Pacific Current Group Ltd Annual Report 2016

FY2016 Annual Report · Pacific Current Group Ltd

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Annual Report 2016

LI M ITE D

CONTENTS

1
Results at a Glance
2 Chairman’s Report
4 CIO’s Report
7 Directors’ Report
30 Auditor’s Independence Declaration
31 Consolidated Statement of Profit or Loss
Consolidated Statement of Other
32
Comprehensive Income

33 Consolidated Statement of Financial Position
34 Consolidated Statement of Changes in Equity
35 Consolidated Statement of Cash Flows
36 Notes to the Financial Statements
71 Directors’ Declaration
72
74 ASX Additional Information
76 Corporate Information

Independent Auditor’s Report

In accordance with ASX Listing Rule 4.10.3, Pacific Current Group Limited’s Corporate Governance
Statement can be found on its website at http://paccurrent.com/shareholders/corporate-governance/

ABOUT PACIFIC CURRENT GROUP LIMITED

Pacific Current Group Limited (ASX:PAC) is a global multi-
boutique asset management business committed to seeking
out and partnering with exceptional investment managers.

Our philosophy

Each partnership is
created with flexibility
to create exceptional
alignment with our
boutique managers.
We apply capital,
strategic insight, and
global distribution to
support the growth
and development of
our partner boutiques.
Our goal is to help
boutique funds focus on
their core business and
what matters most –
investing.

What we offer our boutiques
• Strategic and complementary capital –
we seek to complement their business,
not control

• Flexible ownership structures – our

goal is to create exceptional alignment
with our partners, so every partnership
is uniquely tailored to fit the specific
manager’s needs

• Global distribution and marketing

services to help grow underlying FUM at
the boutique level – allowing portfolio
managers to remain focused on investing

• Access to our global network and

strategic insight – there are many ways
we help support the development of
our boutiques, specifically by providing
intelligent insight and connecting them
with the right people

RESULTS AT A GLANCE

A challenging year from an operational perspective, but
good progress has been made with the group’s restructure
and solid organic growth with key boutiques.

Key Financial Highlights during the year:

Normalised net profit
after tax (NPAT)

Total funds
under management

Full year dividend
(fully franked)

$11.6m

$50.4bn

25c

Year End FUM ($bn)

Aggregate Boutique Management Fees ($m)

Underlying Net Profit ($m)

Final Dividend (cps)

Full Year Dividend (cps)

50.4

176.1

11.6

5.0

25.0

Annual Report 2016CHAIRMAN’S REPORT

On behalf of the Board, I wish to thank our
shareholders for their continued support and patience
during a period of significant change for the Company.

I am confident that this new Executive Team has the right
skills and experience to oversee the necessary changes
and restructuring efforts being made at Pacific Current.
They have worked diligently and assiduously on changes
to staffing, the portfolio structure, carrying values and the
reduction of material costs within the business.

The financial year also saw the continuation of our
efforts of repositioning our portfolio towards “sunrise”
investments and the pursuit of our strategy to continue to
slowly divest out of businesses that we believe have lesser
growth prospects or those where the sale price have been
better than the boutique’s growth prospects.

This strategy led to the decision to invest in GQG, a
boutique which we believe has exciting growth potential.
It also led to the challenging decision to sell our investment
in RARE. The decision to sell our RARE stake also reflected
the fact that we wanted to support RARE’s majority
shareholders who wished to pursue the opportunity to
partner with Legg Mason.

With some of the proceeds from the RARE sale, we
acquired a minority ownership stake in Aperio, a rapidly
growing boutique that is well suited to our overall strategy
and has already had a positive impact. Both Aperio and
GQG have exceptionally sound growth prospects and we
expect them to continue to make a positive contribution
over the years ahead.

One of the main challenges during the year was continued
FUM losses at Seizert due to recent underperformance at
the US boutique. These losses offset much of the positive
performance across our broader portfolio and resulted in
some one-off costs that had a negative impact on our full
year result.

Despite these significant one-off costs, which also
reflect the impact of our restructuring initiatives, Pacific
Current’s balance sheet remains sound. The completion of
the sale of the majority of the Company’s interest in RARE
positively impacted the financial position in FY2016.

The 2016 financial year has been a difficult period for
Pacific Current Group Limited (Pacific Current) as we
continued with our restructuring efforts designed to
simplify and refocus our business.

On behalf of the Board, I wish to thank our shareholders
for their continued support and patience during a period
of significant change for the Company. The past year has
been a challenging one for Pacific Current as we continued
to implement some very important changes both within
our management team and our portfolio. Whilst these
changes have been challenging, we end the financial year
with a business that is better placed for growth and the
delivery of shareholder value over the years ahead.

The year saw changes of key personnel both at Board
and Executive level. In April, our Chief Executive Officer,
Tim Carver resigned from his position as CEO and
subsequently joined GQG Partners LLC (GQG), a US-
based funds management start-up backed by Pacific
Current, as its CEO. Tim is responsible for all business
strategy and management at GQG. Tim will resign as a
director of Pacific Current prior to the Annual General
Meeting in October.

We also appointed Tony Robinson as an independent Non-
Executive Director in August 2015, replacing Andrew
McGill. Tony was subsequently appointed as an Executive
Director of the Group and joined Paul Greenwood, Global
CIO and President North America and Joseph Ferragina,
Chief Operating Officer on our new Executive Team.

LIMITED2

Financial Results
Pacific Current’s underlying net profit after tax decreased
to $11.6 million, down 31% on the prior financial year.
Statutory results were a loss of $48.2 million.

Funds Under Management
Funds under management
to
$50.4 billion as at June 30, 2016. This reflected a strong
performance from Aperio, Aether and IML offset by
continued outflows at Seizert and RARE.

increased by 3.0%

Dividend
The Board has declared a fully franked final dividend of
5 cents per share, taking the total dividends for the year
to 25 cents per share. This equates to a total payout
ratio of 60% of underlying earnings for the year, which
is at the lower end of the targeted range. The Board has
confidence in the outlook for the business and reaffirms
the targeted payout ratio band of 60-80%.

Fund Manager Performance
The financial results were affected by a series of interest
charges and other non-labour costs that will not carry
through to the 2017 financial year. The result was also
affected by the impairment charge relating to continued
losses at Seizert, which was offset by strong performances
at Aperio, Aether and IML as well as a positive contribution
from GQG.

Going forward, we expect these core boutiques to be
the key drivers to earnings, reflecting our continued
diversification of the business that has been achieved
following the merger with Northern Lights in 2014. The
investments in GQG and Aperio reflect our continued
efforts to diversify towards boutiques that are better
suited to current and future investment trends and away
from the traditional long-only style of management.

Social Responsibility
The business from the Board down recognises its corporate
social responsibility and continue to support a number of
diligent and hard-working organisations in their efforts to
bring about meaningful social change. For a number of
years, we have supported Third Link Investment Managers
through the provision of investment and support services
on a pro-bono basis, with all fees donated to the not-for-
profit sector.

Outlook
The Board and Management recognise that shareholders
have had to endure an arduous and challenging year given
a number of significant changes for Pacific Current. The
near term outlook for the Company remains somewhat
difficult as we continue to implement important changes
to refocus the business and reposition our portfolio
towards more attractive industry segments.

Management remains focused on improving our financial
results and I am confident that Pacific Current has the right
team in place to deliver on this goal. We remain optimistic
that the changes we have made, as well as the broader
position of our portfolio will deliver growth over the years
ahead.

Once again, I thank all our shareholders for their continued
support during a difficult period and our dedicated staff,
investment partners and clients for their efforts and
hard work. I look forward to updating you with more
information on our restructuring efforts in the near term.

M. Fitzpatrick
Chairman

Annual Report 2016
CIO’S REPORT

In many ways FY2016 was
another transitional year for PAC.

Mr. Jain left his prior employer, where he managed US$48
billion and decided to partner with us in a new venture,
GQG Partners. With its focus on global and emerging
market equity strategies, its products should have broad
appeal. The initial response to GQG from consultants and
prospects has been exceptionally positive and makes us
quite bullish on its prospects for FY2017.

Aperio and GQG illustrate our efforts to concentrate
new investments in “sunrise” segments of the asset
management industry – those areas that will be the
beneficiaries of increased investor allocations in the
years ahead. This idea informs not only how we go about
seeking new investment opportunities but also how we
think about managing our existing portfolio. Accordingly,
shareholders should expect to see us continue to slowly
migrate out of businesses with lesser prospects or where
we are offered prices that are more attractive than our
view of the underlying growth prospects and then
redeploy capital into more attractive industry segments.

The biggest challenge we faced during the year were
headwinds at Seizert. The decline in Seizert’s FUM has
been brought on by recent underperformance and the
declining appetite for active US equity strategies. The
Seizert team is talented and stable and we are confident
that the firm is simply enduring a typical performance cycle,
the likes of which they have seen numerous times before.
Nevertheless, with the benefit of hindsight, we clearly
overpaid for this asset and the attrition in Seizert FUM
has offset much of the progress being made across the
broader portfolio.

Operational and Financial Performance
Total FUM of our portfolio companies finished the year
at A$50.4 billion. The biggest contributor to this sum was
Aperio Group, which ended 30 June 2016 at A$20.5 billion,
up from A$18.2 billion at the time of our investment six
months earlier. In addition to large inflows at Aperio, other
boutiques – IML, Raven and EAM – also experienced rapid
growth during the year. Seizert and RARE (in which we still
own 10%), were the notable laggards.

Business Performance
In many ways FY2016 was another transitional year
for PAC. We underwent meaningful changes in our
management team as well as within our portfolio of
investment boutiques. While challenging to navigate, we
believe we have ended the year in a place where PAC is
well situated to grow with a portfolio that better reflects
the direction investors’ appetites are moving.

In mid-2015 we made the difficult decision to sell
our position in RARE. Our investment in RARE was
enormously successful, returning more than 33 times
the initial investment. While we believed RARE was an
important asset, we felt it was appropriate to support
the majority shareholders who wanted to pursue the
opportunity to partner with Legg Mason. We were also
confident that we could rapidly redeploy the proceeds
from this transaction. When the transaction concluded,
we immediately retired expensive merger-related debt
and invested in rapidly growing Aperio Group (Aperio).
Aperio is a firm exceptionally well suited to benefit from
the trends toward passive management, ESG, and factor-
tilted portfolios. Early results suggest that the decision to
make this portfolio investment was indeed the right one.

Shortly before the end of FY2016 we invested in GQG
Partners. While a true start-up, we believe GQG has
exceptional growth prospects. The firm has been founded
on the investment skills of one of the world’s more
prominent long-only investors, Rajiv Jain.

LIMITED4

FUM at 30 June 2015

FUM at 30 June 2016

Aperio

RARE

IML

ROC Partners

Seizert

Aether

Goodhart

Raven

Others

RARE

IML

ROC Partners

Seizert

Aether

Goodhart

Trilogy

WHV

Tamro

Raven

Others

Like FY2015 we had large amounts of noise coming
through the financial statements in FY2016. Specifically,
we took large asset impairments, primarily at Seizert,
due to the reduction in the firm’s FUM.

Statutory results were a loss of $48.2 million with an
underlying profit of $11.6 million. The Aurora Trust
recognised impairment charges of $119 million and this
impacted on the PAC result.

Conclusion
Despite the challenges noted, our optimism regarding our
portfolio is increasing. One reason for this is the breadth
of growth we are seeing across our portfolio. In fact, the
majority of our portfolio companies have demonstrated
true organic growth this year and only a small number
have stayed even or lost ground.

Another reason for optimism relates to how well our team
executed in FY2016. In the face of considerable change
they have worked tirelessly to close new investments,
improve our financial reporting, and identify operational
efficiencies. For example, early in 2016 we completely
restructured our sales and marketing team. The net result
was significant cost savings and more sales people in the
field seeking to grow our portfolio companies.

In closing, I would like to thank our shareholders for their
support and patience as we worked through the challenges
of FY2016. In many respects, we are in a much stronger
place than we were a year ago because of the modifications
to our portfolio and the cost savings we have identified.
Nevertheless, management is keenly aware of the need
to enhance financial results going forward and we are
intensely focused on doing just that. As large shareholders
ourselves, maximizing value for PAC shareholders remains
our most important priority in FY2017.

P. Greenwood
Global CIO & President, North America

Annual Report 2016LI M ITE D

DIRECTORS’ REPORT

Your directors submit their Report for the year ended 30 June 2016

Directors
The names and details of Pacific Current Group Limited’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
M. Fitzpatrick, (Chairman) B. Eng, BA (Oxon) Honours

Mr Fitzpatrick joined the Board on 5 October 2004. He
has over 38 years experience in the financial services
sector. After a career in investment banking in Australia
and the US, Mr Fitzpatrick founded Hastings Funds
Management Ltd (‘Hastings’) one of the largest managers of
infrastructure and alternative assets in Australia. Hastings
was a pioneering
infrastructure asset management
company where Mr Fitzpatrick was Managing Director
until he sold his interest to Westpac Banking Corporation.
Mr Fitzpatrick is a Non-executive director of Infrastructure
Capital Group, a boutique manager of $1.4 billion of energy
and infrastructure assets. He also holds a number of other
Non-executive directorships, including the Walter & Eliza
Hall Institute of Medical Research, Latam Autos Limited
and Carnegie Wave Energy Limited. Mr Fitzpatrick is also
the Chairman of the Australian Football League.

Mr Fitzpatrick holds a B.Eng. (Hons) degree in electrical
engineering from the University of Western Australia and
a B.A. (Hons) from the University of Oxford, where he was
a Rhodes Scholar.

Mr Fitzpatrick is a member of the Board’s audit & risk
committee, remuneration committee and governance
committee.

P. Greenwood, (Global CIO and President, North America)
CFA, BA

Mr Greenwood joined the Board on 10 December 2014
as an Executive director. He co-founded Northern Lights
Capital Group, LLC (‘Northern Lights’) in 2006. Prior to
Northern Lights, he created Greenwood Investment
Consulting (‘GIC’), a firm that worked directly with
investment managers on
investment process and
organisational issues.

Before GIC, Mr Greenwood served as director of US
Equity for Russell Investment Group (‘Russell’), where
he managed all of Russell’s US equity oriented portfolio
management and research activities. He also served as
a Russell spokesperson and authored many articles and
research commentaries related to investment manager
evaluation.

T. Carver, (Non-executive director, appointed 30 April
2016; Managing director and CEO, resigned 30 April
2016) BA

Mr Carver joined the Board on 10 December 2014. He is
the co-founder of Northern Lights Capital Group, LLC
(‘Northern Lights’). Serving as Managing director for 8
years prior to Northern Lights merger with Pacific Current
Group Limited, Mr Carver led the transaction process for
Northern Lights and provided overall firm leadership. Prior
to Northern Lights, he co-founded Orca Bay Partners
(‘Orca Bay’), a private equity firm that focused on investing
in boutique asset managers. At Orca Bay, Mr Carver led
the investments and served on the boards of Parametic
Portfolio Associates and Envestnet Asset Management. Mr
Carver began his career at Morgan Stanley in New York.

A. McGill, (Managing director and CEO, resigned on
28 August 2015) B Com LLB

Mr McGill joined the Board on 30 August 2013. He has
more than 25 years financial markets experience, including
investment and management experience within the
alternative asset sector of the funds management industry.
He joined Pacific Current Group Limited as CEO in July
2011 with overall responsibility for management of the
business, including investment and partnering activities.
Prior to joining Pacific Current Group Limited, Mr McGill
was a founding partner of Crescent Capital (‘Crescent’),
an independent mid-market private equity firm, where
he led the successful development of that business from
2000 to 2010. Prior to establishing Crescent, he held
senior roles within Macquarie Bank’s Corporate Finance
and Direct Investment teams. Previous to that, he was a
strategy consultant with LEK Partnership. Mr McGill is
also the Chairman of PM Capital Global Opportunities
Fund Limited and serves on the Council of Kambala Girls
School.

P. Kennedy, (Non-executive director) B.Ec. L.L.M.

Mr Kennedy joined the Board on 4 June 2003. He is the
founding partner of the commercial law firm, Madgwicks
Lawyers, and has more than 40 years experience in
commercial law advising a broad range of clients across a
variety of sectors. He leads the firm’s Dispute Resolution
practice and plays an integral role in the governance
and management of the firm, having been Madgwicks’
Managing Partner for over 10 years.

Mr Kennedy also sits on the boards of a number of
companies in the manufacturing, property and retail
industries. His formal qualifications include B.Ec, LL.B.,
LL.M (Tax), Monash University.

He is the Chairman of the audit & risk committee and
a member of the remuneration committee.

Annual Report 2016DIRECTORS’ REPORT

continued

M. Donnelly, (Non-executive director) B.C.

Ms Donnelly joined the Board on 28 March 2012.
Ms Donnelly, a chartered accountant, is the founder and
former chairperson of the Centre for Investor Education,
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 also a director of JA Russell & Co Sdn Bhd.
In addition, Ms Donnelly is a member of the Advisory
Committee of the Oxford University Centre for Ageing.
Previously Ms Donnelly was deputy Chairperson of the
Victorian Funds Management Corporation and a Non-
executive director of Ashmore Group plc.

Ms Donnelly is the Chairperson of the governance
committee and a member of the audit & risk committee.

J. Vincent, (Non-executive director) MBA, BSBA

Mr Vincent joined the Board on 10 December 2014.
He has been the CEO of the Laird Norton Company,
LLC diversified investment holding company, for the past
16 years. In this role, he has overseen US investments
in real estate, building materials distribution, financial
services, private equity, and consumer services. His
experience in the financial services area includes direct
responsibility for the Pacific Northwest’s largest privately
wealth management. Mr Vincent has held a variety of
board positions and has performed the duties of audit,
compensation, and board chair.

Mr Vincent has demonstrated strong skills in mergers
and acquisitions, corporate governance, executive
compensation, operations and financial management.
He has also led organisations through significant periods
of change.

Mr Vincent currently serves on the boards of Laird Norton
Company, LLC and its affiliates and JM Huber Corporation.

Mr Vincent is the Chairman of the remuneration committee
and a member of audit & risk committee.

G. Guérin, (Non-executive director) MSc, BA

Mr Guérin joined the Board on 10 December 2014.
He is CEO of BNP Paribas Capital Partners, where he has
worked for the past five years developing the alternative
investment capabilities of the BNP Paribas Group.
Mr. Guérin served as CEO and President of Natixis Global
Associates, Executive of Natixis AM North America and
held Executive and senior leadership roles at HDF Finance,
AlphaSimplex, IXIS AM and Commerz Financial Products.

Mr Guérin has over 20 years experience in capital markets
and investment management. This includes cross asset
class experience spanning the equities fixed income and
commodities markets, with a specific focus on alternative
strategies and hedge funds.

During his career, Mr Guérin has managed relationships
with investors and distributors across the world, in
particular in Europe, the US, Japan, the Middle East and
Australia. Mr Guérin has operated distribution capabilities
worldwide and developed new products and investment
capabilities. He has served on the board of various
investment companies,
Investment
Management. Throughout his career, he liaised with
regulators across various jurisdictions and worked with
thought leaders of the investment industry including
Dr Andrew Lo and Dan Fuss.

including Aurora

Mr Guérin is also a director of Ginjer AM and of INNOCAP.

Mr Guérin is a member of the remuneration committee
and governance committee.

