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2013
ANNUAL REPORT 2012
ANNUAL REPORT 2012
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tReAsuRy GRoup ltd
AnnuAl RepoRt 2013
Contents
1 Results at a Glance
2 About us
4 Chairman’s Report
6 CEO’s Report
10 Review of Boutiques
12 Treasury Group Services
14 Directors’ Report
27 Auditor’s Independence Declaration
28 Corporate Governance
32 Income Statement
33 Statement of Comprehensive Income
34 Statement of Financial Position
35 Statement of Changes in Equity
36 Statement of Cash Flows
37 Notes to the Financial Statements
73 Director’s Declaration
74 Independent Audit Report
76 ASX Additional Information
77 Corporate Information
1
Results at a Glance
The 2013 financial year has been
one of solid growth, as we reaped
the benefits of the restructuring
work and investment decisions
in a favourable market.
Key Financial HigHligHts during tHe year:
Normalised net profit after tax (NPAT)
$10.6m
Total funds under management
$17.1bn
Full year dividend (fully franked)
40c per
share
Year End FUM ($bn)
Aggregate Boutique Management Fees ($m)
Reported NPAT ($m)
Underlying NPAT ($m
Final Dividend (cps)
Full Year Dividend (cps)
$
17.1
83.0
10.4
10.6
23.0
40.0
% change
4.6
16.9
53.9
31.6
15.0
17.7
About us
Treasury Group is a
specialist investment and
financial services business,
focused on boutique funds
management companies.
Our philosophy is to partner with talented investment
professionals to deliver the highest standard of investment
outcomes for investors. We invest capital and provide a
range of services to support the growth and development
of our partner boutiques. The structure of our services
and investments are flexible in order to the meet the needs
of boutiques in their different stages of development.
Our OfferinG cAn include sOme, Or All Of The fOllOWinG:
– capital investment structured as equity, debt or otherwise
for specified purposes;
– distribution and marketing services;
– responsible entity services; and
– Other business support services including risk and compliance,
accounting, finance, hr, and operations.
a year of strong growth and increasing momentum as we continued to focus on key elements of our strategy:
expand and diversify portfolio, address issues
– Significant investment of time in review of new
opportunities during the year
Proactive management of investments
and interests
– Exit from investments in Premium Investors completed
for net gain
– Dublin-based UCIT vehicle (Treasury Group
Investment Funds plc) restructured and sold to RARE
Infrastructure
– Evergreen Capital assessing potential merger with
Freehold Investment Management
– Review of Treasury Asia Asset Management (TAAM),
which led to the sale of TAAM post year at a price that
allowed recovery of carrying value of invested capital
Pursue efficiency from support services
– Services provided by Treasury Group Investment
Services Limited increasingly focused on boutiques
which require them most. Mature boutiques
internalised some services during the year
– Boutiques making greater use of Treasury Group
Distribution and Marketing services during the year
invest in core capabilities
– New Chief Investment Officer appointed during year,
increasing Treasury Group’s capabilities focused on
investment activity
AnnuAl RepoRt 2013tReAsuRy GRoup ltd 2
3
Treasury
Group
67.7% 89.6%
21.9%
s&p/AsX
300
Amount by
which Treasury
Group total
shareholder
return exceed
the s&p/
AsX 300
Accumulation
index in 2013
chairman’s report
The financial Year 2013 saw
improved investment conditions
across global financial markets
and the funds management
industry. momentum at key
Treasury Group boutiques
improved and has continued
into fY2014.
In Australia, we saw the listed equities market increase
in value during the year. Industrials did particularly
well, while the Resources sector slid backwards. For our
boutiques, the changing market conditions suited some
more than others.
Treasury Group’s business model is operationally
leveraged to financial markets. During FY2013, a number
of our boutiques delivered exceptional performances for
investors, including RARE Infrastructure, Investors Mutual
and Celeste. Furthermore, each of these boutiques was
nominated for multiple industry awards, with Investors
Mutual and Celeste winning several.
Fundamentally, the Australian funds management
industry remains attractive to investors and is forecast
to grow significantly, underpinned by mandated increases
to superannuation contributions and a stable economic
and regulatory environment.
The restructuring and other strategic work completed
last year has placed Treasury Group in a stronger
position, as the full year benefits flowed through in
FY2013. These savings have an annual run rate in excess
of $1 million. Treasury Group in now a more profitable
and focused business.
Financial result
Treasury Group’s underlying net profit after tax increased
to $10.6m, up 32% on the prior year. Statutory net profit
after tax was $10.4m, an increase of 54%. Treasury Group
continues to maintain a strong balance sheet, with
no external debt and a high level of liquidity.
Through FY2013, global market conditions generally
improved, with material shifts in financial markets
evident. Central banks in key international markets
continue to provide significant monetary stimulus and the
flow-on effects of this is material for investment markets.
In Australia, we saw cash yields decline. For yield-focused
investors, equities became relatively more attractive
than cash, although there still remains to be very large
amounts of funds allocated to cash.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd Funds under Management
($ billions)
All managers associated with Treasury Group – June 2002 to June 2013
54
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Funds under Management
Funds under management increased by 4.6% to $17.1 billion
at year end. We did however, experience net funds outflow
of $2.7bn during the year, mainly due to mandate losses
at Orion and TAAM. In contrast, RARE Infrastructure,
Investors Mutual and Celeste saw strong funds inflows.
We were particularly pleased with the increased level of
inflows from retail investors. For these three boutiques,
an aggregate of $488 million of retail inflows were received,
compared to net outflows of $40 million in the prior year.
We have seen this stronger retail flow continue into 2014.
dividend
The Board has declared a fully franked final dividend of
23 cents per share, an increase of 15% on the final dividend
for FY2012. The increase reflects the Board’s confidence in
the Company’s financial strength and operating outlook.
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 the Third Link Thrive Program
and Third Link Investment Managers via the provision of
investment and support services on a pro-bono basis. The
Thrive Program 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 its Thrive Program are
wonderful initiatives and I invite you to learn more about
their work by visiting www.thirdlink.com.au
Outlook
Over the past 12 months, Treasury Group has experienced
growth in both funds under management and earnings,
led by RARE Infrastructure, Investors Mutual and Celeste.
The strong performances from these boutiques, coupled
with the rebounding investor sentiment during FY2013,
has placed Treasury Group in a strong position at the start
of FY2014. None of our partners has yet reached capacity
limits, and we are confident that all can continue to deliver
future earnings growth to Treasury Group. Management’s
actions over the past couple of years have resulted in a more
efficient and focused business, which was reflected in a re-
rating of Treasury Group’s shares during the year.
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
fY2013 saw strong earnings
growth, achieved due to
improved market conditions,
strong performances from key
boutiques and the benefits of
restructuring work carried
out in the prior year.
Actions that we initiated or completed during the
year include:
– Completion of the restructure of Premium Investors.
This saw Treasury Group exit from our investment in
PRV at a profit to carrying value;
– Restructure and sale of our Dublin-based UCIT vehicle
to RARE Infrastructure. The vehicle remains available
for use by other Treasury Group boutiques, as well as
RARE Infrastructure;
– Significant time and effort devoted to the assessment
of new investment opportunities;
– Appointment of a new Chief Investment Officer; and
– Review of our investment in TAAM.
Operational and Financial Performance
Total funds under management rose by 4.6% during
the year to finish at $17.1bn. This in part reflected more
favourable market conditions, but it also reflected strong
investment performances at Treasury Group boutiques
and funds flows. Funds inflows were experienced at RARE
Infrastructure, Investors Mutual (IML) and Celeste, while
outflows were experienced at Orion and TAAM.
The average net margin earned by our boutique partners
on managed funds was up to 55 basis points – increasing for
a second consecutive year. This reflected an improved mix
of business across the Treasury Group portfolio (i.e. greater
proportion of higher margin Retail FUM and inflows at
boutiques in which Treasury Group has a relatively higher
equity interest).
Historically our boutiques have delivered outperformance
(i.e. net investment returns in excess of benchmark) for
investors. This trend continued in FY2013, with IML and
Celeste doing particularly well.
Business Performance
Through the course of FY2013, we saw investor confidence
improve, volatility decrease and equity market levels rise.
Net fund flows to equities strategies improved during
the year, particularly in the second half. Key Treasury
Group boutiques won inflows, including net inflows from
retail investors, and at Treasury Group head office we
benefited from lower costs and more efficient operations.
All of these factors contributed to our improved
earnings for FY2013.
Over the past year, Management remained attentive to
our refocused strategy, which has been communicated in
various disclosures over the past 18 months. Our plan is
to continue with our proactive approach to the management
of Treasury Group’s investments and interests.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd 76
85-90% of FuM ranked 1st or 2nd Quartile
as at 30 June 2013
5 YEARS
3 YEARS
1 YEAR
90%
85%
89%
10%
15%
11%
3rd & 4th Quartile
1st & 2nd Quartile
0
20
40
60
80
100
%
Furthermore, RARE, IML and Celeste were each nominated
or won industry awards during 2013. As illustrated above,
between 85% and 90% (depending upon the time horizon
considered) of Treasury Group FUM, as at year end, was
underpinned by boutiques with either first or second
quartile performances relative to their competitors.
We believe this provides comfort in relation to both
the sustainability of current Treasury Group earnings
and also prospects for further organic growth from our
existing boutiques.
Normalised net profit after tax was $10.6 million for FY2013,
an increase of 32% on the previous year. This reflects
significantly improved outcomes across our portfolio of
boutiques during 2013. Aggregate Management Fee Income
across Treasury Group boutiques increased by 17% on the
previous year, and Treasury Group’s Share of Associates
Net Profit after Tax was also up, by 30%. FY2013 was a year
in which the “scalability” of the multi-boutique model of
funds management was apparent.
Statutory net profit after tax was $10.4 million, up 54%
compared to last year. The statutory result includes the
impact of one-off abnormal income or expenses associated
with actions taken during the year, such as the restructure
of Premium Investors, and the profits on investments sold
during the year. It also includes the impact of accounting
decisions at year end, such as impairment charges on
underperforming businesses and the recognition of
previously unrecognised tax benefits.
