Thorney Opportunities Ltd
ABN 41 080 167 264
Appendix 4E and
2016 Annual Report
THORNEY OPPORTUNITIES LTD
ACN 080 167 264
APPENDIX 4E (Listing Rule 4.3A)
Preliminary final report for the year ended 30 June 2016
RESULTS FOR ANNOUNCEMENT TO THE MARKET
(All comparisons to year ended
30 June 2015)
$’000s
Up/Down
Movement
Revenue from ordinary activities
Profit (loss) after tax for the year
22,451
16,641
Up
Up
63%
78%
Dividend information
2016 Final dividend per share
2016 Interim dividend per share
2016 Final dividend dates
Ex‐dividend date
Record date
DRP Election date
Final dividend payment date
Amount per
share
(cents)
0.60
0.55
Franked
amount per
share
(cents)
0.60
0.55
Tax rate
for
franking
credit
30%
30%
13 September 2016
14 September 2016
15 September 2016
4 October 2016
A Dividend Reinvestment Plan (DRP) will operate in respect of the 2016 Final dividend and no discount will be
applied. The last date for receipt of election notices to participate in the DRP is Thursday 15 September 2016.
Net tangible asset backing per ordinary share
30 June 2016
60.8 cents
30 June 2015
52.1 cents
Movement
Up 16.7%
This information should be read in conjunction with the 2016 Annual Report of Thorney Opportunities Ltd and
any public announcements made in the period by Thorney Opportunities Ltd in accordance with the
continuous disclosure requirements of the Corporations Act 2001 and Listing Rules.
This report is based on the financial statements of Thorney Opportunities Ltd which have been audited by
Ernst and Young.
Company particulars
Thorney Opportunities Ltd is a disclosing entity under the Corporations Act 2001 and currently considered an
investment entity pursuant to ASX Listing Rules. The Company is primarily an investor in listed equities on the
Australian securities market.
ASX Code: TOP
Security: Thorney Opportunities Ltd fully paid ordinary shares
Directors: Alex Waislitz, Chairman
Ashok Jacob
Henry Lanzer AM
Dr Gary Weiss
Secretary: Craig Smith
Country of incorporation: Australia
Registered office: Level 39, 55 Collins Street
Melbourne Vic 3000
Contact details: Level 39, 55 Collins Street
Melbourne Vic 3000
T: + 613 9921 7116
F: + 613 9921 7100
E: craig.smith@thorney.com.au
W: www.thorneyopportunities.com.au
Investment Manager: Thorney Management Services Pty Ltd
Level 39, 55 Collins Street
Melbourne Vic 3000
AFSL: 444369
Auditor: Ernst & Young, Melbourne
8 Exhibition Street
Melbourne Vic 3000
Share Registry: Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
T: + 612 9290 9600
F: + 612 9279 0664
W: www.boardroomlimited.com.au
For all shareholder related enquiries please contact the share registry.
Annual
General
Meeting:
When: Tuesday 22 November 2016 at 11:00 am Melbourne time
Where: Arnold Bloch Leibler
Level 21, 333 Collins Street
Melbourne Vic 3000
Thorney Opportunities Ltd 2016 Annual Report
Page | 2
Contents
Chairman’s letter ............................................................................................................................................ 4
Directors’ report ............................................................................................................................................. 6
1.
2.
3.
4.
5.
6.
7.
8.
Directors ................................................................................................................................................ 6
Company Secretary ................................................................................................................................ 7
Principal activities .................................................................................................................................. 8
Result..................................................................................................................................................... 8
Dividends ............................................................................................................................................... 8
Review of operations ............................................................................................................................. 8
Financial position ................................................................................................................................... 9
Prospects ............................................................................................................................................... 9
9. Material business risks ........................................................................................................................... 9
10. Events subsequent to balance date ........................................................................................................ 9
11. 2016 Remuneration report (Audited) ................................................................................................... 10
12. Directors’ relevant interests ................................................................................................................. 13
13. Board and committee meetings ........................................................................................................... 13
14. Environmental regulation ..................................................................................................................... 14
15.
Indemnification and insurance of officers and auditor .......................................................................... 14
16. Auditor’s independence declaration ..................................................................................................... 14
17. Non‐audit services ............................................................................................................................... 14
Auditor’s independence declaration .............................................................................................................. 15
Corporate governance statement ................................................................................................................. 16
Statement of comprehensive income ............................................................................................................ 22
Statement of financial position ...................................................................................................................... 23
Statement of changes in equity ..................................................................................................................... 24
Statement of cash flows ................................................................................................................................ 25
Notes to the financial statements .................................................................................................................. 26
Directors’ declaration .................................................................................................................................... 44
Independent audit report .............................................................................................................................. 45
Shareholder information ............................................................................................................................... 47
Thorney Opportunities Ltd 2016 Annual Report
Page | 3
Chairman’s letter
Dear fellow shareholder,
I am pleased to report that for the year ended 30 June 2016, Thorney Opportunities Ltd (TOP) has delivered a
net profit after tax of $16,640,718, an increase of 77.5% over 2015. The TOP net tangible assets (NTA) per
share as at 30 June 2016 was 60.8 cents per share representing an increase of 16.7% over the twelve month
period. TOP’s gross operating performance for the twelve month period was an outstanding 26.2%, a result in
the top echelon of performance results for the period.
Along with the Board of TOP, I am very pleased with the performance of TOP during the past twelve months.
The results were achieved in an equity markets and political environment which continues to challenge the
stock‐picking ability and management skills of all financial market fund managers.
I am also delighted to fulfil my commitment to shareholders to provide consistent distributions. In that regard,
the Board has declared a 2016 final dividend of 0.6 cents per share, fully franked, up 20% from the 2015 final
dividend. This dividend has a record date of 14 September 2016 and will be paid to registered shareholders on
4 October 2016. This takes total dividends paid to shareholders for the twelve month period ended 30 June
2016 to 1.15 cents per share.
The Board will be maintaining the dividend reinvestment plan (DRP) for shareholders, details of which will be
sent shortly. There will be no discount on the pricing for the DRP as the TOP share price continues to trade
below the NTA. Since year end the NTA has further strengthened.
Since the recapitalisation of TOP in November 2013, I have regularly communicated with you in relation to the
investment activities of TOP as well as the operating and financial performance of the investee companies. I
intend to continue this approach to shareholder communications. All the Chairman’s Updates can be found on
TOP’s website, http://thorneyopportunities.com.au/chairmans‐updates/.
Below I have provided a quick snapshot on some of the major positions in the TOP portfolio ahead of a full
investment update in early September.