T. Robinson, (Executive director, appointed 30 April 2016;
Non-executive director, (28 Aug 2015 to 30 April 2016))
BCom, MBA, CFA

On 28 August 2015, Mr Robinson joined the Board in
the capacity of Non-executive director. He has significant
expertise and experience across a number of industries
including banking, financial services, telecommunications,
and transport. He is an experienced company director and
CEO.

Mr Robinson is also a director of Bendigo and Adelaide
Bank Limited and OnCard Limited and holds a number of
directorships of private companies, including River Capital
Ltd.

Mr Robinson’s previous executive roles include Managing
director of IOOF Ltd and OAMPS Limited.

J. Ferragina, (Finance director, COO and Company
secretary) BCom, M App Fin, CA, FFin, GAICD.

Mr Ferragina joined the Board on 31 March 2015.
He is a Chartered Accountant and has worked in funds
management for 20 years. He has gained specialised
experience in a range of funds management companies
including Colonial First State
Investment Managers
and AMP Global Investors Ltd (‘AMP’), which led him
to a position as CFO and Company secretary of Ronin
Property Group, a separately listed company spun out of
AMP. Prior to his appointment as CFO of Pacific Current
Group Limited in October 2005, he was head of finance at
DBRREEF (now Dexus).

Mr Ferragina sits on the boards of Investors Mutual
Limited, Celeste Funds Management Limited, Freehold
Investment Management Limited, ROC Partners Pty Ltd
and Treasury Group Investment Services Limited. He
sat on the boards of RARE Infrastructure Ltd and Octis
Asset Management Pte Ltd up until they were sold during
the year.

LIMITED8

Company secretaries
C. Driver, LLB (Hons), LLM, DipLP, GradDipACG, ACISA, resigned 3 June 2016

Ms Driver was appointed Company secretary on 7 July 2015. Ms Driver is a chartered secretary and lawyer (admitted in
Scotland). She has a Masters in Commercial Law and graduated with a Graduate Diploma in Applied Corporate Governance
in January 2014. Ms Driver is an associate member of the Governance Institute of Australia. Ms Driver previously worked
at Gryphon Minerals Limited as compliance officer and company secretary.

J. Ferragina

Please refer to Mr Ferragina’s profile under the directors section.

Interests in the shares and options/performance rights of Pacific Current Group Limited and related bodies
corporate
At the date of this report, the interests of the directors in the shares and options/performance rights of Pacific Current
Group Limited were:

M. Fitzpatrick

P. Greenwood
T. Carver
P. Kennedy
M. Donnelly
J. Vincent
G. Guérin
T. Robinson
J. Ferragina

(Loss)/Earnings Per Share

Basic (loss) per share

Diluted (loss) per share
Underlying earnings per share

Dividends

Final dividend declared:

on ordinary shares (fully franked)

Dividends paid in the year:
Interim for the year
on ordinary shares (fully franked) paid on 31 March 2016

Final for 2015 shown as declared in the 2015 report
on ordinary shares (fully franked) paid on 30 September 2015

Options/
performance
rights over
ordinary
shares

–

500,000
–
–
–
–
–
–
305,000

Ordinary
shares

2,701,285

–
–
242,628
20,000
–
–
–
141,400

Note

Cents

(172.1)

(172.1)
41.5

Cents per
share

1,406,298

5,625,191

7,738,682

Annual Report 2016DIRECTORS’ REPORT

continued

Corporate Information

Corporate Structure
Pacific Current Group Limited (the ‘Company’ or ‘Group’)
is a company limited by shares and is incorporated and
domiciled in Australia. The Company has prepared a
consolidated financial report incorporating the entities
that it controlled and jointly controlled during the financial
year. On 20 October 2015, Treasury Group Ltd (ASX:
PAC) announced the change of its name to Pacific Current
Group Limited. The new name follows the integration in
the prior year of the operations of Treasury Group Ltd and
Northern Lights Capital Group, LLC (‘Northern Lights’)
under a single operating entity, Aurora Trust (‘Trust’). The
combined enterprise now operates as one global business
under the Pacific Current Group Limited name.

Aurora Investment Management Pty Ltd, the Trustee
of the Trust is a 100% subsidiary owned and controlled by
Pacific Current Group Limited, and is thus consolidated
in the accounts of Pacific Current Group Limited. As at
30 June 2016, the Company owns 65.15% (2015: 64.03%)
of the Trust.

Whilst the ownership exceeds 50% and results in a
presumption of control, the Trust is referred to as a
joint venture arrangement among Pacific Current Group
Limited, Northern Lights and BNP Paribas. Pacific Current
Group Limited and Northern Lights contributed their
businesses to the Trust to conduct investment activities,
and BNP Paribas was an investor in Northern Lights prior
to the merger between Pacific Current Group Limited
and Northern Lights. The key function of the Trust and
the overall business is investment in asset managers.
Former Northern Lights executives are responsible for
investment analyses and recommendations as investment
due diligence and recommendations are undertaken
by the majority Northern Lights controlled investment
committee. Investment decisions require approval by a
majority vote of the Trustee board. The decision making
process leading to execution requires all parties to agree.
It is therefore deemed appropriate that the Trust be
reflected as a joint venture investment.

The Company’s corporate structure at the date of this
report is as follows:

Pacific Current
Group Limited

100%

Aurora
Investment
Management
Pty Ltd
(Trustee)

Northern Lights

65.15%

27.19%

AR Capital
Management
Pty Ltd

(100%)

Celeste Funds
Management Ltd
(38.09%)

Trust

7.66%

BNP Paribas

LIMITED10

Applying a more conservative basis of assumptions in
terms of expected performance and timing of flows has
resulted in a reduction in the carrying value of Seizert
by A$76m. The Trust’s balance of impairment charges
is attributable to changes in the assumptions used in
establishing the appropriate carrying values with respect to
other US portfolio companies Raven Capital Management,
LLC (Raven), Nereus Capital, LLC (Nereus), Alphashares,
LLC and TAMRO Capital Partners, LLC and impairment
charges with respect to its Australian boutiques that is
attributable to loss of FUM (Celeste Funds Management
Investors Limited and Orion
Limited, Global Value
Asset Management (Aust) Pty Ltd) and winding up the
responsible entity business of Treasury Group Investment
Services Limited.

On 7 September 2015, BNP Paribas exchanged its
487,804 Class C units in the Trust for 487,804 Pacific
Current Group Limited shares. Consequently the Trust
issued 487,804 Class A units to Pacific Current Group
Limited, resulting in an increase in the investment of
Pacific Current Group Limited in the Trust to 65.15%
(2015: 64.03%).

The overall ownership in the Trust did not materially
change during the year. As at 30 June 2016, the Trust is
owned by Pacific Current Group Limited (as a single entity)
at 65.15%, Northern Lights at 27.19% and BNP Paribas
at 7.66%.

The Trust is referred to as a joint venture of Pacific Current
Group Limited and the principles of equity method of
accounting are applied.

consolidated entity employed 7

Employees
The
full time
equivalent employees as at 30 June 2016 (2015:17). The
consolidated entity includes Pacific Current Group Limited
(parent), Aurora Investment Management Pty Ltd as the
Trustee of the Trust and AR Capital Management Pty Ltd.

Pacific Current Group Limited owns 65.15% of the Trust
which has US subsidiaries that had 40 employees at the
end of the year (2015:46).

Funds management/business performance
As at 30 June 2016, the FUM of the combined enterprise
was $50.4bn (2015:$49.0bn). The increase of the FUM
was due to the acquisition of an interest in Aperio, inflows
from IML, market performance and positive impact of the
weak Australian dollar relative to the US dollar offset by
the impact of outflows from Seizert and RARE.

Operating and Financial Review

Review of Operations

Nature of operations and principal activities
Pacific Current Group Limited invests in global asset
management through its investment in the Trust. The Trust
continued its overall business of managing its investments
in the asset managers in accordance with the Trust Deed.
During the year, the shareholders of RARE Infrastructure
Ltd (‘RARE’) including the Trust sold their majority
interests to Legg Mason Global Asset Management (‘Legg
Mason’). The proceeds from the sale of RARE provided
the Trust flexibility to reposition its portfolio by partnering
with outstanding asset management professionals by
acquiring equity in Aperio Group, LLC (‘Aperio’) and
Strategic Capital Investors LLP (‘SCI’), both overseas-
based investment managers. The Trust has also settled
its Medley Capital Corporation (‘Medley Capital’) debt
and Y redeemable preference units. The settlement of
these external borrowings and debt instrument issued to
unitholders provided an immediate return to the financial
performance by reducing the Trust’s interest expense and
reducing financial gearing.

its Trustee, Aurora

Investment
The Trust through
Management Pty Ltd participated
the equity
restructure of Investors Mutual Limited (‘IML’) and IML
Investment Partners Pty Limited (‘IML IP’). IML merged
its operations with IML IP resulting in IML owning 100%
of the issued capital in IML IP. In conjunction with this
merger, IML issued additional share capital to retain and
lock in key staff in order to ensure continued growth and
development of IML into the future. As a result, the Trust’s
ownership in IML reduced from 47.22% and 40% of IML IP
pre-merger, to 45.44% of the new merged entity IML. The
equity restructure of the IML Group is viewed to create
synergies within the IML Group which have a material
impact on the Trust in the long term. The IML employees’
equity is held in an employee share plan. As the equity
vests, the Trust’s ownership will be reduced to 40.04%.

to review and monitor

The Trust continues
the
performance of its investments. During the year, the
Trust has taken impairment charges for its investments in
portfolio companies, particularly Seizert Capital Partners,
LLC (‘Seizert’). The significant attribution of the impairment
in Seizert is due to the continued losses in Funds Under
Management (‘FUM’). The current environment has proven
challenging for the firm but Seizert has navigated similarly
challenging environments in the past and continues to
manage funds true to their stated value discipline.

Annual Report 2016DIRECTORS’ REPORT

continued

Operating results for the year
The Company generated net losses attributable to members of Pacific Current Group Limited of $48.2m for the year ended
30 June 2016. This compares with a net profit attributable to members of Pacific Current Group Limited of $136m (restated)
in the prior year which included the $132m (restated) net gain on sale of businesses to the Trust. The net profit after tax
of the Company as reported in the current year compared to the restated 30 June 2015 comparative result is shown in
the table below reconciling the underlying profit. The current period reconciling items to the underlying profit are included
within the share of net losses of equity accounted investments in the Consolidated Statement of Profit or Loss.

Consolidated
2016
$

2015
$

Net (loss)/profit before tax attributable to members of Pacific Current Group Limited

(78,041,766) 193,627,443

Income tax benefit/(expense)

Net (loss)/profit after tax

Add/(Deduct):
– Impairment of investments
– Gain on sale of investments
– Gain on acquisition and/or deemed disposal of investments
– Gain on revaluation of investments
– Transaction costs in the sale of business to the Trust
– Write off of receivables
– Transaction costs at RARE
– Fair value adjustments
– Foreign currency losses on repayment of Y redeemable preference units
– Amortisation of identifiable intangibles
– Prepayment penalty of Medley Capital debt/loan origination costs write off
– Transaction costs at the Trust for RARE
– Employee restructuring
– Deal costs for Aperio, SCI and GQG
– Long term incentives amortisation
– Back out income tax benefit on accounting losses arising from share of losses from the Trust
Total¹
Underlying profit
Underlying earnings per share

Statutory (losses)/earnings per share

29,801,318

(57,925,264)

(48,240,448) 135,702,179

77,498,371
(8,650,287)
(1,177,425)
(466,356)
–
2,363,977
3,677,299
2,074,608
2,123,790
1,903,881
1,528,714
976,498
887,460
440,487
228,025
(23,546,053)
59,862,989
11,622,541
41.5

10,761,277
(132,087,769)*

–
–
2,217,804*
–
–
–
–
–
–
–
–
–
–
–
(119,108,688)
16,593,491
64.8

(172.1)

529.7

* Represents the gain and transaction costs incurred in the sale of business to the Trust in the prior year, net of income tax expense.

1 These are transactions within the Trust.

On 21 October 2015, the shareholders of RARE including the Trust sold their majority interest in RARE to Legg Mason.
The total transaction consideration included upfront cash proceeds of $111m received, an earn-out arrangement up to
four years, and 10% retained equity interest in RARE subject to a two-year differentiated option pricing: call option by
Legg Mason at a fixed multiple of RARE revenues or put option by the Trust at ‘fair market value’. The sale of RARE was
accounted for inside the Trust and Pacific Current Group Limited took the corresponding gain on the sale through its share
in the results of the Trust.

On 31 December 2015, Pacific Current Group Limited, Northern Lights and BNP Paribas reinvested the distributions from
the sale proceeds of RARE into additional units in the Trust to fund the repayment of the Medley Capital debt facility and
the acquisition of Aperio. Pacific Current Group Limited’s reinvestment represented an additional A$55.3m. The relative
ownership of the Trust did not change as all unitholders reinvested at their respective percentage ownerships.

On 4 January 2016, the Trust paid Medley Capital, the debt facility in the amount of US$45.85m including a prepayment
penalty of US$0.65m which represents 1.37% of the original loan.

LIMITED12

On 4 January 2016, the Trust acquired a 23.4% minority
equity in Aperio for US$31.8m (A$44.2m) with an initial
investment of US$15.5m and the remainder is to be paid
at the end of 2016. Aperio, based in Sausalito, California
is an investment management firm with more than
A$20.5bn in FUM across highly customised index-based
portfolios using Aperio’s expertise in tax management,
tilts and ESG (Environmental, Social and Governance)
investments. It is a pioneer in designing and managing
custom portfolios to track index benchmarks or deliver
targeted risk, factor, geographic, or industry exposures,
customised to a client’s specific tax situation, values
and/or desired economic exposure. Aperio works with
both taxable and tax-exempt investors to track a broad
range of US and international indexes. The Trust holds two
out of six board seats at Aperio. The Trust treats Aperio
as an associate and the principles of equity method of
accounting are applied. Pacific Current Group Limited
believes Aperio adds diversification to the Trust’s current
portfolio.

On 15 February 2016, Pacific Current Group Limited
granted 1,199,000 performance rights which have a vesting
date of 1 July 2018 to officers and certain employees as
part of their long term incentives. Two tranches of rights
were issued with equal proportions (50%) vesting based
on the relative total shareholder return (TSR) of Pacific
Current Group Limited compared to the ASX 300 (Hurdle
1) and a group of seven other domestic and international
fund managers (Hurdle 2). The value of each right for
Hurdle 1 and 2 were $1.26 and $2.46, respectively. Total
value of the performance rights issued is $2.2m amortised
over two years and four months from the grant date.
The performance rights on issue were valued based on
the valuation prepared by an independent adviser using a
monte-carlo pricing model.

lock in key staff in order to ensure continued growth and
development of IML into the future. As a result, the Trust’s
ownership in IML reduced from 47.22% and 40% of IML IP
pre-merger, to 45.44% of the new merged entity IML. The
equity restructure of the IML Group is viewed to create
synergies within the IML Group which have a material
impact on the Trust in the long term. The IML employees’
equity is held in an employee share plan. As the equity
vests, the Trust’s ownership will be reduced to 40.04%.

On 30 April 2016, Tim Carver resigned as CEO. Tony
Robinson was appointed as an Executive director. Paul
Greenwood was appointed Global CIO and President,
North America.

On 2 June 2016, Pacific Current Group Limited, operating
through the Trust, entered into an agreement to launch
GQG Partners, LLC (‘GQG’), a newly created long-
only equity firm, based in Fort Lauderdale, Florida. The
Trust is committed to invest up to US$4m in GQG and
retains a minority equity interest. As at 30 June 2016,
the investment in GQG was US$1.6m. While smaller
than typical stakes, there is expectation that GQG could
become a core Pacific Current Group Limited holding.
Former Pacific Current Group Limited CEO Tim Carver
joined GQG as CEO and is responsible for all business
strategy and management. GQG utilises the institutional
sales and marketing capability of Pacific Current Group
Limited in North America and Australia and is evaluating
other distribution partnerships in different geographies.

During the current financial year, additional information
became available with respect to the 2015 financial
year. Pacific Current Group Limited has restated the
comparatives in the consolidated financial statements to
recognise the impact of the finalisation of Purchase Price
Accounting (‘PPA’) in the Trust, correction of prior period
accounting error and adjustment in the income tax and
deferred tax as a result of review of income tax notes and
disclosures. Details of the prior period adjustment are
detailed in Note 2(z) of this financial report.

(Losses)/Earnings Per Share
The (losses)/earnings for the year reflect the operations of the merged company for the full year to 30 June 2016.

Basic (loss)/earnings per share (cents)

Diluted (loss)/earnings per share (cents)

Underlying earnings per share (cents)

2016

(172.1)

41.5

2015
(restated)

529.7

64.8

Financial Position
As at the end of year, Pacific Current Group Limited’s current liabilities exceed current assets. This is driven by a tax liability
with respect to the capital gain on the sale of RARE. The Board is confident of satisfying the Company’s net current liabilities
through its own capacity or through a distribution from the Trust. Pacific Current Group Limited has a 65.15% interest in
the Trust which has debt instruments issued to other parties and to its unitholders (i.e. Northern Lights and BNP Paribas).

Annual Report 2016DIRECTORS’ REPORT

continued

The Trust is reviewing options with respect to capital
including restructuring options and asset
structure
is
disposals. Net assets decreased by 21% which
attributable to decrease in investment in the Trust as a
result of the losses in the Trust primarily due to impairment
charges relating to carrying values. The carrying value of
Pacific Current Group Limited’s investment in the Trust
is determined by the cost to acquire the units and the
share in net losses of the Trust reduced by distributions
received.

Pacific Current Group Limited has the capacity to pay
dividends to its shareholders. During the year, Pacific
Current Group Limited paid 48 cents per share in
dividends. A final dividend of 5 cents per share was
declared on 31 August 2016.

Cash flow from operations
Net cash flow from operating activities increased by
$10.8m to $15.3m or by 246% over the year. This is due to
a higher distribution received from the Trust and lower net
payables to suppliers as a result of transfer of operating
activities to the Trust in the prior year.

Business Strategies and Prospects
Pacific Current Group Limited continues to expand and
diversify its portfolio by partnering with outstanding
asset management professionals worldwide through its
investment in the Trust. The strategy of the combined
company continues to leverage the enhanced capabilities
delivered by the merger in the prior year and includes a
number of elements:

Continued expansion and diversification of portfolio
via value enhancing new investments
The merger resulted in a strengthened management and
investment team with executives well positioned to access
deal flow within international markets. In addition to
partnering with early stage asset management businesses,
the combined enterprise has the scale to invest in
established businesses.

Leveraged distribution capabilities to increase asset base
The combined enterprise has sales executives across
offices in Australia and the US focused on the sale of
boutique investment products and services to institutional
investors, superannuation and pension funds, family
offices and other classes of investors. This is expected
to provide opportunities for broader geographic sales
and distribution strategies (subject to compliance with
regulatory requirements).

Material Business Risks
The material business risks faced by Pacific Current Group
Limited 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
With a diversified global portfolio, Pacific Current Group
Limited is exposed to an immensely larger scale of market
volatility and higher degree of adverse market conditions.
Major international listed equity markets continue to
display volatility on both the upside and downside with
publicised global macro risks such as lower European
growth and deflation, slower growth in China, and
monetary policies in the US and Japan.

