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6
ANNUAL
REP ORT
2016
00 Contents
0 Glossary
01 Chairman’s Letter
02 Overview of the Company
03 Operating & Financial Report
04 Community
05 Directors’ Profiles
06 Directors’ Report
07 Auditor’s Independence Declaration
08 Corporate Governance
09 Financial Statements
10 Directors’ Declaration
11 Independent Audit Report
12 Shareholder Information
13 Corporate Directory
Page
2
4
6
7
18
21
26
43
44
65
128
129
131
133
Financial Calendar
Special dividend record date
Special dividend payment date
24 August 2016
9 September 2016
Final dividend record date
15 September 2016
Final dividend payment date
Annual General Meeting
Interim Results announcement
Full Year Results announcement
3 October 2016
14 November 2016
24 February 2017
25 August 2017
The Company reserves the right to change these dates.
Annual General Meeting
The 2016 Annual General Meeting will be held at 11am on 14 November 2016 at the
Company’s Sydney office at Level 35, 60 Margaret Street, Sydney.
Notice of the Annual General Meeting will be forwarded to all shareholders separately.
1
0 Glossary
2015 Annual Report
2016 Annual Report
2015 financial year
2016 financial year
Antipodes
ASX Principles
Auditor
Board
Board Committees
Chairman
Company
Company Secretary
Deutsche Australia
EOSP
Foundation
FUM
Group
Group Disclosure Officers
means the Group’s annual report for the 2015 financial
year.
means this document.
means the period 1 July 2014 to 30 June 2015.
means the period 1 July 2015 to 30 June 2016.
means Antipodes Partners Limited.
means the Corporate Governance Principles and
Recommendations, 3nd Edition, published by the ASX
Corporate Governance Council.
means PricewaterhouseCoopers.
means the board of directors of Pinnacle Investment
Management Group Limited.
means the Audit, Compliance and Risk Management
Committee and the Remuneration and Nominations
Committee.
means Mr Alan Watson, the Chairman of the Board.
means Pinnacle Investment Management Group
Limited.
means Mrs Eleanor Padman.
means Deutsche Australia Limited, which held a 18.8%
shareholding in the Company at the start of the 2016
financial year. As at the date of this report, Deutsche
Australia no longer has any shareholding in the
Company.
means the Pinnacle Investment Management Group
Employee Option Share Plan.
means the charitable foundation founded by the
Company in 1986 for long term sustainable giving,
formerly known as the Wilson Foundation.
means funds under management.
means Pinnacle Investment Management Group
Limited (known as Wilson Group Limited until 25
August 2016) and the entities that it controlled during
the 2016 financial year.
means during the 2016 financial year each of the
Managing Director, the chief financial officer, company
secretary and the managing director and chairman of
Pinnacle.
means Hyperion Asset Management Ltd.
LTI
Managing Director
Hyperion
Key Management Personnel means the individuals identified as such on page 29 of
the 2016 Annual Report.
means long term incentives offered to individuals who
are staff of the Group.
means, for the period 1 July 2015 to 16 August 2016, Mr
Alexander Grant and from 17 August 2016, Mr Ian
Macoun. Mr Macoun was appointed as an executive
director on 25 August 2016.
means Next Financial Limited.
means net loss after tax.
means net profit after tax.
means net tangible assets.
means Palisade Investment Partners Ltd.
means Pinnacle Investment Management Limited.
means the transaction approved by shareholders on 16
August 2016, pursuant to which the Company
Next Financial
NLAT
NPAT
NTA
Palisade
Pinnacle
Pinnacle Acquisition
2
Pinnacle Group
Pinnacle Boutiques
Pinnacle LTI scheme
Plan Rules
Plato
Principal Investments
Priority Funds
Resolution Capital
Securities business
Sellers
Sellers’ Executives
Solaris
Spheria
STI
VWAP
acquired the 24.99% equity stake in Pinnacle it did not
already own.
means Pinnacle Investment Management Limited and
the Pinnacle Boutiques.
means each of Hyperion Asset Management Ltd,
Palisade Investment Partners Ltd, Plato Investment
Management Ltd, Solaris Investment Management
Limited, Resolution Capital Limited, Antipodes
Partners Limited and Spheria Asset Management Pty
Ltd.
Means the long term incentive scheme described at
pages 32 of the 2016 Annual Report.
means the rules governing the Company’s EOSP.
means Plato Investment Management Ltd.
means investments made by the Group in listed and
unlisted equities and unit trusts on its own behalf and
for its own benefit.
means each of Wilson Group Priority Growth fund and
Wilson Group Priority Core fund, being two
proprietary funds managed by Priority Investment
Management Pty Ltd during the 2016 financial year.
On 1 July 2016, Spheria Asset Management Pty Ltd
was appointed as the new investment manager.
means Resolution Capital Limited.
means the corporate finance, equity capital markets,
institutional sales, research and private wealth
management businesses previously owned by the
Company and branded Wilson HTM.
means each of Macoun Superannuation Fund Pty Ltd
as trustee for the Macoun Superannuation Fund,
Macoun Generation Z Pty Ltd as trustee for the
Macoun Generation Z Family Trust, Usinoz Pty Ltd as
trustee for the Ihlenfeldt Family Trust, AJF Squared
Pty Ltd as trustee for the AJF Squared Family Trust,
Andrew Chambers and Fleur Chambers as trustee for
the Andrew C Chambers Family Trust, Adrian
Whittingham as trustee for the Whittingham Family
Trust, Mark Cormack and Melanie Cormack as trustee
for the Cormack Family Trust and Dellreid Pty Limited
as trustee for the Dell Family Trust.
means Ian Macoun in respect of Macoun
Superannuation Fund Pty Ltd and Macoun Generation
Z Pty Ltd; Alex Ihlenfeldt in respect of Usinoz Pty Ltd;
Andrew Findlay in respect of AJF Squared Pty Ltd;
Andrew Chambers in respect of the Andrew C
Chambers Family Trust; Adrian Whittingham in
respect of the Whittingham Family Trust; Mark
Cormack in respect of the Cormack Family Trust; and
Matthew Dell in respect of Dellreid Pty Limited.
means Solaris Investment Management Limited.
means Spheria Asset Management Pty Ltd.
means short term incentive.
means volume weighted average price.
3
01 Chairman’s Letter
Dear Shareholder
The period under review has seen the continuation of the repositioning of the Group as a
growing funds management business. This commenced in 2015 with the sale of the
Securities business and progressed this year with the acquisition of the remaining 24.99%
equity stake in Pinnacle that was not previously owned.
The resulting reorganisation of our shareholder register has aligned our key management
team with our existing and new investors through common equity ownership. In
addition, the Pinnacle Acquisition gives shareholders access to 100% of Pinnacle’s cash
flows, and allows for increased efficiencies. The Board firmly believes that the Company
is now appropriately positioned for future growth. On 25 August 2016, the Company
changed its name to Pinnacle Investment Management Group Limited. From today, its
ASX ticker has changed to PNI.
During the year, Pinnacle enjoyed strong financial performance.
Funds under
management increased to $19.8 billion as at 30 June 2016, up from $16.1 billion as at 30
June 2015 and $18.9 billion as at 31 December 2015. Profit in Pinnacle grew 43% to $10.6
million net profit after tax. Pinnacle’s share of net profit after tax from its equity interest
in the Pinnacle Boutiques was $15.9 million, an increase of 34% from 2015.
The Group’s 2016 financial year result included:
Group NPAT of $4.5 million, delivering earnings of 4.1 cents per share
Group NPAT from continuing operations of $5.8 million, up 49% from $3.9 million
(before DTA de-recognition) in prior year
Earnings per share from continuing operations of 5.2 cents, up 44% from 3.6 cents
(before DTA de-recognition)
Pinnacle FUM of $19.8 billion, up 23% from $16.1 billion
Pinnacle’s share of NPAT of $15.9 million from Pinnacle Boutiques, up 34% from $11.9
million
Pinnacle NPAT of $10.6 million, up 43% from $7.4 million
NTA of $49.6 million or $0.45 per share, up 12.5% from $0.40
Cash and Principal Investments of $24.5 million as at 30 June 2016.
Further detail of the financial and operating performance of each segment is set out in
the Operating and Financial Review beginning on page 7.
In the 2017 financial year, the Board will be focused on supporting further growth in the
Company and its affiliated boutique investment management firms, whilst being careful
to continue our strong support of the existing affiliated boutiques and to preserve the
‘Pinnacle model’. This is expected to involve both organic growth of, and some
4
additional initiatives in, the seven existing affiliated firms. Initiatives in this regard are
already under way, such as the recent launch of the Antipodes LIC, and more are being
considered. Other growth initiatives may include strategically adding additional affiliated
firms at a measured pace, as well as exploring a number of initiatives in additional
markets complementary to the existing primary Pinnacle distribution channels.
From 1 September 2016, a reconfigured Board will be in place comprised of seven
directors, including two new non-executive directors in Ms Deborah Beale and Mr Gerard
Bradley, and three executive directors, namely Mr Ian Macoun as the Company’s new
Managing Director, Mr Adrian Whittingham and Mr Andrew Chambers.
At the Company's EGM on 16 August 2016, the Board thanked the retiring Managing
Director Mr Alexander Grant, and prior Chairman Mr Steven Skala AO, for their significant
contributions over the recent past in enabling the transformation of the Company.
Sandy’s retirement marks the end of an incredibly distinguished twenty four year career
with the Company, culminating in the past three years as Managing Director. In today’s
world such loyalty and dedication are rare and Sandy can leave us knowing that
shareholders, clients and staff have all been beneficiaries of his time at the Company.
Steven joined the Board in 2002 and became Chairman in 2011. He has guided the Board
with great dexterity and persistence through some turbulent times, and he leaves with
our recognition of, and thanks for, the very important role he played in the strategic
repositioning of the Company.
The shareholder register reorganisation referred to above also brought to conclusion
Deutsche Bank's time as a shareholder. From the start of their shareholding, Deutsche
Bank has been a steadfast strategic partner of the Group, and we thank them for their
support throughout the transformation of the Group to its current position.
Our people, within both the boutiques and our Company, are the foundation of the Group
and are responsible for driving and delivering value for shareholders. The Board thanks
all of the respective executive management teams and their staff for their hard work and
commitment in maintaining and growing the Group’s profitability.
Finally, we thank you the shareholders for your support. We recognise that there remains
much to do and approach the 2017 financial year determined to grow the business within
our new corporate structure. We look forward to welcoming you to the Group’s Annual
General Meeting, which will be held in Sydney at 11am on Monday 14 November 2016.
Yours sincerely
Alan Watson
30 August 2016
5
02 Overview of Pinnacle Investment Management Group Limited
In May 2016, the Company entered into a share sale agreement to acquire the remaining
24.99% equity stake in Pinnacle. This transaction completed on 25 August 2016 when the
Company was renamed Pinnacle Investment Management Group Limited (ASX : PNI).
The Company’s transition away from transactional based broking to a model centred
around the investment management philosophy of client outperformance began with the
establishment of Hyperion Asset Management in 1996. Hyperion subsequently became
the backbone of the creation of Pinnacle in 2006 and its ‘house of boutiques’. Today, the
Company’s operations include seven boutique fund managers with differing investment
styles and offerings, addressing different asset classes, and providing fund managers with:
equity in the boutique manager
seed capital and working capital
distribution services, business support and responsible entity services to allow fund
managers to focus on delivering fund outperformance
independence, including separate management reporting structures and boards of
directors, whilst still offering the economies of scale and financial support inherent in
being part of a larger investment group
The diagram below shows the composition of the Group’s principal operating entities
today:
6
03 Operating & Financial Review
Financial Performance
Group NPAT of $4.5 million, delivering earnings of 4.1 cents per share
Group NPAT from continuing operations of $5.8 million, up 49% from $3.9 million
(before DTA de-recognition) in prior year
Earnings per share from continuing operations of 5.2 cents, up 44% from 3.6 cents
(before DTA de-recognition)
Pinnacle NPAT of $10.6 million, up 43% from $7.4 million
Pinnacle’s share of NPAT from Pinnacle Boutiques of $15.9 million, up 34% from $11.9
million
Pinnacle FUM of $19.8 billion, up 23% from $16.1 billion
Special fully franked dividend of 5.0 cents per share payable on 9 September 2016
Final fully franked dividend of 1.9 cents per share payable on 3 October 2016
NTA of $49.6 million or $0.45 per share, up 12.5% from $0.40 in prior year
Cash and Principal Investments of $24.5 million as at 30 June 2016.
Composition of Group Results ($m)
1H2016
2H2016
FY2016
FY2015
Pinnacle*
Principal Investments
Priority Funds
Next Financial
Wilson Group
Group Overhead (unallocated)
Profit before tax (PBT) from continuing operations
Minority Interests
PBT from continuing operations attributable to shareholders
Tax (expense)/benefit - continuing operations pre DTA derecognition
NPAT from continuing operations attributable to shareholders pre DTA derecognition
Derecogniton of deferred tax assets**
NPAT from continuing operations attributable to shareholders
Discontinued operations - Securities business
Total profit / (loss) attributable to shareholders
4.7
0.5
(0.2)
(0.4)
(0.1)
(1.3)
3.3
(1.2)
2.1
(0.1)
2.0
0.0
2.0
(0.3)
1.8
5.9
0.2
0.7
(0.2)
0.7
(1.4)
5.2
(1.4)
3.8
0.0
3.8
0.0
3.8
(0.9)
2.7
10.6
0.7
0.5
(0.6)
0.6
(2.7)
8.5
(2.6)
5.9
(0.1)
5.8
0.0
5.8
(1.2)
4.5
7.4
0.1
(0.3)
(0.7)
(0.9)
(2.2)
4.3
(1.6)
2.7
1.2
3.9
(9.4)
(5.5)
(3.5)
(9.0)
* Includes share of Pinnacle Boutiques profit after tax
8.0
7.9
15.9
11.9
Earnings per share:
From continuing operations before DTA derecognition**
From continuing operations
Total attributable to shareholders
** In the prior year NPAT from continuing operations was reduced by $9.4 million relating to the de-recognition of deferred tax assets
3.4
3.4
2.5
5.2
5.2
4.1
1.8
1.8
1.6
3.6
(5.2)
(8.5)
Nature of operations
During the 2016 financial year, the Group had two business segments – Pinnacle and
Wilson Group.
Pinnacle develops and supports boutique fund managers. During the 2016 financial year
Pinnacle was owned 75.01% by the Company, with the balance held by senior executives.
Pinnacle has shareholdings of between 23.5% and 49.9% in each of the Pinnacle Boutiques
which together have $19.8 billion in FUM as at 30 June 2016. Pinnacle Boutiques
generated aggregate revenues of $ million, up 29%. Of this, $17.8 million was performance
fees. Pinnacle generated NPAT of $10.6 million, up 43% on the 2015 financial year.
Pinnacle’s share of NPAT from Pinnacle Boutiques was $15.9 million, up 34% on the prior
year. The Pinnacle Group employed a total of 118 staff as at 30 June 2016.
7
The financial results for the Group consolidate Pinnacle and applies equity accounting to
the Pinnacle Boutiques. This approach is unchanged from the 2015 financial year. The
revenues of Pinnacle relate to the provision of support services and distribution. The
Pinnacle Boutiques’ key revenue streams are management and performance fees based on
the value and performance of FUM. Note 31 shows the equity accounted contribution
from Pinnacle Boutiques with further commentary in relation to Pinnacle on pages 120 to
121.
Following the sale of the Securities business, which completed on 1 July 2015, the Group
retained ownership of Priority Funds business, Next Financial and Principal Investments.
During the 2016 financial year, the Group held Principal Investments primarily through its
investment in the Wilson Group Priority Funds. Gains and losses on the fair value of
Principal Investments are recognised through the profit and loss statement. At 30 June
2016 the Group’s investment in the Priority Funds was $7.3 million. The Group redeemed
$2.5 million of this balance during July 2016.
In late 2010, Next Financial ceased offering new products to focus on servicing existing
products to their maturity or earlier if clients choose to redeem. The final instalment
product matured during June 2015 and the operations of Next Financial have been wound
down during the 2016 financial year. Next Financial’s Australian financial services license
was cancelled on 8 July 2016.
As at 30 June 2016, Wilson Group employed seven people.
Principal Activities
The principal activities of the Group during the 2016 financial year are set out below.
Pinnacle
developing and operating funds management businesses
providing distribution services, business support and responsible entity services to
Pinnacle Boutiques and external parties
Wilson Group
specialty funds management through Priority Funds
selected investments as Principal, and
servicing structured products for clients.
8
Business strategies and prospects for future financial years
Following the Pinnacle Acquisition, the Group’s strategy is to continue to pursue
excellence in its funds management businesses and to support the growth of Pinnacle and
the Pinnacle Boutiques.
The Pinnacle Acquisition will create efficiencies consistent with the Group’s new simpler
organisational structure. The Group will also ensure that it manages any legacy issues
arising from its former ownership of the Securities business and that Next Financial is
brought to a conclusion.
Pinnacle will seek to strengthen its portfolio of boutique asset managers through
investment and service provision including high quality distribution, responsible entity and
funds management infrastructure services.
As part of its growth, Pinnacle will consider assisting experienced and talented investment
professionals to establish new boutiques in investment strategies where we know demand
to be strong and special talent to be needed. Pinnacle anticipates further strong growth,
underpinned by expectations that the funds management industry, which it serves, will
continue to expand over the coming decade and beyond.
Economic Conditions and Material Business Risks
The material business risks facing the Group are equity market conditions and regulatory
risk.
Equity Market Conditions
The Group’s results and outlook are influenced by prevailing equity market conditions, and
to a lesser extent, by broader economic trends and investor sentiment.
The ASX 200 fell by 4% over the course of the 2016 financial year; despite this Pinnacle
was able to grow its FUM and revenues and remains well positioned to capitalise on
improved market conditions in the future.
Regulatory Risk
With the disposal of the Securities business, the regulatory framework in which the Group
operates has changed materially. The Group will continue to be vigilant in regards to
regulatory requirements which are continually evolving and which remain very important.
Review of Group Results
Group net profit after tax from continuing operations attributable to shareholders for the
2016 financial year is $5.8 million. Total profit attributable to shareholders is $4.5 million,
after recognizing costs of $1.2 million relating to the discontinued Securities business.
Pinnacle delivered a $10.6 million net profit for the 2016 financial year, a 43%
improvement. This was underpinned by a 34% increase to $15.9 million in Pinnacle’s
share of net profits from the Pinnacle Boutiques. FUM increased by 23% to $19.8 billion
in the 2016 financial year.
9
The Group’s liquidity has improved with cash and Principal Investments of $24.5
million at 30 June 2016, up from $19.8 million (excluding discontinued operations) at
30 June 2015. The Group continues to have no corporate debt.
Group net tangible assets have increased by 11% to $49.6 million with earnings per
share of 5.2 cents up 44% from 3.6 cents from continuing operations (before DTA de-
recognition) in the 2015 financial year.
The Wilson Group segment produced a profit of $0.6 million. This was a $1.5 million
improvement from the loss of $0.9 million in the prior financial year, and largely relates
to the improved performance of the Priority Funds and Principal Investments during
the year.
The Board has declared:
o a fully franked special dividend of 5 cents per share payable on 9
September 2016 for shareholders recorded on the register at 24 August
2016
o a fully franked final dividend of 1.9 cents per share payable on 3 October
2016.
Statement of Comprehensive Income
The following commentary provides an analysis of revenues and expenses for the 2016
financial year for continuing operations in comparison to the prior comparative period.
During the 2016 financial year, the Group’s revenues and expenses were derived from
Wilson Group and Pinnacle but excluded the revenues and expenses of the Pinnacle
Boutiques, the effect of which is reflected through Pinnacle’s share of the equity
accounted net profits. Further information in relation to Pinnacle Boutiques and their
effect on the Group can be found at page 13.
Revenue from Continuing Operations
Revenue from continuing operations increased $0.8 million to $8.4 million, from $7.7
million in the prior period. Further information regarding revenues are provided below
and at Note 5 of the financial statements.
Service Charges to Entities under Joint Control
Service charges to entities under joint control increased by $1.3 million to $5.7 million.
This is reflective of the growth of the Pinnacle Boutiques including additional Pinnacle
Boutiques being added in recent years.
Performance Fees
Performance fees for Pinnacle Boutiques are included in the equity accounted net profits
attributable to Pinnacle Boutiques and are not separately included in the Group’s financial
statements.
10
During the 2016 financial year, performance fees of $1.1 million were earned by the Wilson
Group Priority Funds. This was a substantial increase on the prior year and is reflective of
the strong performance of the funds during the year. Further information is provided in
note 5 of the financial statements.
Fund Management Fees
Fund Management Fees were $0.9 million during the year relating to the management of
the Priority Funds.
Next Financial revenues
The continued wind down of the Next Financial structured products business resulted in
revenues reducing to $15,000, a reduction of $0.3 million from the prior year. It is not
expected that there will be any revenue in future financial years.
Gains/(losses) on financial assets at fair value through profit or loss
This reflects the mark-to-market gains or losses on the Group’s Principal Investments.
Gains on financial assets at fair value through profit and loss during the year were $0.3
million, an increase of $0.6 million on the $0.3 million loss in the prior financial year. This
largely reflects the strong performance of the Wilson Group Priority Funds during the
year, investments in which make up the majority of the Principal Investments portfolio.
Expenses from Continuing Operations
Employee benefits expense increased by $1.1 million to $7.9 million. The increase mainly
relates to an increase in employee costs in the Pinnacle business during the year,
reflecting the continued growth of Pinnacle.
Incentive expense is $0.7 million higher and includes non-cash share based payments
expenses relating to employee share options issued during the year. It also includes
incentives for Wilson Group staff in recognition of their work in respect of the Pinnacle
Acquisition during the year.
Legal and professional fees are up $0.3 million during the year, due largely to one-off
costs arising from additional audit expenses and other advisory services provided to the
Group during the year.
A net reversal of Impairment expense of $0.2 million has been recognised in relation to
loans to Pinnacle Boutiques. An impairment expense of $0.3 million was recognised in the
prior year.
Property expenses reduced by 30% or $0.3 million compared to prior year due to the
reduction in lease space compared to the prior year.
Structured product expense and finance cost expense relate to the costs associated with
Next Financial’s instalment products, which have reduced to $nil in the 2016 financial year
as the product book reached maturity at 30 June 2015.
Share of net profit of jointly controlled entities accounted for using the equity method.
This relates to the Group’s share of the profits of the Pinnacle Boutiques which are equity
accounted. Net profits after tax from Pinnacle Boutiques are up 34% or $4.0 million on
the prior comparative period. Pinnacle Boutique FUM, which underpins the share of
11
Pinnacle Boutique profits, increased by 23 % to $92.8 billion during the 2016 financial year.
Further information is provided on page 14 and in notes 31 to the financial statements.
Non-Controlling Interest. This relates to the interests of minority shareholders of Pinnacle.
Discontinued Operations
Discontinued operations contributed a loss of $0.3 million to total comprehensive income.
This represents a $0.9 million increase in the fair value of contingent consideration for the
sale of the Securities business recognised in other comprehensive income, less $1.2 million
of expenditure in relation to legacy items relating to its sale which are included in profit
and loss. Further information is provided at note 8 of the financial statements.
Consolidated Statement of Financial Position
The following commentary provides an analysis of assets and liabilities for the 2016
financial year for continuing operations.
Cash. Cash and cash equivalents remained stable, reducing $0.1 million to $13.5 million at
year-end compared to the prior year. Cash outflows from operating activities were $0.2
million, which included net outflows of $4.3 million relating to purchases and sales of
financial assets during the year, including Principal Investments. Further information is
provided at notes 9 and 33.
Trade and other receivables. The value of trade and other receivables increased by $2.5
million during the period, this includes $1.2 million in consideration receivable in relation to
the sale of the Securities business.
Financial assets at fair value through profit or loss were $10.9 million (an increase of $4.7
million on the prior period) of which $7.4 million relates to the Group’s investment in the
Wilson Group Priority Core Fund (now Spheria Australian MidCap Fund) and Wilson
Group Priority Growth Fund (now Spheria Australian Smaller Companies Fund) at 30 June
2016.
Other current assets reduced by $1.2 million to $2.4 million at year end. This balance
includes loans to entities under joint control and capitalised transaction costs in relation to
the Pinnacle transaction. Further information is provided at note 13 of the financial
statements.
Investments accounted for using the equity method reflects Pinnacle’s investment in the
Pinnacle Boutiques. Investments increased by $5.1 million during the period to $24.5
million. The increased value of equity accounted profits of $15.9 million from Pinnacle
Boutiques compared to $11.9 million contributed to higher value. Further information is
provided at note 31 of the financial statements.
Trade and other payables increased by $1.1 million to $6.2 million, relating largely to
increases in accrued expenses and incentive payments. Further information is provided at
note 17 of the financial statements.
Provisions. The value of current and non-current provisions reduced by $1.1 million,
relating to utilisation of the provision for transaction related costs for the disposal of the
12
Securities business during the year. Further information is provided at notes 18 and 21 of
the financial statements.
Other current liabilities. Relates to amounts payable to the Securities business which are to
be settled net against consideration receivable for its disposal included in Trade and other
receivables.
Assets and liabilities of disposal group classified as held for sale related to the Securities
business and reduced to $nil upon the disposal of the business on 1 July 2015.
Segment Result
Pinnacle
This segment comprises the Group’s 75.01% equity share in Pinnacle which includes its
investment in the Pinnacle Boutiques. Pinnacle contributed $10.6 million net profit after
tax to the Group result for the 2016 financial year compared with $7.4 million in the 2015
financial year. This was underpinned by Pinnacle’s share of the Pinnacle Boutiques’ profit
after tax increasing by 34% from $11.9 million in the prior comparative period to $15.9
million.
The table below outlines the performance of the Pinnacle Group for the 2016 and 2015
financial years.
Pinnacle Boutiques (100% aggregate basis)
FUM ($billion)
Revenue ($million)
Net profit before tax
Tax expense
Net profit after tax
Pinnacle
Revenue
Expenses
Share of Pinnacle Boutiques net profit after tax statutory result
Pinnacle Group statutory result #
# 100% of Pinnacle (the Group had a 75.01% interest as at 30 June 2016).
FY2016
FY2015
19.8
16.1
92.8
51.5
(14.9)
36.7
6.0
(11.3)
15.9
10.6
72.0
38.9
(11.4)
27.5
5.9
(10.3)
11.9
7.4
Further analysis on Pinnacle is provided at pages 18 to 21 and in note 31 of the financial
statements.
13
Pinnacle Boutiques – FUM Growth1
Pinnacle Boutiques – Revenue Growth2
1 Pinnacle FUM includes 100% of FUM managed by the Pinnacle Boutiques. At 30 June 2016, the Company had a
75.01% interest in Pinnacle, which in turn has an interest in the Pinnacle Boutiques ranging from 23.5% to 49.9%.
2 Revenue shown is 100% of all Pinnacle Boutiques’ revenue. This is shown to indicate trend and excludes
revenue derived by Pinnacle itself, which is consolidated into the Group’s financial statements
14
Pinnacle’s focus during the year was on continuing to support each of the Pinnacle
Boutiques and assisting them to grow their business and profitability. The quality of the
Pinnacle Boutiques was affirmed and demonstrated in many ways during the year,
including by the investment returns they produced and the strength of market interest
and support for their investment offerings. Following is an overview of each of the
Pinnacle Boutiques during the 2016 financial year:
Solaris Investment Management
Solaris is a specialist manager of listed Australian equities following a neutral style.
Solaris had $4.6 billion in funds under management as at 30 June 2016 with incremental
funds coming from new and existing clients and investment performance.
Solaris’ clients benefited from solid investment out-performance in the year, the Core
strategy outperforming the S&P/ASX200 by 1.86%. Solaris’ core strategy has
outperformed the S&P/ASX 200 Index by 2.07% per annum since inception on 9 January
2008 (to 30 June 2016).