Service Stream Limited (SSM)
Business continuing to grow strongly, margins continue to improve, strong cash flow, quality management
team, strong Board, balance sheet in great shape even after recent 5 cents a share capital return.
AMA Group Limited (AMA)
Strong growth in revenue, significant cost savings and efficiencies achieved following the successful acquisition
of the Gemini smash repairs business, balance sheet strength and quality management enables further growth.
Money3 Corporation Limited (MNY)
Rejuvenated Board, new funding in place, growing auto loan book, strong cash flow, diminishing low credit
exposure.
Diversa Limited (DVA)
Profit upgrade announced, merger proposal from OneVue Group, new experienced Chairman, TOP has
increased its holding to a strategic 19% level.
Thorney Opportunities Ltd 2016 Annual Report
Page | 4
Chairman’s letter continued
Fairfax Media Limited (FXJ)
Strong management, excellent balance sheet, relatively new chairman, core Domain business continues to
impress. This is an example of the Thorney management team’s ability to identify value in larger cap stocks.
Austin Engineering Limited (ANG)
Recapitalised balance sheet and lower debt levels provide runway to enable business to stabilise and grow.
Combined Thorney Group and TOP holding now 25%.
Overall, I have been delighted with the performance of the TOP investment portfolio over the period. TOP will
continue to closely monitor the activities of all the investment portfolio positions as well as seek out new and
compelling investments. There are a number of new opportunities currently under review.
On behalf of my fellow board members and investment team, I want to thank you for your continued support
and interest in TOP and I look forward to a successful year ahead.
Alex Waislitz
Chairman
28 July 2016
Thorney Opportunities Ltd 2016 Annual Report
Page | 5
Directors’ report
The directors present their report, together with the financial statements of Thorney Opportunities Ltd (TOP or
Company), for the year ended 30 June 2016 (FY16) and the auditor’s report thereon. The financial statements
have been reviewed and approved by directors on the recommendation of the Audit and Risk Committee.
1.
Directors
The directors of TOP in office during the financial year and at the date of this report are as follows:
Name:
Alex Waislitz
Ashok Jacob
Henry Lanzer
Dr Gary Weiss
Period of Directorship:
Director since 21 November 2013
Director since 21 November 2013
Director since 21 November 2013
Director since 21 November 2013
Information on directors
Alex Waislitz BEc, LLB, Non‐executive Chairman
Alex Waislitz was appointed Chairman of the Company on 21 November 2013. Mr Waislitz is the founder and
Chairman of the private Thorney Investment Group, one of Australia’s most successful private investment
groups. He has extensive business and capital markets experience and has been a member of several public
company boards.
Mr Waislitz is the current Vice President of the Collingwood Football Club Limited where he has been a
director since 1998.
He served on the boards of Zoos Victoria Foundation Board and the Victorian State Government Zoological
Parks and Gardens between 2010 and 2012. He joined the International Advisory Board of Maccabi World
Union in 2012 and is a former member of the International Advisory Board for the MBA program at Ben Gurion
University School of Management.
Mr Waislitz has established registered charities; the Waislitz Foundation and the Waislitz Family Foundation.
These charities focus on community projects, education, health, indigenous programs and the arts.
Mr Waislitz is a graduate of Monash University in Law and Commerce and a Graduate of the Harvard Business
School OPM Program.
Henry D. Lanzer AM B.Com., LLB (Melb), Non‐executive Director
Henry Lanzer AM was appointed a director of the Company on 21 November 2013. Mr. Lanzer is Managing
Partner of Arnold Bloch Leibler ‐ a leading Australian commercial law firm ‐ and has over 30 years’ experience
in providing legal and strategic advice to some of Australia’s leading companies.
He is Chairman of the Audit and Risk Committee for Thorney Opportunities Ltd.
Mr Lanzer is also a director of Premier Investments Limited, a director of Just Group Limited and a director of
the TarraWarra Museum of Art. He is a Life Governor of the Mount Scopus College Council. In June 2015 Mr
Lanzer was appointed as a Member of the Order of Australia.
Thorney Opportunities Ltd 2016 Annual Report
Page | 6
Directors’ report continued
1.
Directors continued
Information on directors continued
Ashok Jacob BSc, MBA, Non‐executive Director
Ashok Jacob was appointed a director of the Company on 21 November 2013. Mr Jacob is the current
Chairman and Chief Investment Officer of Ellerston Capital Limited.
Mr Jacob is a current director of MRF Limited, is a member of the Visy Australia Advisory Board and has been
the Chair of the Australia‐India Council since April 2014.
Mr Jacob’s previous directorships include Crown Ltd, Publishing and Broadcasting Ltd, Consolidated Press
Holdings Limited, Challenger Financial Group Ltd, Fleetwood Holdings Ltd, Ecorp Ltd, CPH Investment Group
Ltd, Folkestone Ltd and SnackFoods Ltd.
He holds a Master of Business Administration from the Wharton School, University of Pennsylvania and a
Bachelor of Science from the University of Bangalore
Dr Gary Weiss LLB(Hons), LLM (with dist.), J.S.D., Non‐executive Director, Lead independent Director
Dr Gary Weiss was appointed a director of the Company on 21 November 2013. Dr Weiss has considerable
expertise in financial services businesses and extensive international business experience.
He holds several directorships including as director of Ariadne Australia Limited (since November 1989) and as
Chairman of Ridley Corporation Limited.
Other current directorships include Premier Investments Limited, Estia Health Limited, The Straits Trading
Company Limited, Pro‐Pac Packaging Limited and Tag Pacific Limited.
Dr Weiss’ previous directorships include Guinness Peat Group plc, Westfield Group, Coats plc (Chairman),
ClearView Wealth Limited (Chairman), Mercantile Investment Company Limited, Tower Australia Limited,
Australian Wealth Management Limited, Tyndall Australia Limited (Deputy Chairman), Joe White Maltings
Limited (Chairman), CIC Limited, Whitlam Turnbull & Co Limited and Industrial Equity Limited.
2.
Company Secretary
Craig Smith B.Bus (Acct), GIA(Cert), Secretary
Craig Smith CPA, ACIS was appointed secretary of the Company on 21 November 2013.
Mr Smith has been the Company Secretary and Chief Financial Officer of the private Thorney Investment
Group since 2008. Prior to joining Thorney, Mr Smith held CFO / Company Secretarial roles with ASX listed
companies Baxter Group Limited and Tolhurst Noall Limited.
