5,741,261

20,863

5,102

29,177

2,130

57,272

194,473

783,616

203,697

206,365

315,767

217,854

680,722

233,049

403,110

79,204

19,038

42,350

27,649

7,966

26,223

4,293

66,131

226,516

360,795

198,610

341,225

257,079

204,946

447,864

214,096

358,271

92,670

62,771

–

305,134

3,684,379

3,741,651

107,897

2,872,740

2,938,871

ANNUAL REPORT 2012TREASURY GROUP LTD
Notes to the Financial Statements cont.

50 – 51

6. ACQUISITION OF SUBSIDIARIES
On 14 December 2011, Treasury Group Ltd acquired a further 47.5% equity interest in Global Value Investors Ltd from Investors
Mutual Ltd, effectively increasing the Group’s direct ownership from 25% to 72.5%. On 23 May 2012, as a consequence of the
terms of the shareholders agreement relating to the ability of TRG to acquire minority interests, Treasury Group Ltd acquired the
remaining minority interests increasing the direct ownership to 100%. Accordingly, Treasury Group Ltd has gained full control
of Global Value Investors Ltd.

On 11 May 2012, Treasury Group Ltd increased its ownership by an additional 61.5% equity interest in AR Capital Management

Pty Ltd through a selective share buyback offered to existing shareholders of the company. As a consequence, Treasury Group Ltd
effectively increased ownership to 91.5% of the issued capital of AR Capital Management Pty Ltd via which Treasury Group Ltd has
gained control of the company.

The consideration transferred and the related gain/goodwill on the purchase/acquisition are as follows:

Global Value
Investors Ltd
acquisition
$

AR Capital
Management
Pty Ltd
acquisition
$

CONSOLIDATED
2012
$

Total
$

(a) Consideration transferred

Cash and cash equivalents
(b) Assets acquired and liabilities assumed at the date of acquisition

843,000

–

843,000

Current assets
Cash and cash equivalents

Trade receivables¹

Other assets

Deferred tax assets

Current liabilities
Trade and other payables

1,742,625

349,638

242,502

484,004

1,058,305

1,760,464

89,892

51,487

17,438

–

1,832,517

401,125

259,940

484,004

123,570

35,247

1,181,875

1,795,711

1 Trade receivables acquired with a fair value of $349,638 and $51,487 which is equivalent to the gross contractual due to Global Value Investors

Ltd and AR Capital Management Pty Ltd respectively.

Consideration transferred
Plus: Payable for acquisition of non-controlling interest (at fair value)

Plus: Fair value of previously held equity interest

Less: Fair value of identifiable net assets acquired

Gain/(goodwill) from purchase

493,000

350,000

259,474

1,760,464

657,990

–

619,135

35,247

(583,888)

493,000

350,000

878,609

1,795,711

74,102

Notes to the Financial Statements cont.

6. ACQUISITION OF SUBSIDIARIES (CONT.)
The acquisition of a further 47.50% interest in Global Value Investors Ltd resulted in a gain from purchase, being the excess of the
net fair value of the identifiable assets acquired and liabilities assumed over the aggregate of the consideration transferred, fair value
for the acquired minority interests and the fair value of any previously-held equity interest in Global Value Investors Ltd.

The acquisition of a further 61.5% interest in AR Capital Management Pty Ltd resulted in a goodwill from acquisition being
the excess of the net fair value of the identifiable assets acquired and liabilities assumed over the aggregate of the consideration
transferred, fair value for the acquired minority interests and the fair value of any previously-held equity interest in AR Capital
Management Pty Ltd.

The equity interest previously held by Treasury Group Ltd in Global Value Investors Ltd and AR Capital Management

Pty Ltd, which qualified as an equity accounted investment, is treated as if it were disposed of and reacquired at fair value on
the acquisition date. It is remeasured to its acquisition-date fair value and compared against the carrying amount of the equity
accounted investment. Accordingly, the loss on disposal of the equity accounted investment in Global Value Investors Ltd
is $281,387. The acquisition of AR Capital Management Pty Ltd resulted in an impairment charge of $361,201 and goodwill
amounting to $583,888.

(d) Net gain/(goodwill) from purchase/acquisition of subsidiary

Gain/(goodwill) from purchase/acquisition of a subsidiary

Loss on disposal of equity accounted investment

(e) Net cash inflow arising on acquisition

Consideration paid in cash

Add: cash and cash equivalents balances acquired

Global Value
Investors Ltd
acquisition
$

AR Capital
Management
Pty Ltd
acquisition
$

657,990

(281,387)

376,603

(583,888)

–

(583,888)

(843,000)

1,742,625

899,625

–

89,892

(f)

Impact of acquisition on the results of the Group

Included in the profit for the year is a loss of $1,070,246 attributable to Global Value Investors Ltd (including any indirect interest of
TRG through its interest in IML during the period) and a loss of $61,898 for AR Capital Management Pty Ltd. Had the acquisition
of Global Value Investors Ltd and AR Capital Management Pty Ltd been effected at 1 July 2011, the revenue of the Group for the
year ended 30 June 2012 would have been $6,776,095 and the profit for the year would have been $5,919,923. The Directors of the
Group consider these ‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on
a yearly basis and to provide a reference point for comparison in future periods.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

7. INCOME TAX

(a) Income tax benefit

The major components of income tax benefit are:

Income Statement
Current income tax

Current income tax benefit

Adjustments in respect of current income tax charge of previous years

Deferred income tax

Relating to origination and reversal of temporary differences

Tax adjustments as a result of tax benefits arising from tax losses not recognised

Income tax benefit reported in the Income Statement
(b) Amounts charged directly to other comprehensive income

Deferred income tax related to income charged or credited directly to other comprehensive income