Fund manager performance
Pacific Current Group Limited’s FUM reflects the
investment performance of its boutique fund managers,
in addition to such other factors as funds flowing into
and out of the underlying funds. Market volatility and
adverse market conditions may lead to decline in FUM and
performance of the Trust’s business which may adversely
affect Pacific Current Group Limited’s earnings and
profitability. While these risks are external and beyond
the control of the Company, a number of our boutique
partners delivered exceptional performance including
IML, Aether Investment Partners, LLC (‘Aether’) and
Aperio. Market risk is however at the core of the business.

Foreign currency risks
Pacific Current Group Limited is exposed to A$/US$
exchange rate risk through its investment in the Trust that
holds the US and other foreign currency denominated
investments. The Company has adopted hedge accounting
such that the impact of foreign currency translation is
taken up through the foreign currency translation reserve
of the Trust. Pacific Current Group Limited takes the
share of the movement of the Trust’s foreign currency
translation reserve in its equity.

Regulatory environment
The business of the Company operates in a highly regulated
environment that is frequently subject to review and regular
change of law, regulations and policies. Pacific Current
Group Limited is exposed to changes in the regulatory
conditions under which it and its boutique fund managers
operate in Australia, the US and the UK. The Company’s
highly experienced in-house risk and regulatory experts
are actively managing and monitoring the Company’s
regulatory compliance activities. Regulatory risk is also
mitigated by the use of industry experts when the need
arises. Other measures include the establishment of the
risk committee composed of executives to ensure that risk
management is monitored, managed and controlled.

Significant Changes in State of Affairs
On 7 September 2015, BNP Paribas which owned the
Class C Units of the Trust exchanged its 487,804 Class C
units for 487,804 Pacific Current Group Limited shares.
On 7 September 2015, Pacific Current Group Limited
issued 487,804 fully paid ordinary shares to BNP Paribas,
and the Trust consequently issued 487,804 Class A units
to Pacific Current Group Limited resulting in an increase
in the ownership of Pacific Current Group Limited in the
Trust to 65.15% (2015: 64.03%).

LIMITED14

On 20 October 2015, Treasury Group Ltd (ASX: PAC)
announced the change of its name to Pacific Current
Group Limited. The new name follows the integration of
the operations of Treasury Group Ltd and Northern Lights
under a single operating entity, the Trust. The combined
enterprise now operates as one global business under
the Pacific Current Group Limited name. The Trust was
created to manage the combined enterprise’s interest in
17 boutiques in Australia, the US and other jurisdictions
ranging from traditional equities to alternatives and private
equity with FUM of $50.4bn as at 30 June 2016. The
Trust is jointly owned by Pacific Current Group Limited,
Northern Lights and BNP Paribas.

On 21 October 2015, the shareholders of RARE including
the Trust sold their majority interest in RARE to Legg
Mason. The total transaction consideration included
upfront cash proceeds of $111m received, an earn-out
arrangement up to four years, and 10% retained equity
interest in RARE subject to two-year differentiated option
pricing: call option by Legg Mason at a fixed multiple of
RARE revenues or put option by the Trust at ‘fair market
value’. The sale of RARE was accounted for inside the Trust
and Pacific Current Group Limited took the corresponding
gain on the sale through its share in the results of the Trust.

On 31 December 2015, Pacific Current Group Limited,
Northern Lights and BNP Paribas reinvested the
distributions from the sale proceeds of RARE into
additional units in the Trust to fund the repayment of the
Medley Capital debt facility and acquisition of Aperio.
Pacific Current Group Limited’s reinvestment represented
an additional A$55.3m. The relative ownership of the
Trust did not change as all unitholders reinvested at
their respective percentage ownerships.

On 4 January 2016, the Trust paid Medley Capital, the
debt facility in the amount of US$45.85m including a
prepayment penalty of US$0.65m which represents
1.37% of the original loan.

On 4 January 2016, the Trust acquired a 23.4% minority
equity in Aperio for US$31.8m (A$44.2m) with an initial
investment of US$15.5m and the remainder to be paid
at the end of 2016. Aperio, based in Sausalito, California
is an investment management firm with more than
A$20.5bn in FUM across highly customised index-based
portfolios using Aperio’s expertise in tax management,
tilts and ESG (Environmental, Social and Governance)
investments. It is a pioneer in designing and managing
custom portfolios to track index benchmarks or deliver
targeted risk, factor, geographic, or industry exposures,
customised to a client’s specific tax situation, values
and/or desired economic exposure. Aperio works with
both taxable and tax-exempt investors to track a broad
range of US and international indexes.

The Trust holds two out of six board seats at Aperio.
The Trust treats Aperio as an associate and the principles
of equity method of accounting are applied. Pacific Current
Group Limited believes Aperio adds diversification to the
Trust’s current portfolio.

On 1 March 2016, the Trust through its Trustee, Aurora
Investment Management Pty Ltd participated in the
equity restructure of IML and IML IP. IML merged its
operations with IML IP resulting in IML owning 100%
of the issued capital in IML IP. In conjunction with this
merger, IML issued additional share capital to retain and
lock in key staff in order to ensure continued growth and
development of IML into the future. As a result, the Trust’s
ownership in IML reduced from 47.22% and 40% of IML IP
pre-merger, to 45.44% of the new merged entity IML. The
equity restructure of the IML Group is viewed to create
synergies within the IML Group which have a material
impact on the Trust in the long term. The IML employees’
equity is held in an employee share plan. As the equity
vests, the Trust’s ownership will be reduced to 40.04%.

On 30 April 2016, Tim Carver resigned as CEO. Tony
Robinson was appointed as an Executive director. Paul
Greenwood was appointed Global CIO and President,
North America.

On 2 June 2016, Pacific Current Group Limited, operating
through the Trust, entered into an agreement to launch
GQG Partners, LLC, (‘GQG’) a newly created long-
only equity firm, based in Fort Lauderdale, Florida. The
Trust is committed to invest up to US$4m in GQG and
retains a minority equity interest. As at 30 June 2016,
the investment in GQG was US$1.6m. While smaller
than typical stakes, there is expectation that GQG could
become a core Pacific Current Group Limited holding.
Former Pacific Current Group Limited CEO Tim Carver
joined GQG as CEO and is responsible for all business
strategy and management. GQG utilises the institutional
sales and marketing capability of Pacific Current Group
Limited in North America and Australia and is evaluating
other distribution partnerships in different geographies.

Significant Events after the Balance Date
On 31 August 2016, the directors of Pacific Current
Group Limited declared a final dividend on ordinary shares
in respect of the 2016 financial year. The total amount
of the dividend is $1,406,298 which represents a fully
franked dividend of 5 cents per share. The dividend has
not been provided for in the 30 June 2016 consolidated
financial statements.

Annual Report 2016DIRECTORS’ REPORT

continued

Performance Rights
On 15 February 2016, Pacific Current Group Limited granted 1,199,000 performance rights which have a vesting date
of 1 July 2018 to officers and certain employees as part of their long term incentives. Two tranches of rights were issued
with equal proportions (50%) vesting based on the relative total shareholder return (TSR) of Pacific Current Group Limited
compared to the ASX 300 (Hurdle 1) and a group of seven other domestic and international fund managers (Hurdle 2).
The value of each right for Hurdle 1 and 2 were $1.26 and $2.46, respectively. Total value of the outstanding performance
rights is $2,225,945 amortised over two years and four months from the grant date. The performance rights on issue were
valued based on the valuation made by an independent adviser using a monte-carlo pricing model.

As at 30 June 2016, there were 100,000 performance rights outstanding that were issued to certain employees in 7 August
2013 with a vesting date of 7 August 2016. These performance rights were valued based on the valuation made by an
independent adviser using a hybrid monte-carlo/binomial option pricing model on the performance rights that were issued
on 11 July 2011. The value of each right was $1.64. Total value of the outstanding performance rights is $164,000 amortised
over three years from the grant date. As at the date of this Report, none of these performance rights have vested.

The amount of performance rights amortisation expense for the period was $372,659 (2015:$91,886).

On 1 July 2015, performance rights issued to certain employees on 1 July 2012 vested at 96% for the 8,731 performance
rights issued and 82% for the 31,250 performance rights issued. Accordingly, a total of 34,007 Pacific Current Group
Limited shares were issued to these employees.

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)

About this Report
This remuneration report (‘Report’), which forms part of the directors’ report, outlines the remuneration arrangements of
Pacific Current Group Limited’s Key Management Personnel (‘KMP’) for the financial year ended 30 June 2016, 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. The Report includes remuneration paid to KMP
as a consequence of each KMP’s role with Pacific Current Group Limited and the Trust.

Contents
1. Defined terms used in this report
2. Key management personnel
3. Remuneration philosophy and structure
4. Relationship between the remuneration philosophy and company performance
5. Remuneration of KMP
6. Key terms of employment contracts of KMP
7. Remuneration of Non-executive directors
8. Share based remuneration
9. KMP equity holdings

LIMITED16

1. Defined Terms used in this Report

EPS

Fixed
Remuneration

KMP

KPI

LTI

STI

TSR

Earnings per share for the purpose of determining performance against LTI performance targets. When
measuring the growth in EPS to determine the vesting of the long-term incentive awards, we define EPS as
net profit after tax divided by the weighted average number of issued shares during the year.
Generally comprises cash salary, superannuation contribution/401K benefits and the remainder as
nominated benefits. Fixed remuneration is determined on the basis of the role of the individual employee,
including responsibility and job complexity, performance and local market conditions. It is reviewed annually
based on individual performance and market data.
Key Management Personnel. Those people who have the authority and responsibility for planning, directing
and controlling the activities of Pacific Current Group Limited and the Group, directly or indirectly. KMP
disclosed in this report are Non-executive directors, Executive directors, CIO and COO.
Key Performance Indicators. These are based on operational targets, growth and business development
targets as well as operational management.
Long Term Incentive. It is awarded in the form of performance rights to executives and employees for the
purpose of retention and to align the interests of employees with shareholders.
Short Term Incentive. The purpose of the STI is to provide financial rewards to executives in recognition of
performance aligned with business and personal objectives. The STI is a cash based incentive paid on an
annual basis and is paid at the discretion of the Board.
Total Shareholder Return is defined as share price growth plus dividends paid over the measurement period.

2. Key Management Personnel
Pacific Current Group Limited’s KMP during or since the end of the financial year were:

Current KMP
Non-executive directors
M. Fitzpatrick
P. Kennedy
M. Donnelly
J. Vincent
G. Guérin
T. Carver

Executive directors
P. Greenwood
T. Robinson

J. Ferragina

Former KMP
T. Carver
A. McGill

Chairman, Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director. Became a Non-executive director on 30 April 2016
after resigning as CEO.

Global CIO and President, North America
Executive director. Appointed executive director on 30 April 2016. Formerly a
Non-executive director appointed 28 August 2015, resigned as Non-executive
director 30 April 2016.
Finance director, COO and company secretary

Managing director and CEO, resigned 30 April 2016
Managing director and CEO, resigned 28 August 2015

Except as noted, the named persons held their current position for the whole of the financial year and since the end of the
financial year.

3. Remuneration Philosophy and Structure
The performance of the Company depends upon the quality of its directors and executives. Pacific Current Group Limited
aims to provide market competitive pay and rewards to successfully attract, motivate and retain the highest quality
individuals. Our remuneration and benefits are structured to reward people for their individual and collective contribution
to our success for demonstrating our values, and for creating and enhancing value for all Pacific Current Group Limited
stakeholders.

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.

Annual Report 2016DIRECTORS’ REPORT

continued

3.1 Remuneration Committee
The remuneration committee is a committee of the Board
established by the Board.

The objective of the committee is to assist the Board
in the establishment of remuneration and incentive
policies and practices for, and in discharging the Board’s
responsibilities relative to the remuneration setting and
review of, the Company’s executive directors and other
senior executives and directors. The list of responsibilities
of the committee is laid out in its charter available on the
Pacific Current Group Limited website.

3.2 Remuneration Structure
In accordance with corporate governance best practices,
the remuneration structure of Non-executive directors,
Executive directors and officers is separate and distinct.
remuneration
In particular, Non-executive director
comprises fixed fees with no performance incentive
payments. Executive directors’ remuneration includes
incentive payments as detailed in this Report.

3.3 External Remuneration Consultants
During the year, Pacific Current Group Limited engaged
AON Hewitt (‘AON’) as an external remuneration consultant
to provide guidance on several key executive and long
term incentive plan matters, including recommendations
in relation to KMP. As required by the Corporations Act,
this engagement was pre-approved by the remuneration
committee and the recommendations were provided
directly to the remuneration committee Chairman. The
Board and remuneration committee are satisfied that the
recommendations were free of undue influence of Pacific
Current Group Limited executives as AON liaised directly
with the Chairman of the remuneration committee, who is
a Non-executive director in providing their advice. AON
did not provide any other advice during the year. The
amount paid to AON was $13,409.

3.4 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

– STI; and
– LTI

The remuneration committee establishes the proportion
of fixed remuneration and variable remuneration.

3.5 Fixed Remuneration

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

The remuneration committee reviews fixed remuneration
annually, and considers performance, relevant comparative
remuneration in the market and advice on policies and
practices.

Structure
Fixed remuneration comprises cash salary, superannuation
contribution/401K benefits and
remainder as
nominated benefits.

the

Changes in 2016
The details of fixed remuneration are included in the
remuneration tables later in this Report. Aside from new
executives, there were no changes to fixed remuneration
for executive KMP during the year.

3.6 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 Executive director
on executive performance. The Executive director bases
his report on a number of tailored KPI for each executive
and officer. The total potential STI available is set at a level
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 Executive directors
is measured. The KPIs
against which performance
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 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.

LIMITED18

Following the resignation of Tim Carver as CEO in April
2016 and the appointment of Tony Robinson as Executive
director, KPIs were set for Mr Robinson for the 2016/17
financial year as follows:
– Achievement of strategic plan milestones
– Qualitative assessment of management team structure
– Achievement of specific financial performance targets
– Discretionary element

The KPIs for 2016 for other executive KMP covered the
Company’s financial performance and clearly defined
KPIs related to the individual roles of Mr Greenwood
and Mr Ferragina.

Payments in 2016

Payments of STI during the financial year 2016 were
as follows:

Mr Ferragina’s deferred component of STI for his
performance in the year ended 30 June 2015 was paid
in June 2016.

Mr. Greenwood’s deferred component of STI for his
performance in the year ended 30 June 2015 was not
yet paid as at the date of this Report. The Company is
currently negotiating with Mr Greenwood in relation to
his employment contract as a result of his new position
and other matters, which is expected to conclude shortly.
Payment of the STI will be made following the amendment
of his employment contract with the Company. Refer to
the table under section 5 for further details regarding
the STI.

For each executive awarded STI, 50% of that is paid within
3 months after the close of the year.

3.7 Special Arrangements in 2016
Subsequent
to Mr McGill’s announced departure,
the Board entered into discussions with Mr Carver to
renegotiate his employment contract as part of Mr Carver
stepping up to be the CEO, culminating in a restructuring
of the contract as announced to the ASX on 1 February
2016. Mr Carver agreed to relinquish certain rights and
entitlements to which he was previously entitled under
his prior arrangement with Northern Lights and agreed
to include non-compete provisions in his contract, in
exchange for a one-time payment of US$600,000 at
signing of the contract subject to remaining employed
through to 30 September 2016.

On 30 April 2016, Mr Carver resigned as CEO and
transitioned from being an Executive director to being a
Non-executive director. In light of a number of on-going
initiatives, the Board was pleased to secure Mr Carver’s
ongoing commitment to the Company by remaining on the
Board. As part of this transition, the Board and Mr Carver
agreed a portion of the amount received by Mr Carver in

the restructure of his employment agreement would not
be subject to clawback if Mr Carver provides continuing
assistance with:
– the routine Securities Exchange Commission
examination of the US distribution company
(now completed);

– transition matters with the boutiques and Northern
Lights shareholders as a result of him becoming a
Non-executive director;

– certain strategic and management initiatives; and
– achieving the 2015/16 budget.
At the date of this Report, Mr Carver has continued
to work with the Company on all the matters agreed,
however on the basis that the Company did not achieve
its 2016 budget, to date Mr Carver has agreed to repay
US$50,000.

3.8 Variable Remuneration – Long Term Incentive (LTI)

Objective
The Company has a Board approved LTI plan (employee
share plan). The Board has established an LTI plan with
the objectives to reward executives and officers in a
manner that aligns this element of remuneration with the
creation of shareholder wealth. The awarding of the LTIs
is fully discretionary and grants are determined by the
remuneration committee.

2016 Structure
The 2016 LTI offer to executive and officers was made
under the LTI Plan in the form of performance rights. The
LTI plan allows for grants to be in the form of performance
rights, options or shares.

In 2016, the following performance rights were awarded
to KMP under the LTI Plan:

Mr Greenwood: 500,000 performance rights

Mr Ferragina: 305,000 performance rights

The grant of these performance rights is not subject to
shareholder approval as any securities to be allocated on
vesting of the performance rights will be purchased on
market. When purchasing securities on market under an
LTI plan, shareholder approval is not required.

Note, as disclosed in the 2015 remuneration report there
were no LTIs awarded to executive KMP during the 2015
financial year.

The performance rights granted in 2016 are subject to the
terms and conditions detailed below. The Board has the
discretion to amend the vesting terms and performance
hurdles for each offer of performance rights to ensure
that they are aligned to market practice and ensure the
best outcome for Pacific Current Group Limited. The
Board also has the discretion to change the LTI plan and to
determine whether LTI grants will be made in future years.

Annual Report 2016DIRECTORS’ REPORT

continued

The structure of LTI plan and 2016 offer is set out below:

Feature

Terms of the 2016 LTI offer

Type of security

Performance rights which are an entitlement to receive fully paid ordinary Pacific Current Group
Limited Shares (as traded on the ASX) on a one-for-one basis.

Valuation

An independent valuation was conducted using a monte-carlo simulation as well as binomial
option pricing methodology.

Performance Period

The performance period is the three year period 1 July 2015 to 1 July 2018 inclusive.

Performance
Conditions

The performance rights are split into two equal groups and each group are subject to a different
TSR performance hurdle as described below.

Broadly, 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 Company with the TSR performance of each
of the entities in a comparator group described below:

Hurdle 1

S&P ASX 300 Comparator Group

50% of the performance rights are subject to a TSR Hurdle that compares the TSR performance of
Pacific Current Group Limited at the end of the performance period with the growth in TSR over
the same period of the S&P ASX 300 companies.

Hurdle 2

Selected Comparator Group

The other 50% of the performance rights are subject to a TSR Hurdle that compares the TSR
performance of Pacific Current Group Limited at the end of the performance period with the
growth in TSR over the same period of a selected comparator group of companies.

In determining the outcome of the TSR Hurdle for this group of performance rights, each company
in the comparator group will be weighted equally. The companies comprising the comparator group
have similar performance drivers to Pacific Current Group Limited and will be subject to review on
the basis of relevance and may change at the Board’s discretion. The comparator group at the time
of this Report is as follows:
– BT Investment Management Limited (ASX ticker: BTT)
– Perpetual Limited (ASX ticker: PPT)
– Platinum Asset Management Limited (ASX ticker: PTM)
– Magellan Financial Group (ASX ticker: MFG)
– Henderson Group (ASX ticker: HGG)
– Affiliated Managers Group (NY ticker: AMG)
– Fortress Investment Group (NY ticker: FIG)

Together Hurdle 1 and Hurdle 2 comprise the total performance conditions but act independently
relative to their specific target component.