The 2016 financial year was one in which Solaris sought successfully to sustain investment
performance for its clients and provide continued team stability. In the forthcoming year,
Solaris seeks to continue to provide its clients with consistent investment performance.
Hyperion Asset Management
Hyperion is a specialist manager of Australian and global equities following a concentrated
quality growth style.
The 2016 financial year was a very rewarding one for Hyperion’s clients. The fund
generated out-performance for clients for the full year. Hyperion’s long term track record
of investment performance in both its large cap and small cap and global portfolios is first
quartile amongst its competitors since inception.
The Hyperion Australian Growth Companies Fund ended the year with an absolute
performance of 15.60% after fees (14.72% above the S&P ASX 300 Accumulation Index)
and the Hyperion Small Growth Companies Fund ended the year with an absolute
performance of 16.87%% after fees (2.46% above the S&P ASX Small Ordinaries
Accumulation Index).
The Hyperion Global Growth Companies Fund produced a 10.6% gross return for the year
(an outperformance of 9.5% over its benchmark the MSCI World Accumulation Index in
AUD).
Hyperion hard closed its Small Growth Companies fund during the year to preserve its
ability to produce future investment performance for clients.
Resolution Capital
Resolution Capital is a dedicated global listed property securities manager.
Funds under management grew to $4.6 billion during the year, representing a year on
year growth of 17.9%.
15
Resolution Capital’s long term out-performance track record remains pleasing. The
business is continuing to make very good progress on its ambition to diversify its client
base with endorsement from a number of major asset consultants, research houses and
institutional investors.
Plato Investment Management
Plato is a specialist manager of Australian equities following a systematic quantitative
style, with a focus on after tax investing for pension phase and accumulation phase
superannuation.
Over the past three years all of the Plato’s beta one strategies outperformed their
benchmarks and Plato now has a strong track record across its product mix. This year
saw the launch of Plato’s global equity income strategy which has been well received by
the market.
Plato continues to have very significant interaction with consultants and prospective
investors, including financial advisers. This interaction has proven positive, with the funds
under management continuing to increase to over $3 billion with strong inflows from retail
investors.
Palisade Investment Partners
Palisade is a specialist manager of unlisted infrastructure assets with pooled funds and
separately managed portfolios for wholesale investors.
Palisade is a specialist manager of unlisted infrastructure assets with pooled funds and
separately managed portfolios for wholesale investors.
In the 2016 financial year Palisade made investments in targeted sectors on behalf of
direct investment management clients and funds it manages. The investment team has
expanded to cater for growth in investments under management.
As at 30 June 2016 funds under management and investor commitments totalled
approximately $2.3 billion (2015: $2.0 billion). During the year the various funds and
individual portfolios managed by Palisade available for investment delivered overall rates
of return of between 11.9% and 17.8%.
Palisade continues to enjoy increased support of asset consultants, continues to raise
further capital for investment and has a strong pipeline of investment opportunities.
Antipodes Partners
Antipodes Partners is a pragmatic value manager of global and Asian equities founded in
2015 by Jacob Mitchell, former Deputy Chief Investment Officer of Platinum Asset
Management, together with a number of ex-Platinum colleagues and like-minded value
investors. Antipodes aspires to grow client wealth ahead of the broad market over the
investment cycle without subjecting capital to undue levels of risk. The investment
approach seeks to take advantage of the market’s tendency for irrational extrapolation
around changes in the operating environment, to identify great businesses that are not
valued as such and build high conviction portfolios with a capital preservation focus.
16
Spheria Asset Management
Spheria Asset Management is a fundamental-based investment manager specialising in
small and microcap companies
Spheria commenced operations in April 2016 and has a bottom-up focus to achieve strong
investment returns for clients with an emphasis on risk management. Assessing risk is
fundamental to Spheria’s investment philosophy. Explicit risk controls include a
preference for companies with low or no balance sheet gearing. When the company does
have debt, Spheria ensures that free cash flow can support the said level of gearing and is
appropriate for the nature of the business
At 31 July 2016 Spheria managed $164 million of client funds.
Strategies looking forward
Pinnacle intends to continue to provide high quality distribution, responsible entity and
funds management infrastructure services, and to support each of the Pinnacle Boutiques
to remain focussed on investing, to enable them to continue to perform strongly and to
grow their FUM and profitability.
Pinnacle will continue to assist experienced and talented investment professionals to
commence a new boutique in investment strategies where it knows demand to be strong
and special talent to be needed.
Pinnacle anticipates further growth, underpinned by expectations that the funds
management industry, which it serves, will continue to expand over the coming decade
and beyond.
Wilson Group
During the 2016 financial year, the Wilson Group segment comprised the Priority Funds,
Next Financial and Principal Investments. The segment reported a net profit before tax of
$0.6 million for the 2016 financial year. The result was comprised of Principal Investment
gains of $0.7 million (2015 - $0.1 million), a profit from the Priority Funds business of $0.5
million (2015 - $0.3 million loss) and a loss in Next Financial of $0.6 million (2015 - $0.7
million).
Principal Investments comprises the Group’s Investments in equity securities and unit trusts.
As at 30 June 2016 the Principal Investments’ portfolio included $7.4 million invested in the
Wilson Group Priority Core Fund and Wilson Group Priority Growth Fund (now Spheria
Australia MidCap Fund and Spheria Australian Smaller Companies Fund).
Principal Investments contributed $0.7 million to the segment result which included $0.5
million in fair value gains, and $0.2 million in distributions received during the year.
The Priority Funds business performed strongly during the year and contributed $0.5 million
to the segment result compared to a loss of $0.3 million in the prior year.
On 1 July 2016, the investment management of the funds was transferred to Spheria Asset
Management, a 40% owned Pinnacle boutique. A subsidiary of Pinnacle remains the
responsible entity of the funds. Further information relating to the funds is provided in Note
30.
The process to wind down the operations of Next Financial continued during the year, with
associated expenses of $0.6 million reducing the Wilson Group segment result. Ongoing
expenditure in relation to the wind-down of the business is expected to be minimal.
17
04 Community Investment
The Company continued its commitment to supporting the community through the
charitable Foundation established by its antecedents in 1987. Since then the Foundation
has donated more than $3 million to over 60 Australian charities, with a focus on
supporting capacity building projects which develop long term sustainability.
Partnerships are often with organisations which are entrepreneurial and which are seeking
to tackle complex social issues through innovative problem solving agendas. The majority
of donations offer annual support of between $10,000 and $20,000 for specific projects,
approved via a formal application and assessment process.
In addition the Foundation seeks longer term partnerships with charitable organisations
aligned to the interests of key shareholders, with the aim of investing in their growth over
a number of years. Currently the Foundation is partnering with HeartKids Australia (HKA)
through donations of $100,000 per annum to fund feasibility studies and the pilot
development of an Australian and New Zealand Congenital Heart Disease (CHD) Registry.
Longterm partnership with HeartKids Australia: CHD Registry
Development and implementation of a Registry is essential to monitor the number of child
and adult patients with CHD, which could potentially total around 65,000 Australians. The
key objective is to provide access to information which can help to more effectively
understand the true range of outcomes and the burden of the entire CHD spectrum across
lifetimes. Core aims are to improve CHD treatment and survival, and the quality of life and
services available to those with CHD. Data will be used to evaluate the results and inform
the planning of effective services, to ensure they are consistent with international best
practice.
Annual project based partnerships
During the 2016 financial year, the projects below have also been supported through
donations of up to $20,000 per charity.
Child Wise: Animation
Through prevention and early intervention approaches, Child Wise works to protect
children from sexual abuse. This donation has enabled the development of an animated
children’s educational tool which focuses on protective behaviours and personal safety,
with material presented in a way which children can process, interpret and feel
comfortable with. The animation teaches children to recognise the difference between
safe and unsafe touch, secrets versus surprises, and how to seek help from trusted adults.
Equipping children with this information reduces their risk to abuse, and also makes them
more likely to speak up if something does happen - ensuring early intervention. It is being
shown to primary school children in Child Wise’s ‘Protective Behaviours Personal Safety
Program’ and is also available online.
OzHarvest Gold Coast: Food collection and NEST project
Funds have assisted in the collection and delivery of 60,000 meals across the Gold Coast
and the facilitation of the NEST (Nutrition, Education and Sustenance) Program for 30
18
charity participants. This course equips participants with valuable skills and knowledge
about nutritious eating choices, low cost meal planning, budgeting, shopping, healthy
cooking and reducing waste.
The broader focus is on capacity building; OzHarvest rescues up to 4,000 kilograms of
food per week on the Gold Coast from more than 95 donors. This is distributed to 45 small
charities, with regular deliveries enabling them to reduce food spending and redirect cash
into education, rehabilitation and frontline client services.
PROJECT FUTURES: The Salvation Army Trafficking and Slavery Safe House
The Foundation is funding specialist treatment offered within the “Health and Well-being
Program”, which is part of the crisis and long term assistance provided 24 hours a day,
seven days a week at the Safe House. This venue supports victims of human trafficking
and works with up to 40 individuals at any one time. It aims to move people through a
continuum of support stemming from the crisis of slavery to: 1) safety; 2) stability; 3)
reduced vulnerability; 4) independent living; and 5) empowerment as thriving members of
the community.
As well as delivering increased physical and mental health services for individuals, the Safe
House has a focus on building stronger advocacy and greater awareness to drive change
and reduce the incidence of trafficking.
The Reach Foundation: Development and delivery of Thrive Program in NSW
Supported by the Foundation in 2014, the Reach Birdcage Program has been redeveloped
as an intensive workshop supporting young women to build skills, explore and critically
question expectations around gender and the influences and risks posed by social media.
As well as building the capacity of the Reach NSW Crew to deliver the program, funding in
2015 and 2016 has enabled Reach to offer the equivalent boys’ program – Locker Room –
in NSW, and to provide a third workshop within the Thrive series to bring young men and
women together.
Combined workshops explore issues of gender identity from both a male and female
perspective, while openly discussing the impact and potential harm caused by gender
stereotypes and expectations. They aim to identify how these affect individual behaviours
and interpersonal relationships.
Sydney Children’s Hospital Foundation: Specialist equipment for the Respiratory
Department at Sydney Children’s Hospital, Randwick
Money donated has been used to purchase two pieces of equipment to provide specialist,
mobile options to improve lung function diagnosis and outcomes for children who are
challenging to assess. The first piece only requires children to perform normal breathing
to produce accurate, reliable measurements and is non-invasive and less distressing for
children aged 3 to 6 years.
The second piece is a portable spirometer used with a PC or tablet, which can be taken to
young patients anywhere in the hospital to deliver an interactive, incentive-based test.
This is essential for children who may be in serious respiratory distress, who have low
immunity due to treatment and/or are connected to various life-saving pieces of
equipment in Intensive Care.
19
The Shepherd Centre: TSC Connects
The Foundation’s support has facilitated the development of a mobile compatible,
interactive platform between parents and therapists so that children’s milestones can be
recorded to help analyse their speech and social behaviour. Hearing impaired children
often have poor social skills because of their inability to predict the behaviour of others
and understand that everyone has their own unique thoughts, feelings and beliefs. This
can result in perceiving the world as an uncertain and unpredictable place, with children
feeling isolated and ostracised – even though they have learnt to listen and speak well.
Advanced speech and language, combined with adequate social skills, are crucial for
successful integration. This innovative program will ensure that therapists can effectively
focus their efforts at an individual level, to help children in the most positive way possible.
20
05 Directors’ Profiles
Mr Alan Watson
Bsc, GAICD
Non-executive Chairman
Experience and expertise
Mr Alan Watson joined the board on 15 July 2013, after he had completed a 30 year
investment banking career, during which he has been Managing Director of several
Australian, American and UK based investment banks. During this career he has worked in
the Securities markets of the UK, Australia, Canada, China and Japan. Immediately prior to
his retirement Mr Watson was with Macquarie Group, where he had been recruited to
establish its European Securities business.
ASX Listed Company Directorships held in last 3 years (current & recent):
Director of Australis Oil & Gas (appointed 24 May 2016)
Director of Aurora Oil and Gas (appointed November 2010, resigned June 2014)
Director Elixir Petroleum (appointed October 2011, resigned May 2014)
Other Directorships:
Director of Airboss of America Corporation (TSX : BOS)
Director of Frensham Foundation
Special responsibilities:
Chairman of the Board
Chairman of Remuneration and Nominations Committee
Interests in shares and options
None
21
Mr Steve Wilson AM
B Com, LLB (UQ), Hon PhD (QUT & Griffith), FAICD, SF Fin, MSAA
Non-executive Director
Experience and expertise
Mr Steve Wilson has over 35 years of professional investment experience, including 4
years with Cazenove & Co. in London before joining Wilson & Co in 1984. Since then he has
spent 25 years as either Chairman, Managing Director or Joint Managing Director of the
Company.
Under his leadership, Hyperion was established in 1996, Priority Funds in 2005 and
Pinnacle in 2006. In October 2011, Mr Wilson resigned from the position of Managing
Director whilst remaining on the board as a Non-executive Director.
Mr Wilson has previously served on several boards including as a Chairman of South Bank
Corporation, Hyperion Asset Management, St John’s Cathedral Completion Fund,
Queensland Rugby Union and as a Director of Telstra Corporation, Tourism Queensland
and the Council of QUT.
ASX Listed Company Directorships held in last 3 years (current & recent):
None
Other Directorships:
Chairman of Racing Queensland
Chairman of Priority Investment Management Pty Ltd
Chairman of Russo Business School
Chairman of Next Financial Limited
Chairman of Barambah Wines
Director of Racing Australia
Director of Pinnacle Investment Management Limited
Director of The Centre for Independent Studies
Director of Australian Oil-Shale Holdings Ltd
Trustee of University of Queensland Rugby Union Foundation
Special responsibilities:
Member of the Audit Compliance and Risk Management Committee
Chairman of Priority Funds Investment Committee
Interests in shares and options
20,003,000 ordinary shares in the Company
22
Mr Ian Macoun
CFA, B Com, MFM, Dip FinSer (FP), FCPA, FAICD
Managing Director (from 17 August 2016)
Experience and expertise
Mr Ian Macoun was appointed as Managing Director of the Company on 17 August 2016
and an executive director on 25 August 2016, having been the managing director and
chairman of Pinnacle since 2006. Mr Macoun’s career to date has included more than 20
years as the CEO and chief investment officer of investment management firms, including
the establishment of Australia's first "multi-boutique" funds management firm (Perennial
Investment Partners – founding Managing Director, from 1998), building a major new
investment corporation (Queensland Investment Corporation; inaugural Chief Executive –
from 1988), and the management of a major Australian bank's investment operation
(Westpac Investment Management; Managing Director from 1993).
Mr Macoun’s early experience, in more than 10 years at Queensland Treasury, included
extensive involvement with many major Australian and International financial market
participants, and the Queensland Government’s commercial participation in many major
industrial development projects during the late 1970’s and the 1980’s. He was a First
Assistant Under Treasurer when he moved to build and lead QIC.
ASX Listed Company Directorships held in last 3 years (current & recent)
None
Other directorships
Pinnacle Investment Management Limited (Chairman and Managing Director)
Hyperion Holdings Limited
Hyperion Asset Management Limited
Palisade Investment Partners Limited
Solaris Investment Management Limited
Resolution Capital Limited
Foray Enterprises Pty Limited
Plato Investment Management Limited (Chairman)
Pinnacle RE Services Limited
Pinnacle Services Administration Pty Ltd
Pinnacle Funds Services Limited
Interests in shares and options
27,969,744 ordinary shares in the Company
750,000 options
23
Mr Steven Skala AO
BA, LLB (Hons)(UQ) BCL (Oxon)
Non-executive director (until 26 August 2016)
Experience and expertise
Mr Steven Skala AO joined the board in 2002, and was appointed Chairman on 2 March
2011. Since 2004, he has been Vice Chairman of Deutsche Bank AG Australia and New
Zealand. Mr Skala resigned as a non-executive director of the Company on 26 August
2016.
Until his appointment as Chairman of the Company, Mr Skala was one of two nominated
representatives of Deutsche Bank. When he was appointed Chairman, he was released
from his appointment as a representative of Deutsche Bank in the Group’s affairs.
Mr Skala is a former commercial lawyer with more than 20 years’ experience in corporate
law. Between 1982 and 1985, he was a partner of Brisbane law firm Morris Fletcher and
Cross (now Minter Ellison). Between 1985 and 2004, Mr Skala was a partner of law firm
Arnold Bloch Leibler and was head of its Corporate and Commercial Practice for several
years.
ASX Listed Company Directorships held in last 3 years (current & recent):
None
Other Directorships:
Vice Chairman of Deutsche Bank AG Australia and New Zealand
Chairman of Blue Chilli Technology Pty Ltd
Chairman Heide Museum of Modern Art
Director of Hexima Limited
Director of Deutsche Australia Limited
Director of Australian Broadcasting Corporation
Director of The Centre for Independent Studies
Director of The Sir John Monash Foundation
Director of Priority Funds Management Pty Ltd (until 26 August 2016)
Director of Next Financial Limited (until 26 August 2016)
Vice President of The Eliza and Walter Hall Institute of Medical Research
Panel Member of Adara Advisors Pty Limited
Member of International Council, the Museum of Modern Art (New York)
Member of the Global Foundation
Special responsibilities:
None
Interests in shares and options
683,753 ordinary shares in the Company
24
Mr Alexander Grant
B Econ UQ, Grad Dip SIA
Managing Director (until 16 August 2016)
Experience and expertise
Mr Sandy Grant was appointed Managing Director on 11 April 2014, having been Acting
Chief Executive Officer since July 2013. During the 2016 financial year, Mr Grant was also a
director of Pinnacle. Mr Grant resigned from both positions on 16 August 2016.
Mr Grant was the Fund Manager of the Wilson Group Priority Growth Fund from 2005, and
co-manager of the Wilson Group Priority Core Fund since its inception in mid 2010. He has
30 years’ experience in the finance industry with a number of institutions.
Mr Grant joined Wilson HTM Ltd in 1992. He was Head of Institutional Stockbroking and a
Director of Wilson HTM Ltd from 2004 to 2007. Mr Grant has been a company
shareholder since 1995.
ASX Listed Company Directorships held in last 3 years (current & recent)
None
Other Directorships:
Director of Pinnacle Investment Management Limited (until 16 August 2016)
Director of Next Financial Limited (until 30 June 2016)
Director of Priority Funds Management Pty Ltd (until 30 June 2016)
Director of Ariano Pty Ltd (until 30 June 2016)
Director of WIG Option Plan Managers Pty Ltd (until 30 June 2016)
Director of Investment Solutions Client Services Pty Ltd (until 30 June 2016)
Director of Next Financial Nominees Pty Ltd (until 30 June 2016)
Director of Next Financial Nominees No. 2 Pty Ltd (until 30 June 2016)
Director of Brisbane Boys’ College Foundation Limited
Special responsibilities:
Member of the Audit Compliance and Risk Management Committee
Interests in shares and options
6,228,738 ordinary shares in the Company
25
06 Directors’ Report and Remuneration Report
Your directors present their report on the Group, consisting of the Company and the
entities it controlled at the end of, or during, the year ended 30 June 2016.
Directors
The directors of the Company during the whole of the financial year and up to the date of
this report were:
Mr A Watson
Mr S M Skala AO (resigned on 26 August 2016)
Mr S M Wilson AM
Mr A Grant (resigned on 16 August 2016)
Mr I Macoun (appointed on 25 August 2016)
Mr C Darvall AM served as a director until his resignation on 31 August 2015.
Information on the qualifications, experience and responsibilities of the directors is
included in the directors’ profiles on pages 21 to 25 of the 2016 Annual Report.
Earnings per share
From continuing operations before de-recognition of DTA*
Basis earnings per share
Diluted earnings per share
From continuing operations
Basis earnings per share
Diluted earnings per share
Total attributable to shareholders
Basic earnings per share
Diluted earnings per share
2016
Cents
2015
Cents
5.2
5.2
5.2
5.2
4.1
4.1
3.6
3.6
(5.2)
(5.2)
(8.5)
(8.5)
* In the prior year NPAT from continuing operations was reduced by $9.4 million relating to the de-recognition of
deferred tax assets.
Dividends
In the 2016 financial year, the following dividends were paid:
A fully franked special dividend of 2.25 cents on 18 September 2015.
A fully franked interim dividend of 1.4 cents on 31 March 2016.
Since the end of the financial year, the Company has declared:
a fully franked special dividend of 5 cents per share to be paid on 9 September 2016.
a fully franked final dividend of 1.9 cents per share to be paid on 3 October 2016.
26
Operating and Financial Review
The Operating and Financial Review can be found at pages 7 to 17 of the 2016 Annual
Report.
Significant changes in the state of affairs
On the 1 July 2015 the Group completed the sale of the Securities business (refer note 8 of
the financial statements at page 99 for further information).
Apart from this, there were no significant changes in the state of affairs of the Group
during the reporting period.
Matters subsequent to the end of the financial year
Since the conclusion of the 2016 financial year, there has been a significant change in the
state of affairs of the Group as a consequence of the acquisition of the 24.99% equity
stake in Pinnacle that the Company did not previously own, following approval by
shareholders at an extraordinary general meeting on 16 August 2016. The notice of
meeting sent to shareholders for the extraordinary general meeting included an
explanatory memorandum which set out further detail in relation to the transaction and an
independent expert’s report which concluded that the transaction was fair and reasonable
to non-associated shareholders.
Other than as outlined above and in note 32 of the financial statements at page 122, there
has not arisen in the interval between the end of the financial year and the date of this
directors’ report any item, transaction or event of a material and unusual nature likely, in
the opinion of the directors of the Company, to significantly affect the:
Group’s operations in future financial years; or
Results of those operations in future financial years; or
Group’s state of affairs in future financial years.
Environmental regulation
The Group is not affected by any significant environmental regulation in respect of its
operations.
Company Secretary
During the 2016 financial year, the role of Company Secretary was performed by Mrs
Eleanor Padman.
Chairman of Audit Compliance and Risk Management Committee
From 1 September 2015 Mr Don Mackenzie held the role of Chairman of the Audit
Compliance and Risk Management Committee. Mr Mackenzie joined the Audit Compliance
and Risk Management Committee in February 2015 as an external independent specialist
with particular expertise in audit and accounting. Mr Mackenzie commenced his
professional career with a Chartered Accounting firm and
in 1976 commenced
employment in a senior accounting role with a Queensland based rural ASX listed
27
company. In 1993 he commenced practice as a Chartered Accountant providing
corporate services predominantly to public companies and from 2008 he has acted in a
personal capacity in that role. During this period Mr Mackenzie has also acted as a non-
director independent member of audit committees for ASX listed companies including
Structural Systems Limited (2002 to 2014), Silver Chef Limited (2005 to 2012) and Aveo
Healthcare Limited (formerly Forest Place Group Limited) from 2004 to 2010. From 2010
Mr Mackenzie was appointed to the board of Forest Place Group Limited and also became
the chairman of its audit committee until he resigned in March 2014.
Meetings of Board and Board Committees
The number of meetings of the Company’s Board and of each Board committee held
during the year ended 30 June 2016 and the number of meetings attended by each
director were as follows:
Meetings of Board and Board Committees
Board
Attended
Audit, Compliance
and Risk
Committee
Remuneration and
Nominations
Committee*
Attended Eligible
Attended Eligible
to
Attend
to
Attend
Eligible
to
Attend
12
3
14
15
15
-
14
3
15
15
15
-
-
1
4
4
4
4
-
1
4
-
4
4
1
1
2
2
2
-
-
1
-
2
-
-
S Skala AO
C Darvall AM**
S Wilson AM
A Watson
A Grant
D Mackenzie
*Responsibilities undertaken by full Board from 12 October 2016.
**Mr Darvall resigned with effect from 31 August 2015
Remuneration Report
The Group’s 2016 remuneration report sets out remuneration information for the Group’s
non-executive directors and Key Management Personnel.
The remuneration report contains the following sections:
1. Key Management Personnel
2. Role of Remuneration and Nominations Committee
3. Executive remuneration policy and framework
4. Links between performance and outcomes
5. Details of Executive Key Management Personnel remuneration
28
6. Executive service agreements
7. Non-executive director remuneration
8. Share based payment compensation
9. Equity instrument disclosures relating to Key Management Personnel
10. Loans to Key Management Personnel
11. Other transactions with Key Management Personnel
12. Equity Capital
Information in this remuneration report has been audited as required by section 308(3C)
of the Corporations Act 2001.
1. Key Management Personnel
This remuneration report provides details of the remuneration of the Key Management
Personnel of the Group for the year ended 30 June 2016. The Key Management Personnel
for this period are listed in the tables below:
Executive Key Management Personnel
Name
Alexander Grant
Ian Macoun
Alex Ihlenfeldt
Position
Managing Director (until his resignation on 16
August 2016)
Managing Director (from 17 August 2016) and
executive director (from 25 August 2016).
Chairman and Managing Director of Pinnacle
Chief Operating Officer and director of
Pinnacle
Non-executive Key Management Personnel
Current
Name
Alan Watson
Steve Wilson AM
Steven Skala AO
Former
Name
Chum Darvall AM
Position
Chairman
Director
Director
Position
Director (until 31 August 2015)
In accordance with the Corporations Amendment (Improving Accountability on Director
and Executive Remuneration) Act 2011 (Cth)), the Key Management Personnel of the
Group for the year ended 30 June 2016 comprised:
29
each non-executive director of the Company
executive director Alexander Grant
Ian Macoun as Chairman and managing director of Pinnacle
Alex Ihlenfeldt as Chief Operating Officer of Pinnacle
2. Role of Remuneration and Nominations Committee
The Remuneration and Nominations Committee is a committee of the Board. The
Committee performs its role consistent with the overall objective of ensuring maximum
shareholder benefit from the retention of a high quality, high performing Board and
executive team. Its responsibilities were performed by the Board during the 2016 financial
year and included the following:
reviewing and making recommendations in relation to the Group’s remuneration
policies and practices to ensure that the Group fairly and responsibly rewards
executives having regard to the performance of the Group and the interests of
stakeholders
reviewing, approving and recommending to the Board for adoption executive
specific
remuneration and
recommendations to the Board on remuneration of executive directors and senior
executives
incentive policies and practices and making
setting the terms and conditions of the employment of the Managing Director,
advising the Board on the Managing Director’s remuneration package and reviewing
the performance of the Managing Director at least annually
reviewing the remuneration of non-executive directors for serving on the Board or any
committee (both individually and in total) and recommending to the Board the
remuneration and retirement policies for non-executive directors having regard to
market trends and shareholder interests
setting the entitlements and expenses policy for the Chairman, non-executive
directors and the Managing Director
ensuring the Group’s remuneration policies and practices comply with the ASX Listing
Rules, ASX Principles and the Corporations Act 2001
assisting the Chairman to facilitate the review of Board performance annually
the appointment of new directors, both executive and non-executive
developing selection criteria for and identifying and assessing candidates for
appointment to the Board
establishing procedures for recommendation to the Chairman for the proper oversight
of the Board and management
30
As has been the case in prior years, during the 2016 financial year, the Remuneration and
Nominations Committee did not provide recommendations on the remuneration for any
Pinnacle employees. The responsibility for the remuneration of Mr Macoun rested with the
board of Pinnacle, which during the 2016 financial year included two directors of the
Company. Mr Macoun was responsible for recommending remuneration arrangements for
Pinnacle employees to the board of Pinnacle.
The Charter for the Remuneration and Nominations Committee is incorporated in the
Company’s Corporate Governance Statement which can be found on the Company’s
website at http://www.pinnacleinvestment.com/shareholders-investor-centre/
3. Executive remuneration policy and framework for the Company
The Board is committed to achieving sustainable long-term growth and returns for
investors. During the 2016 financial year, it has adopted a remuneration framework
consisting of base salary and short term incentives and a remuneration policy which
aimed to motivate and retain highly skilled executives and align their interests with
shareholders.