Unrealised loss on available-for-sale investments

Income tax benefit reported in other comprehensive income
(c)

Reconciliation between aggregate tax benefit recognised in the Income Statement and
tax expense calculated per the statutory income tax rate

A reconciliation between tax benefit and the product of accounting profit before income tax
multiplied by the Group’s applicable income tax rate is as follows:

Accounting profit before income tax:

At the Group’s statutory income tax rate of 30% (2011: 30%)

Share-based payments

Share in net profit of jointly controlled entities

Expenditure not allowable for income tax purposes

Adjustments in respect of current income tax charge of previous years

Income tax expenses relating to acquired subsidiaries

Tax adjustments as a result of tax benefits arising from tax losses not recognised

Aggregate income tax benefit

52 – 53

CONSOLIDATED

2012
$

2011
$

804,872

(126,675)

1,139,464

(50,486)

207,397

109,675

(547,162)

(1,083,029)

338,432

115,624

269,699

764

6,415,796

9,889,480

(1,924,739)

(2,966,844)

(105,333)

22,883

3,445,469

4,204,406

(11,094)

(126,675)

(392,034)

(547,162)

338,432

(11,306)

(50,486)

–

(1,083,029)

115,624

Notes to the Financial Statements cont.

7. INCOME TAX (CONT.)

(d) Recognised deferred tax assets and liabilities

Deferred income tax at 30 June relates to the following:

Consolidated

Deferred tax assets
Tax losses

Tax losses of acquired subsidiary

Revaluation of available-for-sale investments at fair value

Accruals and provisions

Deferred tax liabilities
Revaluation of convertible notes to fair value

Revaluation of available-for-sale investments
at fair value charged to equity

Receivables

STATEMENT OF FINANCIAL POSITION

INCOME STATEMENT

2012
$

2011
$

2012
$

2011
$

2,511,508

426,111

473,867

359,873

–

83,685

266,261

3,771,359

2,861,454

–

108,360

93,612

–

106,602

(551,230)

(10,163)

(1,333)

562,726

(73,505)

(6,758)

(631,493)

–

5,425

207,397

3,073

109,675

Tax losses arising from results of operations have been capped to a level that is expected that the tax losses can be utilised in
a reasonable timeframe. Deferred tax assets and liabilities arising from temporary differences were still recognised in full during the
year. The amount of unrecognised tax benefits relating to tax losses at year end is $2,385,148 (2011: $1,837,986).

(e) Tax consolidation

Effective 1 July 2003, for the purposes of income taxation, Treasury Group Ltd and its 100% owned entities have formed a tax
consolidated group. Treasury Group Ltd is the head entity of the tax consolidated group. Members of the tax consolidated group
have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned entities on a pro-rata
basis. Under a tax funding agreement, each member of the tax consolidated group is responsible for funding their share of any tax
liability. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity
default on its tax payment obligations. At the balance date, the possibility of default is remote.

Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group allocate current taxes to members of the tax consolidated group in accordance with their
accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with
the principles of AASB 112 ‘Income Taxes’. Allocations are made at the end of each half year.

The allocation of taxes is recognised as an increase/decrease in the subsidiaries’ inter-company accounts with the tax
consolidated group head company, Treasury Group Ltd. The Group has applied the group allocation approach in determining
the appropriate amount of current taxes to allocate to members of the tax consolidated group.

ANNUAL REPORT 2012TREASURY GROUP LTD
Notes to the Financial Statements cont.

8. DIVIDENDS PAID AND PROPOSED

(a) Dividends proposed and not recognised as a liability*

Final fully franked dividend 20 cents per share (2011: 20 cents per share)
(b) Dividends paid during the year

Current year interim

54 – 55

TREASURY GROUP LTD

2012
$

2011
$

4,614,151

Fully franked dividend (14 cents per share) (2011: 14 cents per share)

3,229,907

Previous year final

Fully franked dividend (20 cents per share) (2011: 14 cents per share)

Total paid during the year (34 cents per share) (2011: 28 cents per share)
(c) Franking credit balance

4,614,151

7,844,058

3,229,907

6,459,814

The amount of franking credits available for the subsequent financial year are:
—
—

franking account balance as at the end of the financial year at 30% (2011: 30%)
franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date

The amounts of franking credits available for future reporting periods:
—

impact on the franking account of dividends proposed or declared before the financial report was
authorised for issue but not recognised as a distribution to equity holders during the year

Franking credits carried forward after payment of final dividend

10,504,346

8,653,971

898,199

1,049,338

(1,977,493)

9,425,052

7,725,816

* Calculation based on the ordinary shares on issue as at 31 July 2012.

The tax rate at which paid dividends have been franked is 30% (2011: 30%).
Dividends proposed will be franked at the rate of 30% (2011: 30%).

Notes to the Financial Statements cont.

9. CASH AND CASH EQUIVALENTS

(a) Reconciliation of cash and cash equivalents

Cash balance comprises:
— cash at bank and on hand
Closing cash balance
(b) Reconciliation

Profit for the year

Adjustments for
Share of jointly controlled entities’ net profits

Dividend and distributions received from jointly controlled entities

Impairment of equity investment in AR Capital Management Pty Ltd

Net gain on purchase of subsidiary

Loss/(gain) on disposal of available-for-sale investment

Depreciation and amortisation of non-current assets

Loss on disposal of fixed assets

Non-cash distributions and dividends

Non-cash interest

Share-based payments

Foreign exchange loss

Changes in assets and liabilities
Decrease/(Increase) in trade and other receivables

(Increase) in other assets

(Increase) in deferred tax assets

(Increase) in goodwill

(Decrease) in trade and other payables

(Decrease) in current provisions

(Decrease)/Increase in non-current provisions

Increase in financial liability

(Decrease)/Increase in deferred tax liability

Net cash flow from operating activities

At reporting date, Treasury Group Ltd did not have any financing facilities available.