Thorney Opportunities Ltd 2016 Annual Report
Page | 7
Directors’ report continued
3.
Principal activities
Thorney Opportunities Ltd is an investment company listed on the Australian Securities Exchange (ASX: TOP).
Its principal activity is making investments in listed securities.
There have been no changes in the nature of these activities during the 2016 financial year.
4.
Result
The Company’s net profit after tax for the 2016 financial year was $16,640,718 (2015: $9,373,547).
Net tangible assets were 60.8 cents per share (2015: 52.1 cents per share). Earnings per share were 9.85 cents
per share (2015: 5.57 cents per share).
5.
Dividends
On 28 July 2016 the Board declared a fully franked final dividend of 0.6 cents per share (2015: 0.5 cents per
share).
The dividend will be paid to shareholders on 4 October 2016. The dividend of approximately $1,015,951 has
not been recorded as a liability in the financial accounts. The dividend will be paid to all shareholders who are
duly recorded on the register of members as at 5pm on Wednesday, 14 September 2016.
A fully franked 2015 Final dividend of 0.5 cent per share was paid on 14 October 2015 and a fully franked 2016
Interim dividend of 0.55 cents per share was paid on 6 April 2016.
6.
Review of operations
Over the course of the financial year ended 30 June 2016 the Company increased its net profit after tax by
77.5% over the prior corresponding period to $16,640,718. The net tangible assets per share increased 16.7%
from 52.1 cents per share to 60.8 cents per share during the period.
Cash and cash equivalents as at 30 June 2016 was $8,091,960 (2015: $33,793,023). This decrease in the net
cash position reflects the steady deployment of capital into both new investment opportunities and certain
existing investment positions. The Company continues to maintain a prudent approach to its cash
management.
During 2016 TOP became a substantial shareholder in two new investment positions, TPI Enterprises Limited
and Diversa Limited. In addition, the Company, along with its associate, the private Thorney Group, increased
its shareholding, in Money3 Corporation Limited. The Company’s shareholdings in Service Stream Limited and
AMA Group Limited were reduced following strong equity market re‐ratings of both these companies. Also
during the period, TOP increased its investment in Fairfax Media Limited and Austin Engineering Limited.
Thorney Opportunities Ltd 2016 Annual Report
Page | 8
Directors’ report continued
7.
Financial position
The Company’s net tangible assets can be summarised as follows:
Net tangible asset backing per share
Net tangible assets ($)
Shares on issue
Net tangible asset backing cents per share
8.
Prospects
2016
103,012,577
169,324,894
60.8
2015
87,726,108
168,436,720
52.1
The Company remains committed to maintaining its disciplined approach to investing.
The Board is optimistic that, in this challenging economic environment, opportunities which may be attractive
to the Company will continue to emerge over the coming period.
9.
Material business risks
The Company’s risk management and compliance framework operated effectively throughout the financial
year ensuring that the 2 main areas of risk that have been identified (investment risk and operational risk)
were appropriately monitored and managed.
With an investment mandate with exposures to small to medium size capitalisation companies, TOP will
always bear market risk as it invests its capital in assets that are not risk free.
10.
Events subsequent to balance date
There were no events subsequent to balance date.
Thorney Opportunities Ltd 2016 Annual Report
Page | 9
Directors’ report continued
11.
2016 Remuneration report (Audited)
This report outlines the Key Management Personnel remuneration arrangements of the Company in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of the report, Key Management Personnel are defined as those persons and corporate
entities having authority and responsibility for planning, directing and controlling activities of the Company.
For Thorney Opportunities Ltd the Key Management Personnel are the Non‐executive Directors and the
Investment Manager.
(a) Remuneration of Directors
The Non‐executive Directors are remunerated by the Company. It is the policy of the Board to remunerate
Directors at market rates commensurate with the responsibilities undertaken by Non‐executive Directors. The
remuneration of the Non‐executive Directors is not linked to the performance of the Company.
Non‐executive Directors’ fees
The Non‐executive Directors’ base remuneration is reviewed annually. Fees paid to each Director have
remained unchanged from the time of their appointment. The amount of base remuneration is not dependant
on the satisfaction of a performance condition, or on the performance of the Company, the Company’s share
price, or dividends paid by the Company.
Non‐executive Chairman’s fees
For his role as Chairman and director of TOP, the Non‐executive Chairman, Alex Waislitz, receives zero
directors’ fees and zero retirement benefits.
Retirement benefits for Directors
The Company does not provide retirement benefits (other than superannuation) to the Non‐executive
Directors. The Investment Manager does not provide retirement benefits (other than superannuation) to the
Non‐executive Chairman.
Other benefits (including termination) and incentives
The Company does not pay other benefits and incentives to the Non‐executive Directors. The Company and
the Investment Manager do not pay other benefits and incentives to the Non‐executive Chairman.
(b) Remuneration of the Investment Manager
The Investment Manager is a corporate entity controlled by Mr Waislitz that has specified authority and
responsibility in regard to the management of the Company’s investment portfolio and is remunerated by the
Company in accordance with the Investment Management Agreement (IMA) between the Company and the
Investment Manager.
In respect of the year ended 30 June 2016, the Investment Manager was entitled to:
a Base Fee of $1,679,411 (GST exclusive), being a Base Fee equal to 0.75% per half year of the gross asset
value of the Company, payable half‐yearly in arrears, calculated as at the last business day of the relevant
half‐year; and
a Performance Fee of $4,139,685 (GST exclusive), payable in respect of the year ended 30 June 2016. The
fee is the greater of zero and the amount calculated as 20% of the Increase Amount. The Increase
Amount is the adjusted Net Asset Value for the current period less the Net Asset Value from the previous
period and less a hurdle, equivalent to the value of any Base Fee paid or accrued. Performance fee
entitlements are calculated on an annual basis, commencing on 1 July of each financial year. If there is no
Increase Amount for a financial year, the shortfall is not carried forward and not deducted from any
increase in future financial year(s) for the purposes of calculating future Performance Fees.
Thorney Opportunities Ltd 2016 Annual Report
Page | 10
Directors’ report continued
11.