Base salary
Base salary is structured as a package, which may be delivered as a combination of cash
and prescribed non-financial benefits and includes superannuation contributions.
Executives are offered a competitive base salary that comprises the fixed component of
pay and rewards. An executive’s base salary is reviewed on promotion.
There are no guaranteed base salary increases included in any executive’s contract.
Short term incentives (STI)
STI are an ‘at risk’ cash incentive payment which is paid to executives and staff at the
discretion of the Board on an annual basis and in accordance with remuneration policies
and the terms and conditions of employment.
reviewing
The Remuneration and Nominations Committee
recommendations from the Managing Director for STI and recommending them for Board
approval. During the 2016 financial year the Managing Director made recommendations
to the Remuneration and Nominations Committee in relation to cash bonuses to be paid
to individuals within Priority Funds and the Company’s head office. The discretionary cash
bonus took into consideration key performance indicators and individual performance
(both financial and non-financial) over the period.
responsible
for
is
Long term incentives (LTI)
LTI have been provided to certain employees under the Company’s employee option
share plan (EOSP). The EOSP is designed to encourage alignment of the interests of staff
with increased value to shareholders in the long term. Participants are granted options,
which only vest subject to specific conditions being met at the end of the vesting period.
Participation in the EOSP is at the Board’s discretion. Options granted under the EOSP
carry no dividend or voting rights. The rules of the EOSP contain restrictions on removing
the 'at-risk' aspect of the instruments granted to executives, including to Key Management
Personnel.
31
During the 2016 financial year, Mr Alexander Grant exercised 600,000 options granted as
part of his remuneration package and approved by shareholders in November 2014.
Further details appear at page 33.
Pinnacle LTI scheme
The Board announced a new LTI arrangement for senior executives of Pinnacle to the
market on 25 February 2015 (Pinnacle LTI scheme). On 26 June 2015, shareholders
approved the participation of Key Management Personnel in the Pinnacle LTI scheme.
Under the terms of the Pinnacle LTI scheme, executives received a combination of
Pinnacle equity and options in the Company, the key terms of which are set out below.
Equity component
The Company sold 4.29% of its equity in Pinnacle to senior executives, subject to claw
back arrangements. As part of the Pinnacle Acquisition, this equity has been ‘swapped’
for equity in the Company.
Options component
The Company issued 4.25 million options in the Company to senior executives under the
EOSP at a strike price of 98.6 cents per share.
The options vest in two equal tranches on 1 January 2018 and 1 January 2020 with a six
month vesting period. Any options that remain unexercised at the end of the vesting
period will lapse. The options are subject to claw back arrangements and bad leaver
provisions.
As part of the Pinnacle Acquisition, which was approved by shareholders on 16 August
2016, the Sellers’ Executives agreed to execute certain documents, the effect of which was
to roll over and preserve the long term retentive elements of the Pinnacle LTI scheme.
4. Links between performance and outcomes
During the 2016 financial year and in light of the imminent completion of the Pinnacle
Acquisition, the Managing Director conducted formal performance reviews of staff in the
Company and Priority Funds and made recommendations to the Remuneration and
Nominations Committee in respect of their STIs. In making those recommendations,
regard was had to the individual’s overall performance in progressing the Pinnacle
Acquisition to completion and the significant extra workloads assumed as part of that
process.
The table below shows key financial performance indicators applicable to the Group’s
performance over the last five financial years.
Net profit/(loss) after tax attributable to shareholders ($m)
Closing share price ($)
Dividend per share (cents)
Diluted earnings per share (cents)
Net profit/(loss) after tax attributable to shareholders ($m)
before derecognition of DTA*
Diluted earnings per share (cents) before derecognition of DTA
2016
4.5
1.45
3.30
4.1
4.5
4.1
2015
(9.00)
1.20
1.60
(8.5)
0.4
0.4
2014
4.8
0.61
2.75
4.5
4.8
4.5
2013
(1.6)
0.19
Nil
(1.6)
(1.6)
(1.6)
2012
(7.6)
0.20
Nil
(7.3)
(7.6)
(7.3)
* In the 2015 year NPAT from continuing operations was reduced by $9.4 million relating to the de-recognition of deferred tax assets.
32
5. Details of Executive Key Management Personnel remuneration
The relative weightings of the three remuneration components for Key Management
Personnel are set out in the table below for the year to 30 June 2016.
% of total remuneration
Fixed
Remuneration
88%
50%
50%
Performance-based
remuneration
STI
0%
49%
48%
LTI
12%
1%
2%
Alexander Grant
Ian Macoun
Alex Ihlenfeldt
Alexander Grant
In accordance with the terms of his appointment as Managing Director, Mr Grant’s base
salary was set at $400,000 per annum (inclusive of superannuation) with effect from 1
December 2013. In addition, Mr Grant will receive a termination benefit of $85,000
following the conclusion of his employment with the Group.
On 26 November 2014, and following shareholder approval, Mr Grant was granted
1,200,000 options, vesting in two equal tranches of 600,000, on 27 February 2015 and 27
February 2016, with an exercise price of $0.595, and otherwise on terms and conditions
consistent with the EOSP. The exercise price was calculated as the higher of a 20%
premium of Group NTA per share as at 31 December 2013, or VWAP between 1 January
2014 and 31 May 2014.
Ian Macoun
In the 2016 financial year, Mr Macoun’s base salary was $600,000 per annum (inclusive of
superannuation) and he earned an STI of $600,000 (inclusive of superannuation). STI is a
performance incentive of up to 100% of base salary awarded on the basis of meeting
business and strategic objectives.
In addition and in accordance with the terms of the Pinnacle LTI scheme described on
page 32, on 1 July 2015, following the approval of shareholders on 26 June 2015, the
Company granted 750,000 options over its ordinary shares to Mr Macoun.
Alex Ihlenfeldt
In the 2016 financial year, Mr Ihlenfeldt earned a base salary of $300,000 per annum
(inclusive of superannuation) and an STI of $300,000 (inclusive of superannuation). STI is
a performance incentive of up to 100% of base salary awarded on the basis of meeting
business and strategic objectives.
In accordance with the terms of the Pinnacle LTI scheme described on page 32, following
the approval of shareholders on 26 June 2015, on 1 July 2015 the Company granted
425,000 options over its ordinary shares to Mr Ihlenfeldt.
33
Remuneration details for Executive Key Management Personnel (calculated in accordance
with applicable accounting standards) are set out in the table below.
Short-term employee benefits
Post employment
benefits
Long-
term
benefits
Share
based
payments
Cash
bonus
(STI)
Non-
monetary
benefits
Superan
nuation
Retirement
Benefits
Long
service
leave
Options &
Rights
(LTI)
Termination
benefits
Total
Portion of
remuneration
at risk - STI
Portion of
remuneration
at risk - LTI
Cash
salary &
fees
$
Name
Managing Director:
Alexander Grant 2016
365,000
$
-
2015
366,420
170,000
Chairman and Managing Director of Pinnacle
Ian Macoun
2016
2015
565,000
600,000
490,000
525,000
Other Key Management Personnel
Alex Ihlenfeldt
Brad Gale#
Totals
2016
2015
2016
2015
2016
2015
273,973
296,027
242,009
299,658
-
-
322,572
75,000
1,203,973
896,027
1,421,001
1,069,658
# KMP from 24 November 2014 to 30 June 2015
$
$
-
-
-
-
-
-
-
-
35,000
35,000
35,000
35,000
30,000
30,000
-
17,500
- 100,000
-
117,500
$
-
-
-
-
-
-
-
-
-
-
$
$
$
$
(22,088)
65,709
85,000
40,214
169,599
21,592
16,123
8,443
1,407
4,916
2,829
-
15,509
11,529
-
5,151
20,517
-
-
-
-
-
-
-
528,621
781,233
1,230,035
1,067,530
620,425
586,025
-
440,740
4,420
89,661
85,000 2,379,081
64,317 203,052
-
2,875,528
%
-
22%
49%
49%
48%
52%
-
17%
-
-
%
12%
22%
1%
-
2%
2%
-
5%
-
-
6. Executive service agreements
Remuneration and other terms of employment for the Executive Key Management
Personnel are formalised in service agreements.
Alexander Grant
Alexander Grant resigned as Managing Director on 16 August 2016. During the 2016
financial year, Mr Grant’s service agreement reverted to a permanent employment
contract subject to a notice period of six months. The Company had the right to make
payment in lieu of notice. If Mr Grant’s engagement was terminated for cause or because
he resigned other than to give effect to his retirement, he would have forfeited any
entitlement to an STI or to exercise any options granted as an LTI. If Mr Grant’s
engagement ended for any other reason, Mr Grant was entitled to exercise any options
granted as an LTI and was entitled to receive a payment (other than in the event of a
change of control of the Company) that would not exceed 12 months base salary after the
payment of statutory entitlements and which was inclusive of any payment in lieu of
notice.
Ian Macoun
During the 2016 financial year, the chairman and managing director of Pinnacle, Ian
Macoun, was engaged under an ongoing service agreement with Pinnacle that provided
for termination by either party upon giving one month’s notice except where termination
is due to misconduct. A termination payment of at least $900,000 was payable upon
termination by the Company, unless termination was due to misconduct. As part of the
Pinnacle Acquisition, Mr Macoun has entered into a new service agreement, the terms of
which are substantially similar to his previous contract save that his notice period is now 3
months. On 16 August 2016, shareholders voted to approve the payment of termination
benefits to Mr Macoun in an amount of $900,000, consistent with his previous terms of
employment.
34
In 2006, the Group advanced Mr Macoun a loan of $1.119 million to acquire shares in
Pinnacle and agreed to pay, at the time of repayment of the loan (being the time of sale of
Pinnacle shares by Mr Macoun) a bonus with a net value equal to the outstanding balance
of the loan. The loan was unsecured, limited in recourse to the shares in Pinnacle and
interest free. As part of the Pinnacle Acquisition, and following the approval of
shareholders on 16 August 2016, the Company paid Mr Macoun the bonus which was in
turn applied to repay the loan, giving rise to an expense of $222,000, the balance having
been expensed in prior years.
In May 2015, Pinnacle advanced to interests associated with Mr Macoun a loan of $547,293
to acquire shares in Pinnacle. The loan was unsecured, limited recourse and interest free.
As part of the Pinnacle Acquisition, this loan has been repaid and an identical loan
reissued by the Company.
Alex Ihlenfeldt
Alex Ihlenfeldt, the Chief Operating Officer and a director of Pinnacle, is engaged under an
employment agreement dated 1 February 2011 and subsequently amended on 30 January
2012 and 7 May 2015. The contract provides for termination by either party on one
month’s notice except where termination is due to misconduct. In January 2012, Pinnacle
advanced to Mr Ihlenfeldt’s nominated shareholding entity, an unsecured, limited recourse
and interest free loan of $416,072 to acquire shares in Pinnacle. The loan is immediately
repayable if Mr Ihlenfeldt ceases employment with Pinnacle or sells some or all his shares.
In May 2015, Pinnacle advanced to interests associated with Mr Ihlenfeldt a loan of
$309,522 to acquire shares in Pinnacle. The loan is interest free and limited recourse with
various repayment terms on cessation of employment if before 31 December 2018 or
following a sale of equity. As part of the Pinnacle Acquisition, this loan has been repaid
and an identical loan reissued by the Company.
7. Non-executive director remuneration
The structure of non-executive director remuneration is separate and distinct from that of
executive remuneration.
The Board seeks to set aggregate remuneration at a level that provides the Group with
the ability to attract and retain non-executive directors with the appropriate skills and
experience while incurring a cost that is acceptable to shareholders and other
stakeholders.
Non-executive directors’ fees are determined within an aggregate non-executive directors’
fee pool limit, with any increase in the fee pool requiring approval by shareholders. The
current aggregate fee pool currently stands at $600,000 per annum and was approved by
shareholders at the Company’s annual general meeting on 24 October 2006. No changes
were proposed or made to the aggregate fee pool during the 2016 financial year.
In October 2015, the Board resolved to adjust fees payable to non-executive directors in
relation to Company, Committee and subsidiaries, effective from 26 October 2015. On 12
October 2015, the Board resolved to suspend the payment of fees for the Chair of the
Remuneration and Nomination Committee in recognition of the Committee’s more limited
duties following the sale of the Securities business. Fees for the Chair of the
35
Remuneration and Nominations Committee will be reinstated in the 2017 financial year
following completion of the Pinnacle Acquisition, when the Remuneration and
Nominations Committee will assume
for oversight of Pinnacle’s
remuneration policy and practices.
responsibility
The fees paid to non-executive directors’ from 12 October 2015 for Board and Committee
positions are set out in the table below:
Chairman
Non-executive Director
Audit Compliance and Risk Management Committee
- Chair
- Member
Remuneration and Nominations Committee
- Chair*
- Member
Subsidiary Boards
Base Fees
$100,000
$70,000
$10,000
$0
$10,000
$0
$0
* Note that the Board resolved on 12 October 2015 to suspend payment of this fee
until further resolution.
Non-executive directors are not eligible to receive STI but may be eligible to participate in
the EOSP. During the 2016 financial year, no non-executive directors participated in the
EOSP.
Further details concerning the EOSP are set out on page 31.
Total remuneration for the non-executive directors in relation to the Company, Committee
positions and subsidiaries for the 2016 financial year were $300,015 and are presented in
accordance with applicable accounting standards and shown in the table below:
36
Short-term employee benefits
Post employment
benefits
Long-
term
benefits
Share
based
payments
Cash
salary &
fees
Cash
bonus
(STI)
Non-
monetary
benefits
Superan
nuation
Retirement
Benefits
Long
service
leave
Options &
Rights
(LTI)
Terminatio
n benefits
Total
Total
excluding
non fee
remuneratio
n
Portion of
remuneratio
n at risk - STI
Portion of
remuneration
at risk - LTI
$
$
%
Name
$
$
$
$
$
$
$
Non-executive directors
Alan Watson (i)
Steven Skala (ii)
Steven Wilson (iii)
Chum Darvall (ii)
Erica Lane (v)
Totals
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
77,771
144,863
99,239
148,288
84,148
143,083
16,500
99,000
-
25,685
277,657
560,919
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,513
6,637
7,844
11,712
-
-
-
-
-
2,440
22,358
20,789
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
92,284
92,284
151,500
151,500
- 107,084
107,084
- 160,000
160,000
-
-
-
84,148
84,148
143,083
115,000
16,500
16,500
- 99,000
99,000
-
-
-
-
28,125
28,125
- 300,015
300,015
- 581,708
553,625
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
-
-
(i)
(ii)
(iii)
(iv)
(v)
2016: Mr Watson was a director from 1 July 2015 to 23 October 2015, at which time he was appointed Chairman. 2015: Mr Watson received director's fees of $76,500
in his capacity as director and committee chair. Mr Watson also received the amount of $75,000 for extra services and special exertion.
2016: Mr Skala was Chairman until 23 October 2015, and a director for the balance of the year. Mr Skala received director's fees of $90,417 plus a sum of $16,667 by
way of administrative support. 2015: Mr Skala received director's fees of $135,000 plus a sum of $25,000 under a contractual arrangement, whereby the Company
contributes $25,000 towards administrative support.
2016: Mr Wilson received $68,666 as director's fees, $7,333 in relation to his directorship of Pinnacle, and $8,148 in relation to his role as chair of the Priority Funds
Investment Committee. 2015: Mr Wilson received $67,500 as director's fees, $22,500 in relation to his directorship of Pinnacle, $25,000 relation to his role of chair
of the Priority Funds Investment Committee and $28,083 in commission payments.
2016: Mr Darvall was a director of Wilson Group Limited until his resignation on 31 August 2015. Mr Darvall was a director of Pinnacle until his resignation on 30 June
2016 and received $85,000 in this capacity in addition to the fees above. 2015: Mr Darvall received director's fees of $76,500 in his capacity as a director and
committee chair and $22,500 in payment of director's fees in relation to his directorship of Pinnacle.
2015: Ms Lane resigned from the board effective 26 November 2015.
Retirement allowances for non-executive directors
The Company does not provide retirement allowances for non-executive directors, which
is consistent with the guidance contained in the ASX Principles. Superannuation
contributions required under the Australian superannuation guarantee legislation are
deducted from the relevant directors’ overall fee entitlements where their fees are paid
through payroll.
New non-executive director appointments
On appointment to the Board, new non-executive directors are provided with a letter of
appointment setting out the Company’s expectations, their responsibilities, rights and the
terms and conditions of their engagement. All new non-executive directors participate in
a briefing, which covers the operation of the Board and its committees and financial,
strategic, operational and risk management issues. For further detail, refer to the
Corporate Governance Statement on page 44 of the 2016 Annual Report.
8. Share based payment compensation
Outstanding LTI grants
The terms and conditions of each grant of options or rights affecting remuneration in the
previous, this or future reporting periods as at 30 June 2016 are as follows:
37
Grant Date
Category
Expiry
date
Exercise
period
Exercise
price
Number of
rights /
options
granted
during the
year
Number of
rights /
options
exercised
during the
year
Number of
rights /
options
forfeited
during the
year
Number
of rights /
options at
end of
financial
year
Value per
right /
option at
grant date
%
Vested
26 November 2014
Options 30 Jun 16
124 Days
1 July 2015
1 July 2015
Options 30 Jun 18
124 Days
Options 30 Jun 20
125 Days
$0.60
$0.99
$0.99
$0.20
0
600,000
0
0
100%
$0.30 2,125,000
$0.32 2,125,000
0
0
0 2,125,000
0 2,125,000
0%
0%
Details of options and rights provided as remuneration to executive Key Management
Personnel are set out below:
Name
Number of
options /
rights
granted
Value ($) of
options /
rights
granted (i)
Date of
grant
Number of
options/
rights
vested (ii)
Value ($) of
options/ rights
vested (iii)
Vesting
date
Number of
options/
rights
forfeited/
lapsed/ sold
Value ($) of
options/
rights
forfeited/
lapsed/ sold
Key Management Personnel of the Group
Alexander Grant
Options
Sub-Total
Ian Macoun
Options
Options
Sub-Total
Alex Ihlenfeldt
Options
Options
Sub-Total
26-Nov-14
1-Jul-15
1-Jul-15
1-Jul-15
1-Jul-15
600,000
600,000
375,000
375,000
750,000
213,000
212,000
425,000
$124,320
27-Feb-16
$124,320
$110,663
$120,525
$231,188
$62,856
$68,137
$130,993
1-Jan-18
1-Jan-20
1-Jan-18
1-Jan-20
600,000
600,000
$213,000
$213,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Fair values at grant date are calculated using a black-scholes option pricing model that takes into acount the exercise price, the terms
of the right or option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the right or option. Model inputs for the grants made are set out in note 43 to the
financial statements.
(ii) On the vesting of each option/right, the holder became entitled to receive one fully paid ordinary share in the Company on exercise of the
option/right.
(iii) The amount is based on the intrinsic value of the option or right at vesting date.
9. Equity instrument disclosures relating to Key Management Personnel
Options and rights holdings
The number of options and rights over ordinary shares in the Company held during the
2016 financial year by the directors of the Company and other Key Management Personnel
of the Group, including personally related parties, are set out below.
Balance at start of year
Granted as compensation
Exercised
Expired and other changes*
Balance at end of year
2016
600,000
1,175,000
(600,000)
0
1,175,000
2015
220,000
1,200,000
(1,550,000)
730,000
600,000
2014
2,419,975
0
(142,462)
(2,057,513)
220,000
* Includes changes due to staff commencing or ceasing to be Key Management Personnel during the year.
Shareholdings
The numbers of shares in the Company held during the financial year by each Director of
the Company and other Key Management Personnel of the Group, including their related
parties, are set out below.
38
2016 – Ordinary Shares
Wilson Group Limited
Name
Non-executive directors
Steven Skala
Steve Wilson
Alan Watson
Former non-exective director
Chum Darvall
Executive directors
Alexander Grant
Key Management Personnel
Ian Macoun
Alex Ihlenfeldt
Balance at start of
year
Granted during
reporting year as
compensation
Received during
the year on the
exercise of options
and rights
Other changes
during the year*
Balance at the
end of the year
853,753
20,133,000
0
300,000
5,628,738
100,000
1,458,498
500,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
600,000
0
0
0
-170,000
-130,000
0
-300,000
0
0
0
683,753
20,003,000
0
0
6,228,738
100,000
1,458,498
-500,000
0
Received during
the year on the
exercise of options
and rights
Other changes
during the year
Balance at the
end of the year
0
0
0
0
33,471
3,369
Former Key Management Personnel
Brad Gale
* includes changes resulting from commencing or ceasing to be KMP
2016 – Ordinary Shares
Pinnacle
Name
Executive directors
Ian Macoun
Alex Ihlenfeldt
Balance at start of
year
Granted during
reporting year as
compensation
33,471
3,369
10. Loans to Key Management Personnel
Details of loans made to Directors of the Company and other Key Management Personnel
of the Group, including their related parties, are set out below.
(i)
Aggregates for Key Management Personnel
2016
2,391,917
-
135,144
2,391,917
2
Balance at
start of year
$
Interest paid
and payable
for the year
$
Interest not
charged
$
Balance at end
of year
$
Number in
Group at end
of year
(ii)
Individuals with loans above $100,000 during the financial year
Ian Macoun
Alex Ihlenfeldt
Balance at
start of year
$
Interest paid
and payable
for the year
$
Interest not
charged
$
Balance at end
of year
$
Highest
indebtedness
during the
year
$
1,666,293
725,624
-
-
94,146
40,998
1,666,293
725,624
1,666,293
725,624
The loans referenced in the above table are advanced by Pinnacle and are for the purpose
of acquiring shares in Pinnacle. As part of the Pinnacle Acquisition, these loans were
repaid with the proceeds of loans reissued by the Company on 25 August 2016.
The amounts shown for interest not charged in the tables above represents the difference
between the amount paid and payable for the year and the amount of interest that would
have been charged on an arms’ length basis.
39
11. Other transactions with Key Management Personnel
Steven Skala AO
Mr Skala was a non-executive director of the Company until 26 August 2016, Vice
Chairman of Deutsche Bank AG Australian and New Zealand and is a director of Deutsche
Australia. During the 2016 financial year, Deutsche Bank AG was a substantial shareholder
of the Company through Deutsche Australia, which held an 18.55% interest in the
Company’s shares (2015 – 18.55%) until 18 May 2016 and a 9.22% interest from 18 May 2016
to 30 June 2016. On 25 August 2016, Deutsche Australia ceased to be a shareholder.
Chum Darvall AM
Chum Darvall was a non-executive director of the Company until 31 August 2015 and was
a vice chairman of Deutsche Bank AG Australia and New Zealand until 1 July 2014. Mr
Darvall is a member of Palisade’s advisory board for which he is paid $60,000 per annum
plus GST. Mr Darvall is also the chairman of Metrics Credit, which has a distribution
agreement with and pays fees to Pinnacle on normal commercial terms.
12. Equity Capital
Shares issued on exercise of remuneration options
600,000 ordinary shares in the Company were allocated to Alexander Grant as a result of
the exercise of options during the financial year ended 30 June 2016.
Shares under option/rights
Unissued ordinary shares of the Company under option at 30 June 2016 are as follows:
Date options granted
1 July 2015
1 July 2015
TOTAL
Expiry date
30 June 2018
30 June 2010
Exercise price of
options
$0.99
$0.99
Number under option
2,125,000
2,125,000
4,250,000
Under the terms of the transaction documents in respect of the Pinnacle Acquisition, in
the event that the Company conducts a placement prior to 30 June 2020 in respect of the
options set out above, the Sellers are entitled to subscribe in the placement for up to
1,416,667 ordinary shares at the subscription price of the options. The Sellers will be
entitled to subscribe in the placement in proportions that are pro-rata to their unvested
options.
Shares issued on the exercise of options
There were 600,000 ordinary shares in the Company issued on the exercise of options
granted under the EOSP during the year ended 30 June 2016 for a total consideration of
$357,000. Since the end of the 2016 financial year, and as part of the Pinnacle
Acquisition, on 25 August 2016, 37,043,917 ordinary shares were issued under the EOSP to
the Sellers as consideration for the sale of their equity in Pinnacle.
40
End of Remuneration report
Insurance of officers
The Company has paid a premium for a contract insuring all directors and executive
officers of the Company and certain related bodies corporate against all liabilities and
expenses arising as a result of work performed in their respective capacities, to the extent
permitted by law. The directors have not included in this report details of the nature of
the liabilities covered or the amount of the premium paid in respect of the directors and
executive officers insurance liability contract as disclosure is prohibited under the terms of
the contract.
The Company has agreed to indemnify each person who is, or has been a director, officer
or agent of the Company and/or of certain of its related bodies corporate against all
liabilities to another person (other than the Company or a related body corporate) that
may arise from their position as director, officer or agent, except where the liability arises
out of conduct involving a lack of good faith. The Company is required to meet the full
amount of any such liabilities, including costs and expenses for a period of seven years.
No liability has arisen since the end of the previous financial year which the Company
would, by operation of the above indemnities, be required to meet.
Pinnacle and Next Financial are indemnified by the insurance arrangements described.
Non-audit services
The Company may decide to employ the Auditor on assignments additional to their
statutory audit duties.
Details of the amounts paid or payable to the Auditor for audit and non-audit services
provided during the year are set out below.
The Board has considered the position and, in accordance with the advice received from
the Audit Compliance and Risk Management Committee, is satisfied that the provision of
the non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the Auditor, as set out below, did not compromise the
auditor independence requirements of the Corporations Act 2001 for the following
reasons:
all non-audit services have been reviewed by the Audit Compliance and Risk
Management Committee to ensure they do not impact the impartiality and objectivity
of the Auditor
none of the services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing
or auditing the Auditor's own work, acting in a management or a decision making
capacity for the Company, acting as advocate for the Company or jointly sharing
economic risk and rewards.
41
During the 2016 financial year the following fees were paid or are payable for services
provided by the Auditor, its related practices and non-related audit firms:
(i) Audit and other assurance services
Audit and review of financial statements
Other assurance services:
Audit of regulatory returns
Audit of compliance plan - Responsible entity *
Other assurance services
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax services
Total remuneration for taxation services
(iii) Other services
Other services
Total remuneration of PricewaterhouseCoopers Australia
Total remuneration of auditors
2016
$
2015
$
364,115
280,540
26,000
26,395
59,765
476,275
52,860
54,952
43,146
431,498
128,588
128,588
130,531
130,531
-
604,863
604,863
-
562,029
562,029
* Compliance plan audit charges are on-charged to managed funds to which responsible entity
services are provided.
Auditor's independence declaration
A copy of the Auditor's independence declaration as required under section 307C of the
Corporations Act 2001 is set out on page 43 of the 2016 Annual Report.
Rounding of amounts
is of a kind referred to
in
The Company
Financial/Directors reports) Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the ''rounding off'' of amounts in the directors' report.
Amounts in this report have been rounded off in accordance with that Instrument to the
nearest thousand dollars, or in certain cases, to the nearest dollar.
in ASIC Corporations (Rounding
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution of directors.
A Watson
Chairman
Pinnacle Investment Management Group Limited
Sydney
30 August 2016
42
43
08 Corporate Governance
Introduction
This Corporate Governance statement, which has been approved by the Board,
describes the Company’s corporate governance practices and framework which were
in place during the 2016 financial year.
In the 2017 financial year, as a result of the Pinnacle Acquisition, the appointment of
two new independent directors to the Board and the changes to the Group’s
corporate structure, the Board will review and update a number of the Company’s
governance policies and practices.