Expenses at Treasury Group were lower than FY2012.
Following last year’s restructuring activities, more than
$1 million of savings were realised this year, and we expect
to continue to benefit from these savings in future years.
Capital levels at Treasury Group are surplus to all
regulatory requirements and also provide scope for
growth opportunities. As at year end, cash, available-for-
sale investments and loans to boutiques totalled $24.3m,
and there was no outstanding debt. Operating cash flow
during the year was $10.9m.
The value of Treasury Group’s investments in partner
boutiques is carried at $30.0m, which represents historical
cost plus our share of undistributed earnings over time.
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 $69.8m and Treasury
Group’s proportionate share of that amount was $30.6m.
Market environment
Through the course of FY2013, market conditions improved
from Treasury Group’s overall perspective, although some
significant shifts were evident. The significant degree of
monetary stimulus being applied by governments around
the world, and changing market expectations about future
levels of stimulus, are major influencers of financial
markets. In Australia, yields on cash and short duration
fixed income assets declined and the Australian dollar
weakened. The All Ordinaries Price Index rose by 15.5%,
while the Small Ordinaries Price Index declined by 8.3%.
Industrial stocks had a good year (ASX300 Industrials
Price Index up 26%), while Resources did not (ASX300
Resources Price Index down 10.8%). From these contrasting
statistics, it is evident that market conditions were actually
quite different for each boutique, depending upon their
investment style and focus.
Via our wholly owned
subsidiary, Treasury
Group investment services
limited, we provide a full
suite of business support
services to our partner
boutiques and selected
external clients.
With the rise in value of equities markets, average earnings
yields declined a little, but by less than the decline in cash
and term deposit rates. As such, for investors focused on
yield, the equities market became relatively more attractive.
Fundamentally, funds management is an attractive
industry in Australia as it is large and growing. Growth
is underpinned by the legislated increases in the rate of
compulsory superannuation contributions from the wages
of all Australians.
Treasury staff also worked with our boutique partners
to ensure compliance with the Foreign Account Tax
Compliance Act (FATCA) and the 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.
strategy
During the year, market conditions provided a favourable
back drop for Treasury Group’s domestic equities managers
such as Investors Mutual and Celeste.
Management efforts remain on the execution of Treasury
Group’s refocussed strategy. Key elements of our
strategy include:
The mandate of RARE Infrastructure is international and
therefore the market context for it is somewhat different
than for our domestic equities boutiques. However, market
conditions for RARE Infrastructure were also favourable,
due in part to the continued focus of many investors on
yield and preference for asset classes with lower volatility.
RARE Infrastructure offers both hedged and unhedged
products to investors, which accommodates changes
in investor preference due to movement in the value
of the Australian dollar.
The market context for Treasury Group and its boutiques
in 2013 was again influenced by a changing regulatory
environment. This year, the industry prepared for the
introduction of MySuper, which increased investor focus
on value for money strategies.
– expand and diversify our portfolio of boutiques;
– Proactive management of our investments
and interests;
– Improve our capability to provide seed funding
to partner boutiques;
– Invest in distribution and Marketing capabilities;
– Pursue efficiency from support services; and
– consider acquisitions and other growth opportunities.
Our proactive approach was again evident during the year.
The restructuring and exits from investments in Premium
Investors and the Dublin-based UCIT platform represented
successful resolution of ongoing issues associated with
both structures.
In spite of the investment of significant time and effort
throughout the year, FY2013 did not see us complete
any new investments. We are however optimistic about
several opportunities currently before us and hope to be
in a position to announce successful outcomes during
the course of the 2014 financial year.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd Financial Performance
Treasury Group Underlying Profit
S&P/ASX 300
98
Treasury Group financial
performance is strongly
correlated with the level
of listed equities markets.
The S&P/ASX 300
Index increased by
17% during 2013.
Source:
Treasury Group
& Bloomberg
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
conclusion
I am pleased with the progress we have made this year.
Across our portfolio, we have seen growth in FUM and
earnings through the year. At year end, 85-90% of FUM
was underpinned by first or second quartile investment
performance. Looking forward, we will continue to actively
pursue investment and partnership opportunities that
will create further growth and value to the Treasury
Group business.
Finally, I would like to thank all Treasury Group employees,
and the staff of our boutique partners, for their hard work
and efforts this year.
andrew Mcgill
Chief Executive Officer
During FY2013, we benefitted from the cost reduction work
that was done at Treasury Group in the prior year. In excess
of $1.0 million of savings from this work flowed to Net Profit
after Tax during 2013. We expect these savings to continue
to benefit shareholders in the coming years.
Towards the end of the year, we commenced a review of our
investment in Treasury Asia Asset Management (TAAM).
The review was prompted by significant funds outflows at
TAAM, which resulted in the deterioration of the financial
position of the business. Frustratingly, this occurred at
a time when the investment performance of TAAM was
improving. Following year end, a potential opportunity
arose for Treasury Group to exit from its investments in
TAAM and recover in full the value of invested capital.
As at the time of going to print, we remain engaged with
the potential buyer in relation to the opportunity.
We continue to invest in our staff and capabilities.
In August 2013, we were pleased to announce the
appointment of Mr Andrew Howard as Chief Investment
Officer, a new position for Treasury Group. Having worked
most recently as CIO, Asia Pacific at Mercer Australia,
Andrew brings over 20 years’ experience and extensive
knowledge of the local and global funds management
industry and proven capabilities in asset allocation,
portfolio design and manager selection, as well as portfolio
management. At Treasury Group, Andrew will be focused
on the identification of new boutique and investment
opportunities, as well as providing support to the current
Treasury Group boutiques.
review of Boutiques
Treasury Group
boutiques have delivered
strong investment
returns for clients and
outperformed their
market benchmarks
over medium and long
term 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 2013, funds under
management rose to $4.3bn,
representing a 51% increase.
Investment performance
was very strong. For
example, Investors Mutual’s
Australian Share Fund
returned +27.2% for the
year which was 21.9%
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 a 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 for Orion
was $0.7 billion, down
80% on the prior year. The
investment performance of
Orion during the year was
impacted by the drag on
the market by the materials
sector and the stronger
performance of defensive
and yield driven stocks.
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. RARE has product
offerings in Europe/UK,
North America, as well
as Australia.
During the year, RARE’s
funds under management
increased by 45% to
$7.1 billion. RARE funds
remain ranked within
the top quartile of their
peer groups. RARE
Infrastructure has delivered
outperformance for its
clients across its various
investment products since
inception.
celeste Funds
Management
Celeste Funds Management
is a long-only Australian
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.
During 2013, Celeste
won awards for Best
Smaller Companies
manager from both Money
Magazine and the Morgan
Stanley Australian Fund
Managers Awards.
During the year, Celeste
grew its funds under
management from both
institutional and retail
clients by 21%, to $646
million. Investment
performance during the
year was strong, up by
0.3% when compared to a
5.3% decline in the S&P/
ASX Small Ordinaries
Accumulation Index
benchmark. Since
inception, Celeste has
delivered alpha for its
clients returning 15.3% p.a.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd 10
11
during the
year, rare’s
funds under
management
increased by 45%
to $7.1 billion 45%
evergreen capital
Partners
Led by Tim Hannon,
Evergreen is a Melbourne-
based absolute return
fund manager that
targets returns over the
medium to long term, with
lower volatility than the
Australian equity market.
In 2012, Evergreen was
appointed submanager of
the AR Capital Ascot Fund.
At the FY2013 year end,
Evergreen funds under
management were
approximately $105 million,
including its absolute
return funds and property
fund joint venture. Since
inception, returns to
investors in the Evergreen
Equity Returns Fund have
been 2.7%.
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 $63 million.
Since inception, the Octis
Asia Pacific Fund has
outperformed the MSCI
Asia Pacific index by 8.9%
p.a., and 4.6% p.a. against
the Eureka Hedge Index.
treasury asia
Asset Management
Treasury Asia Asset
Management is a boutique
Asian equity funds
management business
founded in 2005 by Peter
Sartori and based in
Singapore.
TAAM specialises in
investing in Asian
securities, managing
portfolios for both
institutional and retail
investors to achieve long
term capital growth.
TAAM’s investment
performance during the
year was improved, up
25.5% and 3.5% ahead of
its benchmark. However,
funds under management
decreased to $274m due to
significant redemptions by
investors. This loss of funds
impacted the business’s
financial performance
and at year end, TAAM was
under review.
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. Aubrey is
also the appointed sub-
manager of the GVI Global
Industrial Fund
During the year, Aubrey’s
funds under management
increased by 23.8% over
the 2012/2013 year to
$465 million, this includes
funds within the GVI funds.
Aubrey has delivered strong
investment performance for
investors since inception.
Investment performance
for the Aubrey Global
Conviction Fund was up
30.1% over the year. The
GVI Aubrey Global Growth
and Income Fund also
saw positive investment
performance returns
of 22.1% and 33.6% p.a.
respectively.
Treasury Group services
Via our wholly-owned
subsidiary Treasury
Group investment services
limited, we provide a full
suite of business support
services to our partner
boutiques and selected
external clients.
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; and
– information technology and automation solutions.
These services are provided through our team of experienced and professional
staff. The 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 the 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd directors
12
13
Michael Fitzpatrick, (Chairman)
Peter Kennedy, (Non-Executive Director)
reubert Hayes, (Non-Executive Director)
Melda donnelly, (Non-Executive Director)
company secretary
reema ramswarup
Directors’ Report
Your Directors submit their report for the year ended 30 June 2013.
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
Michael Fitzpatrick, (Chairman) BA. 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.
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.
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.
He is the Chairman of the Nomination Committee and sits on the Audit and Remuneration Committee.
Melda Donnelly, (Non-Executive Director) B.C.
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.
Ms Donnelly sits on Nomination Committee and Remuneration Committee.