2016 Remuneration report (Audited) continued
(c) Details of Remuneration
Key Management Personnel received the following remuneration amounts:
2016
Short term benefits
Fees
$
Other
$
Alex Waislitz
Ashok Jacob
Henry Lanzer¹
Dr Gary Weiss
Total
Personnel remuneration
Key Management
0
50,000
54,750
50,000
154,750
2015
Short term benefits
Fees
$
Other
$
Alex Waislitz
Ashok Jacob
Henry Lanzer¹
Dr Gary Weiss
Total
Personnel remuneration
¹ Mr Lanzer’s fees are paid or payable to Arnold Bloch Leibler and exclude GST
0
50,000
50,000
50,000
Key Management
150,000
Post‐employment
benefits
Superannuation
$
Total
$
0
4,750
0
4,750
9,500
0
54,750
54,750
54,750
164,250
Post‐employment
benefits
Superannuation
$
Total
$
0
4,760
0
4,760
9,520
0
54,760
50,000
54,760
159,520
0
0
0
0
0
0
0
0
0
0
There were no short‐term cash profit sharing and other bonuses, non‐monetary benefits, other post‐
employment benefits, termination benefits or share based payments to Key Management Personnel for the
current or the prior year. Arnold Bloch Leibler is a legal firm of which Henry Lanzer is the managing partner.
(d) Service Arrangements
The following service arrangements have been agreed between the Company and the Non‐executive Directors
with respect to remuneration and other terms of employment.
Ashok Jacob
Commenced 21 November 2013
No term has been set unless the Director is not re‐elected by shareholders of the Company
Base annual fee of $50,000 plus superannuation
Henry Lanzer
Commenced 21 November 2013
No term has been set unless the Director is not re‐elected by shareholders of the Company
Base annual fee of $54,750 (GST exclusive)
Dr Gary Weiss
Commenced 21 November 2013
No term has been set unless the Director is not re‐elected by shareholders of the Company
Base annual fee of $50,000 plus superannuation
Thorney Opportunities Ltd 2016 Annual Report
Page | 11
Directors’ report continued
11.
2016 Remuneration report (Audited) continued
(e) Employment agreement
The Non‐executive Chairman has an employment agreement with Tiga Trading Pty Ltd, a related body
corporate of the Investment Manager, not the Company.
Commenced as Director on 21 November 2013
No term of agreement has been set unless the Director is not re‐elected by shareholders of the
Company
No base salary or other compensation was received from the Company
The Director is employed under an employment agreement with Tiga Trading Pty Ltd which will
continue indefinitely until terminated
(f) History of TOP performance
The table below summarises TOP’s key financial performance indicators over the last five financial years.
As at 30 June
2016
2015
2014
2013
2012
Earnings
$
16,640,718
9,373,547
(2,669,210)
(258,150)
(2,029,000)
EPS
(cents per share)
9.85
5.57
(2.47)
(0.81)
(6.30)
Share price
(cents per share)
58.0
46.5
44.5
36.4
37.8
NTA
(cents per share)
60.8
52.1
46.6
45.3
45.2
Earnings are for continuing operations only. The Earnings Per Share (EPS), WWM/TOP share price and Net
Tangible Asset Backing Cents Per Share (NTA) have all been adjusted for the 1:7 Share Consolidation that
occurred on 2 December 2014.
History of TOP Performance Last 5 Years
NTA
cps
70
65
60
55
50
45
40
Thorney
appointed
investment
manager
2016
2015
2012
↓
2014
2013
NTA
EPS
EPS
12
10
8
6
4
2
0
‐2
‐4
‐6
‐8
Thorney Management Services Pty Ltd
investment management
responsibilities from 21 November 2013 pursuant to an Investment Management Agreement approved by
shareholders at the 2013 Annual General Meeting.
(Investment Manager) assumed
Thorney Opportunities Ltd 2016 Annual Report
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Directors’ report continued
12.
Directors’ relevant interests
The number of TOP ordinary shares and options held in the Company by the KMP is as follows:
Balance
30 June
2014
Additions/
(Disposals)
Lapsed
Balance
30 June
2015
Additions/
(Disposals)
Balance
30 June
2016
50,566,855
25,283,428
1,182,450
‐
‐
(25,283,428)
51,749,305
‐
814,437
‐
52,563,742
‐
1,034,934
517,467
100,000
50,000
9,971
4,986
‐
‐
‐
‐
‐
‐
‐
(517,467)
1,034,934
‐
‐
‐
1,034,934
‐
‐
(50,000)
100,000
‐
1,057
‐
101,057
‐
‐
(4,986)
9,971
‐
‐
‐
9,971
‐
Alex Waislitz
Shares
Options
Ashok Jacob
Shares
Options
Henry Lanzer
Shares
Options
Dr Gary Weiss
Shares
Options
There have been no changes in Directors’ relevant interests in shares since the end of the financial year. All
Directors have duly notified the Australian Securities Exchange in accordance with the Corporations Act 2001
of changes in their relevant interests during the year.
13.
Board and committee meetings
The number of Board meetings, including meetings of Board Committees, held during the year ended 30 June
2016 and the number of those meetings attended by each Director is set out below:
Board
Meetings
Audit & Risk
Committee
No. of
meetings
held while
a Director
6
6
6
6
No. of
meetings
attended
6
6
5
5
No. of
meetings
held while
a Director
4
‐
4
‐
No. of
meetings
attended
3
1¹
4
1¹
Alex Waislitz
Ashok Jacob
Henry Lanzer
Gary Weiss
¹ Whilst Mr Jacob and Dr Weiss are not formal members of the Audit and Risk Committee they are invited to
attend each meeting. Mr Jacob and Dr Weiss attended 1 committee meeting each during the year.
Thorney Opportunities Ltd 2016 Annual Report
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Directors’ report continued
14.
Environmental regulation
The operations of TOP are not subject to any particular or significant environmental regulations under a
Commonwealth, State or Territory law.
15.
Indemnification and insurance of officers and auditor
TOP has paid insurance premiums in respect of directors’ and officers’ liability for current and former directors
and officers of the Company.
The insurance policies prohibit disclosure of the nature of the liabilities insured against and the amount of the
premiums.
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of
the terms of its audit engagement agreement against claims by third parties arising from any non‐audit
services (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since
the financial year.
16.
Auditor’s independence declaration
The Auditor’s independence declaration, as required under section 307C of the Corporations Act 2001, is set
out on page 15.
17.
Non‐audit services
Details of the amounts paid or payable to Ernst & Young for audit services provided during the year are set out
in note 17 to the financial statements on page 40 of this report.
There were no non‐audit services performed by the Company’s auditor, Ernst & Young, during the 2016
financial year.
This report is made in accordance with a resolution of the Board of Directors.
On behalf of the Board
Alex Waislitz
Chairman
Melbourne, 28 July 2016
Thorney Opportunities Ltd 2016 Annual Report
Page | 14
Corporate governance statement
2016 Corporate governance statement
Thorney Opportunities Ltd (Thorney Opportunities, TOP or Company) is committed to developing and
maintaining an effective system of corporate governance which is commensurate with the size and nature of
the Company, its Board and the scope of its operations.