The percentage of performance rights which vest (if any) will be determined by the Board
by reference to the percentile ranking achieved by Pacific Current Group Limited over the
performance period compared to the comparator group applying under the relevant TSR Hurdle
for that group:

TSR growth – percentile ranking

Performance rights that vest (%)

75th percentile or above

100%

Between 50th and 75th percentile

Progressive pro rata vesting from 50% at
2% for every one percentile increase above
the 50th percentile

50th percentile

Below 50th percentile

50%

Nil

LIMITED20

Feature

Re-testing

Terms of the 2016 LTI offer

There is no re-testing. Any unvested LTI after the test at the end of the performance period will
lapse immediately.

Allocation of shares

Shares allocated will be sourced by the Company on the market to enable it to rely on ASX Listing
Rule 10.14, unless the Company first obtains approval for the issuance at an Annual General
Meeting (AGM).

Forfeiture

Performance rights will lapse for the following reasons:
– upon cessation of employment, except in a good leaver scenario detailed below;
– if the employee acts fraudulently, dishonestly or in breach of obligations;
– in connection with a change of control event as detailed below; or
– if the dealing restrictions are contravened.
Good Leaver

Any unvested performance rights will not lapse (unless the Board determines otherwise)
if the participant’s employment ceases due to death or total permanent disability. In these
circumstances performance rights will vest on the basis that the performance conditions
applicable to those performance rights have been satisfied on a pro rata basis over the period
from the grant date to the date of cessation of employment.

The Board has discretion to allow vesting for other reasons, such as retirement or redundancy.

Change of Control

Generally, in the event of:
– a takeover bid being made, recommended by the Board or becoming unconditional;
– a scheme of arrangement, reconstruction or winding up of the Company being put to members; or
– any other transaction, event or state of affairs that the Board in its discretion determines is likely

to result in a change in control of the Company,

the performance rights may vest at the Board’s discretion in accordance with the LTI plan rules.

Clawback

The Board has “clawback” powers if, amongst other things, the participant has acted fraudulently
or dishonestly.

4. Relationship between the Remuneration Philosophy and Company Performance
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for the
five years to 30 June 2016. Bonuses are paid based on individual and Company performance. The remuneration committee
has ultimate discretion in determining the amount of bonus pool:

Revenue

Net (loss)/profit before tax¹
Net (loss)/profit after tax
Share price at start of year ($)
Share price at end of year ($)
Interim dividend (cps)²
Final dividend (cps)²
(Loss)/EPS
Diluted (loss)/EPS
KMP bonuses ($)

2016
$

2015
(restated)
$

2014
$

2013
$

2012
$

5,602,651

6,714,712

2,323,656

4,303,143

3,944,594

(78,041,766) 193,627,443
(48,240,448) 135,702,179
9.57
9.50
24
28
529.7
529.7
576,185*

9.50
4.31
20
5
(172.1)
(172.1)
1,049,421³

15,187,652 10,803,395
10,390,514
13,061,814
4.09
7.07
7.07
9.57
17
23
23
27
45.0
56.6
45.3
55
539,200
629,500

6,415,796
6,751,757
3.96
4.09
14
20
29.3
29.3
502,166

2015 performance was driven by the gain on the sale of business to the Trust and is non-recurring.

² Franked to 100% at 30% corporate income tax.

Notwithstanding the decline in the financial performance of the business, the Board decided that certain STI payments would be made. This
recognises that some significant achievements were made during the period and recognising the importance of KMP to the business going forward.
In the case of Paul Greenwood, his role changed during the year and consequently changes are proposed to be made to his employment contract.

* Awarded to Mr Greenwood and Mr Ferragina in the prior year. These awards were recommended by the then CEO and approved by the Remuneration

Committee based on their individual performances.

Annual Report 2016DIRECTORS’ REPORT

continued

5. Remuneration of KMP
Details of the nature and amount of each element of the remuneration of each director of the Company and each of the
KMP of the Company and the consolidated entity for the financial year are set out below. Note that the financial year 2015
remuneration for the US executives and directors is for the period 25 November 2014 to 30 June 2015, while the financial
year 2016 numbers are for the full year. Pacific Current Group Limited is responsible for 65% of the remuneration.

Short term

Salary & fees
$

Post
employment
Super-
annuation/
401K
$

Cash
bonus
$

Share based
payments

Options/
Performance
rights
$

Shares
$

Others

Total

Performance
related

Others
$

Non-executive Directors
M. Fitzpatrick – Chairman

2016
2015

118,722
114,417

P. Kennedy – Non-executive director

2016
2015

120,000
120,000

M. Donnelly – Non-executive director

2016
2015

103,472
97,626

–
–

11,278
10,870

–
–

9,828
9,274

–
–

130,000
125,287

120,000
120,000

113,300
106,900

T. Robinson – Non-executive director, appointed 28 August 2015, resigned as Non-executive director 30 April 2016

2016
2015

72,300
–

J. Vincent – Non-executive director

2016
2015

85,000
–

G. Guérin – Non-executive director

2016
2015

75,000
–

–
–

6,868
–

–
–

T. Carver – Non-executive director from 30 April 2016

2016
2015

–
–
R. Hayes – Non executive director, resigned 31 March 2015
–
53,154

–
9,922

2016
2015

–
–

Executive Directors
P. Greenwood¹ – Global CIO and President, North America, appointed 30 April 2016

–
–

79,168
–

85,000
–

75,000
–

–
–

–
63,076

1,797,874
744,757

2016
2015

824,421
480,898

824,421
253,685

16,425
10,174

T. Carver¹ – Managing director and CEO, resigned 30 April 2016

2016
2015

882,157
479,660

–
–

13,725
9,884

A. McGill – Managing director and CEO, resigned 28 August 2015

2016
2015

102,690
631,217

–
–

3,218
18,783

T. Robinson – Executive director, appointed 30 April 2016

2016
2015

48,003
–
J. Ferragina – Finance director, COO and Company secretary

1,608
–

–
–

2016
2015

430,693
379,773

225,000
322,500

19,307
18,783

Total remuneration: KMP

2016
2015

2,862,458
2,356,745

1,049,421
576,185

82,257
87,690

–
–

132,607
–

–
–

824,421 1,720,303
489,544

–

–
8,986

–
–

80,890
2,516

–
–

105,908
658,986

49,611
–

755,890
723,572

213,497
11,502

824,421 5,032,054
– 3,032,122

–
–

46%
34%

–
–

–
34%

–
–

30%
45%

21%
19%

The remuneration table is reported in Australian Dollars except where noted. No KMP appointed during the year received
a payment as part of their consideration for agreeing to hold the position.

¹ The compensation of these KMP were paid by a US subsidiary of the Trust.

LIMITED22

The relative proportions of those elements of remuneration of KMP that are linked to performance:

Executives

P. Greenwood

T. Robinson²

J. Ferragina

Former executive KMP

T. Carver

A. McGill

Maximum potential of
short-term incentive based
on fixed remuneration

2016

2015

100%

N/A

100%

N/A

100%

Actual short-term
incentive based on fixed
remuneration linked to
performance¹

Maximum potential
of long-term incentive
based on fixed
remuneration3

Actual long-term
incentive based on fixed
remuneration linked to
performance3

2016

100%

–²

2015

50%

–

50%

100%

N/A

–4

2016

100%

N/A

100%

N/A

2015

N/A

2016

16%

N/A

17%

N/A

2015

N/A

²
3

Each year, KMP STI are paid in two instalments being 50% in August following the performance year and 50% in June the following year. For
the current year, only the 50% payable in August is provided for as at 30 June 2016. Note that Mr Greenwood’s deferred component of STI for
his performance in the year ended 30 June 2015 has not yet been paid as at the date of this Report. The Company is currently negotiating the
amendment to his employment. For the comparative period, 50% was provided for in June 2015 and the remaining 50% was paid in June 2016.

T. Robinson appointed on 30 April 2016. Mr Robinson was not eligible for an STI in the 2016 financial year.

Valuation based on fair-value at grant date using a monte-carlo simulation as well as binomial option pricing methodology. As disclosed in the 2015
remuneration report there were no LTIs awarded to executive KMP during the 2015 financial year.

In its discretion, the remuneration committee decided to not award Mr McGill any STI in 2015. In his 2015 STI recommendations to the committee,
Mr Carver volunteered to not receive a STI in 2015, and the remuneration committee approved his STI recommendations.

6. Key Terms of Employment Contracts of KMP

6.1 Key Terms of Employment Contract of Executive Director

Contract Details

Tony Robinson, Executive director

Term of Contract

Ongoing until notice is given by either party

Fixed Remuneration $300,000

STI

LTI

Mr Robinson is eligible for a short term incentive in 2016/17 of up to $300,000 with the percentage
payable determined based on achievements of set key performance indicators. This will be assessed
and payable in December 2016, unless agreed to be paid earlier. See further detail in section 3.6.

There is no LTI component in Mr Robinson’s contract.

Termination of
Employment

Under the terms of the contract, Mr Robinson or Pacific Current Group Limited may terminate the
contract giving one month written notice with no termination benefits.

The Company may terminate the contract at any time without notice if serious misconduct has
occurred. Where termination with cause occurs, Mr Robinson is only entitled to that portion of
remuneration that is fixed, and only up to the date of termination.

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.

Annual Report 2016DIRECTORS’ REPORT

continued

6.2 Key Terms of Employment Contract of Global CIO and President, North America

Contract Details

Paul Greenwood, Global CIO and President, North America

Term of Contract

Ongoing until notice is given by either party

Fixed Remuneration US$600,000

STI

LTI

Termination of
Employment

Mr Greenwood is eligible for a STI based on a number of clearly defined KPIs. The STI is for up to 100%
of base salary and paid in two equal instalments over a two year period. See further detail in section 3.6.

Mr Greenwood is eligible to participate in the Company’s LTI plan and the offers each year (if any) will
be disclosed in the remuneration report and will be subject to shareholder approval if required.

Termination for cause/resignation for other than good reason
Under the terms of the contract, the Company may terminate Mr Greenwood’s employment for “cause”
(which includes serious misconduct) without notice and Mr Greenwood may resign his employment for
other than “good reason” or otherwise by giving six (6) months prior written notice. In either of these
situations, Mr Greenwood will be entitled to receive that portion of remuneration which is fixed (and
only up to the date of termination); accrued but untaken annual leave, vested but unpaid amounts
owed to Mr Greenwood under the Company’s retirement, non-qualified deferred compensation or
incentive compensation plans; and any other applicable bonus/incentive payments as per the terms of
the contract and grant or plan documents.

Termination upon death or permanent disability
If Mr Greenwood suffers a permanent disability or dies during the term of their respective contracts,
Mr Greenwood (or his estate, as applicable) will be entitled to receive the same benefits as payable
in a “Termination for cause/resignation for other than good reason” scenario, plus twelve (12) months
continuation coverage under the Company’s health plans under which Mr Greenwood and his dependents
participated immediately prior to Mr Greenwood’s date of termination.

Termination without cause/resignation for good reason
Under the terms of the contract, the Company may terminate Mr Greenwood’s employment without
cause by giving six (6) months prior written notice, and Mr Greenwood may resign his employment for
other than “good reason” or otherwise. In either of these situations, Mr Greenwood will be entitled to
the same benefits as payable in a “Termination upon death or permanent disability” scenario, plus a
lump sum severance payment equal to twelve (12) months base salary.

The Company is currently negotiating the employment contract of Mr Greenwood which is expected
to conclude shortly.

LIMITED24

6.3 Key Terms of Employment Contract of Finance Director, COO and Company Secretary

Contract Details

Joseph Ferragina, Finance director, COO and Company secretary

Term of Contract

Ongoing until notice is given by either party

Fixed Remuneration $450,000

STI

LTI

Mr Ferragina is eligible for a STI based on a number of clearly defined KPIs. The STI is for up to 100% of
base salary and paid in two equal instalments over a two year period. See further detail in section 3.6.

Mr Ferragina is eligible to participate in the Company’s LTI Plan and the offers each year (if any) will be
disclosed in the Remuneration Report and will be subject to shareholder approval if required.

Termination of
Employment

Under the terms of the contract, Mr Ferragina or Pacific Current Group Limited may terminate the
contract giving three months written notice with no termination benefits.

The Company may terminate the contract at any time without notice if serious misconduct has occurred.
Where termination with cause occurs, Mr Ferragina 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.

Annual Report 2016DIRECTORS’ REPORT

continued

7. Remuneration of Non-executive directors

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 caliber, whilst incurring a cost which is acceptable to shareholders.

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 requires shareholder approval and the manner in which it is apportioned amongst
directors is reviewed annually. Non-executive directors do not receive performance-based bonuses from Pacific Current
Group Limited.
Non-executive directors do not receive fees that are contingent on performance, shares in return for their services, retirement
benefits, other than statutory superannuation or termination benefits.
The Executive directors are not remunerated separately for acting as directors.
There is no intent to seek to increase the Non-executive director fee pool at the 2016 AGM.
Following is the schedule of Non-executive directors fees:

Chairman

2016
$

2015
$

100,000

Non-executive director
Audit and risk committee chair
Audit and risk committee member
Remuneration committee member (includes Chair, no fee difference between member and chair)
Governance committee chair
Governance committee member

60,000
20,000
15,000
10,000
10,000
5,000

60,000
20,000
15,000
10,000
–
3,000

The fees above are inclusive of superannuation contributions, except for the director fees paid to Mr Vincent and
Mr Guérin. Total fees paid to Non-executive directors in the year ended 30 June 2016 were $602,468. Refer to
page 22 for details.
The only increase to Non-executive directors’ fees during the 2016 reporting period was an increase in fees paid to the
governance committee chair and members due to the increased workload for this committee during the year.
Directors are not required under the constitution or any other Board policy to hold any shares in Pacific Current Group
Limited. The shareholding level of directors is detailed in the tables later in this Report.

8. Share-Based Remuneration

Share-Based Payments Granted as a Compensation for the Current Financial Year
Pacific Current Group Limited operates an LTI plan for eligible employees as described in section 3.8. The number of
performance rights granted under the LTI plan in 2016 are as detailed in the table below and further described in section 3.8.

Details of share-based payments/performance rights granted as compensation to KMP during the current financial year:

During the financial year

Option series

Numbers
granted1

Numbers
vested

% of grant
vested

% of grant
forfeited

% of
compensation
for the year
consisting of
performance
rights

2016
2016
2016

500,000
–
305,000²

–
–
–

Executive KMP
P. Greenwood
T. Robinson
J. Ferragina

¹ Granted in February 2016.

Following his performance review in July 2014, Pacific Current Group Limited made a commitment to grant Mr Ferragina 165,000 performance
rights. On his promotion to Finance director in April 2015, Pacific Current Group Limited made a commitment to grant Mr Ferragina an additional
140,000 performance rights.

LIMITED26

9. KMP Equity Holdings

Fully paid ordinary shares of Pacific Current Group Limited

30 June 2016

Non-executive directors

M. Fitzpatrick

P. Kennedy

M. Donnelly

J. Vincent²

G. Guérin²

T. Carver³

Executive KMP

P. Greenwood³

T. Robinson

J. Ferragina

30 June 2015

Non-executive directors

M. Fitzpatrick

P. Kennedy

M. Donnelly

J. Vincent²

G. Guérin²

Executive KMP

P. Greenwood³

T. Carver³

J. Ferragina

Balance
1 July 2015

Granted as
remuneration

Received on
vesting of
performance
rights/options

Net change
other

Balance
held nominally

2,701,285

214,929

20,000

–

141,400

–

2,701,285

27,699

242,628

–

20,000

–

141,400

Balance
1 July 2014

Granted as
remuneration

Received on
vesting of
performance
rights/options¹

Net change
other

Balance
held nominally

2,701,285

213,487

20,000

–

7,000

–

134,400

–

2,701,285

1,442

214,929

–

20,000

–

141,400

The performance rights granted on 11 July 2011 vested on 11 July 2014. As a result, Mr Ferragina received Pacific Current Group Limited shares
with a market value of $1,330,560. The market value of the shares on 11 July 2014 was $9.90 per share.

Both Mr Vincent and Mr Guérin represent stakeholders who are Class B and B-1 unitholders in the Trust. These Class B and B-1 units are exchangeable
for fully paid ordinary shares in Pacific Current Group Limited. In the event that exchange notices are delivered to convert such Class B and B-1 unit
holdings as at the date of this report, the stakeholders whom Mr Vincent and Mr Guérin represent will receive fully paid ordinary shares in Pacific
Current Group Limited of 2,439,229 and 2,397,957 respectively. Refer to page 59 for the conversion multiple.

Class B and B-1 unitholders in the Trust. Class B or B-1 units are exchangeable for fully paid ordinary shares in Pacific Current Group Limited. In the
event that exchange notices are delivered to convert such Class B or B-1 unit holdings as at the date of this report, Mr Carver and Mr Greenwood will
receive fully paid ordinary shares in Pacific Current Group Limited of 509,887 and 908,932 respectively. Refer to page 59 for the conversion multiple.

Annual Report 2016DIRECTORS’ REPORT

continued

Performance rights of Pacific Current Group Limited

Balance
at 1 July
2015

Granted as
compensation

Received on
vesting of
performance
rights/options

Balance
At 30 June
2016

Balance
Vested
at 30 June
2016

Net change
other

Vested
but not
exercisable

Vested and
exercisable

Performance
rights vested
30 June 2016

30 June 2016

No.

Executive
KMP

P. Greenwood

T. Robinson

J. Ferragina¹

–

500,000

–

305,000

–

– 500,000

–

– 305,000

–

Balance at
1 July 2014²

Granted as
compensation

Received on
vesting of
performance
rights/
options

Net change
other

Balance
at 30 June
2015

Balance
vested
at 30 June
2015

Vested
but not
exercisable

Vested and
exercisable

Performance
rights vested
30 June 2015

30 June 2015

No.

Executive
KMP

P. Greenwood

–

J. Ferragina

140,000

– (134,400)

(5,600)

–

96%

–

134,400

² The performance rights granted on 11 July 2011 vested on 11 July 2014.

Note – see section 3.8 for applicable performance criteria and further details.

Loans to directors and executives
No loans were made to directors and executives of the Company including their close family and entities related to them
during the year.

LIMITED28

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 & risk committee
meetings

Remuneration committee
meetings

Governance committee
meetings

Meetings
eligible to
attend

Meetings
attended

Meetings
eligible to
attend

Meetings
attended

Meetings
eligible to
attend

Meetings
attended

13
12
11
3
13
13
13
13
10
12

13
12
11
3
13
12
13
12
10
12

4
0
0
0
4
4
4
0
2
0

4
0
0
0
4
3
4
0
2
0

2
0
0
0
2
0
2
2
1
0

3
0
0
0
0
3
0
3
0
0

M. Fitzpatrick
P. Greenwood
T. Carver
A. McGill*
P. Kennedy
M. Donnelly
J. Vincent
G. Guérin
T. Robinson*
J. Ferragina

* They were not Directors for the full year.

Committee Membership
As at the date of this report, the Company had an audit & risk committee, a remuneration committee and a governance
committee of the Board of directors.

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

Audit & Risk

P. Kennedy (Chairman)
M. Fitzpatrick
M. Donnelly
J. Vincent

Remuneration

J. Vincent (Chairman)
M. Fitzpatrick
P. Kennedy
G. Guérin

Governance

M. Donnelly (Chairperson)
M. Fitzpatrick
G. Guérin

Tax Consolidation
As at the date of this report, Pacific Current Group Limited, Aurora Investment Management Ltd and AR Capital Management
Pty Ltd are the members of the tax consolidated entity.

Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Pacific Current
Group Limited support the principles of corporate governance. The Company’s corporate governance statement is available
on Pacific Current Group Limited’s website www.paccurrent.com.

Environmental Regulation and Performance
The Company’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 Pacific Current Group Limited. A copy of the
declaration is set out on page 30.

Signed in accordance with a resolution of the Directors.

M. Fitzpatrick
Chairman

31 August 2016

Annual Report 2016AUDITOR’S INDEPENDENCE DECLARATION

To the Directors of Pacific Current Group Limited

LIMITEDCONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 30 June 2016

Continuing Operations

Revenues

Net gain on investments

Salaries and employee benefits expenses

Other expenses

Notes

5(a)

5(b)

5(c)

2016

2015
(restated)*
$

5,602,651

6,714,712

–

198,803,507

(4,051,766)

(5,266,779)

(1,105,809)

(1,991,791)

Share of net losses of equity accounted investments

5(d)

(78,486,842)

(4,632,206)

(Loss)/profit before income tax

Income tax benefit/(expense)

(Loss)/Profit for the Year

(78,041,766) 193,627,443

6(c)

29,801,318

(57,925,264)

(48,240,448) 135,702,179

ATTRIBUTABLE TO MEMBERS OF THE PARENT

15(e)

(48,240,448) 135,702,179

(Losses)/earnings per share (cents per share)
– basic for (loss)/profit for the year attributable to ordinary equity holders of the

parent

– diluted for (loss)/profit for the year attributable to ordinary equity holders of

the parent

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

7(b)

(172.1)

529.7

(172.1)

529.7

The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.

* The consolidated statement of profit or loss for the year ended 30 June 2015 has been restated. Refer to Note 2(z) for an explanation.

Annual Report 2016
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2016

(Loss)/Profit for the Year

Other comprehensive income

Items that may be reclassified to profit and loss

2016

2015
(restated)*
$

(48,240,448) 135,702,179

Reversal of net unrealised losses on available-for-sale sold during the year

–

(213,684)

Share of net fair value gain on available-for-sale financial assets of a joint venture (after tax)

(112,125)

1,569,431

Share of exchange differences on translating foreign operations of a joint venture (after tax)

6,965,730

9,723,255

Other comprehensive income for the year

Total Comprehensive (Loss)/Income for the Year

Attributable to Members of the Parent

6,853,605

11,079,002

(41,386,843) 146,781,181

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

* The consolidated statement of other comprehensive income for the year ended 30 June 2015 has been restated. Refer to Note 2(z) for an explanation.

LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2016

Current assets

Cash and cash equivalents

Trade and other receivables

Total current assets

Non-Current Assets

Investments in joint ventures/associates

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Provision for income tax

Provisions

Total current liabilities

Non-current liabilities

Provisions

Deferred tax

Total non-current liabilities

Total liabilities

Net assets

Equity

Equity attributable to equity holders of the parent

Issued capital

Reserves

Retained earnings

Total equity

Notes

9(a)

2016

2015
(restated)*
$

2,997,744

1,056,243

11,906,851

10,046,019

14,904,595

11,102,262

11(b)

210,056,666 290,163,883

224,961,261 301,266,145

2,000,884

2,002,211

14,157,614

–

236,468

328,765

16,394,966

2,330,976

175,268

207,445

6(d)

20,961,430

61,920,061

21,136,698

62,127,506

37,531,664 64,458,482

187,429,597 236,807,663

15(a)

15(f)

15(e)

74,556,705

69,500,943

21,401,642

14,231,149

91,471,250 153,075,571

187,429,597 236,807,663

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

* The consolidated statement of financial position for the year ended 30 June 2015 has been restated. Refer to Note 2(z) for an explanation.

Annual Report 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2016

Equity-settled
employee
benefits
reserve
$

Issued
capital
$

Investment
revaluation
reserve
$

Foreign
currency
translation
reserve
$

Note

Retained
earnings
$

Total
$

At 1 July 2015 (restated)*

69,500,943

2,938,463

1,569,431

9,723,255 153,075,571 236,807,663

Total comprehensive
(loss)/income for the year

Issuance of shares due to
vesting of performance
rights

Issuance of shares

Share-based payments

Dividends paid

At 30 June 2016

–

(112,125)

6,965,730 (48,240,448)

(41,386,843)

55,771

(55,771)

4,999,991

–

372,659

–

15(d)

7(b)

–

4,999,991

372,659

– (13,363,873)

(13,363,873)

74,556,705

3,255,351

1,457,306

16,688,985

91,471,250 187,429,597

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

* The consolidated statement of changes in equity for the year ended 30 June 2015 has been restated. Refer to Note 2(z) for an explanation.

For the year ended 30 June 2015

Equity-settled
employee
benefits
reserve
$

Issued
capital
$

Investment
revaluation
reserve
$

Foreign
currency
translation
reserve
$

Note

Retained
earnings
$

Total
(restated)*
$

At 1 July 2014

29,594,265

3,874,436

213,684

– 30,092,285

63,774,670

–

(66,581)

(4,458,846) 138,723,124 134,197,697

Total comprehensive
(loss)/income for the year

Issuance of shares due to
vesting of performance
rights

1,027,859

(1,027,859)

Issuance of shares

38,878,819

Share-based payments

Dividends paid

15(d)

7(b)

–

91,886

–

38,878,819

91,886

– (13,023,319)

(13,023,319)

At 30 June 2015
(as previously reported)

69,500,943

2,938,463

147,103

(4,458,846) 155,792,090 223,919,753

Impact of restatement

2(z)

–

1,422,328

14,182,101

(2,716,519) 12,887,910

At 30 June 2015
(restated)*

69,500,943

2,938,463

1,569,431

9,723,255 153,075,571 236,807,663

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

* The consolidated statement of changes in equity for the year ended 30 June 2015 has been restated. Refer to Note 2(z) for an explanation.

LIMITEDCONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2016

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Dividends and distributions received

Interest received

Notes

2016
$

2015
$

3,702,852

19,269,533

(4,910,718)

(24,544,608)

16,474,272

7,872,346

38,968

1,821,573

Net cash flows generated by operating activities

9(b)

15,305,374

4,418,844

Cash flows from investing activities

Proceeds from disposal of available-for-sale investments

Repayment of loans by former associates

Advances to former associates

Purchase of investment joint venture/associate

Cash held by deconsolidated entities

Net cash flows (used in) investing activities

Cash flows from financing activities

Proceeds from issue of shares, net of transaction costs

Dividends paid on ordinary shares

Net cash flows (used in)/generated by 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

–

6,900,946

2,270,505

(2,454,756)

– (47,005,303)

–

(1,789,712)

– (42,078,320)

–

38,878,819

(13,363,873)

(13,023,319)

(13,363,873) 25,855,500

1,941,501 (11,803,976)

1,056,243

12,860,219

9(a)

2,997,744

1,056,243

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. The non-cash investing activities in
relation to acquisition of units in the Trust were $60,381,631 (2015: $248,862,194), refer to Note 11(b) for further details. Non-cash financing activities
were $4,999,991 (2015:Nil), refer to Note 15(b) for further details.

Annual Report 2016NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2016

1. Corporate Information
The financial report of Pacific Current Group Limited (the ‘Company’ or ‘Group’, formerly Treasury Group Ltd) for the year
ended 30 June 2016 was authorised for issue in accordance with a resolution of the directors on 31 August 2016.

Pacific Current Group Limited 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 Company are disclosed in the Directors’ Report.

2. Summary of Significant Accounting Policies

a. Basis of Preparation
The consolidated financial statements have been prepared on the basis of historical cost.

All amounts are presented in Australian dollars, unless otherwise noted.

b. Statement of Compliance
These consolidated financial statements are general purpose financial statements which have been prepared in accordance
with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

The financial statements comprise the consolidated financial statements of the Company. For the purposes of preparing the
consolidated financial statements, Pacific Current Group Limited is a for-profit entity.

Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures
that the consolidated financial statements and notes of the Company comply with International Financial Reporting
Standards (‘IFRS’).

Application of new and revised accounting standards
There were no new and revised standards that were applied in the current year that had any material impact on accounting
or disclosure.

Amendment to AASBs and new Interpretations that are mandatorily effective for the current year
There were no amendments to AASBs or new interpretations that are mandatorily effective for the current year that were
reqired to be applied in the current year.

Standards and Interpretations in issue not yet adopted
At the date of authorisation of the consolidated financial statements, the Standards and Interpretations were issued but not
yet effective are listed below. Their adoption 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 standard

AASB 15 ‘Revenue from Contracts with Customers’
and AASB 2014-5 ‘Amendments to Australian
Accounting Standards arising from AASB 15’

AASB 16 ‘Leases’

AASB 2014-3 ‘Amendments to Australian Accounting
Standards – Accounting for Acquisitions of Interests in
Joint Operations’

AASB 2014-4 ‘Amendments to Australian Accounting
Standards – Clarification of Acceptable Methods of
Depreciation and Amortisation’

AASB 2014-9 ‘Amendments to Australian Accounting
Standards – Equity Method in Separate Financial
Statements

1 January 2018

30 June 2019

1 January 2018

30 June 2019

1 January 2019

1 January 2016

30 June 2020

30 June 2017

1 January 2016

30 June 2017

1 January 2016

30 June 2017

LIMITED36

Standard/Interpretation

Effective for annual reporting
periods beginning on or after

Expected to be initially applied in
the financial year ending

AASB 2014-10 ‘Amendments to Australian Accounting
Standards – Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture’,
AASB 2015-10 ‘Amendments to Australian
Accounting Standards – Effective Date of
Amendments to AASB 10 and AASB 128’

AASB 2016-1 ‘Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses’

1 January 2018

30 June 2019

1 January 2017

30 June 2018

At the date of authorisation of the consolidated financial statements, there have been no IASB or IFRIC Interpretations that
are issued but not effective that could impact the Group.

c. Revenue Recognition
Revenue is 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 Company 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 accrued as services are provided.

Management fees

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

Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company
and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Distributions and dividends
Distribution and dividend income from investments is recognised when the shareholder’s right to receive payment has been
established. Distributions or dividends received from the equity accounted investments in joint ventures and associates are
not recognised in the profit or loss but are reduced from the equity-accounted investment’s carrying value.

d. Recognition of Gain or Loss on Sale of Investments
Gain or loss is recognised in the Consolidated Statement of Profit or Loss which is determined as the difference between the
carrying amount and fair value of the assets and liabilities being transferred or deemed sold.

e. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured
entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
– has power over the investee;
– is exposed, or has rights, to variable returns from its involvement with the investee; and
– has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the
voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an
investee are sufficient to give it power, including:
– the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
– potential voting rights held by the Company, other vote holders or other parties;
– rights arising from other contractual arrangements; and
– any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Annual Report 20162. Summary of Significant Accounting Policies

(continued)

subsidiary begins when

the
Consolidation of a
Company obtains control over the subsidiary and ceases
when the Company loses control of the subsidiary.
Specifically,
income and expenses of a subsidiary
acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other
comprehensive income from the date the Company gains
control until the date when the Company ceases to control
the subsidiary.

Profit or loss and each component of other comprehensive
income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive
income of subsidiaries is attributed to the owners of
the Company and to the non-controlling interests even
if this results in the non-controlling interests having a
deficit balance.

When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Company’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members
of the Company are eliminated in full on consolidation.

f. Cash and Cash Equivalents
Cash and short-term deposits
in the Consolidated
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 Consolidated Statement of Cash
Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above.

g. 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
Company 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 Company did not have any impaired trade receivables
(2015: Nil).

h. Impairment of Available-for-Sale Financial Assets
The Company assesses at each balance date whether
a financial asset or group of financial assets is impaired.

i. Investments in Joint Ventures and Associates
A joint venture is a joint arrangement whereby the
parties that have joint control of the arrangement have
rights to the net assets of the joint arrangement. Joint
control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about
the relevant activities require unanimous consent of the
parties sharing control.

An associate is an entity over which the Company has
significant influence. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee but is not control or joint control over
those policies.

As at 30 June 2016, the Company owns 65.15%
(2015: 64.03%) of the Trust. Whilst the ownership
exceeds 50% and results in a presumption of control, the
Trust is referred to as a joint venture arrangement among
Pacific Current Group Limited, Northern Lights and BNP
Paribas. Pacific Current Group Limited and Northern
Lights contributed their businesses to the Trust to conduct
investment activities, and BNP Paribas was an investor
in Northern Lights prior to the merger between Pacific
Current Group Limited and Northern Lights. The key
function of the Trust and the overall business is investment
in asset managers. Former Northern Lights executives are
responsible for investment analyses and recommendations
as investment due diligence and recommendations are
undertaken by the majority Northern Lights controlled
investment committee.
Investment decisions require
approval by a majority vote of the Trustee board. The
decision making process leading to execution requires all
parties to agree. It is therefore deemed appropriate that
the Trust be reflected as a joint venture investment.

In the prior year, Pacific Current Group Limited referred to
its investment in the Trust as an associate in its Consolidated
Statement of Financial Position. The principles of the
equity accounting method apply to the accounting for
both associates and joint ventures and the reclassification
of the investment to an investment in joint venture does
not therefore require any adjustment in the accounting for
the investment in the Trust. Further information on this
reclassification is included in Note 2(z).

The results and assets and liabilities of associates or joint
ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except
when the investment, or a portion thereof, is classified
as held for sale, in which case it is accounted for in
accordance with AASB 5 ‘Non-current Assets Held for
Sale and Discontinued Operations’.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED38

Under the equity method, an investment in an associate
or a joint venture is initially recognised in the Consolidated
Statement of Financial Position at cost and adjusted
thereafter to recognise the Company’s share of the profit
or loss and other comprehensive income which includes
reserves of the associate or joint venture. When the
Company’s share of losses of an associate or a joint venture
exceeds the Company’s interest in that associate or joint
venture (which includes any long-term interests that, in
substance, form part of the Company’s net investment in
the associate or joint venture), the Company discontinues
recognising its share of further losses. Additional losses
are recognised only to the extent that the Company
has incurred legal or constructive obligations or made
payments on behalf of the associate or joint venture.

An investment in an associate or a joint venture is
accounted for using the equity method from the date on
which the investee becomes an associate or a joint venture.
On acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the
Company’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as
goodwill, which is included within the carrying amount of
the investment. Distributions or dividends received from
the equity accounted investments in joint ventures and
associates are reduced from the investment’s carrying
value. Any excess of the Company’s share of the net fair
value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised
immediately in profit or loss in the period in which the
investment is acquired.

The requirements of AASB 139 ‘Financial Instruments;
recognition and measurement’ are applied to determine
whether it is necessary to recognise any impairment loss
with respect to the Company’s investment in an associate
or a joint venture. 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
of disposal) 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.

The Company discontinues the use of the equity method
from the date when the investment ceases to be an
associate or a joint venture, or when the investment is
classified as held for sale. When the Company retains
an interest in the former associate or joint venture and
the retained interest is a financial asset, the Company
measures the retained interest at fair value at that date
and the fair value is regarded as its fair value on initial
recognition in accordance with AASB 139.

The difference between the carrying amount of the
associate or joint venture at the date the equity method
was discontinued, and the fair value of any retained interest
and any proceeds from disposing of a part interest in the
associate or joint venture is included in the determination
of the gain or loss on disposal of the associate or joint
venture. In addition, the Company accounts for all
amounts previously recognised in other comprehensive
income in relation to that associate or joint venture on
the same basis as would be required if that associate or
joint venture had directly disposed of the related assets or
liabilities. Therefore, if a gain or loss previously recognised
in other comprehensive income by that associate or joint
venture would be reclassified to profit or loss on the
disposal of the related assets or liabilities, the Company
reclassifies the gain or loss from equity to profit or loss (as
a reclassification adjustment) when the equity method is
discontinued.

When the Company reduces its ownership interest in an
associate or a joint venture but the Company continues
to use the equity method, the Company reclassifies
to profit or loss the proportion of the gain or loss that
had previously been recognised in other comprehensive
income relating to that reduction in ownership interest if
that gain or loss would be reclassified to profit or loss on
the disposal of the related assets or liabilities.

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

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 any accumulated impairment losses. For the
purposes of impairment testing, goodwill is allocated to
each of the Company’s cash-generating units (or groups
of cash-generating units) 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. An impairment loss recognised for
goodwill is not reversed in subsequent periods.

Upon disposal of the relevant cash-generating unit,
the amount of goodwill attributable is included in the
determination of the gain or loss on disposal. The
Company’s policy for goodwill arising on the acquisition
of a joint venture or an associate is described at Note 2(i).

Annual Report 20162. Summary of Significant Accounting Policies

(continued)

k. Plant and Equipment
Plant and equipment is stated at historical cost less
accumulated
accumulated
impairment losses.

depreciation

and

any

Major depreciation methods and periods are:

2016 & 2015

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.

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 expensed as 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 each
financial year end.

investments, available-for-sale

m. Financial Assets
Financial assets are classified into the following categories:
financial assets ‘at fair value through profit or loss’ (FVTPL),
(AFS)
‘held-to-maturity
financial assets and ‘loans and receivables’. The classification
depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition. All regular
way purchases or sales of financial assets are recognised
and derecognised when the right to receive cash flows from
the financial assets have expired or been transferred; on
a trade date basis i.e. the date that the Company commits
to purchase the asset. Regular way purchases or sales are
purchases or sales of financial assets that required delivery
of assets within the time frame established by regulation or
convention in the marketplace.

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.

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.

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

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

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

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

n. Income Tax
The income tax (benefit)/expense for the year comprises
current income tax (benefit)/expense and deferred tax
(benefit)/expense.

Current income tax expense charged to the profit or loss
is the tax payable on taxable income measured at the
amounts expected to be paid to or recovered from the
relevant taxation authority.

Deferred income tax expense reflects movements in
deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.

Current and deferred income tax (benefit)/expense is
charged or credited outside profit or loss when the tax
relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax
is recognised from the initial recognition of an asset or
liability, where there is no effect on accounting or taxable
profit or loss.

Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled and

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED40

The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the Consolidated Statement of Financial Position.

Cash flows are included in the Consolidated Statement
of Cash Flows on a gross basis and the GST component of
cash flows arising from investing and financing activities,
which is recoverable from, or payable to, the taxation
authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.

p. Impairment of Non-financial Assets other than

Goodwill

Non-financial assets other than goodwill 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 its 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 Company prior to the end
of the financial year that are unpaid and arise when the
Company 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 Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company 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.

their measurement also reflects the manner in which
management expects to recover or settle the carrying
amount of the related asset or liability.
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that it
is probable that future taxable profit will be available against
which the benefits of the deferred tax asset can be utilised.
Current tax assets and liabilities are offset where a legally
enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement
of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where: (a) a legally
enforceable right of set-off exists; and (b) the deferred tax
assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity
or different taxable entities where it is intended that net
settlement or simultaneous realisation and settlement of
the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
The Company has applied the Stand-Alone Taxpayer
approach in determining the appropriate amount of current
taxes to allocate to members of the tax consolidation
group. The tax funding agreement provides each member
of the tax consolidated group to pay a tax equivalent
amount to or from the parent in accordance with their
current tax liability or current tax asset. Such amounts are
reflected in amounts receivable from or payable to the
parent company in their accounts and are settled as soon
as practicable after lodgement of the consolidated return
and payment of the tax liability.
The deferred taxes are allocated to members of the tax
consolidated group in accordance with the principles of
AASB 112 ‘Income Taxes’.