Summary
The Group’s compliance with the ASX Principles during the 2016 financial year is
summarised in the table below:
ASX Principle
Comply / Non
Comply
Principle 1:
Lay solid foundations for management
and oversight
Recommendation 1.1
A listed entity should disclose:
Comply
(a) the respective roles and responsibilities of
the board, the chair and management; and
(b) those matters expressly reserved to the
board and those delegated to management.
Recommendation 1.2
A listed entity should:
Comply
(a) undertake appropriate checks before
appointing a person, or putting forward to
security holders a candidate for election, as a
director; and
(b) provide security holders with all material
information relevant to a decision on
whether or not to elect or re-elect a director.
Recommendation 1.3
Recommendation 1.4
A listed entity should have a written
agreement with each director and senior
executive setting out the terms of their
appointment.
Comply
The company secretary of a listed entity should
be accountable directly to the board, through
the chair, on all matters to do with the proper
functioning of the board
Comply
Recommendation 1.5
A listed entity should:
(a) have a diversity policy which includes
Non-comply
See paragraph
1.5 for further
44
requirements for the board to set
measurable objectives for achieving
gender diversity and to assess annually
both the objectives and the entity’s
progress in achieving them;
detail
(b) disclose that policy or a summary of it;
and
(c) disclose as at the end of each reporting
period the measurable objectives for
achieving gender diversity set by the
board in accordance with the entity’s
diversity policy and its progress towards
achieving them and either:
(1) the respective proportions of men
and women on the board, in senior
executive positions and across the
whole organisation (including how
the entity has defined “senior
executive” for these purposes); or
(2) the entity’s “Gender Equality
Indicators”, as defined in the
Workplace Gender Equality Act 2012
Recommendation 1.6
A listed entity should:
Comply
(a) have and disclose a process for
periodically evaluating the
performance of the board, its
committees and individual directors;
and
(b) disclose in relation to each reporting
period, whether a performance
evaluation was undertaken in the
reporting period in accordance with
that process.
Recommendation 1.7
A listed entity should:
Comply
(a) have and disclose a process for
periodically evaluating the performance
of its senior executives; and
(b) disclose in relation to each reporting
period, whether a performance
evaluation was undertaken in the
reporting period in accordance with that
process.
45
Non-comply
See paragraph
2.4 on future
Board and
Committee
composition
Principle 2
Structure the Board to add value
Recommendation 2.1
The board of a listed entity should:
(a) have a nomination committee which:
(1) has at least three members, a
majority of whom are
independent directors; and
(2) is chaired by an independent
director,
and disclose
(3) the charter of the committee;
(4) the members of the committee;
and
(5) as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings;
(b) or, if it does not have a nomination
committee, disclose that fact and the
processes it employs to address board
succession issues and to ensure that the
board has the appropriate balance of
skills, experience, independence and
knowledge of the entity to enable it to
discharge its duties and responsibilities
effectively.
Recommendation 2.2
A listed entity should have and disclose a
statement as to the mix of skills and
diversity that the board is looking to achieve
in its membership.
Comply
Recommendation 2.3
A listed entity should disclose:
Comply
(a) the names of the directors considered by
the board to be independent directors;
(b) if a director has an interest, position,
association or relationship of the type
described in Box 2.1 but the board is of
the opinion that it does not compromise
the independence of the director, the
nature of the interest, position,
association or relationship in question
and an explanation of why the board is
of that opinion; and
46
(c) the length of service of each director
Recommendation 2.4
A majority of the board of a listed entity
should be independent directors
Recommendation 2.5
The chair of the board of a listed entity
should be an independent director and, in
particular, should not be the same person as
the CEO of the entity.
Recommendation 2.6
A listed entity should have a program for
inducting new directors and provide
appropriate professional development
opportunities for directors to develop and
maintain the skills and knowledge needed to
perform their role as directors effectively.
Non-Comply
See paragraph
2.4 on future
Board and
Committee
composition
Following the
appointment of
Mr Alan Watson
on 23 October
2015, the
Company has
complied
Comply
Principle 3
Promote ethical and responsible
decision-making
Recommendation 3.1
A listed entity should:
Comply
(a) have a code of conduct for its directors,
senior executives and employees; and
(b) disclose that code or a summary of it.
Principle 4
Safeguard integrity in financial reporting
Recommendation 4.1
The board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, a
majority of whom are
independent directors; and
(2) is chaired by an independent
director,
and disclose
(3) the charter of the committee;
(4) the members of the committee;
and
(5) as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
Non-comply
See paragraph
2.4 on future
Board and
Committee
composition
47
Recommendation 4.2
those meetings; or
(b) if it does not have an audit committee,
disclose that fact and the processes it
employs that independently verify and
safeguard the integrity of its corporate
reporting, including the processes for
the appointment and removal of the
external auditor and the rotation of the
audit engagement partner.
The board of a listed entity should, before it
approves the entity’s financial statements
for a financial period, receive from its CEO
and CFO a declaration that the financial
records of the entity have been properly
maintained and that the financial statements
comply with the appropriate accounting
standards and give a true and fair view of
the financial position and performance of
the entity and that the opinion has been
formed on the basis of a sound system of
risk management and internal control which
is operating effectively.
Comply
Recommendation 4.3
A listed entity that has an AGM should
ensure that its external auditor attends its
AGM and is available to answer questions
from security holders relevant to the audit.
Comply
Principle 5
Make timely and balanced disclosure
Recommendation 5.1
A listed entity should:
Comply
(a) have a written policy for complying with
its continuous disclosure obligations
under the Listing Rules; and
(b) disclose that policy or a summary of it.
Principle 6
Respect the rights of shareholders
Recommendation 6.1
Recommendation 6.2
Recommendation 6.3
A listed entity should provide information
about itself and its governance to investors
via its website.
A listed entity should design and implement
an investor relations program to facilitate
effective two-way communication with
investors.
A listed entity should disclose the policies
and processes it has in place to facilitate
and encourage participation at meetings of
security holders.
Comply
Comply
Comply
48
Recommendation 6.4
A listed entity should give security holders
the option to receive communications from,
and send communications to, the entity and
its security registry electronically.
Comply
Non-comply
See paragraph
2.4 on future
Board and
Committee
composition
Principle 7
Recognise and manage risk
Recommendation 7.1
The board of a listed entity should:
(a) have a committee or committees which:
(1) has at least three members, a
majority of whom are
independent directors; and
(2) is chaired by an independent
director,
and disclose
(3) the charter of the committee;
(4) the members of the committee;
and
(5) as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b) if it does not have a committee or
committees that satisfy (a) above,
disclose that fact and the processes it
employs for overseeing the entity’s risk
management framework.
Recommendation 7.2
The board or a committee of the board
should:
Comply
(a) review the entity’s risk management
framework with management at least
annually to satisfy itself that it continues
to be sound, to determine whether there
have been any changes in the material
business risks the entity faces and to
ensure that they remain within the risk
appetite set by the board; and
(b) disclose in relation to each reporting
period, whether such a review has taken
place.
49
Recommendation 7.3
A listed entity should disclose:
(a) if it has an internal audit function, how
the function is structured and what role
it performs; or
(b) if it does not have an internal audit
function, that fact and the processes it
employs for evaluating and continually
improving the effectiveness of its risk
management and internal control
processes.
Non-comply
See paragraph
7.3 below for
further detail
Recommendation 7.4
A listed entity should disclose whether, and
if so how, it has regard to economic,
environmental and social sustainability risks.
Comply
Principle 8
Remunerate fairly and responsibly
Recommendation 8.1
The board of a listed entity should:
(a) have a remuneration committee which:
(1) has at least three members, a
majority of whom are
independent directors; and
(2) is chaired by an independent
director,
and disclose
(3) the charter of the committee;
(4) the members of the committee;
and
(5) as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b) if it does not have a remuneration
committee, disclose that fact and the
processes it employs for setting the level
and composition of remuneration for
directors and senior executives and
ensuring that such remuneration is
appropriate and not excessive.
A listed entity should separately disclose its
policies and practices regarding the
remuneration of non-executive directors and
the remuneration of executive directors and
Recommendation 8.2
Non-comply
See paragraph
2.4 on future
Board and
Committee
composition
Comply
50
other senior executives.
Recommendation 8.3
A listed entity which has an equity-based
remuneration scheme should:
Comply
(a) have a policy on whether participants are
permitted to enter into transactions
(whether through the use of derivatives or
otherwise) which limit the economic risk of
participating in the scheme; and
(b) disclose that policy or a summary of it.
51
1. Foundations for Management and Oversight
The relationship between the Board, the Managing Director of the Company and
senior executive management is critical to the Group’s long term success.
The Group’s governance framework during the 2016 financial year can be represented
diagrammatically as follows:
1.1
Responsibilities of the Board
The responsibilities of the Board include:
approving corporate strategy and performance objectives
approving the Group’s budget and financial statements and monitoring financial
performance against forecasts
determining dividend policy and the amount and timing of any dividends
capital management, including the issuing or cancellation of new securities
oversight of the Group’s overall significant risks, including its risk management,
internal compliance, control and accountability systems
approving and monitoring the progress of major capital expenditure, capital
management, and acquisitions and divestitures
oversight of the overall corporate governance of the Group
52
oversight of the Board’s committees
maintaining an ongoing dialogue with the Group’s Auditors and, where
appropriate, principal regulators, to provide reasonable assurance of compliance
with all regulatory requirements
considering the social, ethical and environmental impact of the Group’s activities
and monitoring sustainability practices
selecting, appointing and terminating the external Auditor (including associated
recommendations to shareholders for approval)
reviewing and approving Non-executive directors’ Board and committee fees,
subject to the Board fee pool approved by shareholders
selecting, appointing and determining terms of appointment of the Managing
Director
determining the corporate goals and objectives relevant to the remuneration of
the Managing Director and evaluating the performance of the Managing Director in
light of these objectives
reviewing succession plans for the Managing Director and senior executives
considering and approving the Group’s remuneration policy.
The Chairman is responsible for leading the Board and ensuring that it functions
efficiently and effectively, representing the Group to the public generally, ensuring
directors receive accurate and timely information, monitoring the performance of the
Managing Director and of the Board, determining together with the Managing
Director, what matters should be the concern of the Board and which should be left to
executive management and, in conjunction with the Managing Director, growing the
sustainable per share value of the Company. The Board charter requires that the roles
of the Chairman and the Managing Director be undertaken by separate people.
The Managing Director is responsible for the day to day operations of the Company,
ensuring that the Board is kept abreast of the major matters affecting the Group, and
in conjunction with senior executive management reviewing operations, financial
performance, staff engagement, client services and implementing strategies and
polices for the Company.
The chairman and managing director of Pinnacle is responsible for the day to day
operations of Pinnacle and for implementing Pinnacle’s strategies and policies. He
prepares business plans and reports to the Pinnacle board on achievements against
objectives set out in the business plans and reviews operations, financial performance,
strategy implementation and client services.
Any powers not specifically reserved for the Board are deemed to have been
delegated to the Managing Director and the chairman and managing director of
Pinnacle.
1.2
Election and selection of new directors
Under the Company’s constitution, all directors must retire from office (and may seek
re-election) no later than the third annual general meeting following their last election.
When a director stands for election or re-election, the Board provides shareholders
53
with information in relation to a director’s biographical details, qualifications, skills and
experience, as well as details of any other directorships or material interests they hold.
The Board provides its recommendation in relation to any proposed re-election of a
director in the notice of meeting that is sent to shareholders.
Prospective candidates for election to the Board are reviewed by the Remuneration
and Nominations Committee. The Remuneration and Nominations Committee
considers the experience, skills, gender and background of the candidates and the
requirements of the Board, to ensure the Board’s overall composition enables it to
discharge its responsibilities and lead the Company effectively.
1.3
Service agreements
All directors and senior executives have a written agreement with the Company
setting out the terms of their appointment.
1.4
Company Secretary
The Company Secretary is appointed by the Board and is also the General Counsel.
The Company Secretary attends Board and Board Committee meetings and is
responsible for providing the Board with advice on legal and corporate governance
issues. The Company Secretary is responsible for the operation of the secretariat
function, including implementing the Company’s governance framework and, in
conjunction with the Managing Director, giving practical effect to the Board’s
decisions. The Company Secretary is accountable to the Board through the Chairman,
on all matters to do with the proper functioning of the Board.
1.5
Diversity
As the Company had only 10 employees within head office at the start of the 2016
financial year, the Board did not consider it appropriate to have a standalone diversity
policy or to measure progress against that policy. Instead, the Company has
implemented an employee handbook which includes policy on flexible work place
arrangements, purchased
learning and
development and a workplace code of conduct. These policies are designed to foster
and support equal opportunity in the workplace.
leave, paid parental
leave, access to
In the 2016 financial year, the Company was not required to lodge a mandatory report
under the Workplace Gender Equality Act 2012.
The table below shows the average number of and remuneration for male and female
employees across the Group as at 30 June 2016 (excluding Pinnacle) and
comparatives for the prior year:
54
Board*
Senior Executive**
Remaining Organisation
Average
Remuneration***
l d
Average
Remuneration***
l
Number Average Number
Number
3
0
4 $138,395
0
N/A
2
1
9
1
$310,000
$236,900
$332,399
$236,900
2
2
112
46
$166,875
$74,981
$196,145
$101,197
FY2016
Male
Female
FY2015
Male
Female
*excludes the Managing Director
** Senior Executive defined as a member of the executive committee and one level below the Board
*** includes base salary and superannuation
The percentage of female employees in the Group (excluding Pinnacle) in various
roles as at 30 June 2016 was:
Board – 0% (0 of 4)
Senior executive – 33.3% (1 of 3)
Female employees across the organisation – 50% (2 of 4)
1.6
Review of Board and director performance
During the 2016 financial year, the Board commenced a process to conduct an
assessment of its performance, the performance of individual non-executive directors,
the Chairman and Mr Alexander Grant. The process was concluded after the end of
the 2016 financial year.
1.7
Review of senior executive performance
Performance reviews of senior executives of the Company are conducted annually by
the Managing Director. In the 2016 financial year, these reviews were conducted in
June 2016. In Pinnacle, senior executives’ performance is monitored and reviewed
through a combination of written and verbal appraisals held throughout the year.
2.
Structure of the Board
2.1
Remuneration and Nominations Committee
On 24 October 2016, in light of the small number of staff in the Company’s head office
and the reduced number of directors, the Board determined not to delegate authority
to a separate Remuneration and Nominations Committee. Instead, the Board assumed
the role of the Remuneration and Nominations Committee with all directors as
members. The Company Secretary also acted as Secretary to the committee. During
the 2016 financial year, the Board acted as the Remuneration and Nomination
Committee on 3 occasions with a quorum present on each occasion.
Further commentary in relation to the future composition of this Committee is
provided at paragraph 2.4 above.
55
The role of the Remuneration and Nominations Committee includes:
ensuring that there are remuneration policies and practices to attract and retain
executives and directors who will create value for shareholders
ensuring the Group observes those remuneration policies and practices
fairly and responsibly rewarding executives having regard to the performance of
the Group and the interests of stakeholders
ensuring compliance with the ASX
listing Rules, ASX Principles and the
Corporations Act 2001
assisting the Chairman to facilitate the review of Board performance annually
the appointment of new directors, both executive and non-executive
developing selection criteria for and identifying and assessing candidates for
appointment to the Board, having regard to the Company’s diversity policy
establishing procedures for recommendation to the Chairman for the proper
oversight of the Board and management.
An external consultant or advisor may be engaged where it is considered appropriate
to assist the Remuneration and Nominations Committee to identify and select
candidates with the desired skills and experience and to add diversity to the Board.
The Remuneration and Nomination Committee does not have responsibility for, or
oversight of, remuneration arrangements for Pinnacle and the Pinnacle Boutiques
which are the responsibility of the Pinnacle board.
Further details of the remuneration arrangements in place for non-executive directors
and Key Management Personnel are set out in the remuneration report commencing
on page 28. The Charter for the Remuneration and Nominations Committee appears
on the Company’s website at http://www.pinnacleinvestment.com/shareholders-
investor-centre/
2.2
Board skills matrix
The experience, qualifications and skills of the Board includes expertise in the
following areas relevant to the Group:
Financial services including Funds Management
Mergers and Acquisitions
Business Analysis
Remuneration models
Risk and compliance
Legal
Accounting
56
Marketing and distribution
Media
Investor relations
2.3
Independence and Length of Service
The composition of the Board and the biographies of its directors, including their
experience, expertise, qualifications, term of office and independence status, are set
out on pages 21 to 25 of the 2016 Annual Report.
The Board has adopted the test of director independence set out in Box 2.3 of the
ASX Principles. Having regard to this definition, the Board considers a director to be
independent if he or she is not a member of management and is free of any interest
and any business or other relationship which could, or could reasonably be perceived
to, materially interfere with a director’s ability to act in the best interests of the
Company. The Board has not adopted any quantitative thresholds in relation to
dealing with entities in which a director may have a financial interest and instead
performs assessments on a case by case basis. At 30 June 2016, Steven Wilson and
Alexander Grant both have a substantial holding in the issued shares of the Company.
Consistent with obligations imposed by the Corporations Act 2001 and the ASX
Listing Rules, directors are required to declare any conflicts of interest and, where
deemed necessary, do not participate in any discussions or any decisions which relate
to the conflict. The Board regularly assesses the independence of the non-executive
directors based on their disclosure of interests and the principles set out in Box 2.3 of
the ASX Principles. As at the date of this report:
Alan Watson is the independent non-executive Chairman
Steven Skala is Vice Chairman of Deutsche Bank AG Australia and New Zealand and
was a director of Deutsche Australia for the majority of the 2016 financial year. Mr
Skala was not considered to be independent due to that affiliation.
Chum Darvall, who resigned as a director on 31 August 2015, ceased to be the
nominated director of Deutsche Australia on 1 July 2014. Given his past
relationship and Deutsche Australia’s substantial shareholding, the Board
determined that it did not consider Mr Darvall to be an independent non-executive
director.
Steve Wilson is not considered independent as he has a substantial shareholding in
the Company’s securities and has an ongoing relationship with the Group and its
clients.
2.4
Balance of Independent and Non-Independent Directors
The composition of the Board is guided by the Company’s constitution and the
relevant provisions of the Board charter, which require the Board to be between three
and 10 directors comprised of at least half non-executive directors and at least two
independent directors (as defined
in the ASX Principles) having a mix of
complementary skills and experience from a diverse range of backgrounds, including
gender.
As at the date of this report, the Board comprised four directors, three of whom are
non-executive directors, of which one is considered independent. From 1 September
57
2016 and as part of the Pinnacle Acquisition, the composition of the Board will change
and will be comprised of:
four non-executive directors:
o Alan Watson – independent Chairman
o Deborah Beale – non-executive independent director
o Gerard Bradley – non-executive independent director
o Steve Wilson – non-executive director
three executive directors:
o Ian Macoun – Managing Director
o Andrew Chambers – senior executive
o Adrian Whittingham – senior executive
From 1 September 2016, each of the Audit, Compliance and Risk Management
Committee and the Remuneration and Nominations Committee will have at least three
non-executive, independent directors one of whom will also act as Chair.
The charts below show the current lengths of tenure of directors and the balance
between independent non-executive directors, non-executive directors and executive
directors as at the date of this report:
2.5
Separate roles of Chairman and Managing Director
During the 2016 financial year, the roles of Chairman and Managing Director of the
Company were held by separate directors.
The non-executive directors meet regularly, without the Managing Director or
management present, to discuss the operation of the Board and other matters.
Relevant matters arising from these meetings are tabled with the full Board at the
following Board meeting.
Directors and Board committees have the right, in connection with their duties and
responsibilities, to seek independent professional advice at the Group's expense.
2.6
Induction of new directors
Orientation programs are in place for all newly appointed directors.
58
Directors are encouraged to continue their education by attending external training
and education sessions that keep directors informed of relevant regulatory and
market developments and ensure that each director is well placed to effectively
discharge his or her responsibilities.
3. Ethical and Responsible Decision Making
The Company has a Code of Conduct which applies to all directors, employees,
contractors and consultants of the Company and its related bodies corporate,
including Pinnacle. The Code of Conduct is reviewed regularly. The Code of Conduct
requires that directors, employees, consultants and contractors:
be faithful and diligent, and actively pursue the Group’s best interests and at all
times maintain reasonable ethical, professional and technical standards
devote the whole of their time, attention and skill during normal working hours
and at other times as reasonably necessary to their duties
do not act in conflict with the best interests of the Group
do not compete with the Group
do not, in performing their duties, accept any financial or other benefit except
from the Group
do not conduct themselves in a manner, whether during or after work hours,
causes damage or potential damage to the Group’s property or reputation
do not use internet, email or voicemail at their workplace for excessive personal
use or to view or distribute offensive or illegal material
do not unlawfully discriminate against, or sexually harass, another person.
A copy of the Code of Conduct is available on the Company’s website at
http://www.pinnacleinvestment.com/shareholders-investor-centre/
4.
Integrity in Financial Reporting
4.1
Audit, Compliance and Risk Committee
Since 1 September 2015, following the resignation of Chum Darvall, the Audit,
Compliance and Risk Committee has been chaired by Don Mackenzie. During the 2016
financial year, its members were initially Chum Darvall, Steve Wilson and Don Mackenzie
and then following Mr Darvall’s resignation, Don Mackenzie, Steve Wilson and Alexander
Grant. The Company Secretary also acts as Secretary of the Committee.
Further commentary in relation to the future composition of this Committee is provided
at paragraph 2.4 above. Mr Mackenzie in an external independent specialist with
particular expertise in audit and accounting. Mr Mackenzie has acted as a director/non-
director independent member of audit committees for several ASX listed companies
including Structural Systems Limited, Silver Chef Limited and Aveo Healthcare Limited
(formerly Forest Place Group Limited).
Mr Wilson has commerce and law degrees and worked as a tax accountant for Ernst &
Young and as Head of Research of the Securities business, has accounting and
investment analysis skills. Mr Wilson has served on many audit, compliance and risk
59
committees including Telstra Corporation, Queensland Tourism Corporation and
Southbank Corporation.
Mr Grant has a commerce degree and has extensive investment analysis skills having
held the role of head of Priority Funds and prior to that head of Institutional
stockbroking with the Securities business. Mr Grant has served on other audit,
compliance and risk committees.
The role of the Audit Compliance and Risk Management Committee is to:
approving and monitoring the establishment of an appropriate internal compliance
and risk framework
overseeing business continuity planning
reviewing reports on any material defalcations, frauds and thefts from the Group
reviewing reports on the adequacy of insurance coverage
monitoring compliance with relevant legislative and regulatory requirements
reviewing significant transactions which are not a normal part of the Group’s
business
reviewing the nomination, performance and independence of the external auditors,
including recommendations to the Board for the appointment or removal of any
external auditor
liaising with the external auditors and ensuring that the annual audit and half yearly
review are conducted in an effective manner that is consistent with Committee
members’ information and knowledge and is adequate for shareholder needs
reviewing management processes supporting external reporting
reviewing the significant accounting and financial reporting issues and judgements,
including complex or unusual transactions made in connection with the preparation
of the Company’s financial statements, interim reports, preliminary announcements
and related formal statements
reviewing the disclosures in the financial statements
reviewing recent regulatory and professional pronouncements and understanding
their impact on the financial statements, as advised by the Chief Financial Officer
making recommendations to the Board in relation to the adoption and approval of
the Company’s financial statements and other financial information distributed
externally
reviewing external audit reports to ensure that, where major deficiencies or
breakdowns in controls or procedures have been identified, appropriate and prompt
remedial action is taken by management
reviewing and monitoring compliance with the Group’s Code of Conduct. ensure an
appropriate Committee structure is in place so as to facilitate a proper review
function by the Board
The responsibilities of the Audit Compliance and Risk Committee apply only to the
60
Group and its controlled entities. The Audit Compliance and Risk Committee does not
perform any function in respect of entities where the Company does not have the
capacity to determine the outcome of decisions in relation to financial and operating
policies. These entitles include the Pinnacle Boutiques, the boards of which are
responsible for audit, compliance and risk oversight.
During the 2016 financial year, the Audit Compliance and Risk Management Committee
met four times with all members attending.
Further details of the Audit Compliance and Risk Management Committee’s role are set
out in the Audit Compliance and Risk Management Committee charter which is available
on the Company’s website at http://www.pinnacleinvestment.com/shareholders-
investor-centre/
4.2 Senior Management Assurance
For the year ended 30 June 2016, in accordance with Principle 4.2 of the ASX Principles
and s295A Corporations Act 2001, the Board has received written certification from the
chief executive officer (Mr Ian Macoun) and the chief financial officer (Mr Alex
Ihlenfeldt) that:
the financial statements have been properly maintained and that the financial
statements comply with the appropriate accounting standards and give a true and
fair view of the financial position of the Company; and
that the opinion has been founded on a sound system of risk management and
internal control which is operating effectively in all material respects in relation to
financial reporting risks.
4.3 Participation of External Auditors
The performance of the external auditor is reviewed annually. PricewaterhouseCoopers
(appointed in 2002) is the Group’s auditor. It is PricewaterhouseCoopers’ policy to
rotate audit engagement partners on listed companies at least every five years. The
last rotation occurred in the 2014 financial year.
An analysis of fees paid to the external auditors, including a breakdown of fees for non-
audit services, is provided in the directors’ report at page 42 and in the financial
statements. The external auditors provide a declaration of their independence to the
Audit Compliance and Risk Management Committee.
The external auditor attends the annual general meeting and is available to answer
shareholder questions about the conduct of the audit and the preparation and content
of the audit report.
5. Continuous Disclosure
The Company is committed to giving all shareholders timely and equal access to
information concerning the Company. The Company’s Continuous Disclosure Policy is
available on the Company’s website at
http://www.pinnacleinvestment.com/shareholders-investor-centre/
The Company’s continuous disclosure obligations are reviewed as a standing item on
the agenda for each meeting of the Board. The Board has appointed the Group
Disclosure Officers to assist it in meeting these obligations. The Board has specific
responsibility for disclosure in relation to the following matters:
61
financial results
dividends
profit outlooks, including a material upgrade or downgrade to the Group’s
expected results
the award of a new, or the termination of an existing, significant mandate for the
funds under management
resignations and appointments of directors and key personnel;
material changes to employment, service and consultancy agreements with the
Managing Director and any director
key strategic decisions.
All information disclosed to the ASX is made available via the Company’s website.
This includes ASX announcements, annual reports and half-year reports, notice of
members’ meetings, briefings by the Managing Director, media releases and material
presented at investor, media and analyst briefings.
6.
Respecting the Rights of Shareholders
6.1
Publication of Information
The Group strives to ensure that Company announcements are made in a manner
which is factual, timely, clear and objective, so as not to omit any information material
to decisions of shareholders and potential investors in the Company.
Information concerning the Company and the Group,
including copies of
announcements made through the ASX and the annual report and half yearly report, is
made available to shareholders and prospective investors in the Company via the
Company’s website.
6.2
Investor Relations Program
The Group’s investor relations are the responsibility of the Managing Director, in
conjunction with the Chairman as appropriate.
6.3
Participation of shareholders at meetings
The Board promotes effective communication with shareholders and encourages their
participation at general meetings, and in particular the annual general meeting. The
Board aims to ensure that shareholders are informed of all major developments
affecting the Group’s state of affairs. The Board has adopted, as part of its Board
Charter, procedures to assist the Company to deliver effective shareholder
communication.
Shareholder participation is encouraged as follows:
The location of the annual general meeting is rotated between different State
capital cities to encourage attendance from a cross-section of shareholders
The annual report is distributed to all shareholders according to their stated or
inferred preferences.
62
Proposed major changes in the Group which may impact on share ownership
rights and the removal and appointment of directors are submitted to a vote of
shareholders at a general meeting
The external auditors attend the annual general meeting and are available to
answer questions from shareholders on the conduct of the audit and the
preparation and content of the audit report
The half yearly report contains summarised financial information and a review of
the operations of the Group during the period.