Company Secretary
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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd 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)
Dividends paid in the year:
Interim for the year
– on ordinary shares (fully franked) paid on 27 March 2013
Final for 2012 shown as recommended in the 2012 report
– on ordinary shares (fully franked) paid on 26 September 2012
Corporate Information
Corporate Structure
Options/
Performance
rights over
Ordinary
Shares
–
–
–
–
Cents
45.0
45.0
$
Ordinary
Shares
2,701,285
–
213,487
–
Cents per
share
23
5,306,274
17
3,922,028
20
4,614,151
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 (77.8%)
Investors Mutual Ltd (47.22%)
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 (22.2%) See page 17
1 Treasury Group holdings are held via Treasury Evergreen Pty Limited.
2 Treasury Group holdings are held via Treasury Octis Pty Limited.
Operating and Financial Review
Review of Operations
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 17 full time equivalent employees as at 30 June 2013 (2012: 19). The consolidated entity
includes Treasury Group Ltd (parent), Treasury Group Investment Services Ltd, Global Value Investors Ltd and AR Capital
Management Pty Ltd.
Business Performance/Funds Management
Treasury Group Ltd have experienced strong growth in its business performance and operations over the last year. This is
evidenced by FUM growth across the Group by 5% to $17.13b. This growth in FUM reflected the improved market conditions
and strong performance delivered by Treasury Group’s partner boutiques, strong funds inflow from Investors Mutual Ltd,
Celeste Funds Management and RARE Infrastructure Ltd, offset by net outflows in some of the Group’s other business areas
such Orion Asset Management Ltd and Treasury Asia Asset Management Ltd. The Group’s performance is strongly correlated
with the level of listed equities markets as the fees and revenues earned by the boutique partners are based upon percentage
of funds managed.
The Group’s results arose from four main business segments. The results from Australian equities increased by net 6% which
arose from the increased contribution of Investors Mutual Ltd, IML Investment Partners and Celeste Funds Management offset
by the reduced contribution by Orion Asset Management. The results from alternative equities increased by 67% mainly due to
consistent inflows and strong performance of RARE Infrastructure Ltd. Meanwhile, the results from the Group’s outsourcing and
responsible entity services increased by 165% due to a one-off transaction arising from the restructure of Premium Investors Ltd
(PRV). Lastly, the central administration segment improved by 6% due to continued control, however impairment charges and
write offs were taken up on investments and other assets at the corporate level. Refer to Note 21 for further discussion on the
segment information.
Below are the key business areas of the Group’s operations:
Australian Equities
Investors Mutual Ltd (IML) provides a funds management capability to both institutional and retail investors. The consolidated
entity holds 47.22% 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 specialising in Australian equities. The consolidated entity holds 41.99% of
the issued capital of Orion Asset Management Ltd. Orion Asset Management Ltd is considered a jointly controlled entity of
the Group.
Celeste Funds Management Limited is an Australian equity manager with a small 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. 16
17
International Equities
Global Value Investors Ltd invests in global industrial companies that exhibit recurring earnings, and a strong, stable and
competitive business. Treasury Group Ltd owns 100% interest in the Company.
Treasury Asia Asset Management Ltd is a boutique asset manager specialising in the Asia Pacific region. The consolidated entity
holds 43.96% of the issued capital Treasury Asia Asset Management Ltd. 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 22.2% of the equity capital of Aubrey Capital
Management. The convertible preference shares are treated as Available-For-Sale Assets by the Group in accordance with
Accounting Standards. 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. During the year, Treasury Group Ltd acquired a further 2.2% holdings via the exercise
of rights issue.
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. Treasury Group Ltd owns 77.8% of the
issued capital of AR Capital Management Pty Limited.
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 as well as specialisation in real estate investment trusts. Treasury Group Ltd owns 30%
via its subsidiary Treasury Evergreen Pty Limited. Evergreen Capital Partners Pty Ltd is considered as jointly controlled entity.
Octis Asset Management Pte Ltd is an Asian multi strategy equity manager based in Singapore. Treasury Group owns 20% via
its subsidiary.
Administration & Compliance Services
Treasury Group Investment Services Limited, a wholly-owned controlled entity of Treasury Group Ltd provides administrative,
accounting, and compliance services to certain members of the Group. It is also the responsible entity for the majority of
schemes in the Group.
Operations, acquisitions and disposal
Treasury Group Ltd continued to pursue growth initiatives and investing in core capabilities. During the year, Treasury Group
Ltd acquired a 20% interest in Octis Asset Management Pte Ltd. Octis is an Asian multi strategy equity manager based in
Singapore. Cost of the initial acquisition was $225,395. Treasury Group Ltd also acquired an additional 2.2% holding in Aubrey
Capital Management through the exercise of rights issue. Cost of the acquisition was $314,073.
During the year, Treasury Group Ltd and its subsidiary Treasury Group Investment Services Limited acquired units in Octis Asia
Pacific Fund Limited for $4,307,245 and $1,500,000 respectively. These investments represent seed capital to assist in the growth
and marketing of this product.
On 14 September 2012, the Board of Premium Investors Ltd (PRV) and Wilson Asset Management Capital Limited (WAM)
entered into a Scheme Implementation Agreement (the Scheme). On 12 December 2012, the Scheme was approved and WAM
assumed control of the Company at that date. On 11 January 2013, the Board of PRV gave the 30-day notice of termination of the
Management Agreement between TIS and PRV.
Treasury Group Ltd redeemed its shares held in PRV and its units held in TG TAAM Asia Ex Japan 1, Ascot Fund and Orion Sirius
Fund. Net gain on disposal of these investments amounted to $396,297.
Operating Results for the Year
The above events and transactions resulted to a consolidated profit for the year attributable to members of Treasury Group Ltd
amounted to $10,390,514 (2012: $6,751,757). The net profit after tax of the group as reported in the current year has increased by
54% compared to the 30 June 2012 comparative result as shown in the table below reconciling the underlying profit as follows:
Net profit attributable to members of the parent
Add/(Deduct):
– Net settlement fee from PRV restructure
– Net (gain)/loss on disposal of available-for-sale investments
– Legal and consulting expenses
– Employee and restructuring costs
– Consulting fees
– Impairment of investments accounted for under the equity method
– Impairment of goodwill
– Net effect of GVI restructuring costs
– Tax adjustment to recognise tax losses previously unrecognised
Underlying profit
Earnings Per Share
Consolidated
2013
$
2012
$
10,390,514
6,751,757
(537,264)
(396,297)
278,643
140,000
76,250
800,000
331,124
–
85,158
–
106,806
–
361,201
–
–
770,616
(454,950)
–
10,628,020
8,075,538
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)
Financial Position
2013
45.0
45.0
2012
29.3
29.3
Treasury Group Ltd has a strong balance sheet and sound capital structure. This is evident from the Company’s positive
cash flow position and no existing borrowing facilities that were required to date to fund the growth activities of the Group.
Consolidated cash balance as at 30 June 2013 is $12.1m. Net assets increased by 8% which is largely attributable to the current
year’s profit after tax.
As at 30 June 2013, Treasury Group Ltd holds Available-For-Sale-Investments amounting to $9.9m which can be readily
converted to cash should the need arise.
The value of Treasury Group’s investment in partner boutiques is carried at $30.7m which represents historical cost plus the
share of undistributed earnings over time. A significant proportion of this carrying value is reflected in cash and liquid assets
held at the boutique level.
Treasury Group Ltd has the capacity to pay dividends to its shareholders. During the year, Treasury Group Ltd paid 37 cents
in dividends, an increase of 9% compared to the comparative period. A final dividend of 23 cents per share is declared on
21 August 2013.
During the year, Treasury Group Ltd did not conduct any buy-back schemes to reduce its share capital (2012: nil).
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.
Cash Flow from Operations
Net cash flow from operating activities increased by $4.2m to $10.9m or by 62% over the year. This increase arose from
the consistent dividend and distribution payments by the equity accounted investments to Treasury Group Ltd.
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. 18
19
Business strategies and prospects
Treasury Group Ltd continues to look at start up opportunities as well as acquisitions as part of its growth strategy. This growth
may come from merger and acquisition opportunities at corporate level. With the sound capital structure and strong cash flows
from portfolio of boutique investments, Treasury Group Ltd is positioned to continuously explore and investigate such business
opportunities that deliver additional value without exposing shareholders to excessive risk. These types of opportunities are
potentially risky and difficult to forecast. However, with a disciplined approach and assistance of professional advisers, Treasury
Group Ltd will continue to assess such opportunities as they arise.
Material business risks
The material business risks faced by Treasury Group Ltd that are likely to have an impact on the financial prospects of the
Company and how the Company manages these risks include:
Global Market risks
The nature of the business of Treasury Group Ltd means that the Group is always exposed to market volatility and potential
adverse market conditions. Major international listed equity markets continue to display volatility on both upside and downside
with publicised global macro risks such as higher European sovereign debt risks, slower growth in China and monetary policies
in the US and Japan. While these risks are external and beyond the control of the Group, a number of our boutique partners
delivered exceptional performance including Investors Mutual Ltd, RARE Infrastructure Ltd and Celeste Funds Management
Limited. Market risk is however at the core of the business.
Investment appetite
Retail investors have remained cautious in their investment styles. This conservatism had driven outflows in the retail market.
Treasury Group believes that the Australian funds management industry is attractive and growing, underpinned by mandated
increases to superannuation contributions and stable economic regulatory environment. The risk appetite of investors does
change and this can influence fund flow and asset allocation.
Regulatory environment
The business of the Group operates in a highly regulated environment that is frequently subject to review and regular change.
During the year, Treasury Group Investment Services Limited was subject to ASIC surveillance for its compliance for the various
local regulatory guidelines. Treasury Group Ltd’s risk and compliance team are always working to ensure that the Group is
compliant with the new financial and regulatory requirements.
Significant Changes in the State of Affairs
On 10 July 2012, Treasury Group Ltd acquired a 20% equity ownership in Octis Asset Management Pte Ltd (Octis). Octis is an
Asian multi strategy equity manager based in Singapore. Cost of the initial acquisition was $225,395.