In the following statements we detail how the Company adheres to the 8 core principles and where there is
non‐adherence we disclose why it is necessary to take a different approach.
Principle 1: Lay solid foundations for management and oversight
The primary role of the Board is to ensure the long‐term prosperity of Thorney Opportunities.
The Board is responsible for a broad range of matters and will act in the best interests of the Company to
ensure that the business of the Company is properly managed. The Company has no employees and its day‐to‐
day functions and investment activities are managed by Thorney Management Services Pty Ltd (Investment
Manager) pursuant to an Investment Management Agreement (IMA) approved by shareholders.
The Board has adopted a Board Charter which stipulates those matters expressly reserved to the Board and
which operational activities and what levels of authority have been delegated to the Investment Manager.
The Board may delegate any of these matters to individual Directors, Board Committees or the Investment
Manager but any such delegation shall be in accordance with the law and the Company’s Constitution.
The Board meets at least quarterly. At these meetings senior managers of the Investment Manager are
available to report on the Company’s operations.
Before being invited to join the Board and standing for election by shareholders, all non‐executive Directors
have appropriate background checks. All details of directors’ qualifications, skills and experience, other
material directorships currently held and any related party disclosures are included in the meeting materials
presented to shareholders.
Service arrangements have been agreed between the Company and the Directors with respect to their
individual remuneration and other terms of employment. Each Director has entered into an agreement
regarding insurance, access to records and disclosure of any trading in TOP securities as required under ASX
Listing Rules and the Company’s Trading Policy.
The Company Secretary has a direct reporting line to each Director of TOP in regard to all matters to do with
the proper functioning of the Board and the Committees.
Diversity
As the Company has no employees the Board has determined that a Diversity Policy in compliance with ASX
Recommendation 1.5 is not warranted at this time. However, the composition of the Board is periodically
reviewed.
The TOP Board undertakes a formal annual performance self‐assessment of the Board, the Audit and Risk
Committee and the Investment Manager.
An evaluation of board performance was undertaken during the financial year ended 30 June 2016 with no
material changes proposed to the Board processes or individual director contributions.
Thorney Opportunities Ltd 2016 Annual Report
Page | 16
Corporate governance statement continued
Principle 1: Lay solid foundations for management and oversight continued
The independent directors meet at least once a year to review and evaluate the performance of the
Investment Manager.
A satisfactory evaluation of the Investment Manager’s performance for the financial year ended 30 June 2016
was undertaken by the independent directors.
The Investment Manager has an established induction process for all its employees with responsibilities under
the IMA. As part of this induction process, new senior executives will receive briefings on the business of the
Company and the Investment Manager and their policies and procedures. These briefings will focus on the key
operational, regulatory, risk and compliance issues that are of relevance to the Company and the Investment
Manager.
Principle 2: Structure the board to add value
Nomination and appointment of new Directors
ASX Recommendation 2.1 states that a board should establish a nomination committee and disclose a charter.
Given the size and nature of the Company, the Board has determined that a Nomination Committee is not
warranted.
The Board considers the issues that would otherwise be considered by a Nominations Committee.
Board skills matrix
The TOP Board must comprise directors with an appropriate range of skills, experience and expertise.
Board skills and experience:
Executive leadership
Financial markets
acumen
Governance
Public policy and
Regulation
Shareholder
engagement
All directors
All directors
All directors
All directors
All directors
Strategy
All directors
The Board skills matrix sets out the key skills and experience of the
Directors and the extent to which they are represented on the current
Board and its Committees.
In addition to the skills and experience outlined in this table the Board
considers that each Director has the appropriate attributes such as
honesty and integrity;
an understanding of shareholder value;
has sufficient time to undertake the role appropriately;
an enquiring mind; and
a demonstrated commitment to appropriate standards of
governance.
Background information on Directors in office at the date of this Annual Report is set out in the Directors’
Report.
The Company’s Constitution provides that there must be a minimum of 3 and a maximum of 10 directors.
Having regard to the size and the nature of its business, the Company has determined that a 4 member board
is appropriate and sufficient to enable it to effectively discharge its responsibilities to the Company.
Thorney Opportunities Ltd 2016 Annual Report
Page | 17
Corporate governance statement continued
Principle 2: Structure the board to add value continued
Majority of independent directors
The Board currently comprises 2 independent, non‐executive directors (Ashok Jacob and Dr Gary Weiss) and 2
non‐independent non‐executive directors (Alex Waislitz and Henry Lanzer). The Board regularly assesses the
independence of each non‐executive director.
Director
Alex Waislitz
Henry Lanzer
Ashok Jacob
Dr Gary Weiss
Position
Chairman
Director
Director
Director1
Classification
Non‐independent
Non‐independent
Independent
Independent
Appointment
21 November 2013
21 November 2013
21 November 2013
21 November 2013
Last election
25 November 2014
24 November 2015
21 November 2013
21 November 2013
Thorney Opportunities notes that the current Board does not comply with ASX Recommendation 2.4 with
respect to a majority of independent directors. The Board considers that all Directors of TOP bring significant
expertise and investment experience to the Company and that the current structure is appropriate for the
Company at this time.
Directors are elected by shareholders and in accordance with the provisions of the Constitution, no director
holds office for a period longer than 3 years without standing for re‐election by the shareholders.
Chairman and independence
Thorney Opportunities notes that ASX Recommendation 2.5 states that the chair should be independent and,
in particular, should not be the same person as the CEO of the entity.
The Board takes the view that it is in the best interests of shareholders that Mr Waislitz be the Chairman of
Thorney Opportunities and we make the following observations:
Mr Waislitz, as the long‐term chairman and CEO of the private Thorney Investment Group, has a
demonstrated track record of successful investment performance over 2 decades.
In November 2014, shareholders voted in favour of all Thorney Investment Group proposals, including the
appointment of Mr Waislitz as a director, on the expectation he be appointed Chairman of the Company.
There are well‐credentialed independent directors serving on the Board.
Delegation of certain responsibilities to Board committees.
The appointment of Dr Gary Weiss as Lead independent director.
The Company has a program for inducting new directors and encourages all its directors to maintain the skills
and knowledge required to effectively perform their role.
Each director may obtain independent professional advice at the expense of the Company on matters arising in
the course of their Board duties. The payment for the cost of the advice by the Company is subject to the
approval of the Chairman, which will not be unreasonably withheld.