CONSOLIDATED

2012
$

2011
$

8,194,805

10,088,968

6,754,228

10,005,104

(11,484,896)

(14,014,687)

11,589,758

12,417,263

361,201

(376,603)

85,158

57,272

53,552

–

(210,931)

66,131

–

(125,238)

(196,037)

13,135

351,109

20,442

(86,451)

(76,275)

162,441

1,941,967

2,628,058

(958,304)

(909,905)

(583,888)

(381,346)

(152,758)

(55,239)

600,000

(68,767)

(34,289)

(79,064)

–

(2,923,953)

(38,879)

114,083

–

70,432

6,730,878

7,802,946

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

10. TRADE AND OTHER RECEIVABLES

Current
Trade receivables

Sundry receivables

Other receivables

Related party receivables
—

Jointly controlled entities — Dividend

— Distribution
— Other

— Other related parties

56 – 57

Note

CONSOLIDATED

2012
$

2011
$

1,451,389

2,115,250

4,443

341,612

22,528

534,581

2,095,797

2,448,456

–

704,273

51,308

768,000

653,344

48,630

4,648,822

6,590,789

(a) Allowance for impairment loss

Trade receivables are non-interest bearing and generally on 30 day terms. An allowance for impairment loss is recognised when
there is objective evidence that an individual trade receivable is impaired. No allowance for impairment losses has been made.

2012
2011

* Past due not impaired (PDNI).

Total
$

0-30 days
$

31-60 days
PDNI *
$

61-90 days
PDNI *
$

4,648,822
6,590,789

4,380,325
6,310,375

51,741
5,890

44,776
13,015

+91 days
PDNI *
$

171,980
261,509

Receivables past due but not impaired is $268,497 (2011: $280,414). All overdue amounts as at 30 June 2011 have been received in
full. Payment terms on these amounts have been renegotiated. Management is satisfied that payment will be received in full.

(b) Related party receivables

For terms and conditions of related party receivables, refer to Note 27.

Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security with the exception of the

receivable from disposal of subsidiary, which was secured by the shares of the subsidiary disposed. It is not the Group’s policy to
transfer (on-sell) receivables to special purpose entities.

Trade receivables represent the Group’s outstanding invoices for management fees. As the fees are receivable from large

investment and superannuation funds, management regards the credit risk as very low.

Receivables from other related parties are due from Premium Investors Ltd, a listed investment company, with a high credit

rating. Management regards the credit risk as very low.

Non-current
Security deposits

CONSOLIDATED

2012
$

2011
$

891,713

233,638

The amount receivable is in Australian Dollars, non-interest bearing and is not considered past due or impaired.

Notes to the Financial Statements cont.

11. AVAILABLE-FOR-SALE INVESTMENTS

Non-current
— Investment in Premium Investors Ltd listed shares
— TG TAAM Asia Ex Japan 1*
— Investment in Global Industrial Share Fund – Unhedged*
— Investment in Aubrey Conviction Fund*
— Investment in Ascot Cayman Fund*
— Investment in Orion Sirius Fund*
— Aubrey Capital Management convertible preference shares**
— Unlisted shares in other corporations

CONSOLIDATED

2012
$

2011
$

3,180,669

1,606,829

–

2,033,877

838,522

991,029

862,808

1,100

2,092,561

1,849,191

1,000,772

2,148,229

996,700

–

836,544

1,100

9,514,834

8,925,097

* These investments represent seed capital to assist in the growth and marketing of these products.
** Whilst classified as an available-for-sale to satisfy the definition under the accounting standards, the Board views this as a long-term holding

investment. The acquisition price of these securities was $1,000,000. The change in fair value reflects movements in fair value between reporting
periods, including foreign exchange rates.

Units in funds are readily saleable with no fixed terms.

The fair value of the unlisted available-for-sale investments is based on the current unit price of the investments which is

determined by the value of the underlying investments of the unit trust.

12. LOANS AND OTHER RECEIVABLES (NON-CURRENT)

Loans receivables due from:

Jointly controlled entities

Note

CONSOLIDATED

2012
$

2011
$

4,002,406

5,086,720

All amounts are receivable in Australian Dollars and loans to jointly controlled entities are not considered past due or impaired.

(a) Loans

The majority of non-current loans to jointly controlled entities are subordinated to all other creditors as a condition of their
Australian Financial Services Licence as agreed with the Australian Securities and Investments Commission (ASIC). Interest rates
on the loans are fixed at between 6.5% and 7.5%.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

58 – 59

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in jointly controlled entities

(a) Interests in jointly controlled entities

Name

Investors Mutual Ltd – ordinary shares

Orion Asset Management (Aust) Pty Ltd – ordinary shares

Global Value Investors Ltd – ordinary shares*

Treasury Asia Asset Management Ltd – ordinary shares

RARE Infrastructure Ltd – ordinary shares

RARE IP Trust – units

IML Investment Partners Limited – ordinary shares

Celeste Funds Management Ltd – ordinary shares

AR Capital Management Pty Ltd – ordinary shares*

Evergreen Capital Partners Pty Ltd

Aubrey Capital Management Ltd

CONSOLIDATED

2012
$

2011
$

Note

13(a)

29,697,032

29,269,020

OWNERSHIP INTEREST HELD BY

CONSOLIDATED ENTITY

Balance date

30 June

2012
%

47.50

41.99

–

43.96

40.00

39.17

–

30.00

–

2011
%

47.50

41.99

25.00

40.00

39.17

30.00

–

* During the year, Global Value Investors Ltd and AR Capital Management Pty Ltd became subsidiaries of the Group due to increases in equity

holdings in these companies.