On 14 September 2012, the Board of Premium Investors Ltd (PRV) and Wilson Asset Management Capital Limited (WAM)
entered into a Scheme Implementation Agreement (the Scheme). On 12 December 2012, the Scheme was approved and WAM
assumed control of the Company at that date. On 11 January 2013, the Board of PRV gave the 30-day notice of termination of the
Management Agreement between TIS and PRV.
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 7 August 2013, Mr. Andrew Howard was appointed as Chief Investment Officer of Treasury Group Ltd.
On 21 August 2013, the Directors of Treasury Group Ltd declared a final dividend on ordinary shares in respect of the 2013
financial year. The total amount of the dividend is $5,306,274 which represents a fully franked dividend of 23 cents per share.
The dividend has not been provided for in the 30 June 2013 financial statements.
Performance Rights
On 1 July 2012, Treasury Group Ltd granted additional 39,007 performance rights which have vesting date of 1 July 2015 (2012:
816,749 granted on 12 July 2011 and have vesting date of 11 July 2014) to officers and certain employees as part of their long term
incentives. 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, 9,375 (2012: 154,517)
issued performance rights lapsed and have been terminated. Total value of the remaining performance rights is $1,092,009
amortised over three years from the grant date. The amount of performance rights amortisation expense for the period was
$373,479 (2012:$351,109).
As at the date of this report, there were no unissued ordinary shares under performance rights (30 June 2012: Nil) held by
employees of the Group. Further details of the performance rights outstanding to employees of the Group are included in
Note 26 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 29.4 to Aus 29.7.2 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 two 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. 20
21
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
The Board sets annual KPIs for the CEO against which performance is measured. The KPIs are based on financial targets, growth
and business development targets as well as operational management.
The focus of the KPIs is to drive decision making in a manner that increases returns to shareholders in the short and longer
term. The financial targets and heavily weighted in the STI calculation. The board also considers the general value add to the
business and the company’s stakeholders through areas such as investor relations, deal origination and strategy.
Following are the CEO’s KPIs for 2013:
– Achievement of eps growth targets
– Completion of targeted deal opportunities
– Achievement of strategic plan milestones (which in FY 13 included expansion of TRG capabilities, restructure of PRV, other)
– Qualitative assessment of management of staff
– Qualitative assessment of effectiveness of communications with market
– Discretionary element
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 STI’s above.
Structure
LTI grants are delivered in the form of performance rights/options or shares.
Performance rights
The Company granted performance rights to officers and certain employees as part of their long term incentives. The
performance rights have been split into two equal tranches and each tranche is subject to different total shareholder return
(TSR) performance hurdles. TSR measures the return to a shareholder over the Performance period in terms of changes in the
market value of the shares plus the value of any dividends paid on the shares. Each TSR hurdle compares the TSR performance
of Treasury Group with the TSR performance of each of the entities in a comparator group described below:
Tranche 1 – S & P ASX 300 comparator Group
50% of the performance rights are subject to the TSR hurdle that compares the TSR performance of Treasury Group at the end
of the performance period with the growth in TSR over the same period of the S&P ASX 300 companies.
Tranche 2 – selected comparator group
50% of the performance rights will be subject to a TSR hurdle that compares the TSR performance of Treasury Group at the
end of the performance period with the growth in TSR over the same period of a selected comparator group of companies.
Each company in the comparator group is weighted equally. The comparator group comprises
– BT Investment Management Ltd
– Perpetual Limited
– K2 Asset Management Holdings Limited
– Hunter Hall International Limited
– Platinum Asset Management Limited
– Magellan Financial Group
– IOOF Holdings Limited
The percentage of performance rights which vest (if any) will be determined by the Board be reference to the percentile ranking
achieved by the company over the performance period compared to the comparator group applying under the relevant TSR
hurdle for the tranche:
TSR growth – percentile ranking
Performance rights that vest (%)
75th percentile or above
Between 50th and 75th percentile
50th percentile
Below 50th percentile
100%
Progressive pro rata vesting from 50% at 2% for every one
percentile increase above the 50th percentile
50%
Nil
Upon vesting of the performance rights a share is allocated for each performance right. The shares will rank equally and have
the same voting rights and dividend eligibility as other ordinary shares in the company.
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. 22
23
Lapse of Performance Rights
Performance rights lapse to the extent that performance conditions are not satisfied. These include:
– Cessation of employment before the end of the vesting period
– Contravention of dealing restrictions
– Acting dishonestly or fraudulently
Change of Control
Generally in the event of a change of control whether through takeover, scheme of arrangement or any other transaction that
the board determines is likely to result in a change of control, the performance rights may vest at the board’s discretion.
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
Bonus¹
$
Super-
annuation
$
Options/
Performance
rights²
$
Shares
$
Others³
$
$
Directors
M. Fitzpatrick – Chairman
2013
2012
114,679
114,679
D. Cooper – Non-Executive Director
2013
2012
–
116,302
P. Kennedy – Non-Executive Director
2013
2012
120,000
120,000
R. Hayes – Non-Executive Director
2013
2012
80,275
68,808
M. Donnelly – Non-Executive Director
2013
2012
Executives
55,046
14,397
–
–
–
–
–
–
–
–
–
–
A. McGill – Chief Executive Officer
2013
2012
406,850
421,422
360,000
–#
J. Ferragina – Chief Financial Officer
2013
2012
303,530
284,225
179,200
121,000
10,321
10,321
–
3,396
–
–
7,225
6,192
4,954
1,296
16,470
15,775
16,470
15,775
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
273,333
265,096
76,533
74,227
–
–
–
–
–
–
–
–
–
–
–
–
–
21,865
125,000
125,000
–
119,698
120,000
120,000
87,500
75,000
60,000
15,693
1,056,653
702,293
575,733
517,092
C. Feldmanis – Treasury Group Investment Services Ltd – Managing Director (resigned 17 August 2011)
2013
2012
–
112,532
–
–
–
15,775
R. Sullivan – Head of Distribution (resigned 7 March 2012)
2013
2012
–
–
–
284,225
381,166*
15,775
Total remuneration: Key Management and Highest Paid Personnel
2013
2012
1,080,380
1,536,590
539,200
502,166
55,440
84,305
–
–
–
–
–
–
–
–
–
–
349,866
339,323
–
128,307
–
681,166
58%
–
–
–
–
–
2,024,886
21,865
2,484,249
1 Cash bonuses paid to Executives are performance-based with the exception of Mr. Sullivan and paid every August in the following financial
year. For 2013 KMP bonuses, 50% is deferred and payable in the following year. The deferred component is not provided for as at 30 June 2013.
–
–
–
–
–
–
–
–
–
–
34%
38%
31%
38%
–
–
–
27%
35%
The table below shows the maximum potential bonus of each of the Executives:
Executives
A. McGill
J. Ferragina
Maximum Potential Bonus
2013
450,000
256,000
2012
450,000
240,000
2 Refer to Note 23 for the vesting conditions of options and performance rights granted to Executives.
3 There were no termination payments paid during the year.
# 2012 cash bonus was waived by Mr McGill.
*
In the prior year, 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.
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 amount of bonus pool:
Net profit after tax
10,390,514
6,751,757
10,005,104
11,676,131
4,945,543
2013
$
2012
$
2011
$
2010
$
2009
$
Share price at start of year ($)
Share price at end of year ($)
Interim dividend (cps)
Final dividend (cps)
EPS
KMP bonuses ($)
4.09
7.07
17
23
45.0
3.96
4.09
14
20
29.3
5.06
3.96
14
20
43.4
4.11
5.06
12
14
50.6
9.21
4.11
10
10
21.4
539,200
502,166
992,443
1,421,527
560,384
On 1 July 2012, Treasury Group Ltd granted additional 39,007 performance rights which have vesting date of 1 July 2015 (2012:
816,749 granted on 12 July 2011 and have vesting date of 11 July 2014) to officers and certain employees as part of their long term
incentives. 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, 9,375 (2012: 154,517)
issued performance rights lapsed and have been terminated. Total value of the remaining performance rights is $1,092,009
amortised over three years from the grant date. The amount of performance rights amortisation expense for the period was
$373,479 (2012:$351,109).
Remuneration Long term incentive- Performance rights: Granted and vested during the year
On the year ended 30 June 2013, Treasury Group Ltd issued 39,007 (2012: 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
%
–
–
63,971
–
–
–
–
–
–
–
(4,740)
(4,740)
–
–
–
2013
A. McGill
J. Ferragina
Other employees
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. 24
25
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
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
2013
During the year ended 30 June 2013, the Company did not issue any shares to the Key Management Personnel on the vesting of
performance rights (2012: nil).
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 predetermined 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 split in two equal tranches
and each tranche is subject to different total shareholder return (TSR) performance hurdles. Vesting conditions are subject to
performance hurdles which are discussed earlier in this report.
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 two equal instalments over a two 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. Vesting conditions are subject to the same performance hurdles as
discussed earlier in this report.
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
Meetings
eligible to
attend
Meetings
attended
Audit Committee
Meetings
Meetings
eligible to
attend
Meetings
attended
Remuneration
Committee Meetings
Meetings
eligible to
attend
Meetings
attended
Nomination Committee
Meetings
Meetings
eligible to
attend
Meetings
attended
M. Fitzpatrick
P. Kennedy
R. Hayes
M. Donnelly
10
10
10
10
10
10
10
9
Committee membership
4
4
4
3
4
4
2
2
2
2
2
2
0
0
0
0
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)
P. Kennedy (Chairman)
R Hayes (Chairman)
M. Fitzpatrick
R. Hayes
M. Fitzpatrick
R. Hayes
M. Fitzpatrick
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 auditors of Treasury Group Ltd. A copy of the declaration is set out
on page 27.
Signed in accordance with a resolution of the Directors.
M Fitzpatrick
Chairman
21 August 2013
AnnuAl RepoRt 2013tReAsuRy GRoup ltddirectors’ Report cont. Auditor’s Independence Declaration
26
27
Corporate Governance
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 are 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 programme 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.