6.4
Electronic communications
The Company has a continuing commitment to electronic communication with
shareholders and stakeholders generally including via its website. Shareholders may
elect to receive information from the Company’s share registry electronically.
Electronic on-line voting is made available for shareholders both for annual general
meetings and extraordinary general meetings.
7.
Recognising and Managing Risk
7.1
Risk Management Committee
The Audit, Compliance and Risk Committee is responsible for overseeing and
managing risk. Information about the composition and role of this committee has
been provided at paragraph 4.1 above.
7.2
Annual review of Risk Management Framework
During the 2016 financial year, and following the sale of the Securities business, the
risk framework for the Company and its wholly owned subsidiaries was reviewed and
updated. The effectiveness of the risk framework, the risks facing the Company and
the risk action plans in place to mitigate those risks is a standing agenda item for the
Audit, Compliance and Risk Committee.
Risk management for the Funds Management business is the responsibility of the Pinnacle
managing director and the Pinnacle board.
7.3
Internal Audit
During the 2016 financial year, the Group did not have an internal audit function.
Instead:
the Company’s internal compliance function was responsible for monitoring
internal process and ensuring regulatory compliance
external audit services were engaged in respect of financial reporting
In addition to the regular risk monitoring and reporting to the Audit Compliance and
Risk Committee, the Board receives regular updates from management on the key risk
areas of the Group. The Board also receives periodic written assurances from the
Managing Director and the Chief Financial Officer that the information they provide to
the Board with regard to the integrity of the financial statements is based on a robust
and appropriate system of risk management and internal control and that this system
is operating effectively in relation to financial reporting risks.
63
7.4
Economic, Environmental and Social Sustainability Risks
The Company’s exposure to economic sustainability risks is the most material risk that
it faces. It is also the risk of which the Board is most mindful with constant monitoring
of the economic environment in which the Company operates being an ongoing part
of daily operational and strategic thinking.
The Company’s operations do not expose it to any material environmental risks, nor
does it operate in any industry where it has the potential to damage ecosystems.
However, the Company may have an indirect exposure to environmental risks if the
Priority Funds or Pinnacle Boutiques have a material investment exposure to some
industries. The responsibility for monitoring such exposures belongs to their
respective investment committees or boards.
The Company’s exposure to social sustainability risks are managed through its internal
policies and practices in relation to workplace conduct, whistle blower procedures,
use of technology and social media, dispute resolution and management of client
confidential data.
8.
Fair and Responsible Remuneration
8.1
Remuneration Committee
The Remuneration and Nominations Committee
is responsible for overseeing
remuneration for the Company and its wholly owned subsidiaries. Relevant
information is provided at paragraph 2.1 above.
During the 2016 financial year, the Board did not currently oversee remuneration
arrangements for Pinnacle, which is the responsibility of its board and its managing
director.
8.2
Remuneration Policies and Practices
Remuneration arrangements, policies and practices for non-executive directors,
executive directors and senior executives are disclosed in the Group’s remuneration
report starting at page 28.
There are no schemes in place for retirement benefits for non-executive directors,
other than superannuation.
The Group’s LTI and STI schemes, including the Pinnacle LTI scheme, do not currently
provide
for the reduction, cancellation or clawback of performance-based
remuneration in the event of serious misconduct or a material misstatement in the
Company’s financial statements.
8.3
‘At Risk’ Remuneration
The Company prohibits staff members (including Key Management Personnel) who
are participants in equity based remuneration and LTI schemes from taking derivative
positions or otherwise limiting their economic risk in respect of their participation in
the scheme. Further information on LTI is set out in the remuneration report at page
31.
64
09 Financial Statements
Pinnacle Investment Management Group Limited
(formerly Wilson Group Limited)
ABN 22 100 325 184
Financial Report - 30 June 2016
Contents
Financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
66
68
69
70
71
128
129
These financial statements are the consolidated financial statements of the consolidated entity
consisting of Pinnacle Investment Management Group Limited and its subsidiaries. The financial
statements are presented in Australian currency.
Pinnacle Investment Management Group Limited is a company limited by shares, incorporated and
domiciled in Australia. Its registered office and principal place of business is:
Pinnacle Investment Management Group Limited
Level 19, 307 Queen St
Brisbane QLD 4000
A description of the nature of the consolidated entity's operations and its principal activities is
included in the Director's report, which is not part of these financial statements.
These financial statements were authorised for issue by the Directors on 30 August 2016. The
Directors have the power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and
complete. All press releases, financial reports and other information are available at the 'about us'
and investor relations pages on our website: www.pinnacleinvestment.com/shareholders-investor-
centre/
65
Pinnacle Investment Management Group Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Notes
2016
$'000
2015
$'000
Revenue from continuing operations
5
8,384
7,647
Fair value gains/(losses) on financial assets at fair value through
profit or loss
Employee benefits expense
Incentives expense
Consultants fees
Legal and professional services expense
Property expense
Technology and communications expense
Travel and entertainment expense
Insurance expense
Market information expense
Impairment (reversal)/expense
Depreciation and amortisation expense
Finance cost expense
Other expenses from operating activities
Share of net profit of jointly controlled entities accounted for
using the equity method
Profit before income tax
Income tax expense
Profit/(loss) from continuing operations
Loss from discontinued operations
Profit/(loss) for the year
Profit/(loss) for the year is attributable to:
Owners of Pinnacle Investment Management Group Limited
Non-controlling interests
6
6
31(d)
7
8(b)
Earnings per share:
From continuing operations attributable to owners of Pinnacle
Investment Management Group Limited
Basic earnings per share
Diluted earnings per share
Total profit/(loss) attributable to owners of Pinnacle
Investment Management Group Limited
Basic earnings per share
Diluted earnings per share
34
34
34
34
344
(265)
(7,901)
(3,851)
(815)
(889)
(721)
(559)
(468)
(393)
(217)
207
(38)
(97)
(333)
15,920
8,573
(133)
8,440
(1,248)
7,192
(6,810)
(3,181)
(627)
(637)
(1,028)
(482)
(379)
(404)
(376)
(310)
(89)
(384)
(363)
11,932
4,244
(8,138)
(3,894)
(3,464)
(7,358)
4,537
2,655
7,192
(8,960)
1,602
(7,358)
Cents
Cents
5.2
5.2
4.1
4.1
(5.2)
(5.2)
(8.5)
(8.5)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
66
Pinnacle Investment Management Group Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2016
(continued)
Notes
2016
$'000
2015
$'000
Profit/(loss) for the year
7,192
(7,358)
Other comprehensive income:
Items that may be reclassified to profit or loss
Changes to the fair value of available-for-sale financial assets
8(c)
943
-
Total comprehensive income/(loss) for the year
8,135
(7,358)
Total comprehensive income for the year is attributable to:
Owners of Pinnacle Investment Management Group Limited
Non-controlling interests
Total comprehensive income for the year attributable to owners
of Pinnacle Investment Management Group Limited arises from:
Continuing operations
Discontinued operations
8(b)
5,480
(8,960)
2,655
8,135
1,602
(7,358)
5,785
(305)
(5,496)
(3,464)
5,480
(8,960)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
67
Pinnacle Investment Management Group Limited
Consolidated statement of financial position
As at 30 June 2016
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Derivative financial assets
Other current assets
Assets classified as held for sale
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Available-for-sale financial assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Other current liabilities
Liabilities of disposal group classified as held for sale
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Notes
9
10
11
12
13
8
31
14
8(c)
16
17
18
19
8
21
EQUITY
Contributed equity
Reserves
Accumulated losses
Capital and reserves attributable to owners of Pinnacle
Investment Management Group Limited
22
23(a)
23(b)
Non-controlling interests
Total equity
2016
$'000
13,544
5,670
10,918
-
2,661
-
2015
$'000
13,570
3,160
6,195
89
3,637
17,094
32,793
43,745
24,528
135
14
943
-
25,620
58,413
6,206
979
1,572
-
8,757
73
73
8,830
49,583
61,946
1,167
(19,982)
43,131
6,452
49,583
19,408
53
-
-
753
20,214
63,959
5,093
1,939
-
12,225
19,257
232
232
19,489
44,470
61,466
(307)
(20,486)
40,673
3,797
44,470
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
68
Pinnacle Investment Management Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2016
Attributable to owners of
Pinnacle Investment Management Group
Limited
Notes Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
$'000
Non-
controlling
interests
$'000
Total
equity
$'000
57,534
1,231
(6,924)
51,841
2,604
54,445
-
(8,960)
(8,960)
1,602
(7,358)
Balance at 1 July 2014
Total comprehensive
income for the year
Transactions with owners
in their capacity as
owners:
Share-based payments
Transactions with non-
controlling interests
Dividends paid to
shareholders
Movement in treasury
stock held by employee
share trust
Transfer from reserves
Issue of shares on exercise
of options
Balance at 30 June 2015
Balance at 1 July 2015
Total comprehensive
income for the year
Transactions with owners
in their capacity as
owners:
Share-based payments
Dividends paid to
shareholders
Issue of shares on exercise
of options
Balance at 30 June 2016
23
23
22
23
23
23
-
-
-
-
2,420
3,932
61,466
61,466
-
-
-
480
480
61,946
132
1,380
-
(1,380)
(158)
-
-
-
-
-
(158)
-
(158)
-
(409)
(409)
(4,602)
(4,602)
-
-
-
132
-
2,420
-
-
-
-
(4,602)
132
-
2,420
(1,538)
(4,602)
(2,208)
(409)
(2,617)
(307)
(307)
(20,486)
40,673
3,797
44,470
(20,486)
40,673
3,797
44,470
943
4,537
5,480
2,655
8,135
531
-
-
531
1,167
-
531
(4,033)
(4,033)
-
480
(4,033)
(3,022)
-
-
-
-
531
(4,033)
480
(3,022)
(19,982)
43,131
6,452
49,583
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
69
Pinnacle Investment Management Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipts of premiums on put options over listed securities
Payments of premiums on put options over listed securities
Dividends and distributions received
Interest received
Finance and borrowings costs paid
Loan facility advances - clients
Loan facility repayment - clients
Proceeds from sale of financial assets at fair value through profit
or loss
Payments to purchase financial assets at fair value through profit
or loss
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Repayment of loans by other entities
Payments for property, plant and equipment
Payments for intangible assets
Proceeds from sale of investments in subsidiaries
Cash transfer on deconsolidation of subsidiary
Payments for investments accounted for using the equity method
Loan repayments from related parties
Loan advances to related parties
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Dividends paid to non-controlling interests
Dividends paid to shareholders
Proceeds from issue of shares and other equity securities
Net cash (outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Notes
2016
$'000
2015
$'000
7,325
65,575
(16,902)
(71,248)
-
-
13,691
198
(197)
-
-
339
(339)
12,503
605
(425)
3,959
(3,215)
1,117
5,592
33
(5,407)
(175)
(6,399)
6,947
-
(124)
(9)
4,000
-
(3,150)
3,474
(366)
3,825
-
(4,033)
357
(3,676)
(26)
13,570
-
13,544
17
(106)
(6)
246
(33)
-
1,321
(2,278)
(839)
(409)
(4,602)
2,430
(2,581)
3,527
20,604
(10,561)
13,570
Cash and cash equivalents at the beginning of the financial year
Less cash transferred to assets of disposal group held for sale
Cash and cash equivalents at end of year
8(d)
9
The consolidated statement of cash flows includes cash flows from continuing and discontinued
operations.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
70
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
Notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segment information
Revenue from continuing operations
Expenses
Income tax
Assets and liabilities of disposal group classified as held for sale and
discontinued operation
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Current assets - Financial assets at fair value through profit or loss
Derivative financial assets and liabilities
Current assets - Other current assets
Non-current assets - Property, plant and equipment
Net deferred tax assets
Non-current assets - Other non-current assets
Current liabilities - Trade and other payables
Current liabilities - Provisions
Current liabilities - Other current liabilities
Current liabilities - Financing arrangements
Non-current liabilities - Provisions
Contributed equity
Reserves and accumulated losses
Dividends
Key Management Personnel
Remuneration of auditors
Contingencies
Commitments
Related party transactions
Subsidiaries
Investments accounted for using the equity method
Events occurring after the reporting period
Additional cash flow information
Earnings per share
Share-based payments
Parent Entity financial information
Page
72
86
93
94
97
97
98
99
101
102
102
102
103
103
104
105
106
106
106
107
108
109
110
111
112
114
114
115
115
118
120
122
123
124
125
127
71
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated. The financial statements are for the consolidated entity
consisting of Pinnacle Investment Management Group Limited and its subsidiaries ("the Group") -
refer to note 30.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and
the Corporations Act 2001. The Group is a for profit entity for the purpose of preparing the financial
statements.
(i) Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period,
however, the Group did not have to change its accounting policies or make retrospective
adjustments as a result of adopting these standards.
(iii) Early adoption of standards
The Group has elected not to apply any of the pronouncements before their operative date in the
annual reporting period beginning 1 July 2015.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by
the revaluation of available for sale financial assets, financial assets (including derivative
instruments) at fair value through profit or loss and assets and liabilities of the disposal group
measured at the lower of cost and fair value less costs to sell.
(v) Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates. It also requires
management to exercise its judgement in applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in note 3.
(vi) Adjustment of prior period balances
Prior period balances have been adjusted where changes in the business have resulted in additional
or altered disclosures in the current period.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Pinnacle Investment Management Group Limited ("Company" or "Parent Entity") as at 30 June 2016
and the results of all subsidiaries for the year then ended. Pinnacle Investment Management Group
Limited and its subsidiaries together are referred to in these financial statements as the Group or the
consolidated entity.
Subsidiaries are all entities (including structured entities) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity.
72
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group
(refer to note 1(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of financial position, respectively.
(ii) Employee share trust
The Group has formed trusts to administer the Group's employee share plans. Where the substance
of the relationship is that control rests with the Group, the employee share trust is consolidated and
the shares held by the trust are disclosed as treasury stock and deducted from contributed equity
(refer to note 22 and note 35(a)).
(iii) Entities under joint control
Entities under joint control are all entities over which the Group has a shareholding of between 20%
and 49.99% of the voting rights, and is not deemed to control under relevant accounting standards.
These entities have been assessed to meet the classification of joint venture under AASB 11 Joint
arrangements, due to the requirement for unanimous decision making in relation to a number of
strategic matters contained in the shareholders agreements. Further, the Group does not have direct
rights to the assets, and obligations for the liabilities of the entities. Investments in entities under
joint control are accounted for in the consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Group's investment in entities under joint
control includes goodwill (net of any accumulated impairment loss) identified on acquisition (refer
to note 31).
The Group’s share of the post-acquisition profits or losses and other comprehensive income of
entities under joint control is recognised in the consolidated statement of comprehensive income.
The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. Dividends received or receivable from entities under joint control are recognised as a
reduction in the carrying amount of the investment in the consolidated statement of financial
position.
When the Group's share of losses in an entity under joint control equals or exceeds its interest in the
entity under joint control, including any other unsecured long-term receivables, the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the entity
under joint control.
Unrealised gains on transactions between the Group and entities under joint control are eliminated
to the extent of the Group's interest in the entities under joint control. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of entities under joint control have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The carrying amounts of investments in entities under joint control is tested for impairment in
accordance with the policy described in note 1(i).
73
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
(iv) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group. A change in ownership interest results in an
adjustment between the carrying amounts of the controlling and non-controlling interests to reflect
their relative interests in the subsidiary. Any difference between the amount of the adjustment to
non-controlling interests and any consideration paid or received is recognised in a separate reserve
within equity attributable to owners of Pinnacle Investment Management Group Limited.
When the Group ceases to consolidate or equity account for an investment because of a loss of
control, joint control or significant influence, any retained interest in the entity is remeasured to its
fair value with the change in carrying amount recognised in the consolidated statement of
comprehensive income. This fair value becomes the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, entity under joint venture or
financial asset. In addition, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in other comprehensive income are
reclassified to the consolidated statement of comprehensive income.
If the ownership interest in an entity under joint control is reduced but joint control or significant
influence is retained, only a proportionate share of the amounts previously recognised in other
comprehensive income is reclassified to profit or loss where appropriate.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision maker. In relation to the Group this function is performed by the Board of
Directors.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the
currency of the primary economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in Australian dollars, which is the
Group's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the consolidated statement
of comprehensive income.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable net of the amount
of Goods and Services Tax (GST).
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each of
the Group's activities as described below. The Group bases its estimates on historical results, taking
into consideration the type of customer, the type of transaction and the specifics of each
arrangement.
74
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
Revenue is recognised for the major business activities as follows:
(i) Brokerage and management fees
Brokerage and management fee income are recognised when the Group has performed the
related service and the amount of revenue can be reliably measured.
(ii) Performance fees
Performance fee income is recognised when the Group has met the relevant performance
benchmarks.
(iii) Equity capital markets and corporate advisory income
Equity capital markets and corporate advisory income are recognised when the Group has
performed the related service.
(iv) Interest income
Interest income is recognised using the effective interest method. When a receivable is impaired, the
Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective interest rate of the loan, and continues unwinding the discount
as interest income. Interest income on impaired loans is recognised using the original effective
interest rate.
(v) Dividends
Dividends are recognised as revenue when the right to receive payment is established. This applies
even if they are paid out of pre-acquisition profits. However, the investment may need to be tested
for impairment as a consequence (refer to note 1(l)).
(vi) Service charges to entities under joint control
Service charges to entities under joint control are recognised when the relevant services are
performed.
(f) Income tax
The income tax expense or benefit for the period is the tax payable or receivable on the current
period's taxable income based on the national income tax rate adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the Company's subsidiaries and
entities under joint control operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time
of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the end of
the reporting period and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only
if it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.
75
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(f) Income tax (continued)
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in controlled entities where the Company is able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
(i) Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a
single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated
statement of financial position.
The head entity, Pinnacle Investment Management Group Limited, and the controlled entities in the
tax consolidated group continue to account for their own current and deferred tax amounts. These
tax amounts are measured as if each entity in the tax consolidated group continues to be a
standalone taxpayer in its own right.
In addition to its own current and deferred amounts, Pinnacle Investment Management Group
Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated
group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the Group. Details about the
tax funding agreement are disclosed in note 1(z)(ii).
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax
consolidated entities.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the
Group as lessee are classified as operating leases (note 28). Payments made under operating leases
(net of any incentives received from the lessor) are charged to the consolidated statement of
comprehensive income on a straight-line basis over the period of the lease.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including
business combinations involving entities or businesses under common control, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of
a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre-existing equity interest in the
subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis,
the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-
controlling interest's proportionate share of the acquiree's net identifiable assets.
76
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(h) Business combinations (continued)
The excess of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the
fair value of the Group's share of the net identifiable assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the
difference is recognised directly in the consolidated statement of comprehensive income as a
bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future
are discounted to their present value as at the date of exchange. The discount rate used is the
Group’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained
from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a
financial liability are subsequently remeasured to fair value with changes in fair value recognised in
the consolidated statement of comprehensive income.
(i) Impairment of assets
Assets are tested for impairment whenever 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. The recoverable amount is the higher
of an asset's fair value less costs of disposal and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which 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
reviewed for possible reversal of the impairment at the end of each reporting period.
(j) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash
equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of changes in value, and
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the
consolidated statement of financial position.
Cash held in trust for clients is reported as other cash and cash equivalents and is included within
trade payables.
(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method, less provision for impairment. Trade receivables are generally
due 30 days from the date of recognition. They are presented as current assets unless collection is
not expected for more than 12 months after the reporting date.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off by reducing the carrying amount directly. An allowance account
(provision for impairment of trade receivables) is used when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial re-organisation and default or delinquency in payments (more than 30 days overdue) are
considered indicators that the trade receivable is impaired. The amount of the impairment allowance
is the difference between the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables
are not discounted if the effect of discounting is immaterial.
77
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(k)
Trade receivables (continued)
The amount of the impairment loss is recognised in the consolidated statement of comprehensive
income within other expenses. When a trade receivable for which an impairment allowance had been
recognised becomes uncollectible in a subsequent period, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against other
expenses in the consolidated statement of comprehensive income.
(l) Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through
profit or loss and loans and receivables. The classification depends on the purpose for which the
investments were acquired. The classification of investments is determined at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial
asset is classified in this category if acquired principally for the purpose of selling in the short term.
Derivatives are classified as held for trading unless they are designated as hedges. Assets in this
category are classified as current assets if they are expected to be settled within 12 months,
otherwise they are classified as non-current.
(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. They are included in current assets, except for those with
maturities greater than 12 months after the reporting period, which are classified as non-current
assets. Loans and receivables are included in trade and other receivables (note 10) and other assets
(note 13 and 16).
(iii) Available-for-sale financial assets
Financial assets that are not classified into any of the other categories are included in the available-
for-sale category.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date, being the date on
which the Group commits to purchase or sell the asset. At initial recognition financial assets are
initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially
recognised at fair value and transaction costs are expensed in the consolidated statement of
comprehensive income. Financial assets are derecognised when the rights to receive cash flows
from the financial assets have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Measurement
Loans and receivables are subsequently carried at amortised cost using the effective interest
method.
Available for sale financial assets and financial assets at fair value through profit and loss are
subsequently carried at fair value. Gains or losses arising from changes in fair value are recognised
as follows:
-
-
For financial assets at fair value through profit and loss – in fair value gains / (losses) on
financial assets at fair value through profit and loss;
For other monetary and non-monetary securities classified as available for sale - in other
comprehensive income.
78
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(l) Investments and other financial assets (continued)
Fair value
The fair values of quoted investments are based on current bid prices. Units in managed funds are
valued at the pre-distribution exit price at year end. If the market for a financial asset is not active
(and for unlisted securities) the Group establishes fair value by using valuation techniques. These
include reference to recent arm's length transactions or to other instruments that are substantially
the same, discounted cash flow analysis and option pricing models making maximum use of market
inputs and relying as little as possible on entity-specific inputs.
Impairment
The Group assesses at each balance date whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
- Assets carried at amortised cost
If there is objective evidence of impairment for any of the Group's financial assets carried at
amortised cost, the loss is measured as the difference between the asset's carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset's original effective interest rate. The carrying amount of
the asset is reduced and the loss recognised in the consolidated statement of comprehensive
income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised (such as an
improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss
is recognised in the consolidated statement of comprehensive income.
- Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss
- measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised in profit or loss- is removed from
equity and recognized in profit or loss.
Impairment losses on equity instruments that were recognized in profit or loss are not reversed
through profit or loss in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period
and the increase can be objectively related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss is reversed through profit or loss.
(m) Derivative financial instruments - futures and options
Derivative instruments are initially recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value at each reporting date.
Derivative instruments include equity futures, interest rate futures and equity options. The Group
used derivative instruments to hedge against the risks associated with its instalment warrant
product and the interest rate risk associated with individually managed account loans relating to
Next Financial. Hedge accounting was not applied in respect of these instruments.
79
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(n) Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. All repairs and maintenance are
charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual
values, over their estimated useful lives or in the case of leasehold improvements, the shorter lease
term as follows:
-
-
-
Plant and equipment
Furniture and fittings
Leasehold improvements
2 - 5 years
2 - 5 years
3 - 10 years
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These
are included in the consolidated statement of comprehensive income.
(o) Intangible assets
(i) IT development and software
Costs incurred in developing products or systems and acquiring software and licences that will
contribute to future period financial benefits through revenue generation and/or cost reduction are
capitalised to software and systems. Costs capitalised include external direct costs of materials and
services and direct payroll and payroll related costs of employees' time spent on the project.
Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years
from the point at which the asset is ready to use.
IT development costs include only those costs directly attributable to the development phase that
can be reliably measured and are only recognised following completion of technical feasibility and
where the Group has an intention and ability to use the asset.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months from the reporting date. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
(q) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation
and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
80
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(q) Provisions (continued)
Provisions are measured at the present value of management's best estimate of the expenditure
required to settle the present obligation at the end of each reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the liability. The increase in the provision due to
the passage of time is recognised as interest expense.
(r) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to
be settled within 12 months after the end of each reporting period in which the employees
render the related service are recognised in respect of employees' services up to the end of the
reporting period and are measured at the amounts expected to be paid when the liabilities are
settled. The liability for annual leave is recognised in the provision for employee benefits. All
other short term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and annual leave which are not expected to be settled wholly
within 12 months after the end of the reporting period in which the employees render the related
service are recognised in the provision for employee benefits. They are measured as the present
value of expected future payments to be made in respect of services provided by employees up
to the end of the reporting period using the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the end of the
reporting period on high quality corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows. Remeasurement as a result of
experience adjustments and changes in assumption are recognised in the consolidated
statement of comprehensive income.
The obligations are presented as current liabilities in the consolidated statement of financial
position if the Group does not have an unconditional right to defer settlement for at least 12
months after the reporting period, regardless of when the actual settlement is expected to
occur.
(iii) Retirement benefit obligations
Contributions to defined contribution funds are recognised as an employee benefits expense as
they become payable. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available. The Group has no further payment
obligations once the contributions have been paid.
(iv) Share-based payments
Share-based compensation benefits are provided to certain employees via the Pinnacle Investment
Management Group Employee Option Share Plan and where applicable, WHIG long term incentive
share plan and Pinnacle long term employee incentive agreements. Information relating to these
schemes is set out in note 35.
The fair value of options and rights granted under the plans is recognised as an employee benefits
expense with a corresponding increase in share based payments reserve. The total amount to be
expensed is determined by reference to the fair value of the options and rights granted, which
includes any market performance conditions and the impact of any non-vesting conditions but
excludes the impact of any service and non-market performance vesting conditions.
81
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(r) Employee benefits (continued)
Non-market performance vesting conditions are included in assumptions about the number of
options that are expected to vest. The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of options and rights that are expected to vest
based on the non-market vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the consolidated statement of comprehensive income, with a corresponding
adjustment to the share based payment reserve.
The plan is administered by AET Structured Finance Services Pty Ltd, see note 1(b)(ii). When the
options are exercised, the trust transfers the appropriate amount of shares to the employee. The
proceeds received net of any directly attributable transaction costs are credited directly to equity.
The fair value at grant date of the plans is determined using option pricing models that take into
account the exercise price, the vesting period, the vesting and performance criteria, the impact of
dilution, the share price at grant date, expected price volatility of the underlying share, the expected
dividend yield, and the risk-free interest rate for the vesting period.
(v) Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula
that takes into consideration the profit attributable to the Company's shareholders after certain
adjustments. The Group recognises a provision where contractually obliged or where there is a past
practice that has created a constructive obligation.
(vi) Termination benefits
Termination benefits may be payable when employment is terminated otherwise than in accordance
with the employment contract, or when an employee accepts voluntary redundancy in exchange for
these benefits. The group recognises termination benefits at the earlier of the following dates: (a)
when the group can no longer withdraw the offer of those benefits; and (b) when the entity
recognises costs for a restructuring that is within the scope of AASB 137 and involves the payment
of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the
termination benefits are measured based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after the end of the reporting period are discounted to
present value.
(vii) Long-term employee incentive agreements
The Group has a long term employee incentive scheme which enables certain employees of Pinnacle,
under full recourse and limited recourse loan arrangements, to acquire shares in Pinnacle. The
scheme is designed to align the interests of the employees with those of Pinnacle shareholders.
The fair value of the limited recourse loan arrangements under the long term employee incentive
scheme is recognised as an employee benefits expense with a corresponding increase in share-
based payment reserve. The total amount to be expensed is determined by reference to the fair
value of the limited recourse loan arrangements, which includes any market performance conditions
and the impact of any non-vesting conditions but excludes the impact of any service and non-
market performance vesting conditions. The total expense is recognised over the vesting period,
which is the period over all of the specified vesting conditions are to be satisfied.