Tax Consolidation
Pacific Current Group Limited, Aurora
Investment
Management Ltd and AR Capital Management Pty Ltd are
the members 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 Goods and Services Tax (‘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.

Annual Report 20162. Summary of Significant Accounting Policies

(continued)

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

s. Employee Provisions

Short term and long term employee benefits
A liability is recognised for benefits accruing to employees
in respect of wages and salaries, annual leave, long service
leave, and sick leave when it is probable that settlement will
be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee
benefits, are measured at their nominal values using
the remuneration date expected to apply at the time
of settlement.
Liabilities recognised in respect of long term employee
benefits are measured as the present value of the estimated
future cash outflows to be made by the Company in respect
of services provided by employees up to reporting date.

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

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 Consolidated Statement of Profit or Loss on a
straight-line basis over the lease term. Operating lease
incentives are recognised as a liability when received
and subsequently reduced by allocating lease payments
between rental expense and reduction of the liability.

v. (Loss)/Earnings Per Share
Basic (loss)/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 (loss)/earnings per share is calculated as net loss or
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 Company provides benefits to employees (including
senior executives and directors) of the Company in the
form of share-based payment transactions, whereby
employees render services in exchange for shares or rights
over shares (equity-settled transactions).

The Pacific Current Group Limited’s Long Term Incentive
plan is in place whereby Pacific Current Group Limited,
at the discretion of the Board of Directors, awards
performance rights to directors, executives and certain
members of staff of the Company. Each performance right
at the time of grant represents one Pacific Current Group
Limited share upon vesting.

On 15 February 2016, Pacific Current Group Limited
granted 1,199,000 performance rights which have vesting
date of 1 July 2018 to officers and certain employees as
part of their long term incentives. Two tranches of rights
were issued with equal proportions (50%) vesting based
on the relative TSR of Pacific Current Group Limited
compared to the ASX 300 (Hurdle 1) and on a group of
seven other domestic and international fund managers
(Hurdle 2). The value of each right for Hurdle 1 and Hurdle
2 were $1.26 and $2.46, respectively. Total value of the
outstanding performance rights is $2,225,945 amortised
over two years and four months from the grant date. The
performance rights on issue were valued based on the
valuation made by an independent adviser using a monte-
carlo pricing 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 Pacific Current Group
Limited (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 Company’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 Consolidated
Statement of Profit or Loss charge or credit for a period
represents the movement in cumulative expense recognised
as at the beginning and end of that period.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITEDNo 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 diluted (losses)/earnings per share.

x. Foreign Currency Translation

i. Functional and presentation currency
Both the functional and presentation currency of Pacific
Current Group Limited 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. Going Concern
The directors believe that the Company remains a going
concern on the basis that it can satisy its obligations
through its own capacity or through distributions from
the Trust. The Trust continues to be a going concern and
there are ongoing discussions about capital restructure
and possible asset sales.

z. Comparatives and Restatement of Financial

Information

Accounting Treatment of Investment in the Trust
1) As at 30 June 2016, the Company owns 65.15%
(2015:64.03%) of the Trust. Whilst the ownership
exceeds 50% and results in a presumption of control, the
Trust is referred to as a joint venture arrangement among
Pacific Current Group Limited, Northern Lights and BNP
Paribas. Pacific Current Group Limited and Northern
Lights contributed their businesses to the Trust to
conduct investment activities, and BNP Paribas was an
investor in Northern Lights prior to the merger between
Pacific Current Group Limited and Northern Lights. The
key function of the Trust and the overall business is
investment in asset managers. Former Northern Lights
executives are responsible for investment analyses
and recommendations as investment due diligence
and recommendations are undertaken by the majority
investment committee.
Northern Lights controlled
Investment decisions require approval by a majority vote
of the Trustee board. The decision making process leading
to execution requires all parties to agree. It is therefore
deemed appropriate that the Trust be reflected as a joint
venture investment.

In the prior year, Pacific Current Group Limited
referred to its investment in the Trust as an associate
in its Consolidated Statement of Financial Position.
The principles of the equity accounting method apply
to the accounting for both associates and joint ventures
and the reclassification of the investment to an
investment in joint venture does not therefore require
any adjustment in the accounting for the investment in
the Trust.

Finalisation of PPA of the Trust
2) There was a PPA adjustment in the determination
of net assets of the Trust that were contributed by
Northern Lights. The liabilities brought to the Trust were
understated by $8.8m (US$7.0m). As a consequence
there was an adjustment to the fair value of the
available-for sale investment securities acquired from
Northern Lights, indicating the fair value of one specific
available-for sale investment security’s fair value was
not supportable at period end. An impairment of the
available-for sale investment security was recognised by
the Trust. This resulted in Pacific Current Group Limited
recognising an additional share in these losses, based on
its 64.03% interest in the Trust, of $5.6m.

The income tax effect of the recognition of these
additional losses by Pacific Current Group Limited was
also recognised at 30%, being a reduction of $1.7m in
the income tax expense and the deferred tax liability
balance.

3) The PPA adjustments resulted in a revised amount being
booked to the Trust’s investment revaluation reserve
of $3.1m and the foreign currency translation reserve
of $31.6m. The correction results in Pacific Current
Group Limited recognising an increase in its investment
in the Trust of $22.2m, which represents its 64.03%
proportionate share in the investment revaluation
reserve of $2.0m and foreign currency translation
reserve of $20.2m, respectively.

Annual Report 2016

2. Summary of Significant Accounting Policies (continued)

The income tax effect of the recognition of the additional share in the investment revaluation reserve and foreign currency
translation reserve by Pacific Current Group Limited was also recognised at 30%, being an increase in the deferred
tax liability of $6.7m and respective increases in the deferred tax balances held in the reserves of $0.6m (Investment
revaluation reserve) and $6.1m (Foreign currency translation reserve).

Correction of prior period accounting error
4) The consolidated statement of comprehensive income for the year ended 30 June 2015 stated a lower amount of
gain on sale of investment. This was due to an error in posting transaction costs of $3.4m which were recognised as
an expense of Pacific Current Group Limited but should have been recognised as a cost borne on behalf of the Trust.
As a consequence, the share of joint venture’s losses were also understated by a total of $4.0m being Pacific Current
Group Limited’s then 64.03% share of the combined costs borne by Pacific Current Group Limited ($3.4m) and Northern
Lights ($3.1m) that were not previously reflected in the Trust’s income statement. In addition, $2.2m cash received from
the Trust in part reimbursement of these transaction costs was erroneously credited to the investment in joint venture
balance. This was corrected and a receivable of $1.2m recognised, being the amount of reimbursement that was still
owing to Pacific Current Group Limited as at 30 June 2015.

The income tax effect of the recognition of the additional share of associate losses of ($4.0) offset by the additional gain
on sale of the investments transferred to the Trust of $3.4m was also recognised at 30%. This resulted in a reduction of
$0.2m in the income tax expense and deferred tax liability balances.

Review of income tax notes disclosure
5) During the year, the Company reviewed its accounting for current and deferred income tax. In addition to the income
tax impact of the adjustments outlined above, the Company’s review of the current and deferred income tax balances
also showed that income tax expense was overstated by a further $1.4m and the deferred tax liability was overstated by
$1.7m. Accordingly, an adjustment was made to reduce the income tax expense by $1.4m and reduce the deferred tax
liability by $1.7m, and the remaining $0.3m is booked to retained earnings.

Pacific Current Group Limited and Northern Lights entered into a joint venture arrangement on 25th November 2015
and therefore the restructure has no impact on the opening retained earnings as at 1 July 2014.

Comparative Consolidated
Statement of Other
Comprehensive Income

Previously
stated

Finalisation of PPA of the Trust
Adjustment 3
Adjustment 2

Net gain on of investments 195,410,403

Correction of
prior period
accounting
error
Adjustment 4

3,393,104

Review
of income
tax notes
disclosure
Adjustment 5

Restated
$

198,803,507

Adjustments $

Share in net profit/(losses)
of equity accounted
investments

5,014,466

(5,685,202)

(3,961,470)

(4,632,206)

Income tax expense

(61,157,887)

1,705,561

170,510

1,356,552

(57,925,264)

Profit for the year

138,723,124

(3,979,641)

(397,856)

1,356,552 135,702,179

Comparative Consolidated
Statement of Financial Position

Trade and other receivables

8,829,670

1,216,349

10,046,019

Investments accounted for
under equity method

Deferred tax

Net assets

275,341,759

(5,685,202)

22,292,041

(1,784,715)

290,163,883

(58,769,498)

1,705,561

(6,687,612)

170,510

1,660,978

(61,920,061)

223,919,753

(3,979,641)

15,604,429

(397,856)

1,660,978 236,807,663

Investment revaluation
reserve

(147,103)

Foreign currency translation
reserve

4,458,846

(2,031,897)

609,569

(20,260,144)

6,078,043

(1,569,431)

(9,723,255)

Retained earnings

(155,792,090)

3,979,641

–

397,856

(1,660,978)

(153,075,571)

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED

3. Financial Risk Management Objectives and Policies
Due to the change of business structure and operation, Pacific Current Group Limited’s investments are mainly the units
held in the Trust.

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 consolidated financial statements.

Risk Exposures and Responses

Interest rate risk
The Company’s direct exposure to market interest rates relates primarily to the Company’s cash and short term investments.

At the balance date, the Company had the following financial assets exposed to Australian variable interest rate risk:

Financial assets

Cash and cash equivalents

Consolidated
2016
$

2015
$

2,997,744

1,056,243

2,997,744

1,056,243

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 (losses)/profit and reserves would have been affected as follows:

Consolidated

+0.75% [2015:0.75%]/(75 basis points), [2015:75 basis points]

-0.75% [2015:0.75%]/(75 basis points), [2015:75 basis points]

Post Tax (Losses)/Profit
Higher/(Lower)
2016
$

2015
$

11,837

51,960

(11,837)

(51,960)

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

Credit risk
Credit risk arises from the financial assets of the Company, which comprise cash and cash equivalents and trade and other
receivables. The Company’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 Company does not hold any credit derivatives to offset its credit exposure.

The Company trades only with related parties and recognised, creditworthy third parties, and as such collateral is not requested
nor is it the Company’s policy to securitise its trade and other receivables.

Annual Report 20163. Financial Risk Management Objectives

and Policies (continued)

Liquidity risk
As at the end of year, Pacific Current Group Limited’s
current liabilities exceed current assets. This is driven
by a tax liability with respect to the capital gain on the
sale of RARE. The Board is confident of satisfying the
Company’s net current liabilities through its own capacity
or through a distribution from the Trust. Pacific Current
Group Limited has a 65.15% interest in the Trust which
has debt instruments issued to other parties and to its
unitholders (i.e. Northern Lights and BNP Paribas). The
Trust is reviewing options with respect to capital structure
including restructuring options and asset disposals.

The Company does not have any significant transactional
currency exposures.

Foreign currency risk

Consolidated Statement of Financial Position
Pacific Current Group Limited has an indirect exposure
to foreign currency through its investment in the Trust.
The Trust is an international multi-boutique business
with operations primarily attributable to the US and
Australia and the impact of foreign currency translations
are taken up in the equity reserves of the Trust. Pacific
Current Group Limited takes up its proportionate share of
the Trust’s foreign currency translation reserve through
Pacific Current Group Limited’s equity reserves.

Consolidated Statement of Profit or Loss
Pacific Current Group Limited has an indirect exposure
to foreign exchange movements that arise from the
translation of profits and
in
US$. Profits and losses are translated at an average
exchange rate. A falling Australian dollar relative to the
US Dollar results in a higher net profit in the Trust and
correspondingly in Pacific Current Group Limited. The day
to day expenses in Australia and US operations are funded
within the local operations.

losses predominantly

judgments and estimates

4. Significant Accounting Judgments and Estimates
The preparation of the consolidated financial statements
requires management to make judgments, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates
its
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 Company.
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 consolidated
financial statements are outlined below:

Classification of and valuation of investments
The Company has classified the investment in the Trust as
a joint venture and has accounted for its investment under
equity method. The carrying value of the investment in
the Trust is the cost to acquire the units and the share in
net profits or losses of the Trust reduced by distributions
received. The carrying value of the equity method
investment is subject to assessment for indicators of
impairment. Any required impairment testing would
involve significant judgement. Additionally, Pacific Current
Group Limited has finalised its PPA adjustments relating to
the investment in the Trust (Note 2(z)).

The Company’s consolidated financial statements reflect
the results of the Trust through recognition of its share
of net profits/(losses) of the joint venture. In preparing
the consolidated financial statements of the Trust, the
Trustee needs to exercise significant judgement in areas
that are highly subjective. The valuation of assets and
the assessment of carrying values and goodwill requires
that a detailed valuation be undertaken which reflects
assumptions on markets, manager performance and
expected growth to project future cash flows that are
discounted at a rate that imputes relative risk and cost of
capital considerations.

The valuation of the Investment in the Trust is impacted
by the following key judgements and estimates:

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED46

Taxation

Deferred tax liabilities
liabilities are recognised for taxable
Deferred tax
temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures
(the Trust), except where the Company is able to control
the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the
foreseeable future. (Refer Note 6(d)).

Share-based payment transactions
The Company 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 18. The accounting estimates and
assumptions
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.

relating

Impairment of non-financial assets
At the end of each reporting period, the Trustee is
required to assess the carrying values and the level of
goodwill of each of the underlying assets of the Trust.
Should assets underperform or do not meet expected
growth targets from prior expectations, a resulting
impairment of goodwill is recognised if that deterioration
in performance is deemed not be derived from short
term factors such as market volatility. Factors that are
considered in assessing possible impairment in addition to
financial performance include changes to key investment
investment underperformance and
staff, significant
litigation. Impairments of goodwill can not be reversed if
a business recovers or exceeds previous levels of financial
performance. Impairment of goodwill that forms part of
equity accounted associate carrying value can be reversed
in limited circumstances.

Purchase price allocation
During the prior year and in subsequent acquisition
of assets by the Trust, the Trustee ensures that the
investments are originally accounted as required under
Purchase Price Allocation. Typically, the Trustee will
engage an independent expert to determine identifiable
intangible assets such as customer relationships, brand
and trademarks and intellectual property in addition to
goodwill. Identifiable intangible assets are amortised over
a defined period of which have a degree of judgement
and subjectivity.

Contingent debt instrument
The Trust also carries a form of debt whose value is
contingent on the relative financial performance of six
Northern Lights investments managers namely Raven,
Nereus, Goodhart Partners LLP
(UK), EAM Global
Investors, LLC, Blackcrane Capital, LLC and Northern
Lights Alternative Advisors Ltd relative to the expected
financial performance of two of Pacific Current Group
Limited’s investment managers namely ROC Partners Pty
Limited and Aubrey Capital Management Limited over a
period of seven years. The determination of the carrying
value of this debt instrument is subject to the significant
assumptions about future growth in the earnings of the
managers which operate in different asset classes and in
different markets.

Annual Report 20165. Revenue and Expenses

a. Revenues from continuing operations

Fee income

Fund management fees

Service fees

Total fee income

Interest income

Related parties

– Joint venture/associates

Other persons/corporations

Total interest income

Other Income

Cost recovery from the Trust

Total other income

Total revenues

b. Gains on investments

Net gain on sale of investments to the Trust¹

Net gain on disposal of available-for-sale investments

Total net gains on investments

Consolidated
2016

2015
(restated)
$

–

9,636

5,563,683

4,285,442

5,563,683

4,295,078

–

1,011,220

38,968

244,114

38,968

1,255,334

–

1,164,300

5,602,651

6,714,712

– 198,497,146

–

306,361

– 198,803,507

This is the gain on sale of investment is the result of the sale of Pacific Current Group Limited’s business to the Trust on 25 November 2014 which
is determined as the difference between the carrying amount and fair value of such assets and liabilities transferred at the time of transfer, net
of transaction costs related to the merger. The fair value of Pacific Current Group Limited’s assets on 25 November 2014 was $247,697,894. The
amount of income tax expense on the net gain was $64,774,451.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
48

Consolidated
2016

2015
(restated)
$

c. Expenses

Salaries and employee benefits

Share-based payment expense arising from equity-settled share-based payment
transactions

Total salaries and employee benefits

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

Other expenses

Total other expenses

d. Share of net (losses) of equity accounted investments

Share in net losses of the Trust

Share in net profits from former associates

Total share in net (losses) of equity accounted investments

3,679,107

5,174,893

372,659

91,886

4,051,766

5,266,779

–

597

18,221

1,679

2,878

23,375

62,561

358,514

375,086

–

49,411

99,059

163,631

148,648

–

1,014

129,130

486,351

56,610

574,829

375,491

–

7,821

89,924

55,515

40,630

1,105,809

1,968,416

1,105,809

1,991,791

(78,486,842)

(13,843,700)

–

9,211,494

(78,486,842)

(4,632,206)

Annual Report 2016
6. Income Tax

a. Income tax (benefit)/expense recognised in profit or loss

The major components of income tax (benefit)/expense are:

Current tax

In respect of the current year

Deferred tax

In respect of the current year

Adjustments in respect of previous years

Total income tax (benefit)/expense recognised in the current year

b. Income tax recognised directly in equity

Deferred tax

Consolidated
2016

2015
(restated)
$

14,157,614

–

(43,516,985) 57,891,522

(441,947)

33,742

(29,801,318) 57,925,264

Share of the movement of the Trust’s investment revaluation reserve*

Share of the movement of the Trust’s foreign currency translation reserve*

Total income tax recognised directly in equity

29,142

(653,701)

(2,985,314)

(4,167,108)

(2,956,172)

(4,820,809)

* To take up origination of deferred tax through equity on Pacific Current Group Limited’s share of the Trust’s
investment revaluation reserve of ($97,139) (2015:$2,179,004) and share of the Trust’s foreign currency
translation reserve of $9,951,045 (2015:$13,890,361).

c. Reconciliation between aggregate tax benefit/(expense) recognised in the consolidated
statement of profit or loss and tax expense calculated per the statutory income tax rate

A reconciliation between tax benefit/(expense) and the product of accounting (loss)/profit
before income tax multiplied by the Company’s applicable income tax rate is as follows:

Accounting loss/(profit) before income tax:

At the Company’s statutory income tax rate of 30% (2015: 30%)

Share-based payments

Franking credits received net of tax

Statutory adjustment of gain on sale of investments to the Trust

Expenditure not allowable for income tax purposes

Under/(over) provision from previous years

Others

Aggregate income tax benefit/(expense)

78,041,766 (193,627,443)

23,412,530 (58,088,233)

(111,797)

(27,566)

6,058,638

4,371,580

–

441,947

–

(4,144,275)

(650)

(33,742)

(2,378)

29,801,318 (57,925,264)

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
50

Statement of Consolidated
Financial Position

2016

2015
(restated)
$

Statement of Consolidated
Profit or Loss
2016

2015
(restated)
$

d. Recognised deferred tax assets and liabilities

Deferred income tax at 30 June relates to the following:

Consolidated

Deferred tax assets

Tax losses

Impairment of investment in AR Capital Management Pty Ltd

Accruals and provisions

Deductible capital expenditures

Deferred tax liabilities

Investment in the Trust

Deferred tax

–

1,093,574

(1,531,938)

517,435

217,017

351,106

100,220

217,017

350,126

151,521

668,343

1,812,238

–

(2,602)

476,618

(51,300)

70,044

(21,629,773) (63,732,299) 45,102,825 (58,955,619)

(20,961,430)

(61,920,061) 43,516,985 (57,891,522)

e. Tax consolidation
As at the date of this report, Pacific Current Group Limited, Aurora Investment Management Pty Ltd and AR Capital
Management Pty Ltd are the members of the tax consolidated entity.