During the financial year, the members of the Nomination
Committee were Mr Hayes (Chairman) and Mr Fitzpatrick.
On 17 July 2013, Ms Donnelly was appointed to the
Nominations Committee and the Company now meets the
ASX Principles recommendation of having a minimum of
three members on the Nomination Committee.
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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd The Nomination Committee oversees management
succession plans including the CEO and his direct reports
and evaluates the Board, Committee and Executive’s
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 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;
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 advisor, 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.
– background information on and contact information
Senior Executives
28
29
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, advisors 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
Managers
Employees
Total
Female
4
2
6
9
1
0
3
7
%
25%
–
50%
86%
The representation of women across the organisation as a
whole is 52%.
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.
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 2012/13
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 on-line 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdCorporate Governance cont. 30
31
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.
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. On 17 July 2013, Ms Donnelly was
appointed to the Remuneration Committee.
The Remuneration Committee has a formal charter which
is available on the website of the Company in the Corporate
Governance Section.
The Board have 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 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,
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.
Income Statement
for the year ended 30 June 2013
Revenues
(Loss) on investments
Salaries and employee benefits expenses
Other expenses
Consolidated
2013
$
2012
$
4,303,143
3,944,594
(403,703)
(69,756)
(4,517,723)
(5,202,287)
(3,628,471)
(3,741,651)
Notes
5(a)
5(b)
5(c)
5(c)
Share of net profits of equity accounted investments
13(c)(iv)
15,050,149
11,484,896
Profit Before Income Tax
Income tax (expense)/benefit
Profit for the Year
Attributable to:
Non-Controlling Interest
Members of the Parent
10,803,395
6,415,796
7(c)
(399,156)
338,432
10,404,239
6,754,228
13,725
2,471
20(e)
10,390,514
6,751,757
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
25
25
8(b)
45.0
45.0
37
29.3
29.3
34
The above income statement should be read in conjunction with the accompanying notes.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd Statement of Comprehensive Income
for the year ended 30 June 2013
32
33
Profit for the Year
Other Comprehensive Income
Items that may be reclassified to profit and loss
Reversal of previous revaluation of available-for-sale investments sold during the year
Income tax relating to items that may be reclassified
Total items that may be reclassified to profit and loss
Net unrealised gains/(losses) on available-for-sale investments taken to equity
Income tax relating to items not reclassified
Share of after-tax gain on available-for-sale investments of jointly controlled entities
Other comprehensive income/(loss) for the year (net of tax)
Consolidated
2013
$
2012
$
10,404,239
6,754,228
775,492
(232,646)
542,846
(8,643)
2,593
(6,050)
375,790
(898,998)
(112,737)
113,606
269,699
105,161
376,659
(524,138)
919,505
(530,188)
Total Comprehensive Income for the Year
11,323,744
6,224,040
Attributable to:
Non-Controlling Interest
Members of the Parent
13,725
2,471
11,310,019
6,221,569
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Statement of Financial Position
as at 30 June 2013
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 (net)
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
Financial liability
Total Current Liabilities
Non-Current Liabilities
Provisions
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)
10
10
11
12
7(d)
13
14
15
16
17
18
19
18
19
Consolidated
2013
$
2012
$
12,116,947
8,194,805
7,578,686
4,648,822
175,232
692,175
19,870,865
13,535,802
723,958
891,713
9,893,255
9,514,834
3,629,539
4,002,406
2,760,114
3,208,633
30,633,054
29,697,032
70,270
18,440
91,712
34,357
252,764
583,888
47,981,394
48,024,575
67,852,259
61,560,377
5,861,982
2,823,671
213,202
600,000
143,131
–
6,675,184
2,966,802
99,650
–
99,650
77,194
600,000
677,194
6,774,834
3,643,996
61,077,425
57,916,381
20(a)
20(f)
20(e)
29,594,265
29,594,265
3,823,945
2,530,961
27,643,019
25,788,684
16,196
2,471
61,077,425
57,916,381
The above statement of financial position should be read in conjunction with the accompanying notes.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd Statement of Changes in Equity
for the year ended 30 June 2013
34
35
Note
Ordinary
shares
$
Consolidated
Share
options
reserve
$
Net
unrealised
gains
reserve
$
Retained
earnings
$
Non-
controlling
interest
$
Total
$
29,594,265
3,073,807
(542,846)
25,788,684
2,471
57,916,381
–
–
–
–
–
919,505
10,390,514
13,725
11,323,744
373,479
–
–
–
–
–
–
–
(8,536,179)
–
–
–
373,479
–
(8,536,179)
29,594,265
3,447,286
376,659
27,643,019
16,196
61,077,425
8(b)
As at 1 July 2012
Total comprehensive
income for the year
Share-based payments
Consolidation of
subsidiaries acquired
during the year
Dividends paid
at 30 June 2013
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Note
Ordinary
shares
$
Consolidated
Share
options
reserve
$
Net
unrealised
gains
reserve
$
Retained
earnings
$
Non-
controlling
interest
$
Total
$
29,594,265
2,722,698
(12,658)
26,880,985
–
59,185,290
–
–
–
–
–
(530,188)
6,751,757
2,471
6,224,040
351,109
–
–
–
–
–
–
–
(7,844,058)
–
–
–
351,109
–
(7,844,058)
29,594,265
3,073,807
(542,846)
25,788,684
2,471
57,916,381
8(b)
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
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Statement of Cash Flows
for the year ended 30 June 2013
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Dividends and distributions received
Interest received
Income tax refund
Notes
Consolidated
2013
$
2012
$
4,476,460
5,278,541
(7,779,450)
(12,175,058)
13,507,057
12,750,418
570,870
134,883
780,596
96,381
Net Cash Flows from Operating activities
9(b)
10,909,820
6,730,878
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 Increase/(Decrease) in Cash and Cash Equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year
(10,609)
–
(43,489)
(10,133)
(225,395)
(1,400,000)
(6,121,318)
(2,372,933)
7,562,073
984,926
–
(604,710)
343,750
1,675,839
–
989,517
1,548,501
(780,983)
(8,536,179)
(7,844,058)
(8,536,179)
(7,844,058)
3,922,142
(1,894,163)
8,194,805
10,088,968
9(a)
12,116,947
8,194,805
The above statement of cash flows should be read in conjunction with the accompanying notes.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd Notes to the Financial Statements
for the year ended 30 June 2013
36
37
1. Corporate Information
The financial report of Treasury Group Ltd (the ‘Company’ or the ‘Group’) for the year ended 30 June 2013 was authorised for
issue in accordance with a resolution of the Directors on 21 August 2013.
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.
The financial report is presented in Australian dollars.
Treasury Group Ltd is a for-profit entity.
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 year and have affected the
amounts reported in these financial statements.
Standards affecting presentation and disclosure
Standard/Interpretation
Summary
Amendments to AASB 101
‘Presentation of Financial
Statements’
Amendments to AASB 101
‘Presentation of Financial
Statements’
The amendment (part of AASB 2011-9 ‘Amendments to Australian Accounting Standards
- Presentation of Items of Other Comprehensive Income’ introduce new terminology for
the statement of comprehensive income and income statement. Under the amendments
to AASB 101, the statement of comprehensive income is renamed as a statement of
profit or loss and other comprehensive income and the income statement is renamed as
a statement of profit or loss. The amendments to AASB 101 retain the option to present
profit or loss and other comprehensive income in either a single statement or in two
separate but consecutive statements. However, the amendments to AASB 101 require
items of other comprehensive income to be grouped into two categories in the other
comprehensive income section: (a) items that will not be reclassified subsequently to
profit or loss and (b) items that may be reclassified subsequently to profit or loss when
specific conditions are met. Income tax on items of other comprehensive income is
required to be allocated on the same basis – the amendments do not change the option
to present items of other comprehensive income either before tax or net of tax. The
amendments have been applied retrospectively, and hence the presentation of items of
other comprehensive income has been modified to reflect the changes. Other than the
above mentioned presentation changes, the application of the amendments to AASB 101
does not result in any impact on profit or loss, other comprehensive income and total
comprehensive income.
The amendments (part of AASB 2012-5 ‘Further Amendments to Australian Accounting
Standards arising from Annual Improvements 2009-2011 Cycle’) requires an entity
that changes accounting policies retrospectively, or makes a retrospective restatement
or reclassification to present a statement of financial position as at the beginning of
the preceding period (third statement of financial position), when the retrospective
application, restatement or reclassification has a material effect on the information in the
third statement of financial position. The related notes to the third statement of financial
position are not required to be disclosed.
2. Summary of Significant Accounting Policies (Cont.)
Standards and Interpretations affecting the reported results or financial position
There are no new and revised Standards and Interpretations adopted in these financial statements which affected the reporting
results or financial position.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective. 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.
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2015
30 June 2016
AASB 10 ‘Consolidated Financial Statements’ and AASB 2011-7
‘Amendments to Australian Accounting Standards arising from the
consolidation and Joint Arrangements standards’
AASB 11 ‘Joint Arrangements’ and AASB 2011- 7 ‘Amendments to
Australian Accounting Standards arising from the consolidation and Joint
Arrangements standards’.
AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB
2011-7 ‘Amendments to Australian Accounting Standards arising from
the consolidation and Joint Arrangements standards’
AASB 127 ‘Separate Financial Statements’ (2011) and AASB
2011-7 ‘Amendments to Australian Accounting Standards arising from
the consolidation and Joint Arrangements standards’
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
AASB 128 ‘Investments in Associates and Joint Ventures’ (2011) and AASB
2011-7 ‘Amendments to Australian Accounting Standards arising from the
consolidation and Joint Arrangements standards’
1 January 2013
30 June 2014
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 2011-4 ‘Amendments to Australian Accounting Standards to Remove
Individual Key Management Personnel Disclosure Requirements’
1 July 2013
30 June 2014
AASB 2012-2 ‘Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities’
AASB 2012-3 ‘Amendments to Australian Accounting Standards –
Offsetting Financial Assets and Financial Liabilities’
AASB 2012-5 ‘Amendments to Australian Accounting Standards
arising from Annual Improvements 2009–2011 Cycle’
1 January 2013
30 June 2014
1 January 2014
30 June 2015
1 January 2013
30 June 2014
AASB 2012-10 ‘Amendments to Australian Accounting Standards –
Transition Guidance and Other Amendments’
1 January 2013
30 June 2014
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 38
39
c. Revenue recognition
e. Cash and cash equivalents
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 (g) and (h) 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.