Pinnacle accounts for the inflows and outflows associated with these arrangements on a net basis,
as the arrangements are expected to be settled net.
82
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(r) Employee benefits (continued)
Certain entities under joint control have similar incentive schemes and Pinnacle may provide cash
funding to certain employees of these entities in order for the employees to acquire shares in the
entities. Pinnacle accounts for these contributions as investments in entities under joint control.
Remuneration of the employees is recorded in the entities under joint control and Pinnacle records
its share of the profits or losses of these entities upon equity accounting. A liability is recorded to
the extent that Pinnacle has a net obligation to the employee of a jointly-controlled entity under the
employee contract.
(s) Contributed equity
Ordinary shares are classified as equity (note 22).
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.
(t) Dividends
Provision is made for the amount of any dividend declared being appropriately authorised and no
longer at the discretion of the Group, on or before the end of the reporting period but not
distributed at the end of the reporting period.
(u) Earnings per share
(i) Basic earnings per share
Basic earnings after tax per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity other
than ordinary shares by;
• the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding treasury
shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
to take into account:
• the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares; and
• the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
(v) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the taxation authority. In this case it is recognised as part of the
cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the taxation authority is included with other
receivables or payables in the consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable to, the taxation authority, are
presented as operating cash flows.
83
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(w) Disposal group held for sale and discontinued operations
The assets and liabilities of the disposal group are classified as held-for-sale and stated at the lower
of carrying amount and fair value less costs of disposal if their carrying amount is to be recovered
principally through a sale transaction rather than continuing use.
Assets of the disposal group classified as held-for-sale are presented separately from other assets in
the consolidated statement of financial position. The liabilities of the disposal group classified as
held-for-sale are presented separately from other liabilities in the consolidated statement of financial
position.
A discontinued operation is a component of the Group's business that has been disposed of or is
classified as held for sale and that represents a separate major line of business or geographical area
of operations, is part of a single coordinated plan to dispose of such line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued
operations are presented separately in the consolidated statement of comprehensive income.
(x) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial / Director’s
Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission,
relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that instrument to the nearest thousand
dollars, or in certain cases, the nearest dollar.
(y) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published which are not
mandatory for 30 June 2016 reporting periods and have not been early adopted by the Group. The
Group's assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments (effective from 1 January 2018)
AASB 9 addresses the classification, measurement and derecognition of financial assets and
financial liabilities and introduces new rules for hedge accounting. In December 2014, the AASB
made further changes to the classification and measurement rules and also introduced a new
impairment model. These latest amendments now complete the new financial instruments standard.
The standard is not applicable until 1 January 2018 but is available for early adoption.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements
only affect the accounting for financial liabilities that are designated at fair value through profit or
loss and the Group does not have any such liabilities. The new hedging rules will also have no impact
as the Group does not undertake hedge accounting. The new impairment model is an expected
credit loss (ECL) model which may result in the earlier recognition of credit losses. The Group has
not yet assessed how its impairment provisions would be affected by the new rules.
(ii) AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018)
The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118
which covers contracts for goods and services and AASB 111 which covers construction contracts.
The new standard is based on the principal that revenue is recognised when control of a good or
services transfers to a customer - so the notion of control replaces the existing notion of risks and
rewards. The standard permits a modified retrospective approach for the adoption. Under this
approach entities will recognise transitional adjustments in retained earnings on the date of initial
application (eg 1 January 2018), i.e. without re-stating the comparative period. They will only need to
apply the new rules to contracts that are not completed as of the date of initial application.
84
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
1 Summary of significant accounting policies (continued)
(y) New accounting standards and interpretations not yet adopted (continued)
The Group is currently assessing the impact of the new rules and has identified that recognition of
performance fee income could be affected. At this stage, the Group is not able estimate the impact
of the new rules on the Group's financial statements. The Group will make more detailed
assessments of the impact over the next twelve months.
There are no other standards that are not yet effective that are expected to have a material impact
on the entity in the current or future reporting periods and on foreseeable future transactions.
(z) Parent Entity financial information
The financial information for the Parent Entity, Pinnacle Investment Management Group Limited,
disclosed in note 36 has been prepared on the same basis as the consolidated financial statements,
except as set out below.
(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Pinnacle
Investment Management Group Limited.
(ii) Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
have implemented the tax consolidation legislation.
The head entity, Pinnacle Investment Management Group Limited, and the controlled entities in the
tax consolidated group account for their own current and deferred tax amounts. These tax amounts
are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer
in its own right.
In addition to its own current and deferred tax amounts, Pinnacle Investment Management Group
Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated
group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities
fully compensate Pinnacle Investment Management Group Limited for any current tax payable
assumed and are compensated by Pinnacle Investment Management Group Limited for any current
tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are
transferred to Pinnacle Investment Management Group Limited under the tax consolidation
legislation. The funding amounts are determined by reference to the amounts recognised in the
wholly-owned entities' financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the
funding advice from the head entity. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly owned tax
consolidated entities.
(iii) Share based payments
The grant by the Parent Entity of options over its equity instruments to the employees of
subsidiaries in the Group is treated as a capital contribution to that subsidiary. The fair value of
employee services received, measured by reference to the grant date fair value, is recognised over
the vesting period as an increase to investments in subsidiaries, with a corresponding credit to
share based payment reserve.
85
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk
and price risk), credit risk and liquidity risk. A core focus of the Group's overall risk management
program focuses on the volatility of the financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group.
Risk governance is managed through the Board’s Audit, Compliance and Risk Management
Committee, which provides direct oversight of the Group's risk management framework and
performance. The Board approves written principles for risk management covering areas such as
principal investments, including the use of appropriate hedging strategies, and cash flow
management. The management of risk throughout the Group is achieved through the procedures,
policies, people competencies and risk monitoring functions that form part of the overall Group risk
management framework. This is achieved through regular updates in the form of targeted risk
management analysis and reporting functions that provide an assessment of the Group's risk
exposure levels and performance to benchmarks / tolerance limits.
The Group holds the following financial instruments (excluding financial assets of the disposal group
classified as held for sale):
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Derivative financial assets
Available for sale financial assets
Loans to entities under joint control (current)
Loans to shareholders and entities under joint control (non-current)
Financial liabilities
Trade and other payables
Other current liabilities
2016
$'000
2015
$'000
13,544
5,407
10,918
-
943
1,766
-
13,570
2,259
6,195
89
-
3,637
753
32,578
26,503
6,206
1,572
7,778
5,093
-
5,093
(a) Market risk
(i) Foreign exchange risk
The Group is not materially exposed to foreign exchange risk.
(ii) Price risk
Through its business transactions and investments, the Group is exposed to equity securities price
risk. This risk is the potential for losses in Group earnings as a result of adverse market movements
and arises from investments held by the Group that are classified on the consolidated statement of
financial position as financial assets at fair value through profit or loss.
The Group manages the price impact of market risk on a daily basis through an established risk
management framework. This includes the procedures, policies and functions undertaken by the
business to manage market risk within tolerances set by the Board. Equity derivatives are used as an
active risk mitigation function and the Group currently utilises such derivatives to reduce market risk
of its equity exposures. The performance of the Group’s direct equity exposures and market risk
mitigants are monitored on a regular basis.
The majority of the Group's equity investments are Australian listed equity securities and unlisted
unit trusts.
86
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
Sensitivity
The table below summarises the impact of increases/decreases in equity securities prices on the
Group’s after tax profit for the year and on equity. The analysis is based on the assumption that
equity securities prices had increased/decreased by 15% (2015 - 15%) with all other variables held
constant and all the Group’s equity investments included in financial assets at fair value through
profit and loss moved in correlation with the index.
Impact on after-tax profit
2015
$'000
2016
$'000
Impact on equity
2015
$'000
2016
$'000
Group
1,637
650
1,637
650
(iii) Interest rate risk
The Group's main interest rate risk arises from holding cash and cash equivalents. During 2016 and
2015, the Group’s cash and cash equivalents were denominated in Australian dollars. The Group
reviews its interest rate exposure as part of the Group’s cash flow management and takes into
consideration the yields, duration and alternative financing options as part of the renewal of existing
positions.
As at the reporting date, the Group had the following cash and cash equivalents:
30 June 2016
30 June 2015
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
Cash and cash equivalents
Net exposure to cash flow interest rate
risk
1.96%
13,544
2.32%
13,570
13,544
13,570
The Group's loans to entities under joint control are subject to fixed interest rates and carried at
amortised cost. They are therefore not subject to interest rate risk as defined in AASB 7.
Sensitivity
At 30 June 2016, if interest rates had changed by -/+100 basis points from the year end rates with all
other variables held constant, after tax profit and equity for the year would have been $95,000
lower/higher (2015 - change of 100 basis points: $95,000 lower/higher).
(b) Credit risk
Credit risk arises from cash and cash equivalents, financial assets at fair value through profit or loss,
loans to entities under joint control, loans to shareholders and outstanding receivables.
Credit risk is managed on a Group basis. Credit risk relates to the risk of a client or counterparty
defaulting on their financial obligations resulting in a loss to the Group. These obligations primarily
relate to distribution and management fees. The Group does not carry material trade receivable
exposure to either a single counterparty or a group of counterparties. For banks and financial
institutions, only independently rated parties with a minimum rating of BBB+ / A-1 are accepted as
counterparties.
87
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
(b) Credit risk (continued)
The Group held the following credit risks:
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Derivative financial assets
Available-for-sale financial assets
Loans to entities under joint control (current)
Loans to shareholders and entities under joint control (non-current)
2016
$'000
13,544
5,407
10,918
-
943
1,766
-
2015
$'000
13,570
2,259
6,195
89
-
3,637
753
32,578
26,503
The Group records trade receivables and loans in the following classifications:
Neither past due nor impaired trade receivables and loans are those that are within their relevant
contractual payment terms and there is no evidence to suggest that the client or counterparty will
fail to meet their obligations.
Past due but not impaired trade receivables and loans are those that have fallen outside of their
contractual settlement terms. However there remains an expectation of full recovery based on the
value of the underlying equities and the financial position of the client or counterparty.
Past due and impaired trade receivables and loans are those that have fallen outside of the
prescribed settlement terms and/or there is evidence to suggest that the client or counterparty will
fail to meet their obligations. Refer to note 1(k) for more information on the trade receivables policy
of the Group.
Trade and other receivables
Neither past due nor impaired
Past due but not impaired
Past due and impaired
Loans
Neither past due nor impaired
Total trade and loan receivables
2016
$'000
2015
$'000
5,394
13
-
5,407
1,766
7,173
1,463
796
-
2,259
4,390
6,649
88
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
Impaired trade and loan receivables
As at 30 June 2016 receivables of the Group with a nominal value of $nil (2015 - $nil) were impaired.
Past Due but not impaired
As of 30 June 2016, trade receivables of $13,000 (2015 - $796,000) were past due but not impaired.
These relate to customers for whom there is no recent history of default.
The ageing of these receivables is as follows:
1 to 3 months
3 to 6 months
Over 6 months
Credit quality
2016
$'000
2015
$'000
13
-
-
13
528
160
108
796
The credit quality of financial assets can be assessed by reference to external credit ratings. These
credit ratings are only available for cash assets, Australian listed securities and non-exchange traded
derivative financial assets:
Cash at bank and short-term bank deposits
AA-
A+
Derivative financial assets
Exchange traded options and unrated assets
Australian listed securities
AA-
BBB
2016
$'000
2015
$'000
13,544
-
13,544
13,557
13
13,570
-
-
135
150
285
89
89
-
-
-
89
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
(c) Liquidity risk
The Group manages liquidity risk by continuously monitoring actual and forecast cash flows. Due to
the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding
through available cash and readily liquefiable investments in the Group’s Principal Investments
portfolio. At 30 June 2016 the Group has $24.5 million in available cash and Principal Investments.
Subsidiaries of the Company, Next Financial Limited, Pinnacle Funds Services Limited, Pinnacle
Investment Management Limited and Pinnacle RE Services Limited hold Australian Financial Services
Licences (AFSL) and hold amounts in liquid assets in accordance with relevant ASIC regulations on
the basis of expected cash flows. This is generally carried out at a local level in the operating
companies of the Group in accordance with practice and limits set by the Group. In addition, the
Group’s liquidity management policy involves projecting cash flows and considering the level of
liquid assets necessary to meet these, monitoring liquidity ratios against internal and external
regulatory requirements and maintaining debt financing plans.
Financing arrangements
The Group had access to the following undrawn borrowing facilities (excluding bank
funding for loans to clients) at the end of the reporting period:
Overdraft and intra-day settlement facilities
Expiring within one year
Further information on financing arrangements is detailed in note 22.
Maturities of financial liabilities
2016
$'000
2015
$'000
-
-
10,000
10,000
The table below analyses the Group's financial liabilities. The financial liabilities are broken down into
maturity groupings based on the remaining period at the reporting date to the contractual maturity
date. The amounts disclosed in the table are the contractual undiscounted cash flows.
1 - 30
days
30
days to
1 year
$'000 $'000
Between
1 and 5
years
$'000
Over 5
years
$'000
Total
contractual
cash flows
$'000
Contractual maturities of
financial liabilities
At 30 June 2016
Trade and other payables
Other current liabilities
Total financial liabilities
At 30 June 2015
3,399
-
3,399
2,807
1,572
4,379
-
-
-
-
-
-
-
-
-
-
Trade and other payables
Total financial liabilities
3,624
3,624
1,469
1,469
Carrying
amount
$'000
6,206
1,572
7,778
6,206
1,572
7,778
5,093
5,093
5,093
5,093
90
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
(d) Fair value measurements (continued)
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(b)
(c)
inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (level 3).
The following table presents the Group's assets measured and recognised at fair value:
30 June 2016
Level 1
$'000
Level 2
$'000
Level 3
$'000
Assets
Australian listed securities
Other unlisted equity securities
Unlisted unit trusts
Contingent consideration from disposal of
discontinued operation
Total assets
285
-
10,402
-
10,687
No liabilities were held at fair value at 30 June 2016.
-
-
-
-
-
-
231
-
943
1,174
Total
$'000
285
231
10,402
943
11,861
30 June 2015
Assets
Exchange traded options
Other unlisted equity securities
Unlisted unit trusts
Total assets
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
89
-
5,837
5,926
-
-
-
-
-
358
-
358
89
358
5,837
6,284
No liabilities were held at fair value at 30 June 2015.
There were no transfers between levels for recurring fair value measurements during the current
year. The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels
as at the end of the reporting period.
The fair value of Australian listed securities and exchange traded options is based on quoted market
prices at the end of the reporting period. The quoted price used for Australian listed securities and
exchange traded options held by the Group is the current bid price. The quoted market price used
for unlisted unit trusts is the current exit unit price. These instruments are included in level 1.
The fair value of unlisted equity securities and contingent consideration from disposal of
discontinued operation is determined using valuation techniques. The Group uses a variety of
methods and makes assumptions that are based on market conditions existing at the end of each
reporting period. In the circumstances where a valuation technique for these instruments is based on
significant unobservable inputs, such instruments are included in level 3.
91
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2 Financial risk management (continued)
The carrying amounts of cash and cash equivalents, trade receivables and payables, loans to entities
under joint control and loans to shareholders are assumed to approximate their fair values due to
their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to
the Group for similar financial instruments.
Fair value measurements using significant unobservable inputs (level 3)
Level 3 items include unlisted equity securities held by the Group, and contingent consideration
from disposal of discontinued operations. The following table presents the changes in level 3
instruments for the years ended 30 June 2016 and 30 June 2015:
Opening balance 1 July 2014
Unrealised losses recognised in fair value gains/(losses) on financial
assets at fair value through profit or loss
Closing balance 30 June 2015
Unrealised losses recognised in fair value gains/(losses) on financial
assets at fair value through profit or loss
Fair value adjustments recognised in other comprehensive income
Closing balance 30 June 2016
(i) Transfer between levels 1 and 3
There were no transfers between levels 1 and 3 during the year.
Contingent
consideration
$’000
Unlisted
equity
securities
$'000
-
-
-
-
943
943
459
(101)
358
(127)
-
231
(ii) Valuation process
Unlisted equities valued under Level 3 are investments in unlisted companies. Where possible, the
investments are valued based on the most recent transaction involving the securities of the
company. Where there is no recent information or the information is otherwise unavailable, the value
is derived from calculations based on the value per security of the underlying net tangible assets of
the investee company.
Contingent consideration valued under Level 3 relates to the disposal of discontinued operations
(refer note 8(c)). The fair value of contingent consideration from disposal of the Securities business
is determined based on forecasts of profits, taxable income and deferred tax asset utilisation using
the latest financial information available for the business at balance date.
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that may have a financial impact on the Group
and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future in the preparation of the
financial statements. The resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
92
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
3 Critical accounting estimates and judgements (continued)
(a) Critical accounting estimates and assumptions (continued)
(i) Estimated impairment of assets
The Group tests at least annually whether assets have suffered any impairment, in accordance with
the accounting policy stated in note 1. Where required, the recoverable amounts of assets have been
determined based on value-in-use calculations. These calculations require the use of assumptions.
(ii) Income taxes
The Group is subject to income taxes in Australia. Significant judgement is required in determining
the provision for income taxes. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group
estimates its tax liabilities based on the Group's understanding of the tax law. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the current and deferred income tax assets and liabilities in the period in which such
determination is made.
In addition, the Group can recognise deferred tax assets relating to carried forward tax losses and
deductible timing differences to the extent that it is considered probable that there will be future
taxable profits relating to the same taxation authority against which the carried forward tax losses
and deductible timing differences will be utilised. The Group has forecast future taxable profits by
applying assumptions to budgeted results to extrapolate forecast taxable profits for future financial
years.
(b) Critical judgements in applying the Group's accounting policies
(i) Fair value of financial assets
The fair value of financial assets that are not traded in an active market is determined by using
valuation techniques. The Group uses its judgement to select a variety of methods and make
assumptions that are mainly based on market conditions existing at each reporting date. Refer to
note 2(d) for further details.
(ii) Entities subject to joint control
Entities subject to joint control are not considered controlled entities for the purposes of AASB 10
on the basis that all key strategic and operational decisions require a unanimous vote by the Board
of directors.
(iii) Assets classified as held for sale
Assets classified as held for sale during the period were measured at the lower of their carrying
value or fair value less costs to sell, at the time of reclassification, as required by AASB 5. The
determination of fair values is based on evidence available to management at the time of
reclassification and requires the use of estimates and judgements regarding the ultimate sale
consideration for the disposal group, including the fair value of contingent consideration.
Subsequent re-assessment of the fair value of the disposal group is brought to account as profit or
loss of the discontinued operation, as appropriate, at the time of re-assessment
(iv) Provision for legal claims
The Group makes judgements concerning the potential impact of legal claims. These calculations
require the use of assumptions concerning the likely success of each claim and the potential amount
of compensation payable.
93
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
3 Critical accounting estimates and judgements (continued)
(b) Critical judgements in applying the Group's accounting policies (continued)
(v) Share-based payments
The Group measures equity settled share-based payment transactions by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by
management using option pricing models that use estimates and assumptions. Management
exercises judgement in preparing the valuations and these may affect the value of any share-based
payments recorded in the financial statements.
(vi) Contingencies
The Group has made certain judgements and estimates relating to the contingent liabilities outlined
in note 27. These assumptions are based on all existing information available at the signing date of
the Financial Report.
4 Segment information
(a) Description of segments
The Group has two reporting segments, Wilson Group and Pinnacle, based on internal management
reports used to make strategic decisions that are reviewed by the Board of directors. The business
segmentation is considered from a product and services perspective and the two reportable
segments identified consist of:
Pinnacle
• developing and operating funds management businesses; and
• providing distribution services, business support and responsible entity services to the
Pinnacle Boutiques and external parties.
Wilson Group
• specialty funds management through Priority Funds;
• selected investments as Principal; and
• servicing structured products for clients.
The Wilson Group segment previously included the results of the Securities business, which is now
classified as a discontinued operation - refer to note 8 for further details.
94
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
4 Segment information (continued)
(b) Operating segments
2016
Segment Revenue
Revenue from continuing operations
Interest income on structured products
Other interest revenue
Total segment revenue
Unallocated revenue
Consolidated revenue
Segment result excluding non-controlling interests
Segment result attributable to non-controlling interests
Segment result
Net unallocated expenses
Profit before income tax from continuing operations
Income tax expense
Profit from continuing operations
Loss from discontinued operations
Profit for the year
Other information regarding operating segments
Share of profits of entities accounted for using the
equity method
Depreciation and amortisation expense
Interest and finance charges - corporate
Unallocated - interest and finance charges - corporate
Total finance cost expense
Wilson
Group
$'000
2,398
15
122
2,535
Pinnacle Consolidated
$'000
$'000
5,747
-
67
5,814
628
-
628
7,968
2,655
10,623
8,144
15
189
8,349
35
8,384
8,596
2,655
11,251
(2,677)
8,573
(133)
8,440
(1,248)
7,192
-
12
-
15,920
15,920
26
117
38
117
(20)
97
Fair value (losses)/gains on financial assets at fair value
through profit or loss
454
(110)
344
95
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
4 Segment information (continued)
(b) Operating segments (continued)
2015
Segment Revenue
Revenue from continuing operations
Interest income on structured products
Other interest revenue
Total segment revenue
Unallocated revenue
Consolidated revenue
Segment result excluding non-controlling interests
Segment result attributable to non-controlling interests
Segment result
Net unallocated expenses
Profit before income tax from continuing operations
Income tax expense
Loss from continuing operations
Loss from discontinued operations
Loss for the year
Other information regarding operating segments
Share of profits of entities accounted for using the equity
method
Depreciation and amortisation expense
Interest and finance charges - corporate
Unallocated - interest and finance charges - corporate
Total interest and finance charges - corporate
Amortisation using effective interest rate
Interest and finance charges - client
Total finance cost expense
Wilson
Group
$'000
1,446
305
4
1,755
(1,049)
-
(1,049)
Pinnacle Consolidated
$'000
$'000
5,649
-
-
5,649
5,825
1,602
7,427
7,095
305
4
7,404
243
7,647
4,776
1,602
6,378
(2,134)
4,244
(8,138)
(3,894)
(3,464)
(7,358)
-
30
(68)
115
124
11,932
11,932
59
538
-
-
89
470
(325)
145
115
124
384
Fair value (losses)/gains on financial assets at fair value
through profit or loss
(682)
417
(265)
Segment revenue
Sales between segments are carried out at arm’s length and are eliminated on consolidation. The
revenue from external parties reported to the Board of directors is measured in a manner consistent
with that in the consolidated statement of comprehensive income.
The Group is domiciled in Australia and revenue is predominantly sourced from customers within
Australia.
Net profit before income tax
The Board of directors assess the performance of the operating segments based on a measure of
net profit before income tax. This measurement basis excludes some corporate overheads and
Group costs which are not allocated to segments.
96
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
5 Revenue from continuing operations
Services revenue
Brokerage
Fund management fees
Performance fee income
Service charges to entities under joint control
Interest income on structured products (Next Financial)
Amortisation of loan establishment fees (Next Financial)
Other revenue
Directors fees
Interest received or due
Dividends and distributions
Gain on deconsolidation of subsidiary
Other revenue
6 Expenses
2016
$'000
-
914
1,105
5,704
15
-
7,738
44
189
195
-
218
646
8,384
2015
$'000
7
1,297
26
4,423
305
25
6,083
44
392
788
56
284
1,564
7,647
Profit before income tax includes the following specific
expenses:
2016
$'000
2015
$'000
Finance cost expense (i)
Interest and finance charges - corporate
Interest and finance charges - client
Amortisation using effective interest rate
Total finance cost expense
Rental expense relating to operating leases
Minimum lease payments
Total rental expense relating to operating leases
Impairment
Impairment expense - loans to related parties and investments
accounted for using the equity method
Reversal of impairment expense - loans to related parties and
investments accounted for using the equity method
Total impairment (reversal) / expense
97
-
-
97
549
549
145
124
115
384
685
685
941
1,024
(1,148)
(207)
(714)
310
(i) Interest and finance charges are shown divided into two components, those attributable to the
corporate treasury functions and those related to the client operations of Next Financial Limited
(refer to note 21).
97
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
7 Income tax
(a) Income tax expense/(benefit)
Income tax expenses is attributable to:
Continuing operations
Discontinued operations
Total income tax expense/(benefit)
Current tax
Deferred tax
Adjustments for tax in respect of prior periods
Deferred income tax expense/(benefit) included in income tax
expense/(benefit) comprises:
Decrease in deferred tax assets
Decrease in deferred tax liabilities
2016
$'000
2015
$'000
133
76
209
(2,414)
2,410
213
209
2,228
182
2,410
8,138
663
8,801
(1,352)
10,142
11
8,801
10,358
(216)
10,142
2015
$'000
4,244
(2,801)
1,443
433
(3,580)
93
498
61
749
(1,746)
11
10,536
10,547
8,801
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax
Loss from discontinued operations before income tax
Profit before income tax
Tax at the Australian tax rate of 30% (2015 - 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Share of profits of entities under joint control
Impairment
Non-deductible expenditure
Sundry items
Loss on held for sale classification
Adjustments for tax in respect of prior periods
Deferred tax assets not recognised*
Total income tax expense/(benefit)**
2016
$'000
8,573
(1,172)
7,401
2,220
(4,776)
282
187
(171)
-
(2,258)
213
2,254
2,467
209
* Relates to deferred tax assets in relation to Pinnacle and Wilson Group income tax consolidated
groups which have not been recognised on the basis that it is not considered probable that the tax
losses giving rise to the deferred tax assets will be recovered.
** Includes $76,000 (2015- $663,000) of income tax expense recognised in loss from discontinued
operations (refer to note 8).
98
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
7
Income tax (continued)
(c) Tax losses not recognised
Unused tax losses of Pinnacle for which no deferred tax asset has been
recognised
Unused tax losses of Wilson Group for which no deferred tax asset has
been recognised
Total
Potential tax benefit at 30%
2016
$'000
2015
$'000
22,724
17,756
31,828
54,552
16,366
27,032
44,788
13,436
(d) Tax consolidation legislation
Pinnacle Investment Management Group Limited and its wholly-owned Australian controlled entities
implemented the tax consolidation legislation from 1 July 2003. Next Financial Limited and its
subsidiaries joined the tax consolidated group on 1 April 2009. The accounting policy in relation to
this legislation is set out in note 1(f) and further information is provided at Note 1(z).
8 Discontinued Operations
(a) Description
On 15 May 2015 the Company entered into transaction documents with Craigs Investment Partners,
Deutsche Australia and staff representatives of the Securities business for the purchase of 100% of
the issued shares of entities comprising the Securities business. On 26 June 2015 shareholders
approved the sale, with completion of the transaction occurring on 1 July 2015.
Under the terms of the sale agreement the Company:
transferred its shareholdings in the subsidiaries comprising its Securities business to the
purchasers;
received cash consideration of $4,000,000, and provided vendor finance with a fair value of
$868,000;
may receive a future profit share for the first two years post completion of 50% of the profit
before tax of the Securities business exceeding $3,000,000, but capped at $1,000,000 each
year;
may receive additional value for deferred tax assets if the amount utilised by the Securities
business exceeds $350,000 during the first three years post completion;
has contingent liabilities relating to its historical ownership of the business which will run off
over time;
committed to pay certain staff related costs, run-off insurances and other items.
Following completion of the transaction, the Company and the purchasers further agreed to provide
various services to each other to ensure a smooth transition of the ownership of business.
Further detail of the transaction was provided in the notice of meeting provided for the
extraordinary general meeting dated 20 May 2015.