(b) Principal activity

(a) Investors Mutual Ltd provides a funds management capability to both institutional and retail investors.

(b) Orion Asset Management (Aust) Pty Ltd is the parent company of Orion Asset Management Ltd, a wholesale fund management

company in Australia.

(d) RARE Group (RARE Infrastructure Ltd, RARE IP Trust, RARE North America and RARE Infrastructure Sovereign Enterprise)

is a funds management business specialising in listed global infrastructure assets.

(e) IML Investment Partners Limited provides investment sub-advisory services to Investors Mutual Ltd.

(f ) Celeste Funds Management Ltd is an Australian equity manager with a smaller companies focus.

(g) Evergreen Capital Partners Pty Ltd is an Australian equity absolute return manager which focuses on management of ASX listed

equities via an absolute return style.

(h) Aubrey Capital Management Ltd is a global growth equity thematic manager based in Edinburgh, Scotland. Treasury Group Ltd

acquired convertible preference shares which could entitle TRG to take 20% of its capital.

These entities, except Aubrey Capital Management Ltd, are incorporated and domiciled in Australia.

Notes to the Financial Statements cont.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONT.)

(i) Carrying amount of investments accounted for using the equity method

Balance at the beginning of the year
— trust distribution received from jointly controlled entities for prior years
— share of jointly controlled entities’ net profits for the financial year
— share of unrealised (loss)/gains reserve of jointly controlled entities
— acquisition of jointly controlled entity
— disposal of jointly controlled entities
— dividends received from jointly controlled entities
Balance at the end of the year

(ii) Share of jointly controlled entities’ balance sheet

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets

(iii) Share of jointly controlled entities’ revenues

Revenues

(iv) Share of jointly controlled entities’ net income

Profit before income tax

Income tax expense

Profit after income tax

CONSOLIDATED

2012
$

2011
$

29,269,020

27,833,141

(3,735,854)

(4,109,675)

11,484,896

14,014,687

94,071

(161,545)

2,000,000

(1,521,197)

–

(7,893,904)

(8,307,588)

29,697,032

29,269,020

25,970,702

25,107,325

1,687,365

4,935,620

(12,013,188)

(12,398,125)

(2,422,330)

(2,094,384)

13,222,549

15,550,436

30,200,085

33,889,708

16,406,994

20,020,981

(4,922,098)

(6,006,294)

11,484,896

14,014,687

During the year, Treasury Group Ltd acquired additional equity shares in Global Value Investors which increases the direct
ownership to 100%.

During the year, Treasury Group Ltd increased its ownership by an additional 61.5% equity interest in AR Capital Management

Pty Ltd through a selective share buyback offered to existing shareholders of the company. As a consequence, Treasury Group
Ltd owns 91.5% of the issued capital of AR Capital Management Pty Ltd via which Treasury Group Ltd has gained control
of the company.

The equity interest previously held by Treasury Group Ltd in these two companies which qualified as an equity accounted
investment is treated as if it were disposed of and reacquired at fair value on the acquisition date. It is remeasured to its acquisition-
date fair value and compared against the carrying amount of the equity accounted investment.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

14. PLANT AND EQUIPMENT

Furniture and fittings
At cost

Accumulated depreciation

Office equipment
At cost

Accumulated depreciation

Leasehold improvements
At cost

Accumulated depreciation

Total
(a) Reconciliations

Reconciliations of the carrying amounts of plant and equipment at the beginning and
end of the current financial year.

Furniture and fittings
Opening balance

Additions

Depreciation expense

Disposal

Closing balance

Office equipment
Opening balance

Additions

Depreciation expense

Disposal

Closing balance

Leasehold improvements
Opening balance

Additions

Depreciation expense

Disposal

Closing balance

Notes

14(a)

60 – 61

CONSOLIDATED

2012
$

2011
$

12,082

(1,214)

10,868

415,123

(340,042)

75,081

5,962

(199)

5,763

91,712

40,124

9,898

(5,102)

(34,052)

10,868

94,835

27,629

(29,177)

(18,206)

75,081

6,439

5,962

(2,130)

(4,508)

5,763

84,810

(44,686)

40,124

407,574

(312,739)

94,835

24,563

(18,124)

6,439

111,620

42,963

5,127

(7,966)

–

40,124

96,007

25,051

(26,223)

–

94,835

10,732

(4,293)

–

6,439

Notes to the Financial Statements cont.

15. INTANGIBLES

Software
At cost

Accumulated amortisation

(a) Reconciliations

Reconciliations of the carrying amounts of intangibles at the beginning and end of the
current financial year.

Software
Opening balance

Additions

Amortisation expense

Closing balance

16. TRADE AND OTHER PAYABLES (CURRENT)

Trade payables

Other payables

Related party payables:
—

jointly controlled entities

(a) Fair value

CONSOLIDATED

2012
$

2011
$

121,779

(87,422)

34,357

111,647

(66,560)

45,087

Note

15(a)

45,087

10,133

(20,863)

34,357

67,758

4,978

(27,649)

45,087

CONSOLIDATED

2012
$

2011
$

395,927

1,154,582

381,044

1,067,184

1,273,162

2,823,671

1,756,789

3,205,017

Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

(b) Related party payables

For terms and conditions relating to related party payables, please refer to Note 27.

Trade and other payables are non-interest bearing. Liquidity risk exposure is not regarded as significant.