1 Lead Independent Director
Thorney Opportunities Ltd 2016 Annual Report
Page | 18
Corporate governance statement continued
Principle 3: Act ethically and responsibly
Code of Conduct and Conflicts of Interest
The Company has established a Code of Conduct that provides guidance to Directors and employees of the
Investment Manager. Under these principles Directors will:
conduct business in good faith and in a manner that will maintain confidence in the Company’s
integrity;
perform their duties to high standards of honest, ethical and law‐abiding behaviour;
not engage in conduct likely to adversely affect the reputation of Thorney Opportunities.
treat others with dignity and respect; and
The Code of Conduct also sets out details of how conflicts of interest should be avoided. Directors must
disclose to the Company any material personal interest they or their associates may have in a matter that
relates to the affairs of the Company, and inform the Board, via the Company Secretary, of any changes.
Where conflicts of interest arise, the Code sets out appropriate arrangements that must be followed.
A copy of the Code of Conduct is available on the Company’s website.
Principle 4: Safeguard integrity in corporate reporting
Audit Committee
Thorney Opportunities has established an Audit and Risk Committee and adopted an Audit and Risk Committee
Charter. Henry Lanzer (Committee Chairman) and Alex Waislitz have been formally appointed to the
Committee but all directors are invited and encouraged to attend each meeting. The Company notes that its
Committee composition and Charter do not conform to ASX Recommendation 4.1, however the Board believes
that given the size and nature of the Company and the Board, the committee structure is sufficiently
appropriate to independently verify and safeguard the integrity of the financial reporting.
A table of attendance at committee meetings by directors is included in the directors’ report.
Assurance
Thorney Opportunities does not employ its own CEO or CFO. However for the purposes of section 295A of the
Corporations Act and ASX Recommendation 4.2, the Chairman and Company Secretary provide the required
assurances and declarations each half‐year.
The Thorney Opportunities Board has received assurance from the Chairman and Company Secretary that, in
their opinion:
the financial records of the Company have been properly maintained;
the financial statements comply with the appropriate accounting standards and give a true and fair
view of the financial position and performance of the Company; and
the opinion has been formed on the basis of a sound system of risk management and internal control
which is operating effectively.
External Auditor
The Audit and Risk Committee Charter includes information on the procedures for selection and appointment
of the external auditor of Thorney Opportunities and for the rotation of the external audit engagement
partner. In 2013 shareholders appointed Ernst & Young as the company’s auditor and this marks Year 3 under
the rotation policy.
TOP ensures that the external auditor attends the AGM and is available to answer questions relevant to the
audit from shareholders.
Thorney Opportunities Ltd 2016 Annual Report
Page | 19
Corporate governance statement continued
Principle 5: Make timely and balanced disclosure
Thorney Opportunities has adopted a Disclosure Policy which has procedures designed to ensure compliance
with ASX Listing Rule and Corporations Act disclosure requirements and to ensure accountability of Directors
and senior management of the Investment Manager for that compliance.
The policy, which is available on the Company’s website, has procedures designed to ensure that material
information is communicated to the Chairman and Company Secretary and for the assessment of information
for the disclosure of material information to the market.
The Board acknowledges the importance of promoting timely and balanced disclosure of all material matters
concerning Thorney Opportunities and believes it is fully compliant with Principle 5 and its recommendations.
Principle 6: Respect the rights of shareholders
Thorney Opportunities has a Communications Policy which seeks to promote effective communication with our
shareholders. The Company communicates in several ways including via its Annual Report and Half‐yearly
accounts, monthly net tangible asset backing announcements, regular shareholder updates from the Chairman
and other ASX announcements regarding material investments and other developments.
Thorney Opportunities Ltd maintains a website at: www.thorneyopportunities.com.au.
Annual General Meeting
TOP’s AGM will be held on Tuesday 22 November 2016 at 11:00 am Melbourne time in the boardroom of
Arnold Bloch Leibler, Level 21, 333 Collins Street Melbourne.
The Chairman of the meeting will ensure that shareholders are given the opportunity to participate at the
AGM.
TOP encourages shareholders to contact the Share Registry and opt in to receive and send all communications
to and from the Company electronically.
Principle 7: Recognise and manage risk
The Board, through the Audit and Risk Committee, is responsible for setting policies for oversight of risk and
identification and management of material business risks. Thorney Opportunities has an approved Audit and
Risk Committee Charter (see Principle 4 above) and in conjunction with the Investment Manager has adopted a
Risk Management Policy.
The Investment Manager has implemented a risk management and compliance framework which enables the
identification of risks, the execution of appropriate responses, the monitoring of risks and the controls applied
to mitigate risks.
The main areas of risk that have been identified are market risk and operational risk. As a listed investment
company Thorney Opportunities will always bear market risk as it invests its capital in assets that are not risk
free. Operational risks can include legal, regulatory, disaster recovery, systems, process and human resource
risks. Our risk management framework has been designed to monitor, review and continually improve risk
management throughout the Company.
For the year ended 30 June 2016 the Audit and Risk Committee reviewed TOP’s risk management framework
and the Board was satisfied that it continues to be sound.
Thorney Opportunities Ltd 2016 Annual Report
Page | 20
Corporate governance statement continued
Principle 7: Recognise and manage risk continued
The Board believes that commensurate with the size and nature of the business that an internal audit function
is not warranted at this time. TOP utilises highly effective internal control processes and systems, developed
over 2 decades by the Investment Manager to manage the multifaceted investment activities of the private
Thorney Group. The Investment Manager employs staff and consultants who are responsible for evaluating
and continually improving the effectiveness of the risk management and internal control systems. These
systems are subject to an annual external audit.
The Company does have a material exposure to the Australian stock market. A large fall or correction to the
overall market is likely to adversely affect the TOP NTA. The Investment Manager seeks to reduce this risk
through careful stock selection, diversification and management of the relative weightings of individual
securities.
Principle 8: Remunerate fairly and responsibly
Remuneration Committee
ASX Recommendation 8.1 states that a board should establish a remuneration committee. Given the size and
nature of the Company and the fact the company does not employ executives, the Board has determined that
a Remuneration Committee is not warranted, nor does it have a Remuneration Policy to disclose.
Non‐executive Directors
Non‐executive Directors are remunerated by a fixed director’s fee including superannuation or as a fixed
consulting fee plus GST, as permitted by the Company’s Constitution.