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.
f. Trade and other receivables
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.
Collectability 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
(2012: 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.
2. Summary of Significant Accounting Policies
i. Investments in jointly controlled entities
(Cont.)
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.
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.
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:
2013 & 2012
Furniture & 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 40
41
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.
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.
m. Investments and other financial assets
ii. Loans and receivables
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.
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.
2. Summary of Significant Accounting Policies
(Cont.)
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 or
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 or
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.
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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 42
43
p. Impairment of non-financial assets other
than goodwill
s. Employee leave benefits
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.
q. Trade and other payables
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.
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.
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.
2. Summary of Significant Accounting Policies
(Cont.)
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 two plans in place to provide
these benefits:
i. 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.
ii. 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.
The cost of the equity-settled Officer and executive Long
Term Incentive 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.
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 & 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.
y. Comparatives
Where necessary, comparative information has been
immaterially reclassified and repositioned for consistency
with current year disclosures.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 44
45
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
2013
$
2012
$
12,116,947
8,194,805
12,116,947
8,194,805
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% [2012:0.75%]/(75 basis points), [2012:75 basis points]
–0.75% [2012:0.75%]/(75 basis points), [2012:75 basis points]
Post tax Profit
Higher/(Lower)
2013
$
2012
$
48,571
48,149
(48,571)
(48,149)
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 carrying value of the loans.
3. Financial Risk Management Objectives and Policies (Cont.)
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 proceeding year all of the Group’s financial liabilities are due within 6 months or less.
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 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
2013
$
2012
$
–
3,180,669
8,568,200
5,470,257
1,100
1,100
8,569,300
8,652,026
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)
2013
$
2012
$
–
–
222,724
(222,724)
599,851
382,918
(599,851)
(382,918)
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 2013, 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
possiblechange.
The Group does not have any significant transactional currency exposures.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 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
46
47
Consolidated
2013
$
2012
$
–
1,606,829
1,323,955
862,808
–
2,474
1,323,955
2,472,111
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 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:
Consolidated
AUD/US $ + 10%
AUD/US$ – 10%
AUD/GBP + 10%
AUD/GBP – 10%
Equity
Higher/(Lower)
2013
$
2012
$
–
–
112,478
(112,478)
92,677
60,397
(92,677)
(60,397)
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 Octis Asia Pacific Fund Limited*
Investment in Aubrey Conviction Fund*
Aubrey Capital Management convertible preference shares**
Others
Total
Level 1
Level 2
Level 3
30 June 2013
Total
–
–
–
–
–
5,921,032
2,647,168
–
–
5,921,032
2,647,168
–
1,323,955
1,323,955
1,100
–
1,100
8,569,300
1,323,955
9,893,255
3. Financial Risk Management Objectives and Policies (Cont.)
Level 1
Level 2
Level 3
30 June 2012
Total
Available-for-sale-investments
Investment in Premium Investors Limited***
3,180,669
–
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
–
1,606,829
2,033,877
838,522
991,029
–
–
–
–
–
–
862,808
1,100
–
–
–
–
–
–
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
* 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
*** Listed available-for-sale investment
The fair value of these investments was derived from the quoted price available from ASX as at 30 June 2012.
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 $90,985.
Reconciliation of Level 3 fair value measurements of financial assets
Opening balance
Additional acquisition of convertible preference shares
Revaluation of convertible preference shares
Total
Opening balance
Revaluation of convertible preference shares
Total
30 June 2013
Available for sale
Convertible preference shares
862,808
314,073
147,074
1,323,955
30 June 2012
Available for sale
Convertible preference shares
836,544
26,264
862,808
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont.
48
49
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
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.
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 hybrid monte-carlo/binomial option
pricing model with the assumptions detailed in Note 23. 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 $3,629,539(2012:
$4,002,406). There was no impairment charge during the
year (2012: nil).
Deferred tax assets
Goodwill
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.
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 2013 was
$252,764 (2012: $583,888). An impairment charge of $331,124
was recognised during the year (2012: nil).
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. (Loss) on investments
Notes
Consolidated
2013
$
2012
$
1,385,405
639,931
1,713,743
2,121,649
202,028
323,389
3,301,176
3,084,969
–
116,573
395,048
8,665
395,048
125,238
299,155
285,325
358,932
363,016
584,480
721,948
22,439
12,439
4,303,143
3,944,594
Net gains/(loss) on disposal of available-for-sale investments
Impairment of investment accounted for under the equity method
Net gain on purchase of a subsidiary
Total (loss) on investments
396,297
(85,158)
(800,000)
(361,201)
6(d)
–
376,603
(403,703)
(69,756)
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 50
51
Notes
Consolidated
2013
$
2012
$
14(a)
14(a)
14(a)
15(a)
4,144,244
4,851,178
373,479
351,109
4,517,723
5,202,287
2,231
27,515
2,305
15,917
47,968
170,602
410,295
249,728
210,392
164,803
235,700
651,431
266,528
392,500
47,877
5,102
29,177
2,130
20,863
57,272
194,473
783,616
203,697
206,365
315,767
217,854
680,722
233,049
450,641
79,204
210,296
112,351
16(a)
331,124
–
–
42,350
239,227
164,290
3,580,503
3,684,379
3,628,471
3,741,651
c. Expenses
Salaries and employee benefits
Salaries and employee benefits
Share-based payment expense arising from equity-settled share-based payment
transactions
Depreciation and amortisation
Furniture & fittings
Office equipment
Leasehold improvements
Software
Total depreciation and amortisation of non-current assets
Other expenses
Accounting & audit fees
Operating lease rental – minimum lease payments
Marketing & communication expenses
Travel & accommodation costs
Payroll tax
Legal & compliance fees
Consulting fee & IT charges
Insurance charges
Directors’ fees (non-executives)
Share registry & ASX fees
Subscriptions and training expenses
Impairment of goodwill
Fund administration expenses
Other expenses
Total other expenses
6. acquisition of Subsidiaries (Prior Year)
During the prior year, 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 14 December 2011. 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 47.8% 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 77.8% of the issued capital of AR Capital Management Pty Limited via which Treasury
Group Ltd has gained control of the Company.
The consideration transferred and the related gain/goodwill on the purchase/acquisition were as follows:
a. Consideration transferred
Cash and cash equivalents
b. Assets acquired and liabilities assumed at the date of acquisition
Current assets
Cash and cash equivalents
Trade receivables¹
Other assets
Deferred tax assets
Current liabilities
Trade and other payables
Fair value of identifiable net assets acquired
Consolidated
2012
$
aR Capital
Management
Pty Ltd
acquisition
$
Global Value
Investors Ltd
acquisition
$
Total
$
843,000
–
843,000
1,742,625
349,638
242,502
484,004
89,892
51,487
17,438
–
1,832,517
401,125
259,940
484,004
1,058,305
123,570
1,181,875
1,760,464
35,247
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.
c. Gain from purchase of subsidiary
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
–
–
619,135
493,000
350,000
878,609
1,760,464
35,247
1,795,711
657,990
(583,888)
74,102
During the prior year, Treasury Group Ltd acquired a further 47.50% interest in Global Value Investors Ltd which 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.
During the prior year, the acquisition of a further 47.8% 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 52
53
6. acquisition of Subsidiaries (Prior Year) (Cont.)
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 was 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
f. Impact on acquisition on the results of the Group
Global Value
Investors Ltd
acquisition
$
aR Capital
Management
Pty Ltd
acquisition
$
657,990
(583,888)
(281,387)
–
376,603
(583,888)
(843,000)
1,742,625
899,625
–
89,892
89,892
Included in the profit for the comparative are 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 comparative year would have
been $5,919,923.
7. Income Tax
a. Income tax benefit
The major components of income tax benefit are:
Income Statement
Current income tax
Current income tax (charge)/benefit
Adjustments in respect of current income tax charge of previous years
Deferred income tax
Relating to origination and reversal of temporary differences
Tax adjustment to recognise tax losses previously unrecognised
Income tax (expense)/benefit reported in the Income Statement
b. Amounts charged directly to other comprehensive income
Consolidated
2013
$
2012
$
(627,012)
804,872
(110,506)
(126,675)
(116,588)
207,397
454,950
(547,162)
(399,156)
338,432
Deferred income tax related to income charged or credited directly to other comprehensive income
Unrealised (gain)/loss on available-for-sale investments
Income tax (payable)/benefit reported in other comprehensive income
(112,737)
269,699
(112,737)
269,699
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% (2012: 30%)
Share-based payments
Reversal of share in net profit of jointly controlled entities
Distributions received
Expenditure not allowable for income tax purposes
Adjustments in respect of current income tax charge of previous years
Dividend difference
Others
Tax adjustment to recognise tax losses previously unrecognised
Aggregate income tax (expense)/benefit
10,803,395
6,415,796
(3,241,019)
(1,924,739)
(112,044)
(105,333)
4,515,045
3,445,469
(1,583,400)
–
(8,682)
(11,094)
(110,506)
(126,675)
(313,500)
–
–
(392,034)
454,950
(547,162)
(399,156)
338,432
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 54
55
Statement of Financial
Position
2013
$
2012
$
Income
Statement
2013
$
2012
$
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
2,099,432
2,511,508
(412,076)
Tax losses of acquired subsidiaries
Revaluation of available-for-sale investments at fair value
Impairment of investment accounted for under the equity
method
Accruals and provisions
Deferred tax liabilities
562,261
–
348,360
414,827
426,111
365,507
108,360
359,873
3,424,880
3,771,359
Revaluation of convertible notes to fair value
(551,230)
(551,230)
Revaluation of available-for-sale investments at fair value
charged to equity
Receivables
(112,737)
(799)
(10,163)
(1,333)
(664,766)
(562,726)
–
–
–
–
–
240,000
54,954
108,360
93,612
–
–
–
–
534
5,425
Net deferred tax assets
2,760,114
3,208,633
(116,588)
207,397
During the year, Treasury Group Ltd recognised tax benefits relating to tax losses in prior years amounting to $454,950 (2012:
nil) that were not recognised in those years. Deferred tax assets and liabilities arising from temporary differences were
recognised in full during the year.