Trade, other and related party payables are all due within less than 90 days.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

17. EMPLOYEE PROVISIONS

Current
Provision for annual leave, beginning balance

Provisions during the year

Annual leave taken

Provision for annual leave, closing balance

Non-current
Provision for long service leave, beginning balance

Provisions during the year

Long service leave taken

Provision for long service leave, closing balance

18. FINANCIAL LIABILITY

62 – 63

CONSOLIDATED

2012
$

2011
$

295,889

133,503

(286,261)

143,131

132,433

91,524

(146,763)

77,194

334,768

98,630

(137,509)

295,889

18,350

260,582

(146,499)

132,433

600,000

–

On 25 May 2012, Treasury Group Ltd acquired a 30% equity ownership in Evergreen Capital Partners Pty Ltd for an upfront
payment of $1,400,000 plus a deferred amount of $600,000 contingent upon the achievement by Evergreen of business performance
hurdles prior to 30 June 2014.

19. CONTRIBUTED EQUITY AND RESERVES

(a) Ordinary shares

Issued and fully paid

2012

2011

29,594,265

Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares.
Accordingly the Company does not have authorised capital nor par value in respect of its issued shares.

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(b) Movements in ordinary shares on issue

Balance at beginning of the financial year

Balance at end of the financial year

2012
Number of
shares

TREASURY GROUP LTD

2011
Number of
shares

23,070,755

29,594,265

23,070,755

29,594,265

23,070,755

29,594,265

23,070,755

29,594,265

The Company’s capital management policies focus on ordinary share capital. When managing capital, management’s
objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits
to other stakeholders.

Management periodically reviews the capital structure to take advantage of favourable costs of capital or high returns

on assets.

During the year ended 30 June 2012, management paid dividends of $7,844,058 (2011: $6,459,814). The Directors anticipate
maintaining a dividend payout ratio over a medium-term period of at least 60-80% of underlying profit in a normal year subject
to future acquisitions.

The Group does not have any external borrowings.

Notes to the Financial Statements cont.

19. CONTRIBUTED EQUITY AND RESERVES (CONT.)

(d) Share options

Options over ordinary shares:

During the financial year, no options were issued over ordinary shares (2011: nil).
At the end of the year there were no unissued ordinary shares (2011: 275,000) in respect of which no options (2011: 275,000)

were outstanding to employees of the Group and jointly controlled entities. The options had a weighted average exercise price
of nil (2011: $12.07).

(e) Long term incentives – performance rights

During the year, Treasury Group Ltd issued 816,749 performance rights to executives and certain employees as part of their long
term incentives. These performance rights were granted on 12 July 2011 and have a vesting date of 11 July 2014. The performance
rights on issue were valued by RSM Bird Cameron using a hybrid monte-carlo/binomial option pricing model. The value of each
right at issue was $1.64. Due to resignation or redundancy of employees, 154,517 issued performance rights lapsed and have
been terminated. Total value of the remaining performance rights is $1,109,868 amortised over three years from the grant date.
The amount of performance rights amortisation expense for the period was $351,109.

At the end of the year, there were no unissued ordinary shares in respect of which no performance rights were outstanding

to employees of the Group.

(f)

Retained profits

Balance at the beginning of the year

Profit for the year

Dividends

Balance at end of year

(g) Reserves

Net unrealised gains reserve

Balance at the beginning of the year

Reversal of previous revaluation of available-for-sale investments sold during the year

Net unrealised gains/(losses) on available-for-sale investments

Income tax relating to components of other comprehensive income

Share of after-tax gain on available-for-sale investments of jointly controlled entities

Balance at end of year

Share options reserve

Balance at the beginning of year

Share-based payments, net of reversal

Share-based payments recharged to related parties

Balance at end of year

Total reserves

CONSOLIDATED

2012
$

2011
$

26,880,985

6,751,757

23,335,693

10,005,104

(7,844,058)

(6,459,812)

25,788,684

26,880,985

CONSOLIDATED

2012
$

2011
$

(12,658)

(6,050)

(898,998)

269,699

105,161

(542,846)

2,722,698

351,109

–

3,073,807

2,530,961

398,331

(420,298)

(2,545)

764

11,090

(12,658)

2,798,973

(89,718)

13,443

2,722,698

2,710,040

Net unrealised gains reserve
The reserve records after tax fair value changes on available-for-sale investments.

Share options reserve
This reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration.
Refer to Note 22 for further details of these plans.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

64 – 65

20. SEGMENT INFORMATION
Information reported to the Group’s Board of Directors for the purposes of resource allocation and assessment of performance is
specifically focused on the profit after tax earned by each business within the Group. Therefore the Group’s reportable segments
under AASB 8 are included in the table below.

Information regarding these segments is presented below. The accounting policies of the reportable segments are the same

as the Group’s accounting policies.

The following is an analysis of the Group’s results by reportable operating segment:

Segment profit/(loss) after tax for the year
— Outsourcing and responsible entity services

— Australian equities

—

International equities

— Alternative investments

— Central administration costs and Directors’ salaries*

Total per income statement

CONSOLIDATED

2012
$

2011
$

313,976

6,663,441

(244,619)

5,066,073

485,307

9,208,147

447,480

4,359,060

11,798,871

14,499,994

(5,044,643)

(4,494,890)

6,754,228

10,005,104

* Includes costs related to the restructure of the GVI and AR Capital businesses. Refer to Directors’ Report for abnormal items in relation to

restructure of these businesses.

Other than Australia, no country represents more than 10% of revenue for Treasury Group Ltd and its jointly controlled entities.
No individual customer represents more than 10% of revenue for Treasury Group Ltd and its jointly controlled entities.

International equities in the above table includes Global Value Investors Ltd.

21. COMMITMENTS AND CONTINGENCIES
Operating lease commitments

The Group has entered into commercial property leases to meet its office accommodation requirements. These non-cancellable
leases have remaining terms of four years as at 30 June 2012. All leases include a clause to enable upward revision of the rental
charge on an annual basis according to prevailing market conditions.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Future minimum rentals:

Minimum lease payments

— not later than one year

—

later than one year and not later than five years

Aggregate lease expenditure contracted for at reporting date

Amounts not provided for:

— rental commitments

Total not provided for

Aggregate lease expenditure contracted for at reporting date

CONSOLIDATED

2012
$

2011
$

572,434

2,005,993

2,578,427

205,789

–

205,789

Notes to the Financial Statements cont.

22. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS
Officer and Executive Option Plan

An Officer and Executive Option Plan has been established where Treasury Group Ltd may, at the discretion of the Board of
Directors, grant options over the ordinary shares of Treasury Group Ltd to Directors, executives and certain members of staff of
the consolidated entity. The options are granted in accordance with performance guidelines established by the Board of Directors of
Treasury Group Ltd, although the Board of Treasury Group Ltd retains the final discretion on the issue of the options. Options are
granted under the plan for no consideration and carry no dividend or voting rights. When exercisable, each option is convertible
into one ordinary share. The options are not quoted on the ASX. There are no cash settlement alternatives. Employees have to be
employed by the consolidated group during the vesting period, otherwise the options are forfeited.

The expense recognised in the Income Statement in relation to this share-based payment plan is $nil (2011: positive expense

reversal of $76,275).

The weighted average exercise price of options granted during the year was $nil for the consolidated entity (2011: nil).

Outstanding at beginning of year

—

lapsed during the year^

Outstanding at the end of the year

Exercisable at the end of the year

2012

2011

Number of
options

275,000

(275,000)

–

Weighted
average
exercise price

Number of
options

Weighted
average
exercise price

$12.07

1,505,000

($12.07)

(1,230,000)

–

275,000

$11.85

$12.27

$12.07

^ During the year ended 30 June 2012, 275,000 options lapsed held by certain key management personnel (2011: 1,230,000).

The fair value of options granted under the Officer and Executive Option Plan is estimated on the date of granting using a binomial
option-pricing model applying the following assumptions:

— Historical volatility for the financial year

— Risk free rate

— Dividend yield

— Expected life

— Other variables as contained in the notes to the financial report.

2012

n/a

2011

n/a

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.
The expected volatility reflects the assumptions that the historical volatility is indicative of future trends, which may not necessarily
be the actual outcome. No other features of options granted were incorporated in the measurement of fair value.

Performance rights

A Long Term Incentive Plan has been established where Treasury Group Ltd, at the discretion of the Board of Directors, awards
performance rights to Directors, executives and certain members of staff of the Group. Each performance right at the time of grant
represents one Treasury Group Ltd share if it vests.

During the period, Treasury Group Ltd issued 816,749 performance rights to executives and certain employees as part of
their long term incentives. These performance rights were granted on 12 July 2011 and have a vesting date of 11 July 2014. The
performance rights on issue were valued by RSM Bird Cameron using a hybrid monte-carlo/binomial option pricing model. The
value of each right at issue was $1.64. Due to Mr Sullivan giving notice of resignation, his 140,000 issued performance rights have
lapsed and have been terminated. Total value of the remaining performance rights is $1,109,868 amortised over three years from
the grant date. The amount of performance rights amortisation expense for the period was $351,109.

Employee Share Plan

The Employee Share Plan has been established whereby Treasury Group Ltd, at the discretion of the Board of Directors, provides
the opportunity to employees and Directors to purchase shares in Treasury Group Ltd at market value less a discount of 5% to
20%. These shares are purchased via a salary sacrifice arrangement. The shares are held in trust at the employees’ request for a
period between two and 10 years. Employees have to be employed by the consolidated group while taking part in the plan. There
are 20 employees eligible to participate in the plan. Shares acquired under the Employee Share Plan vest immediately. During the
year, 4,291 (2011: 18,065) shares were purchased under the plan at a weighted average cost of $4.11 (2011: $4.85). The balance as at
30 June 2012 was 45,736 shares (2011: 84,117). During the year, 4,291 shares were vested (2011: 36,256) and 42,672 shares were sold
(2011: 23,746). The weighted average cost of all shares is $7.72 (2011: $5.30) per share.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

66 – 67

23. SUBSEQUENT EVENTS
On 10 July 2012, Treasury Group Ltd acquired 20% equity ownership in Octis Asset Management Pte Ltd with an option to
increase it by further 10% if certain hurdles linked to new fund flows are satisfied. Octis is an Asia multi strategy equity manager
based in Singapore. Cost of the initial 20% acquisition was $225,395.

On 22 August 2012, the Board of Premium Investors Limited (PRV) resolved to undertake an off market buyback of up to

75% of the ordinary shares on issue subject to approval by PRV shareholders. This is likely to have an effect on the results of the
Group in the coming financial year, the extent of which is yet to be determined as the outcomes of this process are yet to occur.

On 22 August 2012, the Directors of Treasury Group Ltd declared a final dividend on ordinary shares in respect of the 2012

24. EARNINGS PER SHARE

Net profit attributable to ordinary equity holders of the parent

CONSOLIDATED

2012
$

2011
$

6,751,757

10,005,104

Number of shares

Weighted average number of ordinary shares used in calculating basic earnings per share:

23,070,755

Effect of dilutive securities:

Dilutive effect of potential ordinary shares – share options and performance rights

–

Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share

23,070,755

Earnings per share (cents per share)

basic for profit for the year attributable to ordinary equity holders of the parent

diluted for profit for the year attributable to ordinary equity holders of the parent

29.3

43.4

Options do not have a dilutive effect on the earnings per share calculation due to the exercise price of all outstanding options
being in excess of the average share price for the year. Performance rights do not have a diluted effect on the earnings per share
calculation as the potential vesting conditions of these rights have not been met as at 30 June 2012.

Notes to the Financial Statements cont.

25. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Details of Key Management Personnel

(i) Directors
M. Fitzpatrick
D. Cooper
P. Kennedy
R. Hayes
M. Donnelly

(ii) Executives
A. McGill
J. Ferragina
C. Feldmanis
R. Sullivan

Chairman (Non-Executive)
Director (Non-Executive) (resigned 14 December 2011)
Director (Non-Executive)
Director (Non-Executive)
Director (Non-Executive) (commenced 28 March 2012)

Chief Executive Officer
Chief Financial Officer
Managing Director – Treasury Group Investment Services Limited (resigned 17 August 2011)
Head of Distribution, (resigned 7 March 2012)

(b) Compensation for Key Management Personnel

Short-term

Post employment

Share-based payments

Total remuneration

CONSOLIDATED

2012
$

2011
$

2,060,621

2,916,018

84,305

339,323

88,974

(76,275)

2,484,249

2,929,217

Balance at
1 July 2011

Granted as
remuneration

Options
exercised

Options
lapsed

Balance at
30 June 2012

Total vested
and exercisable
at 30 June
2012 *

–

100,000

50,000

125,000

275,000

–

(100,000)

(50,000)

(125,000)

(275,000)

–

30 June 2012

Directors
M. Fitzpatrick

D. Cooper

P. Kennedy

R. Hayes

M. Donnelly

Executives
J. Ferragina

C. Feldmanis

R. Sullivan

Total

* Options are exercisable once vested.

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

68 – 69

25. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONT.)
(c) Option holdings of Key Management Personnel

30 June 2011

Directors
M. Fitzpatrick

D. Cooper

M. Burgess

P. Kennedy

R. Hayes

Executives
J. Ferragina

C. Feldmanis

R. Sullivan

Total

Balance at
1 July 2010

Granted as
remuneration

Options
exercised

Options
lapsed

Balance at
30 June 2011

Total
vested and
exercisable at
30 June 2011 *

–

1,000,000

–

150,000

80,000

275,000

1,505,000

–

(1,000,000)

–

(50,000)

(30,000)

(150,000)

(1,230,000)

–

100,000

50,000

125,000

275,000

100,000

50,000

125,000

275,000

* Options are exercisable once vested.

(d) Performance rights holdings of Key Management Personnel

Balance at
1 July 2010

Granted as
remuneration

Options
exercised

Options
lapsed

Balance at
30 June 2011

Total
vested and
exercisable at
30 June 2012 *

–

500,000

140,000

780,000

–

(140,000)

–

500,000

140,000

–

500,000

140,000

–

640,000

30 June 2012

Directors
M. Fitzpatrick

D. Cooper

P. Kennedy

R. Hayes

M. Donnelly

Executives
A. McGill

J. Ferragina

R. Sullivan

Total

* Performance rights are exercisable once vested.

Notes to the Financial Statements cont.

25. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONT.)
(e) Share holdings of Key Management Personnel

Ordinary shares held in Treasury Group Ltd

30 June 2012¹

Directors
M. Fitzpatrick

P. Kennedy

R. Hayes

M. Donnelly

Executives
A.McGill

J. Ferragina
Total

Ordinary shares held in Treasury Group Ltd

30 June 2011

Directors
M. Fitzpatrick

M. Burgess

D. Cooper

P. Kennedy

R. Hayes

Executives
J. Ferragina

C. Feldmanis

R. Sullivan

Total

Balance
1 July 2011

Granted as
remuneration

On exercise
of options

Net change
other #

Balance
30 June 2012

2,701,285

181,200

–

16,237

2,898,722

–

2,701,285

30,000

211,200

–

50,000

6,167

86,167

50,000

22,404

2,984,889

Balance
1 July 2010

Granted as
remuneration

On exercise
of options

Net change
other #

Balance
30 June 2011

2,701,285

5,000

633,000

148,700

–

16,237

28,745

16,122

3,549,089

–

2,701,285

(5,000)

–

32,500

–

633,000

181,200

–

16,237

28,745

16,122

27,500

3,576,589

¹ The share holdings by D. Cooper, C. Feldmanis and R. Sullivan are not included in this table.
# In the above table, net change other is comprised of shares in Treasury Group Ltd acquired or disposed of during the year by Key Management

Personnel and for persons who are no longer considered Key Management Personnel the change in their relevant shareholding.

(f) Transactions with Director-related entity

Details of the transactions with Director-related entities are set out in Note 27. All transactions were conducted on
commercial terms.

(g) Loans to key management employees

No loans have been advanced to key management employees at any stage during the financial year ended 30 June 2012 (2011: $nil).

ANNUAL REPORT 2012TREASURY GROUP LTDNotes to the Financial Statements cont.

26. AUDITOR’S REMUNERATION

Auditor of parent entity (Deloitte Touche Tohmatsu)
Amounts received or due and receivable by Deloitte Touche Tohmatsu:

—

an audit or review of the financial report of the entity and any other entity in the consolidated
group and jointly controlled entities

— non-audit services to the entity and any other entity in the consolidated group

70 – 71

CONSOLIDATED

2012
$

2011
$

184,500

91,545

276,045

163,000

99,450

262,450

27. RELATED PARTY DISCLOSURES
The consolidated financial statements include the financial statements of Treasury Group Ltd and the controlled entities in the
following list:

Companies
Treasury Capital Management Pty Ltd

Treasury Group Investment Services Limited

Treasury Group Nominees Pty Ltd

Global Value Investors Ltd*

Treasury Evergreen Pty Limited

AR Capital Management Pty Ltd

PERCENTAGE OF EQUITY INTEREST

HELD BY THE CONSOLIDATED ENTITY

2012

2011

100

91.5

100

–

* This direct ownership in Global Value Investors Ltd for the 2011 prior year comparative did not include the indirect 22.56% interest that Treasury

Group Ltd held through interest in IML during the 2011 year.