The maximum remuneration of Non‐executive Directors is determined by Shareholders at a General Meeting
in accordance with the Constitution, the Corporations Act and the ASX Listing Rules, as applicable. At present
the maximum aggregate remuneration of Non‐executive Directors is $400,000 per annum. The apportionment
of non‐executive Director Remuneration within that maximum will be made by the Board having regard to the
inputs and value to the Company of the respective contributions by each Non‐executive Director. The Board
may award additional remuneration to Non‐executive Directors called upon to perform extra duties or services
on behalf of the Company.
Non‐executive Chairman
The Non‐executive Chairman is employed by the private Thorney Investment Group and does not receive any
salary, benefits or incentives for his role as a Director of TOP.
The amount of remuneration for all directors, including all monetary and non‐monetary components, are
detailed in the directors’ report under 2016 Remuneration Report (audited).
Investment Manager
The Investment Manager has specified authority and responsibility in regard to management of the Thorney
Opportunities investment portfolio. The Investment Manager is entitled to a base fee and a performance fee
in accordance with the IMA.
Persons involved in investment management are employees of the private Thorney Investment Group and are
not remunerated by the Company.
Further details on the fees paid to the Investment Manager are included in the financial statements.
Thorney Opportunities Ltd 2016 Annual Report
Page | 21
Statement of comprehensive income
For the year ended 30 June 2016
Income
Net changes in fair value of trading investments
Interest received
Dividend income
Other income
Total investment income
Expenses
Management fees
Performance fees
Directors' fees
Finance costs
Fund administration and operational costs
Legal and professional fees
Other administrative expenses
Total expenses
Profit before income tax
Income tax benefit
Total comprehensive profit for the year
Note
2016
$
2015
$
3
3
3
3
3
21
21
21
18,536,018
1,558,814
2,143,801
212,185
10,506,853
2,403,981
888,629
15,235
22,450,818
13,814,698
(1,721,396)
(4,243,177)
(169,725)
(210,915)
(109,032)
(183,411)
(53,209)
(1,407,155)
(2,417,078)
(164,520)
(113,246)
(82,590)
(187,029)
(69,533)
(6,690,865)
(4,441,151)
15,759,953
9,373,547
4
880,765
‐
16,640,718
9,373,547
2016
cents
2015
cents
Basic and diluted earnings per share
15
9.85
5.57
The Statement of comprehensive income should be read in conjunction with the notes to the financial
statements.
Thorney Opportunities Ltd 2016 Annual Report
Page | 22
Statement of financial position
As at 30 June 2016
ASSETS
Current assets
Cash and short‐term deposits
Financial assets
Receivables
Prepayments
Total current assets
Non‐current assets
Financial assets
Deferred tax assets
Total non‐current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Payables
Borrowings
Derivative financial instruments
Total current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserve
Accumulated losses
TOTAL EQUITY
Note
2016
$
2015
$
6
8
9
8
10
11
12
13
14
8,091,960
93,324,033
125,039
10,017
33,793,023
51,340,689
85,891
17,270
101,551,049
85,236,873
13,521,492
880,765
10,277,672
‐
14,402,257
10,277,672
115,953,306
95,514,545
5,285,671
7,413,726
241,332
6,695,489
852,708
240,240
12,940,729
7,788,437
12,940,729
7,788,437
103,012,577
87,726,108
81,393,308
21,619,269
‐
80,975,125
11,551,886
(4,800,903)
103,012,577
87,726,108
The Statement of financial position should be read in conjunction with the notes to the financial statements.
Thorney Opportunities Ltd 2016 Annual Report
Page | 23
Statement of changes in equity
For the year ended 30 June 2016
Balance at 1 July 2015
80,975,125
11,551,886
(4,800,903)
87,726,108
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total
equity
$
Profit for the year
Total comprehensive income for the year
Transfer to Profits reserve
Transactions with shareholders:
Dividends paid
Shares issued via dividend reinvestment
plan (DRP)
Cost of shares issued
Total transactions with shareholders
‐
‐
‐
‐
420,003
(1,820)
418,183
‐
‐
16,640,718
16,640,718
16,640,718
16,640,718
11,839,815
(11,839,815)
‐
(1,772,432)
‐
‐
(1,772,432)
‐
‐
‐
‐
‐
(1,772,432)
420,003
(1,820)
(1,354,249)
103,012,577
Balance as at 30 June 2016
81,393,308
21,619,269
For the year ended 30 June 2015
Balance at 1 July 2014
Profit for the year
Total comprehensive income for the year
Transfer to Profits reserve
Transactions with shareholders:
Shares issued – options exercised
Cost of shares issued
Total transactions with shareholders
Balance as at 30 June 2015
Issued
capital
$
80,945,910
‐
‐
‐
38,941
(9,726)
29,215
Reserves
$
Accumulated
losses
$
Total
equity
$
‐
‐
‐
(2,622,564)
78,323,346
9,373,547
9,373,547
9,373,547
9,373,547
11,551,886
(11,551,886)
‐
‐
‐
‐
‐
‐
‐
38,941
(9,726)
29,215
80,975,125
11,551,886
(4,800,903)
87,726,108
The Statement of changes in equity should be read in conjunction with the notes to the financial statements.
Thorney Opportunities Ltd 2016 Annual Report
Page | 24
Statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities:
Interest received
Dividends received
Proceeds from sale of trading investments
Payments for trading investments
Payments to suppliers and employees
Finance costs paid
Other
2016
$
2015
$
1,624,922
2,143,801
8,792,696
(35,902,522)
(4,516,202)
(210,915)
88,393
2,610,780
888,629
6,795,587
(27,151,012)
(1,897,063)
(113,246)
15,001
Net cash (used in)/provided by operating activities
6(a)
(27,979,827)
(18,851,324)
Cash flows from investing activities:
Payments for long‐term investments
Net cash (used in)/provided by investing activity
Cash flows from financing activities:
Net proceeds from (repayments of) borrowings
Proceeds from issue of shares
Payment for transaction costs
Dividends paid (net of DRP)
Net cash provided by/(used in) financing activities
(3,000,513)
(3,000,513)
‐
‐
6,561,018
‐
(1,819)
(1,279,922)
(762,666)
38,941
(9,726)
(9,517)
5,279,277
(742,968)
Net (decrease)/increase in cash held
Cash at the beginning of the year
Cash at the end of the year
(25,701,063)
33,793,023
(19,594,292)
53,387,315
6
8,091,960
33,793,023
The Statement of cash flows should be read in conjunction with the notes to the financial statements.
Thorney Opportunities Ltd 2016 Annual Report
Page | 25
Notes to the financial statements
1.