99
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
8 Discontinued Operations (continued)
(b) Financial performance and cash flows
The profit/(loss) for the current and prior corresponding period related to the discontinued
operations were as follows:
Revenue
Expenses
Results from operating activities
Loss on disposal of discontinued operation (see (c) below)
Re-measurement of Disposal Group to fair value less costs of disposal
Transaction related costs
Loss before tax from discontinued operations
Income tax expense
Loss from discontinued operation attributable to owners of
Pinnacle Investment Management Group Limited
Changes in fair value of contingent consideration
Total comprehensive loss attributable to discontinued operation
2016
$'000
-
(1,134)
(1,134)
(38)
-
-
(1,172)
(76)
(1,248)
943
(305)
The cash-flows for the current and prior corresponding period related to the discontinued
operations were as follows:
Net cash (outflow) from operating activities
Net cash inflow from investing activities
Net cash inflow from financing activities
Net cash flow for the year
(c)
Details of the disposal
2016
$'000
(161)
4,000
-
3,839
The carrying amounts of assets and liabilities as at the date of disposal (1 July 2015) were:
Current Assets
Cash
Trade and other receivables
Other current assets
Non-Current Assets
Deferred tax Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Other current liabilities
Non-Current Liabilities
Provisions
Other non-current liabilities
Total Liabilities
Net assets
2015
$'000
51,982
(50,405)
1,577
-
(2,497)
(1,881)
(2,801)
(663)
(3,464)
-
(3,464)
2015
$'000
(1,076)
-
6,360
5,284
$'000
10,246
2,987
1,634
14,867
2,715
17,582
(5,299)
(3,563)
(104)
(8,966)
(605)
(1,868)
11,439
6,143
100
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
8 Discontinued Operations (continued)
(c) Details of the disposal
Consideration received / receivable in cash and cash equivalents
Contingent consideration
Other consideration
Disposal consideration
Carrying value of net assets disposed of
Gain on disposal before changes in fair value of contingent consideration
Changes in fair value of contingent consideration recognised in other comprehensive
income
Loss on disposal
$’000
5,237
943
868
7,048
(6,143)
905
(943)
(38)
The agreement for the disposal included items of contingent consideration relating to a profit-share
over the first two years post disposal, and utilisation of deferred tax assets in the first 3 years
following disposal. At 30 June 2016 the fair value of these items has been assessed at $943,000.
This carrying value has been included in available-for-sale financial assets in the statement of
financial position.
(d)
Assets and liabilities of disposal group classified as held-for-sale
Assets
Cash and cash equivalents
Trade and other receivables
Deferred tax assets
Other non-current assets
Assets of disposal group held-for-sale
Liabilities
Trade and other payables
Provisions
Other non-current liabilities
Liabilities of disposal group held-for-sale
9 Current assets - Cash and cash equivalents
Available cash at bank and on hand
Fixed-term deposits
Other committed cash at bank and on hand
(a) Risk exposure
2015
$'000
10,561
3,659
2,716
158
17,094
6,093
4,160
1,972
12,225
2015
$'000
13,339
217
14
13,570
2016
$'000
13,238
305
1
13,544
The Group's exposure to interest rate risk is discussed in note 2. The maximum exposure to credit
risk at the end of each reporting period is the carrying amount of each class of cash and cash
equivalents mentioned above.
(b) Fixed term and at-call deposits
Fixed-term and at-call deposits bear floating interest rates between 1.70% and 3.25% (2015: 2.0%
and 3.15%). At-call deposits have an average maturity of 30 days. Fixed-term deposits have a
maturity ranging from 90 days to 1 year.
101
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
10 Current assets - Trade and other receivables
2016
$'000
2015
$'000
Trade receivables
Related party receivable
Income receivable
Other receivables
Prepayments
3,235
-
476
1,696
263
(a) Effective interest rates and credit risk
All of the Group's receivables are classified as current and are non-interest bearing.
5,670
1,416
29
814
-
901
3,160
There is no significant concentration of credit risk with relation to current receivables. Refer to note
2 for more information on the financial risk management policy of the Group.
(b) Fair value and credit risk
Information about the Group's exposure to credit risk and about the methods and assumptions used
in determining fair value is provided in note 2(b) and 2(d).
11 Current assets - Financial assets at fair value through profit or loss
Australian listed securities
Other unlisted equity securities
Unlisted unit trusts
2016
$'000
285
231
10,402
10,918
2015
$'000
-
358
5,837
6,195
(a) Risk exposure and fair value measurements
Information about the Group's exposure to price risk and the methods and assumptions used in
determining fair value is provided in note 2.
12 Derivative financial assets and liabilities
Current assets
Exchange traded put options (a)
Total current derivative financial instrument assets
(a) Instruments used by the group
2016
$'000
2015
$'000
-
-
89
89
The Group from time to time purchases exchange traded options to specifically hedge against
market risks associated with its Principal Investments portfolio.
(b) Risk exposures and fair value measurements
Information about the Group's exposure to credit and price risk and methods and assumptions used
in determining fair values is provided in note 2. The maximum exposure to credit risk at the end of
each reporting period is the fair value of each class of derivative financial assets mentioned above.
102
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
13 Current assets - Other current assets
Loans from Pinnacle to entities under joint control
Capitalised transaction costs
2016
$'000
1,766
895
2,661
2015
$'000
3,637
-
3,637
Loans to entities under joint control includes accumulated equity accounted losses where the
associated equity investment value is less than zero as a result of accumulated losses being greater
than the cost of the investment.
As outlined in note 3(a) loans to entities under joint control are assessed at least annually for
possible indicators of impairment. Where indicators of impairment exist, the recoverability of these
loans is determined. This relies on assumptions regarding the future profitability of the jointly
controlled entities and their ability to service the loans.
14 Non-current assets - Property, plant and equipment
Plant and
equipment
$'000
Fixtures
and fittings
$'000
Leasehold
improvements
$'000
Total
$'000
At 30 June 2014
Cost
Accumulated depreciation and impairment
Net book amount
4,595
(4,547)
48
762
(762)
-
7,980
(6,791)
1,189
13,337
(12,100)
1,237
Year ended 30 June 2015
Opening net book amount
Additions
Disposals
Depreciation charge
Depreciation charge - discontinued
operations
Transfer to assets of disposal group held
for sale
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions
Disposals
Depreciation on disposal
Depreciation charge
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
48
57
(18)
(12)
(13)
(17)
45
85
(40)
45
45
97
(26)
26
(32)
110
156
(46)
110
-
9
(1)
-
-
-
8
19
(11)
8
8
11
-
-
(1)
18
30
(12)
18
1,189
222
-
(19)
(690)
1,237
288
(19)
(31)
(703)
(702)
(719)
-
-
-
-
-
10
-
-
(3)
7
10
(3)
7
53
104
(51)
53
53
118
(26)
26
(36)
135
196
(61)
135
Property, plant and equipment is held by subsidiary entities – Ariano Pty Ltd, Pinnacle Services
Administration Pty Ltd and Next Financial Limited
103
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
15 Net deferred tax assets
Deferred tax assets (a)
Deferred tax liabilities (b)
Net deferred tax assets
(a) Deferred tax assets
The deferred tax asset balance comprises temporary differences
attributable to:
Unrealised loss on fair value assets
Other
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after 12 months
2016
$'000
425
(425)
-
2015
$'000
242
(242)
-
2016
$'000
2015
$'000
260
165
425
(425)
-
-
425
425
222
20
242
(242)
-
2
240
242
* A deferred tax asset in relation to tax losses is regarded as recoverable and therefore recognised
only when, on the basis of all available evidence, it can be regarded as probable that there will be
suitable taxable profits against which to recover the losses and from which the future reversal of
underlying timing differences can be deducted.
As at 30 June 2015 the deferred tax assets of continuing operations were derecognised on the basis
that they could no longer be recognised under this criteria.
Movements in deferred tax
assets
At 1 July 2014
Adjustments relating to prior
periods
(Charged)/credited
- to profit or loss - current
- to profit or loss - deferred
Transfer to assets of disposal
group held for sale
At 30 June 2015
At 1 July 2015
Adjustments relating to prior
periods
(Charged)/credited
- to profit or loss – current
- to profit or loss - deferred
At 30 June 2016
Tax losses
$'000
8,622
Capital
Allowances
$'000
1,087
Unrealised
loss on FV
assets
$'000
230
(9)
598
(9,211)
-
-
-
2,410
(2,410)
-
-
-
108
(1,195)
-
-
-
-
-
-
-
(8)
-
222
222
-
38
260
Other
$'000
3,345
Total
$'000
13,284
2
(7)
-
(1,247)
598
(10,358)
(2,080)
20
(3,275)
242
20
242
-
145
165
2,410
(2,227)
425
104
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
15 Net deferred tax assets (continued)
(b) Deferred tax liabilities
The deferred tax liabilities balance comprises temporary differences attributable to:
2016
$'000
2015
$'000
Financial assets at fair value through profit or loss
Receivables
Total deferred tax liabilities
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after 12 months
Movements in deferred tax liabilities Property,
plant
and
equipment
$'000
Put option
premiums
$'000
At 1 July 2014
Adjustments relating to prior periods
Charged/(credited)
- to profit or loss - deferred
Transfer to assets of disposal group
held for sale
At 30 June 2015
At 1 July 2015
Charged/(credited)
- to profit or loss - deferred
At 30 June 2016
444
-
104
(548)
-
-
-
-
106
-
(106)
-
-
-
-
-
Financial
assets at
fair value
through
profit/loss
$'000
427
(3)
(184)
-
240
240
185
425
16 Non-current assets - Other non-current assets
Loans to employee shareholders
Loans from Pinnacle to entities under joint control
425
-
425
-
425
425
240
2
242
2
240
242
Other
$'000
Total
$'000
44
-
(30)
(12)
2
2
(2)
-
1,021
(3)
(216)
(560)
242
242
183
425
2016
$'000
2015
$'000
-
-
-
488
265
753
Loans to employee shareholders at balance date are used by employees for the purpose of
purchasing shares in entities under joint control, are repayable on sale of shares or termination of
employment and are primarily repaid via dividends received from those entities.
105
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
17 Current liabilities - Trade and other payables
Trade payables
Accrued expenses
Accrued bonuses
Other payables
18 Current liabilities - Provisions
Employee benefits - annual leave and long service leave
Transaction - related costs *
2016
$'000
319
2,168
3,229
490
6,206
2016
$'000
979
-
979
2015
$'000
493
1,418
2,262
920
5,093
2015
$'000
816
1,123
1,939
* Transaction related costs relate to the disposal of the Securities business (refer note 8).
(a) Movements in provisions
Movements in each class of provision during the financial year, are set out below:
2016
Current
Carrying amount at the start of the year
Additional provisions recognised
Amounts utilised during the year
Carrying amount at end of year
19 Current liabilities - Other current liabilities
Payables to disposal group
Transaction
related Costs
$'000
Employee
Benefits
$'000
1,123
-
(1,123)
-
816
163
-
979
2016
$'000
2015
$'000
1,572
1,572
-
-
106
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
20 Current liabilities - Financing arrangements
(a) Secured liabilities and assets pledged as security
Bank Guarantee Facility
The Group has a bank guarantee facility which is secured by a general security deed over the assets
of a subsidiary of the Group, Ariano Pty Ltd, and guarantees provided by the Company and other
Group entities (excluding entities within the Pinnacle Investment Management Limited and Next
Financial Limited groups) – refer note 27. These facilities expire on the 30 June 2017:
Intraday settlement facility (amount used at balance date - $nil)
Bank overdraft (amount used at balance date - $nil)
Bank guarantee (amount used at balance date - $5,050,000)
2016
$'000
-
-
5,500
5,500
2015
$'000
7,500
2,500
10,000
20,000
On 1 July 2015 the facility was amended as a result of the sale of the Wilson HTM Securities business
(refer note 8). The intraday settlement facility and overdraft facility were removed and the bank
guarantee facility reduced to $5,050,000.
On 27 June 2016 the bank guarantee facility was amended to increase the amount of the facility
from $5,050,000 to $5,500,000. The amended facility is supported by a negative pledge that
states that (subject to certain exceptions) the Group will not provide any security over its assets and
that the Group's consolidated tangible net assets must not be less than 60% of its total tangible
assets. Ongoing compliance with covenants is reviewed on a regular basis and compliance was
maintained during the period.
Banking funding facilities for loans to clients of Next Financial Limited
Next Financial Limited previously utilised funding lines provided by Westpac for loans to clients
through its geared investment product. These loans were secured by equitable charges over
securities and cash which Next Financial Limited held as trustee for clients.
The facility was a five year term funding agreement provided on a limited recourse basis and
secured by the securities (listed equities, cash and derivatives) held in custody. The facility carried
specific undertakings in relation to maintaining net equity values, minimum financial solvency ratios
and maintain prescribed collateral, gearing and derivative margin exposure limits.
At 30 June 2015 all funding lines with Westpac had been repaid. The facility was not utilised during
the year ended 30 June 2016 and has now been closed.
107
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
20 Current liabilities - Financing arrangements (continued)
Assets pledged as security
The carrying amounts of assets pledged as security at balance date in relation to the corporate loan
facilities are set out below:
Current
Cash and cash equivalents
Receivables
Financial assets at fair value through profit or loss
Other current assets
Total current assets pledged as security
Non-current
Other financial assets
Other non-current assets
Plant and equipment
Total non-current assets pledged as security
Total assets pledged as security
2016
$'000
78
420
-
1,119
1,617
-
176
70
246
1,863
2015
$'000
16,618
32,193
5,127
14,000
67,938
13,579
-
719
14,298
82,236
The balances for the prior year include assets of the Wilson HTM Securities business prior to its
disposal on 1 July 2015.
(b) Interest rate risk exposure
Information about the Group's exposure to interest rate changes are provided in note 2.
21 Non-current liabilities - Provisions
Employee benefits - long service leave
2016
$'000
2015
$'000
73
73
232
232
(a) Movements in provisions
Movements in each class of provision during the financial year are set out below:
2016
Carrying amount at start of year
Amounts utilised during the year
Carrying amount at end of year
Employee
Benefits
$'000
232
(159)
73
108
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
2016
Shares
2015
Shares
111,131,752
111,131,752
110,531,752
110,531,752
2016
$'000
61,946
61,946
2015
$'000
61,466
61,466
Number of
shares
Issue
price
$'000
103,013,752
57,534
534,398
68,000
$0.00
132
-
4,075,000
$0.27
1,095
2,275,000
$0.32
500,000
$0.75
600,000
$0.60
(534,398)
-
110,531,752
600,000
$0.60
-
111,131,752
725
375
357
(132)
1,380
61,466
357
123
61,946
22 Contributed equity
(a) Share capital
Ordinary shares:
Fully paid contributed equity - Company
Total contributed equity
(b) Movements in ordinary share capital
Date
Details
1 July 2014
Opening balance
Add: Treasury stock held at the
beginning of the year
Exercise of employee options – Sept
2009 grant
Exercise of employee options – Feb
2013 grant
Exercise of employee options – Feb
2013 grant
Exercise of employee options – Feb
2014 grant
Exercise of employee options – Nov
2014 grant
Treasury stock utilised upon exercise of
employee options
Transfer from share-based payments
reserve
30 June 2015 Balance
Exercise of employee options – Nov
2014 grant
Transfer from share-based payments
reserve
30 June 2016 Balance
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is
entitled to one vote and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised
capital.
(d) Treasury stock
Treasury stock are shares in Pinnacle Investment Management Group Limited that were held by the
employee share trust for the purpose of issuing shares under the Pinnacle Investment Management
Group Employee Option Share Plan, and shares forfeited under employee shareholder loan
arrangements. There was no treasury stock held at 30 June 2016.
109
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
22 Contributed equity (continued)
(e) Employee share plans
Information relating to the Pinnacle Investment Management Group Employee Option Share Plan,
including details of options issued, exercised and lapsed during the financial year and options
outstanding at the end of the financial year, is set out in note 35.
(f) Capital risk management
The Group's objective when managing capital is to safeguard its ability to continue as a going
concern, so it can continue to provide returns for shareholders, benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets.
The Group monitors capital on the basis of both Group liquidity and capital and liquidity ratios
required under various licences held by subsidiaries.
There have been no material instances of non-compliance with externally imposed capital
requirements in the current period.
23 Reserves and accumulated losses
(a) Reserves
Share-based payments reserve
Available-for-sale financial assets reserve
Movements:
Share-based payments reserve
Balance at 1 July
Share-based payments expense
Tax effect of share based payment arrangement
Transfer to contributed equity (options exercised)
Issue of shares held by employee share plans to employees
Balance at 30 June
Available-for-sale financial assets reserve
Balance at 1 July
Changes in fair value of available-for-sale financial assets (refer note 8)
Balance at 30 June
2016
$'000
2015
$'000
224
943
1,167
(307)
-
(307)
(307)
531
-
-
-
224
-
943
943
1,231
712
(747)
(1,380)
(123)
(307)
-
-
-
The share-based payments reserve is used to recognise:
•
•
•
•
the grant date fair value of options issued to employees but not exercised;
the grant date fair value of shares issued to employees;
the issue of shares held by employee share plans to employees; and
the grant date fair value of the Pinnacle Long-term Employee Incentive
Plan.
The available-for-sale financial assets reserve is used to recognise changes in the fair value of
available-for-sale financial assets.
110
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
23 Reserves and accumulated losses (continued)
(b) Accumulated losses
Movements in accumulated losses were as follows:
Balance at 1 July
Profit/(loss) and total comprehensive income for the year attributable to
owners of Pinnacle Investment Management Group Limited
Dividends paid to shareholders
Balance at 30 June
24 Dividends
(a) Ordinary shares
Special dividend of 2.25 cents per fully paid share paid on 18 September 2015
Fully franked based on tax paid @ 30.0%
Final ordinary dividend for the year ended 30 June 2014 of 2.75 cents
per fully paid share paid on 18 September 2014
Fully franked based on tax paid @ 30.0%
2016
$'000
(20,486)
4,537
(4,033)
(19,982)
2015
$'000
(6,924)
(8,960)
(4,602)
(20,486)
2016
$'000
2,487
2015
$'000
-
-
2,848
Interim dividend for the year ended 30 June 2016 of 1.40 cents (2015 – 1.60
cents) per fully paid share paid on 31 March 2016 (2015 - 17 April 2015)
Fully franked based on tax paid @ 30.0%
Total dividends paid
1,546
4,033
1,754
4,602
(b) Dividends not recognised at the end of the reporting period
2016
$'000
2015
$'000
Since year end the directors have declared the payment of a special dividend
of 5.0 cents per fully paid ordinary share (2015 – special dividend of 2.25
cents) fully franked based on tax paid at 30%. The aggregate amount of the
dividend expected to be paid on 9 September 2016, but not recognised as a
liability at year end, is:
5,557
2,487
Since year end the directors have declared the payment of a final dividend of
1.9 cents per fully paid ordinary share (2015 - $nil) fully franked based on tax
paid at 30%. The aggregate amount of the dividend expected to be paid on 3
October 2016, but not recognised as a liability at year end, is:
Total dividends not recognised at the end of the reporting period
2,815
8,372
-
2,487
(c) Franked dividends
The franked portions of final dividends recommended after 30 June 2016 will be franked out of
existing franking credits.
2016
$'000
2015
$'000
Franking credits available for subsequent financial years based on a tax rate
of 30% (2015 - 30%)
26,578
22,717
111
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
24 Dividends (continued)
The above amounts represent the balance of the franking account as at the end of the reporting
period, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income
tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the
reporting date; and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the
end of each reporting date.
The consolidated amounts include franking credits that would be available to the Company if
distributable profits of subsidiaries were paid as dividends.
25 Key Management Personnel
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
2016
$
2,377,657
122,358
4,420
85,000
89,661
2015
$
3,051,578
138,289
64,317
-
203,052
2,679,096
3,457,236
Certain Pinnacle Key Management Personnel are party to the long term employee incentive
arrangement described in note 1 (r)(vii). At 30 June 2016, the balance of loans issued to Pinnacle
Key Management Personnel was $1,272,917 (2015 - $1,272,917) relating to 5,160 (2015 - 5,160 shares)
shares issued in Pinnacle.
Detailed remuneration disclosures for Key Management Personnel are provided in the Remuneration
Report.
(b) Equity instrument disclosures relating to Key Management Personnel
(i) Option and rights holdings
The numbers of options and rights over ordinary shares in the Company held during the financial
year by the directors of Pinnacle Investment Management Group Limited and other Key
Management Personnel of the Group, including their personally related parties, are set out below.
Balance at start of year
Granted as compensation
Exercised
Expired and other changes*
Balance at end of year
2016
Number
600,000
1,175,000
(600,000)
-
1,175,000
2015
Number
220,000
1,200,000
(1,550,000)
730,000
600,000
*includes changes due to staff commencing or ceasing to be Key Management Personnel during the
year.
112
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
25 Key Management Personnel (continued)
(b) Equity instrument disclosures relating to Key Management Personnel (continued)
(ii) Shareholdings
The numbers of shares in the Company held during the financial year by the directors of Pinnacle
Investment Management Group Limited and other Key Management Personnel of the Group,
including their related parties, are set out below.
Pinnacle Investment Management Group Limited
Balance at start of year
Purchased
Sold and other changes*
Balance at end of year
2016
Number
2015
Number
28,973,989 24,036,843
1,550,000
600,000
(1,000,000)
3,387,146
28,573,989 28,973,989
*includes changes due to staff commencing or ceasing to be Key Management Personnel during the
year.
Pinnacle Investment Management Limited
Balance at start of year
Granted as compensation
Purchased
Other changes*
Balance at end of year
2016
Number
2015
Number
36,840
-
-
-
36,840
31,680
-
-
5,160
36,840
*includes changes due to staff commencing or ceasing to be Key Management Personnel during the
year.
(c) Loans to Key Management Personnel
Details of loans made to Directors of Pinnacle Investment Management Group Limited and other Key
Management Personnel of the Group, including their related parties, are set out below.
(i)
Aggregates for Key Management Personnel
Balance
at the
start of
the year
$
2016
2015
2,391,917
1,119,000
Interest
paid and
payable
for the
year
$
-
-
Loans
advanced
during the
year
$
-
856,845
Loan
repayments
received
$
Other
Changes*
$
Balance at
the end of
the year
$
Interest
not
charged
$
Number in
Group at
the end of
the year
-
-
-
416,072
2,391,917 135,144
97,113
2,391,917
2
2
*includes changes due to staff commencing or ceasing to be Key Management Personnel during the
year.
The amounts shown for interest not charged in the table above represents the difference between the
amount paid and payable for the year and the amount of interest that would have been charged on an
arm’s length basis.
113
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
26 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the
Company and its related practices:
(i) Audit and other assurance services
Audit and review of financial statements
Other assurance services:
Audit of regulatory returns
Audit of compliance plan - Responsible entity *
Other assurance services
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax services
Total remuneration for taxation services
(iii) Other services
Other services
Total remuneration of PricewaterhouseCoopers Australia
Total remuneration of auditors
2016
$
2015
$
364,115
280,540
26,000
26,395
59,765
476,275
52,860
54,952
43,146
431,498
128,588
128,588
130,531
130,531
-
604,863
604,863
-
562,029
562,029
* Compliance plan audit charges are on-charged to managed funds to which responsible entity
services are provided.
27 Contingencies
(a) Contingent assets and liabilities
The Group had contingent liabilities at 30 June 2016 in respect of:
(i) Guarantees
The Group has provided guarantees in respect of the following items:
(a) leases of related entities (via bank guarantees) amounting to $nil (2015 - $2,679,000).
(b) Australian Securities and Investments Commission deposit of $nil (2015 - $40,000)
(c) Australian Financial Services Licence Net Tangible Asset obligations (via bank guarantee) in
respect of:
(i) Pinnacle Funds Services Limited - $5,000,000 (2015 - $5,000,000)
(ii) Pinnacle RE Services Limited - $50,000 (2015 - $50,000)
The bank guarantee facility was amended on 1 July 2015 as a result of the sale of the Wilson HTM
Securities business and the facility limit was reduced to $5,050,000 (refer note 20). The facility was
subsequently amended on 27 June 2016 to $5,500,000. The unused bank guarantee facility available
at balance date was $450,000 (30 June 2015 - $2,231,000).
These guarantees may give rise to liabilities in the Company if the related entities do not meet their
obligations that are subject to the guarantees.
No material losses are anticipated in respect of any of the above contingent liabilities.
(ii) Disposal of Securities Business
The group has contingent liabilities and assets in respect to its historical ownership of the Wilson
HTM Securities business prior to its disposal on 1 July 2015 (refer note 8).
114
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
28 Commitments
(a) Capital commitments
There were no capital expenditure commitments at balance sheet date.
(b) Lease commitments: Group as lessee
Commitments in relation to leases contracted for at the reporting date
but not recognised as liabilities are payable as follows:
Within one year
Later than one year but not later than five years
Non-cancellable operating leases
(c) Other expenditure commitments
Commitments contracted for at reporting date but not recognised as
liabilities are payable as follows:
Within one year
Later than one year and not later than five years
2016
$'000
2015
$'000
598
2,070
2,668
2,668
1,717
3,618
5,335
5,335
2016
$'000
2015
$'000
123
145
268
1,381
354
1,735
(d) Other commitments
A controlled entity - Pinnacle has previously entered into agreements whereby it has agreed to
advance sufficient funds to entities under joint control to cover their operating expenses until such
time as the entity becomes profitable on a monthly basis and is generating positive cash flows.
Further information in relation to these balances is provided in note 31.
29 Related party transactions
(a) Parent Entity
The Parent Entity of the Group is Pinnacle Investment Management Group Limited (refer note 36).
(b) Subsidiaries and jointly controlled entities
Interests in subsidiaries are set out in note 30.
Interests in jointly controlled entities are set out in note 31.
Details of the disposal of a controlled entity are set out in note 8 and 30.
Details of service charges to jointly controlled entities are provided in note 5.
Details of dividend payments from entities under joint control are provided in note 31.
115
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
29 Related party transactions(continued)
(c) Key Management Personnel
Disclosure relating to Key Management Personnel is set out in note 25.
Disclosure relating to share-based payments is set out in note 35.
(d) Transactions with other related parties
The following transactions occurred with related parties:
Transactions with Deutsche Bank AG
Corporate finance fees received from Deutsche Bank AG
Interest revenue received from Deutsche Bank AG
2016
$
2015
$
-
-
-
1,214,450
363
1,214,813
Other transactions
Management fees, performance fees and brokerage received from
investments in unlisted unit trusts managed by subsidiaries
2,018,969
1,361,731
All transactions were made on normal commercial terms and conditions and at market rates.
* At 30 June 2016 management fees of $84,685 (30 June 2015 - $72,091) and performance fees of
$1,104,778 (30 June 2015 - $25,759) were included in trade and other receivables.
Deutsche Australia
Deutsche Australia was a substantial shareholder of the Company and held 9.22% of the Company’s
shares at balance date (2015 - 18.55%).
Steven Skala was a non-executive director of the Company until his resignation on 26 August 2016
and is a director of Deutsche Australia Limited and Vice Chairman Australia and New Zealand of
Deutsche Bank AG.
Deutsche Bank AG participated in the purchase of the Wilson HTM Securities business from the
Company on 1 July 2015 (refer note 8). Prior to the sale of the Securities business, in accordance
with its obligations under the shareholder agreement with the Company, Deutsche Bank AG
provided its Australian equities research product to the Company for use as the basis for the
preparation of publications or briefing notes for distribution solely to the Securities business’ Private
Wealth Management clients under the Wilson HTM brand.
Steven Wilson AM
In February 2014, Mr Wilson entered into an agreement with Wilson HTM Ltd, a subsidiary of the
Company, to provide investment management services. This agreement is on the same terms and
conditions as other Wilson HTM Ltd advisors. Wilson HTM Ltd was sold on 1 July 2015 and is no
longer a subsidiary of the Company. For the period ended 30 June 2015 $28,236 was paid to Mr
Wilson under this agreement.