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.
8. Dividends Paid and Proposed
Treasury Group Ltd
2013
$
2012
$
a. Dividends proposed and not recognised as a liability*
Final fully franked dividend 23 cents per share (2012: 20 cents per share)
5,306,274
4,614,151
b. Dividends paid during the year
Current year interim
Fully franked dividend (17 cents per share) (2012: 14 cents per share)
3,922,028
3,229,907
Previous year final
Fully franked dividend (20 cents per share) (2012: 20 cents per share)
Total paid during the year (37 cents per share) (2012: 34 cents per share)
4,614,151
4,614,151
8,536,179
7,844,058
c. Franking credit balance
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% (2012: 30%)
– franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date
9,378,174
9,957,655
915,732
898,199
10,293,906
10,855,854
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
(2,274,117)
(1,977,493)
8,019,789
8,878,361
* Calculation based on the ordinary shares on issue as at 31 July 2013
The tax rate at which paid dividends have been franked is 30% (2012: 30%).
Dividends proposed will be franked at the rate of 30% (2012: 30%).
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 56
57
Consolidated
2013
$
2012
$
12,116,947
8,194,805
12,116,947
8,194,805
10,404,239
6,754,228
(15,050,149)
(11,484,896)
13,547,967
11,629,758
800,000
361,201
–
(376,603)
(396,297)
47,968
–
85,158
57,272
53,552
(395,048)
(125,238)
(54,117)
(13,135)
373,479
11,609
(45,146)
351,109
20,442
(13,730)
(2,929,864)
1,941,967
684,698
448,519
331,124
(958,304)
(978,672)
(583,888)
3,038,311
(381,346)
70,071
22,456
(152,758)
(55,239)
–
600,000
10,909,820
6,730,878
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 investment accounted for under equity method
Net gain on purchase of subsidiary
(Gain)/loss 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
Others
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
Decrease/(increase) in other assets
Decrease/(Increase) in deferred tax assets
Decrease/(increase) in goodwill
Increase/(decrease) in trade and other payables
Increase/(decrease) in current provisions
Increase/(decrease) in non-current provisions
Increase in financial liability
Net cash flow from operating activities
At reporting date, Treasury Group Ltd did not have any financing facilities available.
10. Trade and Other Receivables
Current
Trade receivables
Sundry receivables
Other receivables
Related party receivables
– Jointly controlled entities — Dividend
— Other
– Other related parties
a. Allowance for impairment loss
Note
Consolidated
2013
$
2012
$
4,835,029
1,451,389
2,664
79,091
4,443
341,612
28
2,136,708
2,095,797
525,194
–
704,273
51,308
7,578,686
4,648,822
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.
2013
2012
* Past due not impaired (‘PDNI’)
Total
$
0-30 days
$
31-60 days
PDNI*
$
61-90 days
PDNI*
$
7,578,686
6,995,367
4,648,822
4,380,325
72,124
51,741
90,804
44,776
+91 days
PDNI*
$
420,391
171,980
Receivables past due but not impaired is $583,319 (2012:$268,497). All overdue amounts as at 30 June 2012 have been received in
full. Payment terms on these amounts have been re-negotiated. 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 28.
c. Fair value and credit risk
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.
Non-current
Security deposits
Consolidated
2013
$
2012
$
723,958
891,713
723,958
891,713
The amount receivable is in Australian Dollars, non-interest bearing and is not considered past due or impaired.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont.
11. available-for-Sale Investments
Non-current
– Investment in Octis Asia Pacific Fund Limited*
– Investment in Premium Investors Ltd listed shares
– Investment in Aubrey Conviction Fund*
– TG TAAM Asia Ex Japan 1*
– Investment in Ascot Cayman Fund*
– Investment in Orion Sirius Fund*
– Aubrey Capital Management convertible preference shares**
– Unlisted shares in other corporations
58
59
Consolidated
2013
$
2012
$
5,921,032
–
–
3,180,669
2,647,168
2,033,877
–
–
–
1,323,955
1,100
1,606,829
838,522
991,029
862,808
1,100
9,893,255
9,514,834
*
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 $1,314,073, of which the $314,073 was acquired during the year. 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
Loans receivables due from:
Jointly controlled entities
Notes
Consolidated
2013
$
2012
$
28
3,629,539
4,002,406
3,629,539
4,002,406
All amounts are receivable in Australian Dollars and loans to jointly controlled entities are not considered past due or impaired.
The following table is a reconciliation of the movement of impairment charges on loans to jointly controlled entities:
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%.
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
Treasury Asia Asset Management Ltd – ordinary shares
RARE IP Trust – units
RARE Infrastructure Ltd – ordinary shares
IML Investment Partners Limited – ordinary shares
Celeste Funds Management Ltd – ordinary shares
Evergreen Capital Partners Pty Ltd – ordinary shares
Octis Asset Management Pte Ltd – ordinary shares
Aubrey Capital Management Ltd
i. Principal activity
Notes
Consolidated
2013
$
2012
$
13 (c) (i)
30,633,054
29,697,032
30,633,054
29,697,032
Ownership interest held by
consolidated entity
Balance date
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
2013
%
47.22
41.99
43.96
40.00
40.00
40.00
39.17
30.00
20.00
–
2012
%
47.50
41.99
43.96
40.00
40.00
40.00
39.17
30.00
–
–
a.
Investors Mutual Limited 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.
c. Treasury Asia Asset Management Ltd is a boutique asset manager specialising in the Asia Pacific Region.
d. RARE IP Trust and RARE Group [RARE Infrastructure Ltd, RARE North America, RARE Infrastructure Sovereign Enterprise,
RARE Infrastructure (Europe) Ltd, RARE Infrastructure (UK) Ltd, RARE Infrastructure (USA) Inc.] are funds management
business specialising in listed global infrastructure assets.
IML Investment Partners Limited provides investment sub advisory services to Investors Mutual Limited.
e.
f. Celeste Funds Management Limited 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. Octis Asset Management Pte Ltd is an Asian multi strategy equity manager based in Singapore.
i. 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 22.2% of its capital.
These entities, except Aubrey Capital Management Ltd and Octis Asset Management Pte Ltd, are incorporated and domiciled
in Australia.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 13. Investments accounted for using the Equity Method (Cont.)
c. Additional disclosures
(i) Carrying amount of investments accounted for using the equity method
Balance at the beginning of the year
– acquisition of jointly controlled entity
– share of jointly controlled entities’ net profits for the year
– trust distribution received from jointly controlled entity
– dividends received from jointly controlled entities
– share of unrealised gains reserve of jointly controlled entities
– impairment of investment in jointly controlled entities
– disposal of 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
60
61
Consolidated
2013
$
2012
$
29,697,032
29,269,020
225,395
2,000,000
15,050,149
11,484,896
(5,278,000)
(3,735,854)
(8,269,967)
(7,893,904)
8,445
94,071
(800,000)
–
–
(1,521,197)
30,633,054
29,697,032
30,599,085
25,970,702
846,150
1,687,365
(12,988,995)
(12,013,188)
(1,598,177)
(2,422,330)
16,858,063
13,222,549
36,367,614
30,200,085
21,500,212
16,406,994
(6,450,063)
(4,922,098)
15,050,149
11,484,896
During the prior year, Treasury Group Ltd acquired additional equity in Global Value Investors which increased the direct
ownership to 100%.
During the prior year, Treasury Group Ltd increased its ownership by an additional 47.8% 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 77.8% 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.
14. Plant and Equipment
Furniture & 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 & 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)
Consolidated
2013
$
2012
$
12,082
(3,445)
8,637
12,082
(1,214)
10,868
419,603
415,123
(367,557)
(340,042)
14 (a)
52,046
75,081
14 (a)
12,089
(2,502)
9,587
70,270
5,960
(197)
5,763
91,712
10,868
–
(2,231)
–
8,637
75,081
4,480
(27,515)
–
52,046
5,763
6,129
(2,305)
–
9,587
40,124
9,898
(5,102)
(34,052)
10,868
94,835
27,629
(29,177)
(18,206)
75,081
6,441
5,960
(2,130)
(4,508)
5,763
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes 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. Goodwill
Cost
Accumulated impairment losses
The balance of goodwill had been determined using a discounted cash flow
analysis which projects future cash value of the asset.
a. Impairment losses on goodwill
Opening losses, beginning balance
Impairment charges
Opening losses, closing balance
17. Trade and Other Payables (Current)
Trade payables
Other payables
Related party payables:
– jointly controlled entities
62
63
Consolidated
2013
$
2012
$
121,779
121,779
(103,339)
18,440
(87,422)
34,357
Note
15(a)
34,357
–
45,087
10,133
(15,917)
(20,863)
18,440
34,357
583,888
583,888
16(a)
(331,124)
–
252,764
583,888
5(c)
–
(331,124)
(331,124)
–
–
–
946,759
395,927
941,552
1,154,582
3,973,671
1,273,162
5,861,982
2,823,671
a. Fair value
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 28.
c. Interest rate and liquidity risk
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.
18. 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
19. Financial Liability
Current
Non-Current
Note
Consolidated
2013
$
2012
$
143,131
295,889
127,986
133,503
(57,915)
(286,261)
213,202
143,131
77,194
22,456
132,433
91,524
–
(146,763)
99,650
77,194
600,000
–
–
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.