Pacific Current Group Limited 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, Pacific Current Group Limited. The Company has applied the group allocation approach
in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group.

Annual Report 2016

7. Dividends Paid and Proposed

Pacific Current Group Limited
2015
$

2016
$

a. Dividends proposed and not recognised as a liability*

Final fully franked dividend of 5 cents per share (2015: 28 cents per share)

1,406,298

7,738,682

b. Dividends paid during the year

Current year interim

Fully franked dividend (20 cents per share) (2015: 24 cents per share)

5,625,191

6,625,283

Previous year final

Fully franked dividend (28 cents per share) (2015: 27 cents per share)

Total paid during the year (48 cents per share) (2015:51 cents per share)

7,738,682

6,398,036

13,363,873

13,023,319

* Calculation based on the ordinary shares on issue as at 31 July 2016

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% (2015: 30%)

4,524,639

5,195,799

– franking credits that will arise from the receipt of distributions recognised as receivables at

the reporting date

The amounts of franking credits available for future reporting periods:

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

Franking credits carried forward after payment of final dividend

The tax rate at which paid dividends have been franked is 30% (2015: 30%).

Dividends proposed will be franked at the rate of 30% (2015: 30%).

8,655,199

5,056,214

13,179,838

10,252,013

(602,699)

(3,316,578)

12,577,139

6,935,435

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED52

8. (Losses)/Earnings Per Share

Consolidated
2016

2015
(restated)
$

The following reflects the income and share data used in the calculations of basic and diluted
(losses)/earnings per share:

Net (loss)/profit attributable to ordinary equity holders of Pacific Current Group Limited

(48,240,448) 135,702,179

Weighted average
number of shares

Weighted average number of ordinary shares used in calculating basic (losses)/earnings per
share:

28,031,112

25,617,169

Effect of dilutive securities:

Dilutive effect of potential ordinary shares – equity-settled employee benefits and
performance rights

Adjusted weighted average number of ordinary shares used in calculating diluted
(losses)/earnings per share

–

28,031,112

25,617,169

(Losses)/earnings per share (cents per share):

Basic (loss)/profit for the year attributable to ordinary equity holders of the parent

Diluted (loss)/profit for the year attributable to ordinary equity holders of the parent

(172.1)

529.7

In the opinion of the management performance rights do not have a dilutive effect on the earnings per share calculation as
the vesting of these rights is uncertain.

Annual Report 2016

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

(Loss)/profit for the year

Adjustments for

Share of the Trust’s net losses

Dividend and distribution received from the Trust and former associates

(Gain) on sale of investments to the Trust

(Gain) on sale of available-for-sale investments

Depreciation and amortisation of non-current assets

Non-cash distributions, dividends and other income

Non-cash investments in the Trust

Non-cash interest

Share-based payments

Others

Changes in assets and liabilities

(Increase)/decrease in trade and other receivables

Decrease in other assets

Decrease in trade and other payables

Increase in current provisions

(Decrease)/increase in non-current provisions

Net (decrease)/increase in deferred tax liabilities

Net cash flow generated by operating activities

Consolidated
2016

2015
(restated)
$

2,997,744

1,056,243

2,997,744

1,056,243

(48,240,448) 135,702,179

78,486,842

4,632,207

71,855,912

11,544,906

– (198,497,146)

–

(306,361)

23,375

(1,164,300)

(55,381,640)

–

(158,692)

372,659

91,996

(944,219)

(969,714)

(1,860,832)

1,071,160

–

1,926,236

(1,327)

(5,669,758)

14,065,317

106,862

(32,177)

71,563

(43,014,713) 56,014,331

15,305,374

4,418,844

At the reporting date, Pacific Current Group Limited did not have any financing facilities available.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
10. Trade and Other Receivables

Current

Trade receivables

Sundry receivables

Related party receivables

— Trust’s distribution
— Other

Consolidated
2016

2015
(restated)
$

1,017,762

1,035,681

61,203

64,828

10,827,886

7,729,161

–

1,216,349

11,906,851

10,046,019

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

2016

2015

* Past due not impaired (‘PDNI’)

Total
$

0-30 days
$

31-60 days
PDNI*
$

61-90 days
PDNI*
$

11,906,851 11,480,367

10,046,019

9,417,533

–

237,183

216,028

+91 days
PDNI*
$

189,301

412,458

Receivables past due but not impaired is $426,484 (2015:$628,486). 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 22.

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.

Trade receivables represent the Group’s outstanding invoices for management fees receivable from related parties and the
credit risk is therefore very low.

Annual Report 2016

11. Investments in Joint Ventures/Associates

Investment in Trust

Investment in Celeste Funds Management Limited (‘Celeste’)

a. Interests in joint ventures/associates

Name

Aurora Trust – units

Celeste Funds Management Ltd – ordinary shares

Consolidated
2016

2015
(restated)
$

210,056,666 290,163,883

–

210,056,666 290,163,883

Ownership interest held by
consolidated entity

Balance
date

30 June

2016
%

65.15

38.09

2015
%

64.03

38.09

Principal activity
(a) As at 30 June 2016, the Company owns 65.15% (2015:64.03%) of the Trust. Whilst the ownership exceeds 50% and results
in a presumption of control, the Trust is referred to as a joint venture arrangement among Pacific Current Group Limited,
Northern Lights and BNP Paribas. Pacific Current Group Limited and Northern Lights contributed their businesses to the
Trust to conduct investment activities, and BNP Paribas was an investor in Northern Lights prior to the merger between
Pacific Current Group Limited and Northern Lights. The key function of the Trust and the overall business is investment
in asset managers. Former Northern Lights executives are responsible for investment analyses and recommendations as
investment due diligence and recommendations are undertaken by the majority Northern Lights controlled investment
committee. Investment decisions require approval by a majority vote of the Trustee board. The decision making process
leading to execution requires all parties to agree. It is therefore deemed appropriate that the Trust be reflected as a joint
venture investment.

(b) Celeste is an Australian equity manager with a smaller companies focus. It is incorporated and domiciled in Australia. The
equity holding in Celeste is legally owned by Pacific Current Group Limited, but the economic benefits flow to the Trust
and therefore the investment carrying value and the share of net profits/(losses) of Celeste are reflected in the Trust.

b. Carrying amount of investments in joint ventures

Investment in the Trust is comprised of the following:

Beginning balance

Cash investment

Non-cash investment

Share in net (losses)

Distribution received/receivable

Share in unrealised foreign currency translation reserve

Share in investment revaluation reserve

Total

290,163,883

–

46,805,185

60,381,631¹ 248,862,194

(78,486,842)

(13,843,700)

(71,855,912)

(7,729,161)

9,951,045

13,890,361

(97,139)

2,179,004

210,056,666 290,163,883

Non-cash investment includes $4,999,991 conversion of the 487,804 Class C units in the Trust held by BNP Paribas to 487,804 ordinary shares
of Pacific Current Group Limited. On 7 September 2015, the Trust cancelled the 487,804 Class C units and issued 487,804 Class A units to Pacific
Current Group Limited. On 31 December 2015, Pacific Current Group Limited reinvested $55,381,640 of distributions from the sale proceeds of
RARE into additional units in the Trust to fund the Trust’s repayment of the Medley Capital debt facility and its acquisition of Aperio. The relative
ownership of the Trust did not change as all unitholders reinvested at their respective percentage ownerships.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
56

c. Details of the Company’s material joint venture at the end of the reporting period are as follows:

Name of joint venture

Principal Activity

Place of incorporation and
operation

Aurora Trust

Funds management

Australia

Proportion of ownership
interest and voting power
held by the Company

2016

2015

65.15%

64.03%

The above joint venture is accounted for using the equity method in the consolidated financial statements. The consolidated
group of the joint venture includes the Trust, Treasury Group Investment Services Limited (TIS), Global Value Investors
Limited (GVI), Northern Lights MidCo (MidCo), LLC, Seizert, and Aether.

Summarised financial information in respect of the Company’s material joint venture is set out below. The summarised
financial information below represents amounts shown in the joint venture’s consolidated financial statements in accordance
with the Accounting Standards. Additional financial information of the Trust is contained in Note 24.

Aurora Trust

Current assets

Non-current assets

Current liabilities

Non-current liabilities

2016
$

2015
(restated)*
%

30,890,115

70,763,871

411,833,098

565,633,270

(45,982,007)

(111,061,760)

(73,939,097)

(71,306,887)

The above amounts of assets and liabilities include the following:

Cash and cash equivalents

20,784,134

39,288,137

Current financial liabilities (excluding trade and other payables and provisions)

21,874,929

18,591,500

Non-current financial liabilities (excluding trade and other payables and provisions)

73,939,097

71,306,887

Revenue

(Loss) for the year

Other comprehensive income for the year

Total comprehensive (loss)/income for the year

38,400,404

29,488,357

(120,484,314)

(21,711,478)

14,693,516

25,096,613

(105,790,798)

3,385,135

Distributions received/receivable from the joint venture during the year

71,855,912

7,729,161

The above (loss)/income for the year includes the following:

Depreciation and amortisation

Interest income

Interest expense

Income tax expense¹

Reconciliation of the above summarised financial information to the carrying amount of
the interest in the joint venture recognised in the consolidated financial statements:

Net assets of the joint venture

Proportion of the Company’s ownership interest in the joint venture

Carrying amount of the Company’s interest in the joint venture

¹ This is the income tax expense of the joint venture’s subsidiaries.

2,496,045

1,235,373

613,470

438,008

10,718,834

8,070,225

1,975,742

1,896,732

322,802,109

454,028,494

65.15%

64.03%

210,305,574

290,714,445

210,056,666²

290,163,883²

² The discrepancy between the share of the Company in the net assets of the Trust and the carrying value of the investment in the Trust is due to the

impact of equity accounting the share in losses of the Trust which is based on ownership at each reporting date.

* The comparative financial statements of the Trust for the year ended 30 June 2015 have been restated. Details of the nature and the impact on the
Group’s reported Consolidated Statement of Profit or Loss, Consolidated Statement of Other Comprehensive Income, Comprehensive Statement of
Financial Position and Consolidated Statement of Changes in Equity is set out in Note 2(z).

Annual Report 201612. Trade and Other Payables

Trade payables

Other payables

Related party payables:

– Trust

(a) Fair value

Consolidated
2016
$

2015
$

27,590

1,108

1,858,030

1,660,911

115,264

340,192

2,000,884

2,002,211

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 22.

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.

13. Provision for Income Tax

Provision for income tax

Consolidated
2016
$

2015
$

14,157,614

–

This represents the amount of income tax liability that arose as a result of the capital gains distributions from the Trust, net
of the previously recognised tax losses of Pacific Current Group Limited.

14. 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

Consolidated
2016
$

2015
$

328,765

13,926

221,903

166,847

(106,223)

(59,985)

236,468

328,765

207,445

135,882

19,113

(51,290)

71,563

–

175,268

207,445

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
15. Contributed Equity and Reserves

a. Issued capital

Issued and fully paid ordinary shares

2016
$

2015
$

74,556,705

69,500,943

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

Beginning balance

Issued on 6 August 2014

Issued on 18 December 2014

Issued on 23 January 2015

Issued on 31 July 2015

Issued on 7 September 2015

Balance at end of the year

Pacific Current Group Limited

2016

2015

Number of
shares

27,604,144

69,500,943

23,070,755

29,594,265

–

34,007

–
–
–
55,771

487,804

4,999,991

626,743

1,027,859

2,926,830

28,835,705

979,816

10,043,114

–

28,125,955

74,556,705

27,604,144

69,500,943

On 31 July 2015, Pacific Current Group Limited (formerly Treasury Group Ltd) issued 34,007 ordinary shares on exercise of
34,007 performance rights issued under the former Treasury Group Performance Rights Plan for its Executives. As a result
of this issue, $55,771 was transferred from the equity-settled employee benefits reserve to share capital.

On 7 September 2015, Pacific Current Group Limited (formerly Treasury Group Ltd) issued 487,804 ordinary shares in
exchange for 487,804 Class C units in the Trust held by BNP Paribas. On 7 September 2015, the Trust cancelled the
487,804 Class C units and issued 487,804 Class A units to Pacific Current Group Limited.

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 is constantly reviewing the capital structure to take advantage of favourable costs of capital or high returns on
assets. As the market is constantly changing, Management may change the amount of dividends to be paid to shareholders
or conduct share buybacks.

During the year ended 30 June 2016, the Company paid dividends of $13,363,873 (2015: $13,023,319). Directors anticipate
that the payout ratio is 60-80% of the Trust’s distribution to Pacific Current Group Limited over the medium term.

During the year, the sale proceeds from the divestment of RARE were used to repay external debt and invest in Aperio. The
distribution representing the profit on sale was distributed to Pacific Current Group Limited and reinvested for additional
units in the Trust.

As at 30 June 2016, the Trust has on issue Class B units which are exchangeable (at the holders’ election) to Pacific Current
Group Limited shares at the following fixed ratios:

(i)

Any time from 24 November 2014 – 2 Pacific Current Group Limited shares for every 3 Class B units or B-1 units

(ii) Any time from 24 November 2017 – 5 Pacific Current Group Limited shares for every 6 Class B units or B-1 units

(iii) In the event of takeover – 1 Pacific Current Group Limited share for each Class B unit

(iv) In the event a Qualified Public Offering (‘QPO’) does not occur during the QPO period, for an exchange occurring on and

from the expiration of the QPO period – 1 Pacific Current Group Limited share for each Class B unit

Annual Report 201615. Contributed Equity and Reserves (continued)
If the takeover and QPO events in (iii) and (iv) above were to occur, the Trust Class B units would be cancelled and
Pacific Current Group Limited would issue ordinary shares. As a consequence, the Trust would issue Class A units to Pacific
Current Group Limited and become a fully owned and controlled subsidiary of Pacific Current Group Limited.

d. Long term incentives - performance rights
On 15 February 2016, Pacific Current Group Limited granted 1,199,000 performance rights which have a vesting date
of 1 July 2018 to officers and certain employees as part of their long term incentives. Two tranches of rights were issued
with equal proportions (50%) vesting based on the relative total shareholder return (TSR) of Pacific Current Group Limited
compared to the ASX 300 (Hurdle 1) and a group of seven other domestic and international fund managers (Hurdle 2). The
value of each right for Hurdle 1 and 2 were $1.26 and $2.46, respectively. Total value of the outstanding performance rights
is $2,225,945 amortised over two years and four months from the grant date. The performance rights on issue were valued
based on the valuation made by an independent adviser using a monte-carlo pricing model.

As at 30 June 2016, there were 100,000 performance rights outstanding that were issued to certain employees on
7 August 2013 with a vesting date of 7 August 2016. These performance rights were valued based on the valuation made by
an independent adviser using a hybrid monte-carlo/binomial option pricing model on the performance rights that were
issued on 11 July 2011. The value of each right was $1.64. Total value of the outstanding performance rights is $164,000
amortised over three years from the grant date. As at the date of this Report, none of these performance rights has vested.

The amount of performance rights amortisation expense for the period was $372,659 (2015:$91,886).

e. Retained earnings

Balance at the beginning of the year

(Loss)/profit for the year

Impact of restatement

Dividends

Balance at end of year

f. Reserves

Consolidated
2016

2015
(restated)
$

153,075,571 30,092,285

(48,240,448) 135,702,179

–

304,426

(13,363,873)

(13,023,319)

91,471,250 153,075,571

Consolidated
2016

2015
(restated)
$

Equity-settled employee benefits reserve

Balance at the beginning of the year

Issuance of shares due to vesting of performance rights

Share-based payments

Balance at end of year

Investment revaluation reserve

Balance at the beginning of the year

Reversal of net unrealised losses on available-for-sale sold during the year

2,938,463

3,874,436

(55,771)

(1,027,859)

372,659

91,886

3,255,351

2,938,463

1,569,431

213,684

–

(213,684)

Share on net fair value gain on available-for-sale financial assets of the Trust (after tax)

(112,125)

1,569,431

Balance at end of year

1,457,306

1,569,431

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED

Consolidated
2016

2015
(restated)
$

Foreign currency translation reserve

Balance at the beginning of the year

9,723,255

–

Share on exchange differences on translating foreign operations of the Trust (after tax)

6,965,730

9,723,255

Balance at end of year

Total Reserves

16,688,985

9,723,255

21,401,642

14,231,149

Equity-settled employee benefits 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 18 for further details of these plans.

Investment revaluation reserve
The reserve records the Company’s share of after-tax gain on available-for-sale investments of the Trust.

Foreign currency translation reserve
The reserve records the Company’s share of the foreign currency translation reserve of the Trust which is derived from
foreign exchange differences arising on translation of the Trust’s foreign operations.

16. Segment Information
Information reported to the Company’s Board of Directors for the purposes of resource allocation and assessment of
performance is specifically focused on the (loss)/profit after tax earned by each business within the Company. Therefore the
Company’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 Company’s accounting policies.

As at 30 June 2016, Pacific Current Group Limited has identified the Trust as the sole operating segment. The Trust is equity
accounted by Pacific Current Group Limited. All the operational and investment activities are undertaken by the Trust. It
is the financial performance of the Trust that impacts on the financial performance of Pacific Current Group Limited as no
other significant operations are undertaken by the Company.

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

Consolidated
2016

2015
(restated)
$

Segment (loss)/profit after tax for the year

Australian unlisted trust

Outsourcing and responsible entity services

Australian equities

Alternative investments

Central administration costs

Total per Consolidated Statement of Profit or Loss

Segment net assets for the year

Australian unlisted trust

Central administration

Total per Consolidated Statement of Financial Position

(54,940,789)

(9,690,590)

–

341,030

3,014,911

6,176,823

(54,940,789)

(157,826)

6,700,341 135,860,005

(48,240,448) 135,702,179

185,765,507 235,972,983

1,664,090

834,680

187,429,597 236,807,663

As at 30 June 2016, the Australian unlisted trust above includes the equity accounted investment in the Trust.

Annual Report 2016

17. Commitments and Contingencies

Operating Lease Commitments
The Company has entered into commercial property leases to meet its office accommodation requirements. All leases
include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

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

Future minimum rentals:

Minimum lease payments

– not later than one year

– later than one year and not later than five years

Aggregate lease expenditure contracted for at reporting date

Amounts not provided for:

– rental commitments

Total not provided for

Aggregate lease expenditure contracted for at reporting date

Consolidated
2016
$

2015
$

234,386

342,564

–¹

234,386

576,950

234,386

576,950

There are no new commitments after a year as the the lease agreement of the current premises expires on 17 March 2017. The lease agreement for
the new office premises was signed post 30 June 2016.

18. Employee Benefits and Superannuation Commitments

The Pacific Current Group Limited Long Term Incentive Plan
On 15 February 2016, Pacific Current Group Limited granted 1,199,000 performance rights which have a vesting date
of 1 July 2018 to officers and certain employees as part of their long term incentives. Two tranches of rights were issued
with equal proportions (50%) vesting based on the relative TSR of Pacific Current Group Limited compared to the ASX 300
(Hurdle 1) and a group of seven other domestic and international fund managers (Hurdle 2). The value of each right for
Hurdle 1 and Hurdle 2 were $1.26 and $2.46, respectively. Total value of the outstanding performance rights is $2,225,945
amortised over two years and four months from the grant date. The performance rights on issue were valued based on the
valuation made by an independent adviser using a monte-carlo pricing model.