Chum Darvall AM
A director of the Company until 31 August 2015, Chum Darvall AM was appointed in February 2014
as a member of the Palisade Investment Partners Advisory Board, which is associated with a jointly
controlled entity. For the period during which he was a director of the Company Mr Darvall received
fees of $10,000 from the entity (2015 - $60,000).
116
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
29 Related party transactions(continued)
Issue of options – Pinnacle KMP
On 1 July 2015, the Company issued 4,250,000 options in the Company to senior executives of its
subsidiary Pinnacle Investment Management Limited. This included the issue of 750,000 options to
Ian Macoun, and 425,000 options to Alex Ihlenfeldt, who are both Key Management Personnel of the
consolidated entity.
The options were issued under the Pinnacle Investment Management Group Employee Option Share
Plan at an exercise price of 98.6 cents per share. They were granted for no consideration and vest
based on fulfilment of specified service conditions. The options vest in two equal tranches (375,000
options per tranche for Mr Macoun, 212,500 options per tranche for Mr Ihlenfeldt) on 1 Jan 2018 and 1
Jan 2020 respectively, with a six month exercise period post vesting. The options are subject to
claw-back arrangements and bad leaver provisions. Any options that remain unexercised at the end
of the exercise period will lapse.
Funds managed by subsidiaries
Subsidiary companies received responsible entity, management and performance fees in relation to
the management of the Spheria Australian Smaller Companies Fund (formerly Wilson Group Priority
Growth Fund) and Spheria Australian MidCap Fund (formerly Wilson Group Priority Core Fund). The
Group also holds an investment in the Spheria Australian Smaller Companies Fund and Spheria
Australian MidCap Fund and these are included in financial assets at fair value through profit or loss.
The gains and losses related to these investments are included in fair value gains and losses on
financial assets held at fair value through profit or loss.
(e) Loans to/from related parties
Loans with entities under joint control
Balance at 1 July
Loans advanced
Loans repaid
Impairment
Balance at 30 June
(f) Investments in funds managed by subsidiaries
Balance at 1 July
Additions
Revaluation
Balance at 30 June
2016
$
2015
$
4,148,478
300,000
(3,000,000)
317,524
1,766,002
3,320,216
2,278,268
(1,150,000)
(300,006)
4,148,478
2016
$
2015
$
4,769,470
2,000,000
651,501
7,420,971
5,245,642
-
(476,172)
4,769,470
(g) Guarantees
The Group has provided guarantees to subsidiaries as described in note 27.
117
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
30 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
significant subsidiaries in accordance with the accounting policy described in note 1(b). The country
of incorporation of all subsidiaries is also their principal place of business.
Name of entity
WIG Option Plan Managers Pty Ltd
Priority Funds Management Pty Ltd (a)
Priority Investment Management Pty Ltd (a)
Ariano Pty Ltd
Next Financial Limited
Next Financial Nominees Pty Ltd
Next Financial Nominees No.2 Pty Ltd
Investment Solutions Client Services Pty Ltd
Pinnacle Investment Management Limited
Pinnacle Funds Services Limited
Pinnacle Services Administration Pty Ltd
Pinnacle RE Services Limited
Plato Global Shares Income Fund (Managed
Risk)
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Class of
security
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Ordinary share
Units
Equity holding
2015
%
100
100
100
100
100
100
100
100
75
75
75
75
-
2016
%
100
100
100
100
100
100
100
100
75
75
75
75
100
Discontinued Operations
Wilson HTM NewCo 2015 Pty Ltd (b)
Wilson HTM Corporate Finance Ltd (b)
Wilson HTM Services Pty Ltd (b)
Wilson HTM Ltd (b)
Australia
Australia
Australia
Australia
Ordinary share
Ordinary share
Ordinary share
Ordinary share
-
-
-
-
100
100
100
100
(a) In July 2015 Wilson HTM Funds Management Pty Ltd was renamed Priority Funds Management
Pty Ltd and Wilson HTM Investment Management Pty Ltd was renamed Priority Investment
Management Pty Ltd.
(b) On 1 July 2015 the shares of Wilson HTM Corporate Finance Ltd, and Wilson HTM Services Pty
Ltd were transferred as part of the sale of the Securities business (refer note 8). Set out below is
summarised financial information for each subsidiary that has non-controlling interests that are
material to the Group. The amounts disclosed for each subsidiary are before inter-entity
eliminations:
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Accumulated non-controlling interest
Summarised statement of comprehensive income
Revenue
Share of net profit of jointly controlled entities accounted for using
the equity method
Expenses
Total comprehensive income
Total comprehensive income allocated to non-controlling interest
Pinnacle Investment
Management Limited
2015
$000
2016
$000
17,563
24,779
42,342
15,635
74
15,709
26,633
6,452
12,932
19,983
32,915
5,139
12,230
17,369
15,546
3,797
6,003
5,860
15,920
(11,300)
10,623
2,655
11,932
(10,263)
7,529
1,602
118
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
Pinnacle Investment
Management Limited
2015
$000
2016
$000
-
409
6,779
(83)
(2,000)
4,696
7,669
(1,464)
(5,086)
1,119
30 Subsidiaries (continued)
Dividends paid to non-controlling interest
Summarised statement of cash flows
Net cash inflows from operating activities
Net cash outflows from investing activities
Net cash outflows from financing activities
Net increase in cash and cash equivalents
Unconsolidated structured entities
A structured entity is an entity whereby voting or similar rights are not the dominant factor in
deciding who controls the entity and the relevant activities are directed by means of contractual
arrangements.
The Group had influence over the funds that a subsidiary, Priority Investment Management Pty Ltd,
managed due to its power to participate in the financial and operating policy decisions of the
investee through its investment management agreement. Priority Investment Management Pty Ltd
ceased to be the investment manager on 1 July 2015 and was replaced by Spheria Asset
Management Pty Limited, an entity under joint control.
Spheria Australian Smaller Companies Fund and Spheria Australian MidCap Fund are considered to
be structured entities in accordance with AASB 12. The Group has made seed investments into these
funds in order to provide start up support while external investment is received. The Group also
received management and performance fees for its role as investment manager of the funds (refer
note 5 and 29(d)). The Group holds an investment in both funds. The funds invest in Australian listed
equities.
The nature and extent of the Group's investment in funds is summarised below:
Spheria
Australian
Smaller
Companies
Fund
2016
$'000
Spheria
Australian
Smaller
Companies
Fund
2015
$'000
Spheria
Australian
MidCap
Fund 2016
$'000
Spheria
Australian
MidCap Fund
2015
$'000
2,236
703
2,939
2,939
45,361
40,776
-
5,185
-
-
-
36,723
34,878
606
5,791
5,791
32,182
29,323
4,799
24
4,823
4,823
27,856
26,325
Current Assets
Financial assets at fair value
through profit or loss
Receivables
Total Assets
Maximum exposure to loss
Net Asset Value of Funds
Fund's investment portfolio
Unless specified otherwise, the Group's maximum exposure to loss is the total of its on-balance
sheet positions at 30 June 2016. There are no additional off balance sheet arrangements which
would expose the Group to potential loss.
119
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
31 Investments accounted for using the equity method
(a) Carrying amounts
A subsidiary of the Group, Pinnacle holds investments in entities under joint control that undertake
funds management activities. Information relating to these entities under joint control is set out
below.
Name of company
Unlisted
Principal Activity
Funds Management
Plato Investment Management
Limited
Palisade Investment Partners Limited Funds Management
Funds Management
Hyperion Holdings Limited
Foray Enterprises Pty Limited
Funds Management
Solaris Investment Management Ltd Funds Management
Sigma Funds Management Pty Ltd*
Funds Management
Spheria Asset Management Pty Ltd
Funds Management
Antipodes Partners Holdings Pty Ltd Funds Management
*Interest disposed of during April 2016.
Ownership
interest
2016
%
2015
%
Carrying Value
2016
2015
$'000
$'000
49.92
49.92
566
-
35.71
49.99
40.00
40.00
-
40.00
23.57
35.71
49.99
40.00
40.00
26.00
-
22.50
2,279
4,239
12,741
2,786
-
632
1,285
873
4,270
11,652
2,613
-
-
-
24,528
19,408
Each of the above entities under joint control is incorporated and has their principal place of
business in Australia and are accounted for using the equity method.
(b) Summarised financial information for joint ventures
Hyperion Holdings
Limited
Foray Enterprises Pty
Limited
Summarised statement of financial position
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Net Assets
Group share in %
Reconciliation to carrying amounts:
Opening net assets 1 July
Total comprehensive income
Dividends paid
Closing net assets
Group's share of net assets
Excess consideration over share of net assets
Carrying amount
Summarised statement of comprehensive income
2016
$000
9,041
3,205
(3,808)
(187)
8,251
49.99%
2015
$000
12,486
724
(4,661)
(233)
8,316
49.99%
8,316
20,454
(20,519)
8,251
4,125
114
4,239
7,207
15,553
(14,444)
8,316
4,158
112
4,270
2016
$000
12,627
1,272
(4,956)
(44)
8,899
40.0%
5,768
5,367
(2,236)
8,899
3,560
9,181
12,741
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends received from joint venture entities
37,293
20,454
-
20,454
(10,259)
29,639
15,554
-
15,554
(7,222)
18,018
5,369
-
5,369
(900)
2015
$000
9,379
1,501
(4,388)
(724)
5,768
40.0%
4,971
5,297
(4,500)
5,768
2,307
9,345
11,652
15,742
5,296
-
5,296
(1,800)
120
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
31 Investments accounted for using the equity method (continued)
Individually immaterial jointly controlled entities
In addition to the interests disclosed above, the Group also has interests in a number of individually
immaterial entities under joint control that are accounted for using the equity method.
Aggregate carrying amount of individually immaterial joint ventures
Aggregate amounts of the Group's share of:
Profit for the year
Other comprehensive income
Total comprehensive income
(c) Movements in carrying amounts
Carrying amount at the beginning of the financial year
Purchase of shares in entities under joint control
Long term employee incentive arrangements
Share of profit after income tax
Write off of investment in entities under joint control
Recovery of impairment
Dividends received/receivable
Carrying amount at the end of the financial year
(d) Share of entities revenue, expenses and results
Revenues
Expenses
Profit before income tax
Income tax expense
Profit after income tax
(e) Summary of entities under joint control
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2016
$'000
7,548
3,702
-
3,702
2016
$'000
19,408
2,140
-
15,920
-
556
(13,496)
24,528
2016
$'000
38,070
(15,184)
22,886
(6,966)
15,920
2016
$'000
18,398
3,255
21,653
9,057
576
9,633
12,020
2015
$'000
3,485
2,194
-
2,194
2015
$'000
19,362
10
(171)
11,932
(10)
-
(11,715)
19,408
2015
$'000
29,164
(12,090)
17,074
(5,142)
11,932
2015
$'000
14,871
1,546
16,417
7,010
467
7,477
8,940
121
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
32 Events occurring after the reporting period
Purchase of non-controlling interests of Pinnacle
On 25 August 2016 the Company completed the purchase of the 24.99% non-controlling interest in its
subsidiary Pinnacle that it did not already own from the Sellers of Pinnacle (Pinnacle Vendors), following
approval by shareholders at an extraordinary general meeting on 16 August 2016, and the fulfilment of all
conditions precedent.
Issue of Shares
Under the terms of the share sale agreement the Company issued 37,043,917 shares in the Company as
consideration to the Sellers in exchange for their shareholdings in Pinnacle.
Shareholder Loans
Separately, on 25 August 2016, the Sellers acquired 10,251,152 shares in the Company from Deutsche
Australia. A portion of these shares was acquired by the Sellers with five-year loans from the Company to
the Seller’s executives totalling $3,000,000.
The key terms of the loans are as follows:
(a) The loans have a five year term, are limited recourse (subject to the limitations of any indemnification
of the relevant trustees of the Sellers) and are interest bearing;
(b) They are secured by way of a share mortgage (see further detail below);
(c) Repayment will occur at the earlier of the end of the five year term, the date on which any shares are
sold or within six months of the cessation of the employment of the Seller’s Executive;
(d) Events of default include cessation of employment of the Seller’s Executive, insolvency or any
representation or warranty or statement of the borrower being incorrect or misleading.
As security for the loans, the Company has obtained a first ranking mortgage over that number of the
Company’s shares which is equal to two times the principal loan amount in value utilising a share price of
90 cents per share. In the occasion of any event of default under the loans, the Company can exercise its
rights to enforce its security including by the appointment of a receiver.
Additionally, current loans amounting to $4,311,649 issued by Pinnacle to the Seller’s Executives were re-
issued by the Company. The current loans date from 2009, 2011, 2012 and 2015 and were used to assist
the Seller’s Executives to acquire equity in Pinnacle. The loans are interest free and (with the exception of
the 2015 loans) repayable on termination of employment or when the underlying equity is sold, whichever
event occurs earlier. The re-issued loans are secured by share mortgages with limited recourse to the
shares.
Pinnacle Investment Management Group Employee Option Share Plan
Shareholder approval was given on 16 August 2016 to amend the terms of the Pinnacle Investment
Management Group Employee Option Share Plan to facilitate the issuing of shares and provision of loans
referred to above.
Employee Options
In the event that the Company conducts a placement prior to 30 June 2020 in respect of options that are
issued but unvested as at 26 August 2016, the Sellers are entitled to subscribe to the placement for up to
a maximum of 1,416,667 shares at the subscription price of the options.
Warranties
The Company has provided a number of warranties under the share sale agreement with the Sellers’
Executives including warranties relating to information provided, solvency, title, capacity, authorisations,
financial position, information, contingent liabilities, insurance and compliance with laws. Those warranties
and the Company’s liability are qualified in time and amount by a number of matters.
Change of Name
Wilson Group Limited changed its name to Pinnacle Investment Management Group Limited on 25 August
2016.
122
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
32 Events occurring after the reporting period (continued)
Special Dividend
On 16 August 2016 the Company announced the payment of a special dividend of $0.05 per ordinary
share, with a record date of 24 August 2016 and payment date of 9 September 2016.
Director appointment and resignations
On 16 August 2016 Mr Ian Macoun was appointed Managing Director of the Company. Mr Macoun was
appointed to the board of Directors on 25 August 2016.
On 16 August 2016 Mr Alexander Grant resigned as Managing Director of the Company.
On 26 August 2016 Mr Steven Skala AO resigned as a Director of the Company.
Other than the above, no matter or circumstance has occurred subsequent to year end that has
significantly affected, or may significantly affect, the operations of the Group, the results of those
operations or the state of affairs of the Group or economic entity in subsequent financial years.
33 Additional cash flow information
(a) Reconciliation to cash at the end of the year
For the purposes of the consolidated statement of cash flows, cash and cash equivalents include
cash at bank and on hand, deposits at call and cash held in trust net of outstanding bank overdrafts.
Cash and cash equivalents at the end of the reporting period as shown in the consolidated
statement of cash flows can be reconciled to the related items in the consolidated statement of
financial position as follows:
Cash and cash equivalents
Balances per statement of cash flows
(b) Reconciliation of net cash flow from operating activities to profit
Profit/(loss) for the year
Depreciation and amortisation
Impairment
Loss on remeasurement of subsidiaries
Gain on deconsolidation of subsidiary
Equity settled share-based payments
Net gains on sale of financial assets at fair value through profit or loss
Unrealised losses/(gains) on financial assets at fair value through profit
or loss
Change in current and deferred tax balances
Change in operating assets and liabilities, net of effects from acquisition
and disposal of businesses:
Trade and other receivables
Investments
Financial assets
Trade and other payables
Provisions
Financial liabilities
Net cash (outflow)/inflow from operating activities
2016
$'000
13,544
13,544
2016
$'000
7,192
195
360
-
-
531
(483)
140
-
(1,446)
(2,795)
(4,291)
418
4
-
(175)
2015
$'000
13,570
13,570
2015
$'000
(7,358)
1,268
310
2,497
(56)
712
(312)
455
8,801
2,542
(217)
(312)
(919)
(125)
(339)
6,947
The reconciliation of net cash flow from operating activities to profit/(loss) includes both continuing
and discontinued operations
123
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
34
Earnings per share
(a) Basic earnings per share
Attributable to the ordinary equity shareholders of the Company
From continuing operations
From discontinued operations
From total operations
(b) Diluted earnings per share
Attributable to the ordinary equity shareholders of the Company
From continuing operations
From discontinued operations
From total operations
(c) Reconciliations of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit/(loss) attributable to the ordinary owners of the Company used in
calculating basic and diluted earnings per share:
From continuing operations
From discontinued operation
Profit/(loss) used in calculating basic and diluted earnings per share
(d) Weighted average number of shares used as the denominator
2016
Cents
5.2
(1.1)
4.1
2015
Cents
(5.2)
(3.3)
(8.5)
2016
Cents
2015
Cents
5.2
(1.1)
4.1
(5.2)
(3.3)
(8.5)
2016
$'000
2015
$'000
5,785
(1,248)
4,537
(5,496)
(3,464)
(8,960)
2016
Number
2015
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
110,580,932 105,748,422
Adjustments for calculation of diluted earnings per share:
Weighted average options
Weighted average number of ordinary and potential ordinary shares
used as the denominator in calculating diluted earnings per share
1,129,086
-
111,710,018 105,748,422
(e) Information concerning the classification of securities
Options granted to employees under the employee share schemes are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the
extent to which they are dilutive. The options have not been included in the determination of basic
earnings per share.
124
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
35 Share-based payments
(a) Pinnacle Investment Management Group Employee Option Share Plan
The establishment of the Pinnacle Investment Management Group Employee Option Share Plan
(EOSP) was approved by the Board during the 2007 financial year. The EOSP is designed to provide
long-term incentives for staff (including executive and non-executive directors) to deliver long-term
shareholder returns. Under the plan, participants are granted options which only vest if certain
service conditions are met. Participation in the plan is at the Board's discretion and no individual has
a contractual right to participate in the plan or to receive any guaranteed benefits.
Set out below are summaries of options granted under the plan.
Grant
date
Expiry
date
2016
26 Nov 2014 (B) 30 Jun 2016
1 July 2015 (A)
1 July 2015 (B)
30 June 2018
30 June 2020
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
$0.595 600,000
-
$0.986
-
$0.986
- 600,000
-
-
-
-
-
600,000 4,250,000 600,000 - 4,250,000 -
2,125,000
2,125,000
-
2,125,000
2,125,000
-
-
-
Weighted average exercise price
$0.60
$0.99
$0.60
-
$0.99
-
Grant
date
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Exercised
during the
year
Forfeited
during
the year
Balance
at end of
the year
2015
11 Sep 2014
11 Sept 2009
30 Jun 2015
18 Feb 2013
30 Jun 2015
18 Feb 2013
30 Jun 2015
24 Feb 2014
26 Nov 2014
30 Jun 2015
26 Nov 2014 (B) 30 Jun 2016
-
(68,000)
96,000
$0.27 4,900,000
$0.32 2,275,000
$0.75 500,000
-
-
-
-
-
-
-
600,000
7,771,000 1,200,000 (7,518,000) (853,000) 600,000
(28,000)
-
- (4,075,000) (825,000)
-
- (2,275,000)
-
(500,000)
-
-
(600,000)
600,000
-
-
600,000
$0.595
$0.595
Vested and
exercisable
at end of
the year
-
-
-
-
-
-
-
Weighted average exercise price
$0.31
$0.60
$0.34
$0.26
$0.60
-
Options forfeited were as a result of the resignation of plan members from the Group and upon the
expiry of options.
The weighted average share price at the date of exercise of options exercised during the year ended
30 June 2016 was $1.47 (2015 - $1.05).
The weighted average remaining contractual life of share options outstanding at the end of the
period was 2.6 years (2015 - 1.0 years).
Under the plan, participants are granted options which vest if the employees are still employed by
the Group at the end of the vesting period. The Board may elect to waive the continuing service
condition (for example in cases of redundancy) and allow options to continue.
Options granted under the plan carry no dividend or voting rights.
The plan is consolidated into the Group's financial statements in accordance with note 1 (b)(ii).
Shares held by the trust and not yet issued to employees at the reporting period are shown as
treasury shares in the financial statements (see note 22(d)).
125
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
35 Share-based payments (continued)
Fair value of interests granted - 26 November 2014 (B)
Options were granted for no consideration and vested based on fulfilment of specified service
conditions. Vested options are exercisable for a period of 18 weeks after vesting. The fair value of
options were determined using a Black-Scholes pricing model taking into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the instrument.
• Fair value at grant date: $0.21 per option
• Exercise price: $0.595
• Grant date: 26 November 2014
• Vesting date: 27 February 2016
• Share price at grant date: $0.70
• Expected price volatility of the Company's shares: 52%
• Expected dividend yield: 3.90%
• Risk-free interest rate: 2.77%
Fair value of interests granted – 1 July 2015 (A)
Options were granted for no consideration and vest based on fulfilment of specified service
conditions. Vested options are exercisable for a period of 6 months after vesting. The fair value of
options were determined using a Black-Scholes pricing model taking into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the instrument.
• Fair value at grant date: $0.30 per option
• Exercise price: $0.986
• Grant date: 1 July 2015
• Vesting date: 1 January 2018
• Share price at grant date: $1.20
• Expected price volatility of the Company's shares: 31%
• Expected dividend yield: 3.63%
• Risk-free interest rate: 2.03%
Fair value of interests granted – 1 July 2015 (B)
Options were granted for no consideration and vest based on fulfilment of specified service
conditions. Vested options are exercisable for a period of 6 months after vesting. The fair value of
options were determined using a Black-Scholes pricing model taking into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the instrument.
• Fair value at grant date: $0.32 per option
• Exercise price: $0.986
• Grant date: 1 July 2015
• Vesting date: 1 January 2020
• Share price at grant date: $1.20
• Expected price volatility of the Company's shares: 31%
• Expected dividend yield: 3.63%
• Risk-free interest rate: 2.31%
126
Pinnacle Investment Management Group Limited
Notes to the consolidated financial statements
30 June 2016
(continued)
35 Share-based payments (continued)
(b) Pinnacle Long-term Employee Incentive Plan
Information regarding the Pinnacle Long-term Employee Incentive Plan is provided in notes 1(r)(vii)
and 25(a).
(c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part
of incentive expenses were as follows:
Pinnacle Investment Management Group Employee Option Share Plan
Pinnacle Long-term Employee Incentive Plan
2016
$
468,316
62,699
531,015
2015
$
688,881
23,580
712,461
36 Parent Entity financial information
(a) Summary financial information
The individual financial statements for the Parent Entity show the following aggregate amounts:
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Contributed equity
Reserves
Accumulated losses
Total equity
Profit/(loss) for the year
2016
$'000
36,559
13,777
50,336
25,768
1
25,769
24,567
2015
$'000
38,659
18,942
57,601
43,219
3
43,222
14,379
61,946
1,417
(38,796)
24,567
61,526
409
(47,556)
14,379
12,794
(40,330)
13,737
Total comprehensive income/(loss)
(b) Guarantees entered into by the Parent Entity
Details of guarantees entered into by the Group are provided at note 27.
(c) Contingent liabilities of the Parent Entity
Details of contingent liabilities of the Parent Entity are provided at note 27.
No material losses are anticipated in respect of these contingent liabilities.
(d) Contractual commitments for the acquisition of property, plant and equipment
As at 30 June 2016, the Parent Entity had no contractual commitments for the acquisition of
property, plant and equipment (2015 - nil).
(40,330)
127
10 Directors’ declaration
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 65 to 127 are in
accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations
2001 and other mandatory professional reporting requirements, and
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, and
(b)
there are reasonable grounds to believe that Pinnacle Investment
Management Group Limited will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards
Board.
The directors have been given the declarations by the Managing Director and Chief
Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
A Watson
Chairman
Sydney
30 August 2016
128
129
130
12 Shareholder Information
The shareholder information set out below is correct as at 29 or 30 August 2016, as
indicated.
Shares on Issue
Distribution of securities – (as at 29 August 2016)
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
No. of shareholders
No. of shares
246
310
119
283
111
178,377
905,046
952,855
10,559,494
135,579,897
1,069
148,175,669
Unmarketable Parcels (as at 29 August 2016)
Minimum $ 500.00
parcel at $ 1.80 per unit
Minimum Parcel Size
Holders
278
55
Twenty largest shareholders (as at 30 August 2016)
%
0.1%
0.6%
0.6%
7.1%
91.5%
0
100%
Units
4052
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
MACOUN GENERATION Z PTY LTD
WARRAGAI INVESTMENTS PTY LTD
BAINPRO NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY
LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY
LTD
MACOUN SUPERANNUATION PTY LTD
KINAULD PTY LTD
MR ALEXANDER WILLIAM MACDONALD
AJF SQUARED PTY LTD
ANDREW CHAMBERS + FLEUR CHAMBERS
MR ADRIAN WHITTINGHAM
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
EARLSTON NOMINEES PTY LTD
MR DAVID FRANCIS CLEARY
MACOUN FAMILY SUPER PTY LTD
MR DAVID NOEL GROTH
USINOZ PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR ROBERT JAMES WILSON
Units
% of Units
20,243,592
10,420,000
10,251,152
9,221,466
6,041,777
5,690,004
4,750,000
4,670,090
4,647,214
4,647,214
4,647,214
3,637,615
3,120,000
3,005,925
1,968,148
2,989,424
4,021,610
1,943,018
1,633,242
1,500,000
13.66%
7.03%
6.92%
6.22%
4.08%
3.84%
3.21%
3.15%
3.14%
3.14%
3.14%
2.45%
2.11%
2.03%
1.33%
2.02%
2.71%
1.31%
1.10%
1.01%
131
Substantial Shareholdings
The names of the shareholders who have notified the Company of a substantial
holding in accordance with section 671B of the Corporations Act 2001 are:
Substantial Shareholder
No. of shares
% of total shares on
issue
IAN MACOUN
27,969,744
18.88%
STEVEN MONTEITH WILSON
AM
PACIFIC CURRENT GROUP
LIMITED AND AURORA
INVESTMENT MANAGEMENT
PTY LTD
Voting Rights
20,003,000
13.50%
10,821,468
7.30%
On a show of hands every member present in person or by proxy shall have one
vote and upon a poll each share shall have one vote.
Options and Performance Rights On Issue
Distribution of securities
There are 4,250,000 options on issue as at 30 August 2016.
The options are held by AET Structured Finance Services Pty Ltd as trustee for the
Pinnacle Investment Management Group Employee Option Share Plan. The options
are not listed.
Voting Rights
There are no voting rights attaching to the options.
132
Queensland
Brisbane
Registered Office
Level 19, 307 Queen Street
Brisbane QLD 4000
Telephone 1300 651 577
New South Wales
Sydney
Level 35, 60 Margaret Street
Sydney NSW 2000
Telephone 1300 651 577
13 Corporate Directory
Pinnacle Investment Management Group
Limited
Incorporated in Queensland on 23 April 2002
ABN
22 100 325 184
Directors
Alan Watson, Chairman
Alexander Grant, Managing Director (until 16
August 2016)
Ian Macoun, Managing Director (from 17 August
2016; executive director from 25 August 2016)
Steven Skala AO (until 26 August 2016)
Chum Darvall AM (until 31 August 2015)
Steven Wilson AM
General Counsel and Company Secretary
Eleanor Padman
Independent Member of Audit Committee
Don Mackenzie
Chief Financial Officer and Chief Operating
Officer
Alex Ihlenfeldt
Share Registry
Computershare Investor Services Pty Limited
117 Victoria Street
West End QLD 4101
Telephone 1300 552 270
ASX Code
PNI (previously WIG)
Shares are listed on the Australian Securities
Exchange
Bankers
Commonwealth Bank of Australia
Westpac Banking Corporation
Auditor
PricewaterhouseCoopers
Website Address
www.pinnacleinvestment.com.au
133
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pinnacleinvestment.com.au
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ANNUAL
REP ORT
2016