20. Contributed Equity and Reserves
a. Ordinary shares
Issued and fully paid
2013
$
2012
$
29,594,265
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
Treasury Group Ltd
2013
Number of
shares
2012
Number of
shares
$
$
Balance at beginning of the financial year
23,070,755
29,594,265
23,070,755
29,594,265
Balance at end of the financial year
23,070,755
29,594,265
23,070,755
29,594,265
c. Capital management
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 2013, management paid dividends of $8,536,179 (2012: $7,844,058). 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.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 64
65
The Group does not have any external borrowings.
d. Long term incentives- performance rights
On 1 July 2012, Treasury Group Ltd granted additional 39,007 performance rights which have vesting date of 1 July 2015 (2012:
816,749 granted on 12 July 2011 and have vesting date of 11 July 2014) to officers and certain employees as part of their long term
incentives. 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, 9,375 (2012: 154,517)
issued performance rights lapsed and have been terminated. Total value of the remaining performance rights is $1,092,009
amortised over three years from the grant date. The amount of performance rights amortisation expense for the period was
$373,479 (2012:$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.
e. Retained profits
Balance at the beginning of the year
Profit for the year
Dividends
Balance at end of year
f. Reserves
Net unrealised gains reserve
Balance at the beginning of the year
Consolidated
2013
$
2012
$
25,788,684
26,880,985
10,390,514
6,751,757
(8,536,179)
(7,844,058)
27,643,019
25,788,684
Consolidated
2013
$
2012
$
(542,846)
(12,658)
Reversal of previous revaluation of available-for-sale investments sold during the year
775,492
(8,643)
Income tax relating to 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 unrealised gains/(losses) on available-for-sale investment
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
(232,646)
2,593
375,790
(898,998)
(112,737)
113,606
269,699
105,161
376,659
(542,846)
3,073,807
2,722,698
368,164
345,794
5,315
5,315
3,447,286
3,073,807
3,823,945
2,530,961
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 23 for further details of these plans.
21. 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 after tax for the year
– Outsourcing and responsible entity services
– Australian equities
– Alternative investments
– Central administration costs and directors’ salaries
Total per Income Statement
Segment net assets for the year
– Outsourcing and responsible entity services
– Australian equities
– Alternative investments
– Central administration
Total per Statement of Financial Position
Consolidated
2013
$
2012
$
830,764
313,976
7,069,305
6,663,441
8,056,603
4,821,454
15,956,672
11,798,871
(5,552,433)
(5,044,643)*
10,404,239
6,754,228
5,960,548
5,101,808
11,850,754
11,758,538
6,712,478
3,051,946
24,523,780
19,912,292
36,553,645
38,004,089
61,077,425
57,916,381
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.
*
Prior year includes costs related to the restructure of the GVI and AR Capital businesses. Refer to Director’s Report for abnormal items in
relation to restructure of these businesses.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 66
67
22. 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 term of four years as at 30 June 2013. 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
23. Employee Benefits and Superannuation Commitments
Performance rights
Consolidated
2013
$
2012
$
316,720
572,434
906,339
2,005,993
1,223,059
2,578,427
1,223,059
2,578,427
1,223,059
2,578,427
1,223,059
2,578,427
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.
On 1 July 2012, Treasury Group Ltd granted additional 39,007 performance rights which have vesting date of 1 July 2015 (2012:
816,749 granted on 12 July 2011 and have vesting date of 11 July 2014) to officers and certain employees as part of their long term
incentives. 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, 9,375 (2012: 154,517)
issued performance rights lapsed and have been terminated. Total value of the remaining performance rights is $1,092,009
amortised over three years from the grant date. The amount of performance rights amortisation expense for the period was
$373,479 (2012:$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 2 and 10 years. Employees have to be employed by the consolidated group while taking part in the plan. There
are 17 employees eligible to participate in the plan. Shares acquired under the Employee Share Plan vest immediately. During
the year, 4,360 (2012: 4,291) shares were purchased under the plan at a weighted average cost of $4.91 (2012: $4.11). The balance
as at 30 June 2013 was 46,751 shares (2012: 45,736). During the year, 4,360 shares vested (2012: 4,291) and 3,345 shares were sold
(2012: 42,672). The weighted average cost of all shares is $7.37 (2012: $7.72) per share.
24. Subsequent Events
On 7 August 2013, Mr. Andrew Howard was appointed as Chief Investment Officer of Treasury Group Ltd.
On 21 August 2013, the Directors of Treasury Group Ltd declared a final dividend on ordinary shares in respect of the 2013
financial year. The total amount of the dividend is $5,306,274 which represents a fully franked dividend of 23 cents per share.
The dividend has not been provided for in the 30 June 2013 financial statements.
25. Earnings Per Share
Net profit attributable to ordinary equity holders of the parent
Consolidated
2013
$
2012
$
10,390,514
6,751,757
Number of shares
Weighted average number of ordinary shares used in calculating basic earnings per share:
23,070,755
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
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
45.0
45.0
29.3
29.3
Options do not have a dilutive affect 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 vesting conditions of these rights have not been met as at 30 June 2013.
26. Key Management Personnel Disclosures
a. Details of Key Management Personnel
i. Directors
M. Fitzpatrick Chairman (Non–Executive)
P. Kennedy
Director (Non–Executive)
R. Hayes
Director (Non–Executive)
M. Donnelly
Director (Non–Executive)
ii. Executives
A. McGill
Chief Executive Officer
J. Ferragina
Chief Financial Officer
b. Compensation for Key Management Personnel
Short–term
Post employment
Share–based payments
Total remuneration
Consolidated
2013
$
2012
$
1,619,580
2,060,621
55,440
349,866
84,305
339,323
2,024,886
2,484,249
For 2013 KMP bonuses, 50% is deferred and payable in the following year. The deferred component is not provided for as at
30 June 2013.
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont.
68
69
b. Performance rights holdings of Key Management Personnel
30 June 2013
Directors
M. Fitzpatrick
D. Cooper
P. Kennedy
R. Hayes
M. Donnelly
Executives
A. McGill
J. Ferragina
Total
Balance at
1 July 2012
Granted as
remuneration
Performance
rights
exercised
Performance
rights lapsed
Balance at
30 June 2013
Total
vested and
exercisable at
30 June 2013*
–
–
–
–
–
500,000
140,000
640,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
140,000
500,000
140,000
640,000
640,000
* Performance rights are exercisable once vested.
b. Performance rights holdings of Key Management Personnel
30 June 2012
Directors
M. Fitzpatrick
D. Cooper
P. Kennedy
R. Hayes
M. Donnelly
Executives
A.McGill
J. Ferragina
R. Sullivan
Total
Balance at
1 July 2011
Granted as
remuneration
Performance
rights
exercised
Performance
rights lapsed
Balance at
30 June 2012
Total
vested and
exercisable at
30 June 2012*
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
140,000
140,000
780,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
140,000
(140,000)
–
–
–
–
–
–
500,000
140,000
–
(140,000)
640,000
640,000
* Performance rights are exercisable once vested.
26. Key Management Personnel Disclosures (Cont.)
c. Share Holdings of Key Management Personnel
30 June 2013
Ordinary shares held in Treasury Group Ltd
Balance
1 July 2012
Granted as
remuneration
On exercise
of options
Net change
other #
Balance
30 June 2013
Directors
M. Fitzpatrick
P. Kennedy
R. Hayes
M. Donnelly
Executives
A. McGill
J. Ferragina
Total
30 June 2012
Ordinary shares held in Treasury Group Ltd
Directors
M. Fitzpatrick
P. Kennedy
R. Hayes
M. Donnelly
Executives
A. McGill
J. Ferragina
Total
2,701,285
211,200
–
–
50,000
22,404
2,984,889
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,701,285
2,287
213,487
–
–
–
–
–
–
50,000
22,404
2,287
2,987,176
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
6,617
50,000
22,404
86,167
2,984,889
# 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.
d. Transactions with director-related entity
Details of the transactions with Director-related entities are set out in Note 28. All transactions were conducted on
commercial terms.
e. Loans to key management employees
No loans have been advanced to key management employees at any stage during the financial year ended 30 June 2013
(2012: $Nil).
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont. 27. 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
2013
$
2012
$
197,587
79,559
215,644
156,917
277,146
372,561
28. 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
All subsidiaries are incorporated in Australia.
Transactions with related parties
Percentage of equity interest
held by the consolidated entity
2013
2012
100
100
100
100
100
77.8
100
100
100
100
100
77.8
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 (2012: $Nil) and $343,750
(2012: $1,675,839) in repayments were received, repaying the outstanding loan. 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.
29. Parent Entity Disclosure
The accounting policies of the parent are the 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
2013
$
2012
$
8,352,207
6,916,885
859,334
(624,257)
9,211,541
6,292,628
9,258,596
5,473,118
38,538,683
41,092,533
47,797,279
46,565,651
1,417,581
67,733
688,911
637,365
1,485,314
1,326,276
29,594,265
29,594,265
13,035,337
13,219,310
3,447,286
3,073,807
235,077
(648,007)
46,311,965
45,239,375
AnnuAl RepoRt 2013tReAsuRy GRoup ltdnotes to the Financial statements cont.
Director’s Declaration
72
73
In accordance with a resolution of the Directors of Treasury Group Ltd, I state that:
1.
In the opinion of the Directors:
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 2013 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 2013.
On behalf of the Board
M Fitzpatrick
Chairman
21 August 2013
Independent Audit Report
32
73.
AnnuAl RepoRt 2013tReAsuRy GRoup ltd 74
75
20
25
ASX Additional Information
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
a. Distribution of equity securities (as at 31 July 2013)
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 2013)
The names of the twenty largest holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
Squitchy Lane Holdings Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Ltd
Citicorp Nominees Pty Ltd
Kattag Holdings Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Mr Timothy Gerard Ryan
JP Morgan Nominees Australia Limited
Mr Michael Brendan Patrick De Tocqueville
BNP Paribas Nominees Pty Ltd ACF Pengana
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