As at 30 June 2016, there were 100,000 performance rights outstanding that were issued to certain employees in 7 August
2013 with a vesting date of 7 August 2016. These performance rights were valued based on the valuation made by an
independent adviser using a hybrid monte-carlo/binomial option pricing model on the performance rights that were issued
on 11 July 2011. The value of each right was $1.64. As at the date of this Report, none of these performance rights has
vested. Total value of the outstanding performance rights is $164,000 amortised over three years from the grant date. As
at the date of this Report, none of these performance rights has vested.

The amount of performance rights amortisation expense for the period was $372,659 (2015:$91,886).

19. Subsequent Events
On 31 August 2016, the Directors of Pacific Current Group Limited declared a final dividend on ordinary shares in respect of
the 2016 financial year. The total amount of the dividend is $1,406,298 which represents a fully franked dividend of 5 cents
per share. The dividend has not been provided for in the 30 June 2016 consolidated financial statements.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED62

20. KMP Disclosures

a. Details of KMP

i. Non-executive directors
M. Fitzpatrick

Chairman, non-executive

P. Kennedy

M. Donnelly

J. Vincent

G. Guérin

T. Carver

ii. Executives & KMP
P. Greenwood

T. Robinson

Non-executive director

Non-executive director from 30 April 2016 after resigning as CEO

Global CIO and President, North America, appointed 30 April 2016

Executive director, appointed 30 April 2016. Formerly a Non-executive director appointed
28 August 2015.

J. Ferragina

Finance director, COO and Company secretary

iii. Former KMP
T. Carver

A. McGill

Managing director and CEO, resigned 30 April 2016

Managing director and CEO, resigned 28 August 2015

b. Compensation for KMP

Short-term

Post employment

Share-based payments

Others

Total remuneration

Consolidated
2016
$

2015
$

3,911,879

2,932,930

82,257

213,497

824,421

87,690

11,502

–

5,032,054

3,032,122

Each year, KMP STI are paid in two instalments being 50% following the performance year in August and 50% in June the
following year. For the current year, only the 50% payable in August is provided for as at 30 June 2016. For the comparative
period, only the 50% payable in August was provided for as at 30 June 2015.

c. Transactions with director - related entity
There were no transactions with the directors during the year (2015: Nil).

d. Loans to KMP
No loans have been advanced to key management employees at any stage during the financial year ended 30 June 2016
(2015: Nil).

Annual Report 201621. Auditor’s Remuneration

Auditor of Parent entity (Deloitte Touche Tohmatsu)

Amounts received or due and receivable by Deloitte Touche Tohmatsu:

– For audit of the financial report – Pacific Current Group Limited

– Tax advisory on integration with Northern Lights

– Tax compliance

Total

Consolidated
2016*
$

2015
$

66,150

63,000

452,090

874,393

37,900

65,545

556,140

1,002,938

* Auditor’s remuneration for the year ended 2016 is borne by the Trust on behalf of the Company.

22. Related Party Disclosures
The consolidated financial statements include the financial statements of Pacific Current Group Limited and the controlled
entities in the following list:

Companies

Aurora Investment Management Pty Ltd, the Trustee of the Trust

AR Capital Management Pty Ltd

These are both incorporated in Australia.

Percentage of equity interest
held by the consolidated entity
2015

2016

100

The following transactions with related parties were on normal terms and conditions. There were no write offs to bad debt
expenses during the financial year (2015: Nil) and no provision for bad debts as at year end (2015: Nil).

Transactions with parties to the joint venture arrangement
There were no transactions with Northern Lights and BNP Paribas during the year (2015: Pacific Current Group Limited,
Northern Lights and BNP Paribas established the Trust to hold 17 boutiques and gave effect to the merger). Pacific Current
Group Limited acquired 61.22% ownership interest in the Trust, an Australian unlisted unit trust and Northern Lights and
BNP Paribas acquired the remaining 38.78%. The consideration transferred in exchange for the 61.22% equity was based
on the fair values of the assets and liabilities given up. Details of the transaction are discussed in the corporate structure on
page 10 and Note 11 of the financial report.

Transactions with the joint venture

Service fees
During the year, Pacific Current Group Limited provided management and administrative services to the Trust. During the
year, Pacific Current Group Limited received management and administrative fees of $1,142,451 (2015: $202,724).

Cost recovery
In the prior year, Pacific Current Group Limited incurred transaction costs in relation to issuance of shares. The proceeds of
the issuance of shares was used to acquire units in the Trust. The transaction costs incurred were reimbursed by the Trust
in the form of units.

Receivables and payables
As at 30 June 2016, Pacific Current Group Limited has outstanding receivables of $849,146 (2015: Nil) and Nil outstanding
payables (2015: $7,200) relating to the Trust.

Loans
In the prior year, Pacific Current Group Limited extended a loan to the Trust for $38,878,821. Interest on the loan was at a
commercial rate of 11% (Base Rate + LIBOR). Both the principal and interest in the amount of $39,759,804 was paid by the
Trust on 13 April 2015.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED64

Transactions with the joint venture (continued)

Dividend and distributions
Dividends and distributions received and receivable at the reporting date are disclosed in Note 10 of the financial report.

Transactions with a subsidiary
During the year, there were intercompany transactions between Pacific Current Group Limited and its wholly-owned
subsidiary, Aurora Investment Management Pty Limited. These transactions comprised of expense recharges and the
intercompany receivable and payable are eliminated on consolidation.

Transactions between a subsidiary and the joint venture

Service fees
During the year, Pacific Current Group Limited’s wholly owned entity Aurora Investment Management Pty Ltd, the Trustee
of the Trust provided management and administrative services to the Trust. During the year, Aurora Investment Management
Pty Ltd received management and administrative fees of $4,007,802 (2015: $3,296,513).

Receivables and payables
As at 30 June 2016, Aurora Investment Management Pty Ltd has outstanding receivables of $125,920 (2015: $952,336) and
Nil outstanding payables (2015: Nil) relating to the Trust.

Transactions between a subsidiary and subsidiary of a joint venture

Service fees
During the year, Aurora Investment Management Pty Ltd, the Trustee of the Trust provided management and administrative
services to Treasury Group Investment Services Ltd, a controlled entity of the Trust. During the year, Aurora Investment
Management Pty Ltd received management and administrative fees for $413,430 (2015: $328,907).

Receivables and payables
As at 30 June 2016, Aurora Investment Management Pty Ltd has outstanding receivables of $23,711 (2015: $61,995)
relating to Treasury Group Investment Services Ltd.

Transactions with former associates

Service fees
In the prior year, Pacific Current Group Limited provided distribution services to former associates. Total fees received were
$87,569.

Loans
In the prior year, loans advanced by Pacific Current Group Limited to former associates were with a fixed repayment date
once a repayment clause was triggered. Interest on the loans was capitalised at commercial rates until the repayment clause
was triggered.

In the prior year, Pacific Current Group Limited received $2,270,505 in repayments of these loans. Interest income on these
loans was $130,237.

Transactions with directors
There were no transactions with the directors during the year (2015: Nil)

Annual Report 201623. Parent Entity Disclosure
The accounting policies of the parent are consistent with the consolidated entity.

i. Financial Performance

Profit for the year

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

Equity-settled employee benefits reserve

Total equity

Consolidated
2016

2015
(restated)*
$

101,854,471

153,829,567

101,854,471

153,829,567

14,258,907

9,696,534

356,162,682

295,781,051

370,421,589

305,477,585

16,695,161

1,492,747

16,958,123

60,707,122

33,653,284

62,199,869

74,556,705

69,500,943

259,389,131

170,898,533

2,822,469

2,878,240

336,768,305

243,277,716

* The parent entity financial statements for the year ended 30 June 2015 have been restated. Refer to Note 2(z) for an explanation.

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED

24. Joint Venture Primary Consolidated Financial Statements

Aurora Trust Consolidated Statement of Profit or Loss

Investment income

Revenues

Share of net profits of equity accounted investments

Other gains and losses

Foreign exchange gain

Total net investment income

Expenses

Salaries and wages

Establishment costs

Legal and compliance fees

Commission and sales and marketing expenses

Insurance expense

Rent expense

Travel and entertainment

Auditors’ remuneration

Other expenses

Impairment expense

Write-off of receivables

Foreign exchange loss

Total operating expenses

Net (loss) before interest, amortisation and depreciation expenses

Interest expense

Amortisation of other identifiable intangibles

Depreciation expense

Total interest, amortisation and depreciation expenses

Net (loss) after interest, amortisation and depreciation expenses

Income tax expense¹

(Losses) for the year attributable to unitholders

Attributable to:

Unitholders

Non-controlling interest

For the period
25 November
2014 to
30 June 2015
(Restated)*
$

2016

38,400,404

29,488,357

10,851,048

15,276,555

15,800,565

–

711,230

65,052,017

45,476,142

29,012,128

14,737,646

–

6,459,623

4,398,188

1,654,880

834,759

1,043,637

980,400

1,679,832

2,662,680

1,607,691

919,454

875,203

841,134

662,876

3,454,868

3,105,254

118,953,753

25,685,583

3,628,514

3,132,897

–

170,345,710

55,985,290

(105,293,693) (10,509,148)

10,718,834

8,070,225

2,217,539

1,111,568

278,506

123,805

13,214,879

9,305,598

(118,508,572)

(19,814,746)

1,975,742

1,896,732

(120,484,314) (21,711,478)

(120,470,977)

(21,711,478)

(13,337)

–

¹ This is the income tax expense of the joint venture’s subsidiaries.

* The comparative financial statements of the Trust for the year ended 30 June 2015 have been restated. Details of the nature and the impact on the

Group’s reported Consolidated Statement of Profit or Loss is set out in Note 2(z).

The Trust consolidates the operations of TIS, GVI, MidCo, Seizert and Aether due to the fact that the Trust owns 100% of
the ordinary equity of these managers.

Annual Report 2016
24. Joint Venture Primary Consolidated Financial Statements (continued)

Aurora Trust Consolidated Statement of Other Comprehensive Income

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

Net fair value gain on available-for-sale investments

Other comprehensive income for the year

Total comprehensive (loss)/income for the year

Attributable to:

Unitholders

Non-controlling interest

For the period
25 November
2014 to
30 June 2015
(Restated)*
$

2016

14,901,115

21,693,519

(207,599)

3,403,094

14,693,516

25,096,613

(105,790,798)

3,385,135

(105,777,461)

3,385,135

(13,337)

–

* The comparative financial statements of the Trust for the year ended 30 June 2015 have been restated. Details of the nature and the impact on the

Group’s reported Consolidated Statement of Other Comprehensive Income is set out in Note 2(z).

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITED
68

30 June 2016

30 June 2015
(Restated)*
$

20,784,134

39,288,137

8,088,830

28,250,418

2,017,151

3,225,316

30,890,115

70,763,871

23,262,682

27,984,771

37,550,000

–

5,295,915

6,267,067

161,332,053 270,733,657

31,490

29,083

976,586

1,077,028

134,395,514 215,832,449

41,605,435 42,648,392

7,383,423

1,060,823

411,833,098 565,633,270

442,723,213 636,397,141

24,107,078

32,610,553

21,874,929

–

18,591,500

59,859,707

45,982,007 111,061,760

73,939,097 71,306,887

119,921,104 182,368,647

322,802,109 454,028,494

547,596,022 462,593,359

39,790,129

25,096,613

(264,571,001)

(33,661,478)

322,815,150 454,028,494

(13,041)

–

322,802,109 454,028,494

Aurora Trust Consolidated Statement of Financial Position

Current assets

Cash and cash equivalents

Trade and other receivables

Other current assets

Total current assets

Non-current assets

Available-for-sale investments

Investments held at fair value through profit or loss

Loans and other receivables

Investments in associates

Deferred tax

Property, plant and equipment

Goodwill

Other intangible assets

Other non-current assets

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Deferred consideration - Aperio

Y- Redeemable preference units

Financial liability – Medley Capital

Total current liabilities

Non-current liabilities

Financial liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Units issued

Reserves

Retained losses

Total equity attributable to unitholders

Non-controlling interest

Total equity

* The comparative financial statements of the Trust for the year ended 30 June 2015 have been restated. Details of the nature and the impact on the

Group’s reported Consolidated Statement of Financial Position is set out in Note 2(z).

Annual Report 2016
24. Joint Venture Primary Consolidated Financial Statements (continued)

Aurora Trust Consolidated Statement of Cash Flows

Cash Flows from Operating Activities

Receipts from customers

Payments to suppliers and employees

Dividends and distributions received

Interest received

Interest repayment on debt facility

Income tax paid¹

Net cash flows generated/(used in) operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Proceeds from disposal of available-for-sale investments

Purchase of available-for-sale investments

Repayment of loans by associates

Advances to associates

Payment for acquisition of a subsidiary

Purchase of investment in associates

Proceeds from disposal of investments in associates

Repayment of advances from related party

Net cash inflow on business combination

Net cash flows generated from investing activities

Cash flows from financing activities

Distributions paid

Proceeds from issue of units

Repayment of borrowings

Net cash flows (used in)/generated from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Exchange differences in translating foreign currency

Cash and cash equivalents at the end of year

Non-cash financing activities during the year were $85,002,663 (2015: Nil).

¹ This is the income tax expense of the joint venture’s subsidiaries.

For the period
25 November
2014 to
30 June 2015
$

2016
$

57,934,888

49,781,923

(67,340,937)

(78,164,412)

20,851,511

14,522,329

230,451

215,518

(4,444,308)

(4,849,561)

(2,701,823)

(35,093)

4,529,782 (18,529,296)

(125,015)

(486,670)

–

2,761

2,161,708

(6,382,243)

(2,234,039)

1,352,194

218,750

–

(1,550,000)

(9,499,344)

(23,666,063)

(254,544)

112,522,341

(1,444,363)

–

26,359,166

82,256,851

14,717,788

(20,899,927)

–

43,878,813

(84,238,991)

(1,490,398)

(105,138,918) 42,388,415

(18,352,285) 38,576,907

39,288,137

–

(151,718)

711,230

20,784,134

39,288,137

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016LIMITEDDIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Pacific Current Group Limited, I state that:

In the opinion of the Directors:

the consolidated financial statements and notes are in accordance with the Corporations Act 2001, including:

ii.

iii.

giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date;

complying with Accounting Standards and Corporations Regulations 2001; and

complying with International Financial Reporting Standards, as stated in Note 2 to the consolidated financial
statements.

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.

This declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the year ended 30 June 2016.

On behalf of the Board

M. Fitzpatrick
Chairman

31 August 2016

Annual Report 2016

INDEPENDENT AUDITOR’S REPORT

For the year ended 30 June 2016

LIMITED72

Annual Report 2016ASX ADDITIONAL INFORMATION

Corporate Governance
In accordance with ASX Listing Rule 4.10.3, Pacific Current Group’s Corporate Governance Statement can be found on its
website at www.paccurrent.com/shareholders/corporate- governance/.

The Directors approved the 2016 Corporate Governance Statement on 30 August 2016.

Shareholder Information as at 9 September 2016
Additional information required by the Australian Securities Exchange listing rules and not shown elsewhere in this report
is as follows.

a. Distribution of equity securities (as at 9 September 2016)
The number of shareholders by size of holding for fully paid ordinary shares are:

Holding

1 – 1,000
1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

Total

Number of shareholders

Number of shares

1,735
1,887

383

223

4,250

869,378
4,787,977

2,828,178

5,253,446

14,386,976

28,125,955

The number of shareholders holding less than a marketable parcel of shares is 324, a total of 13,759 shares.

b. Twenty largest shareholders (as at 9 September 2016)
The names of the twenty largest holders of quoted shares are:

Name

SQUITCHY LANE HOLDINGS PTY LTD

RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR TIMOTHY GERARD RYAN
BNP PARIBAS CAPITAL PARTNERS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

2
3
4
5
6
7
8
9
10
11 MR MICHAEL BRENDAN PATRICK DE TOCQUEVILLE
GLENN HARGRAVES INVESTMENTS PTY LTD
12
BANSON NOMINEES PTY LTD
13
NETWEALTH INVESTMENTS LIMITED
14
KATTAG HOLDINGS PTY LTD
15
INVIA CUSTODIAN PTY LIMITED
16
HFM INVESTMENTS PTY LTD
17
TOP POCKET PTY LTD
18
19
29TH MARSUPIAL PTY LTD
20 MARDOM PTY LTD

Total

Balance of Register

3.09
17.02

10.06

18.68

51.15

100

8.54

6.23
6.18
4.08
3.80
3.50
2.44
2.01
1.73
1.48
1.42
1.33
1.32
1.16
1.14
0.90
0.89
0.89
0.61
0.50

Number of
shares

2,401,500

1,752,129
1,738,807
1,147,582
1,068,459
985,762
686,180
564,573
487,804
416,463
400,000
375,000
370,854
325,411
320,000
254,512
250,000
250,000
172,591
141,400

14,109,027

14,016,928

50.16

49.84

LIMITED74

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

Name

Perpetual Limited and subsidiaries

Michael Fitzpatrick
Copia Investment Partners

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

e. Buyback
There is no current on-market buy-back.

Number of
Shares

3,904,140
2,701,285
1,439,000

Current
Interest

13.89%
9.60%
5.12%

Annual Report 2016CORPORATE INFORMATION

ABN 39 006 708 792

Directors
M. Fitzpatrick, Chairman

P. Greenwood, Global Chief Investment Officer (CIO) and President, North America

T. Carver, Non-executive Director, from 30 April 2016; Managing Director and Chief Executive Officer (CEO),
resigned 30 April 2016

A. McGill, Managing Director and CEO, resigned 28 August 2015

P. Kennedy, Non-executive Director

M. Donnelly, Non-executive Director

J. Vincent, Non-executive Director

G. Guérin, Non-executive Director

T. Robinson, Executive Director, appointed 30 April 2016; Non-executive Director 28 Aug 2015 to 30 April 2016

J. Ferragina, Finance Director, Chief Operating Officer (COO) and Company Secretary

Company Secretaries
C. Driver (resigned 3 June 2016)

J. Ferragina

Registered Office
Level 14
39 Martin Place
Sydney, NSW, 2000
Phone
(02) 8243 - 0400
Facsimile (02) 8243 - 0410

Bankers
Westpac Banking Corporation

Share Register
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford, Victoria, 3067
(03) 9415 - 5000
Phone

Auditors
Deloitte Touche Tohmatsu

Internet Address
www.paccurrent.com

LIMITED
76

Annual Report 2016SYDNEY
Level 14, 39 Martin Place
Sydney NSW 2000
Ph: +61 2 8243 0400
–
MELBOURNE
Level 2, 88 Collins Street
Melbourne, Victoria 3000
Ph: +61 2 8243 0400
–
SEATTLE
1301 2nd Ave, Suite 1700
Seattle, WA 98101
Ph: +1 (206) 965 8879
–
DENVER
44 Cook Street, Suite 1020
Denver, CO 80206
Ph: +1 (303) 321-9900
–
TACOMA
2323 North 30th Street, Suite 201
Tacoma, WA 98403
Ph: +1 (253) 238 0417
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LONDON
Rex House, 4-12 Regent Street,
London, SW1Y 4PE
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PARIS
5 rue du Helder 75009
Paris, France