All subsidiaries are incorporated in Australia.

Transactions with related parties

Service fees
During the year, Treasury Group Ltd and its wholly-owned entity, Treasury Group Investment Services Limited, provided
administrative services to jointly controlled entities. Dealings were on commercial terms and conditions. Details of service fees and
receivables at reporting date are disclosed in Note 5 and Note 10 to the financial report respectively.

Dividend and distribution
Dividends and distributions received and receivable at reporting date are disclosed in Note 5 and Note 10 to the financial report
respectively.

Loans
Loans advanced by Treasury Group Ltd to jointly controlled entities are with a fixed repayment date once repayment clause has
been triggered. Interest on the loans is capitalised at commercial rates until repayment clauses have been triggered.

During the year, Treasury Group Ltd did not provide any additional loans to jointly controlled entities (2011: $100,000) and
$1,675,839 (2011: $1,683,677) in repayments were received, repaying the outstanding loan. Capitalised interest to jointly controlled
entities during the year was nil (2011: $36,014). Details of interest income and the amount remaining outstanding at year-end are
disclosed in Note 5 and Note 12 to the financial report respectively.

Fund management
During the year, no fund management and administration fees were paid (2011: nil). Payables at the reporting date are disclosed in
Note 16 to the financial report.

Notes to the Financial Statements cont.

28. PARENT ENTITY DISCLOSURE
The accounting policies of the parent are consistent with the consolidated entity.

(i) Financial performance

Profit for the year

Other comprehensive income for the year (net of tax)

Total comprehensive income
(ii) Financial position

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Equity

Issued capital

Retained earnings

Reserves

Share options

Net unrealised (losses)/gains reserve

Total equity

2012
$

2011
$

6,916,885

8,722,372

(624,257)

(1,781)

6,292,628

8,720,591

5,473,118

41,055,259

46,528,377

9,006,242

38,782,727

47,788,969

688,911

600,091

653,742

688,918

1,289,002

1,342,660

29,594,265

13,219,310

29,594,265

14,153,096

3,073,807

2,722,698

(648,007)

(23,750)

45,239,375

46,446,309

ANNUAL REPORT 2012TREASURY GROUP LTDDirectors’ Declaration

72 – 73

In accordance with a resolution of the Directors of Treasury Group Ltd, I state that:

In the opinion of the Directors:

1.
(a) the financial statements and notes are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2012 and of its performance

for the year ended on that date;

(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(iii) complying with International Financial Reporting Standards, as stated in Note 2 to the financial statements
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable.

2. 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 year ended 30 June 2012.

On behalf of the Board

M. Fitzpatrick
Chairman

22 August 2012

Independent Audit Report

ANNUAL REPORT 2012TREASURY GROUP LTDIndependent Audit Report cont.

74 – 75

ASX Additional Information

Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.

(a) Distribution of equity securities (as at 31 July 2012)

The number of shareholders by size of holding, in each class of share are:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

The number of shareholders holding less than a marketable parcel of shares are:

(b) Twenty largest shareholders (as at 31 July 2012)

The names of the twenty largest holders of quoted shares are:

Squitchy Lane Holdings Pty Ltd

RBC Dexia Investor Services Australia Nominees Pty Ltd

Citicorp Nominees Pty Ltd

Kattag Holdings Pty Ltd

5 Aust Executor Trustees NSW Ltd

6 UBS Wealth Management Australia Nominees Pty Ltd

7 Mr Timothy Gerard Ryan

8 DSBH Pty Ltd

Perpetual Trustee Company Ltd

10 Mr Michael Brendan Patrick De Tocqueville

11 Banson Nominees Pty Ltd

12 Top Pocket Pty Ltd

13 HFM Investments Pty Ltd

14 Penswood Pty Ltd

15 Bond Street Custodians Limited

16 29th Marsupial Ltd

17 National Nominees Limited

18 HSBC Custody Nominees

19 Harkosi Securities Pty Ltd

20 JP Morgan Nominees Australia Limited

ORDINARY SHARES

Number
of holders

Number
of shares

1,047

1,066

212

146

627,114

2,699,728

1,548,982

3,942,481

14,252,450

2,491

23,070,755

3,935

LISTED ORDINARY SHARES

Number
of shares

Percentage of
ordinary shares

2,401,500

2,182,951

1,731,341

1,150,000

1,102,186

1,077,598

840,000

633,000

613,437

450,000

370,313

311,390

250,000

199,000

182,031

172,050

161,674

154,571

140,000

129,409

10.41

9.46

7.50

4.98

4.78

4.67

3.64

2.74

2.66

1.95

1.61

1.35

1.08

0.86

0.79

0.75

0.70

0.67

0.61

0.56

14,252,450

61.78

The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:

Michael Fitzpatrick

Financial & Investment Management Group Ltd (Citicorp Nominees Pty Ltd)

(d) Voting rights

All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

Number
of shares

2,701,285

1,582,254

ANNUAL REPORT 2012TREASURY GROUP LTDCorporate Information

76 – 77

ABN 39 006 708 792

DIRECTORS
M. Fitzpatrick (Chairman)
P. Kennedy
R. Hayes
M. Donnelly

CHIEF EXECUTIVE OFFICER
Andrew McGill

COMPANY SECRETARY
Reema Ramswarup

REGISTERED OFFICE
Level 14
39 Martin Place
Sydney, NSW 2000
Phone
(02) 8243 0400
Facsimile (02) 8243 0410

BANKERS
Westpac Banking Corporation

SHARE REGISTER
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford, Victoria 3067
(03) 9415 5000
Phone

AUDITOR
Deloitte Touche Tohmatsu

INTERNET ADDRESS
www.treasurygroup.com