Corporate information
TOP is a company limited by shares, incorporated and domiciled in Australia. The nature of the operations and
principal activities of the company are described in the director’s report.
The Company’s investment activities are managed by Thorney Management Services Pty Ltd (Investment
Manager) pursuant to an Investment Management Agreement approved by Shareholders.
The financial statements of Thorney Opportunities Ltd for the year ended 30 June 2016 were authorised for
issue in accordance with a resolution of the Board of Directors on 28 July 2016.
2.1
Summary of accounting policies
(a)
Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Accounting Standards Board. The financial statements are presented in Australian
Dollars and the company is a for‐profit entity for the purpose of preparing financial statements.
The annual report has also been prepared on a historical cost basis, except for financial assets and financial
liabilities held at fair value through profit or loss, that have been measured at fair value.
Statement of compliance
The financial statements have been prepared in accordance with the Australian Accounting Standards as
issued by the Australian Accounting Standards Board and International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Changes in Accounting Standards
The Company has adopted a number of new and amended Australian Accounting Standards and AASB
interpretations for the reporting period, including the following list:
AASB 2013‐9 ‐ Amendments to Australian Accounting Standards – Conceptual Framework, Materiality
and Financial Instruments (Part C, including incorporating Chapter 6 Hedge Accounting into AASB 9
Financial Instruments)
AASB 2015‐3 ‐ Amendments to Australian Accounting Standards arising from the Withdrawal of AASB
1031 Materiality
AASB 2014‐8 – Limits the application of the existing versions of AASB9 (AASB 9 (December 2009) and
AASB 9 (December 2010)) from 1 February 2015 and applies to annual reporting periods beginning on
after 1 January 2015
The adoption of these new and amended standards did not have an impact in the reporting of the Company.
Thorney Opportunities Ltd 2016 Annual Report
Page | 26
Notes to the financial statements continued
2.1
Summary of accounting policies continued
(a)
Basis of preparation continued
Standards issued that might have an impact but not yet effective
Standards issued that might have an impact but are not yet effective up to the date of issuance of the
Company’s financial statements are listed below. The Company intends to adopt applicable standards when
they become effective. The Company has not yet completed an impact assessment on these standards.
Financial Instruments — Amendments to AASB 9
AASB 9 (December 2014) is a new standard which replaces AASB 139. This new version supersedes AASB 9
issued in December 2009 (as amended) and AASB 9 (issued in December 2010) and includes a model for
classification and measurement, a single, forward‐looking ‘expected
impairment model and a
substantially‐reformed approach to hedge accounting. The Company early adopted the standard issued in
December 2009 (as amended) and does not intend to apply the subsequent amendments until effective date 1
January 2018.
loss’
Classification and measurement
AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets
compared with the requirements of AASB 139. There are also some changes made in relation to financial
liabilities. The main changes are:
Financial assets
Allows an irrevocable election on initial recognition to present gains and losses on investments in equity
instruments that are not held for trading in other comprehensive income. Dividends in respect of these
investments that are a return on investment can be recognised in profit or loss and there is no impairment
or recycling on disposal of the instrument.
Financial assets can be designated and measured at fair value through profit or loss at initial recognition if
doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise
from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities are limited to the measurement of liabilities
designated at fair value through profit or loss (FVPL) using the fair value option.
Revenue from Contracts with Customers — AASB 15
AASB 15 Revenue from Contracts with Customers replaces the existing revenue recognition standards AASB
111 Construction Contracts, AASB 118 Revenue and related Interpretations (Interpretation 13 Customer Loyalty
Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of
Assets from Customers, Interpretation 131 Revenue—Barter Transactions Involving Advertising Services and
Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry). AASB 15 incorporates
the requirements of IFRS 15 Revenue from Contracts with Customers issued by the International Accounting
Standards Board (IASB) and developed jointly with the US Financial Accounting Standards Board (FASB).
Thorney Opportunities Ltd 2016 Annual Report
Page | 27
Notes to the financial statements continued
2.1
Summary of accounting policies continued
(a)
Basis of preparation continued
AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for
contracts within the scope of other accounting standards such as leases or financial instruments).The core
principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises revenue in accordance with that core principle by
applying the following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the performance obligations in the contract
(e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
AASB 2015‐8 amended the AASB 15 effective date so it is now effective for annual reporting periods
commencing on or after 1 January 2018. Early application is permitted.
AASB 2014‐5 incorporates the consequential amendments to a number Australian Accounting Standards
(including Interpretations) arising from the issuance of AASB 15.
Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s
Disclosure Initiative project. The amendments are designed to further encourage companies to apply
professional judgment in determining what information to disclose in the financial statements. For example,
the amendments make clear that materiality applies to the whole of financial statements and that the
inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendments also
clarify that companies should use professional judgment in determining where and in what order information
is presented in the financial disclosures.
Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses
[AASB 112]
This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income Taxes (August 2015) to clarify
the requirements on recognition of deferred tax assets for unrealised losses on debt instruments measured at
fair value.
Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require entities preparing financial
statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of
financial statements to evaluate changes in liabilities arising from financing activities, including both changes
arising from cash flows and non‐cash changes.
Thorney Opportunities Ltd 2016 Annual Report
Page | 28
Notes to the financial statements continued
2.2
Accounting judgements and estimates
The preparation of the Company’s financial statements requires management to make judgments, estimates
and assumptions that affect the amounts recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that could require a material adjustment to the
carrying amount of the asset or liability affected in the future.
The significant accounting policies have been consistently applied in the current financial year and the
comparative period, unless otherwise stated. Where necessary, comparative information has been
re‐presented to be consistent with current period disclosures.
Fair value of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position
cannot be measured based on quoted prices in active markets, their fair value is measured using valuation
techniques. The inputs to these models are taken from observable markets where possible, but where this is
not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations
of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could
affect the reported fair value of financial instruments.
2.3
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
a) Financial instruments
(i) Classification
The Company classifies its financial assets and financial liabilities into the categories below in accordance with
AASB 9.
Financial assets and liabilities at fair value through profit or loss
The Company has two discrete portfolios of securities, the long‐term portfolio and the trading portfolio.
The long‐term portfolio relates to holdings of securities which the Directors intend to retain on a long term
basis. The long‐term portfolio is recognised as a non‐current asset in the statement of financial position.
The trading portfolio comprises securities acquired principally for the purpose of generating a profit from
short‐term fluctuation in price. The trading portfolio is recognised as a current asset in the statement of
financial position. All derivatives are classified as held for trading.
Other financial liabilities
This category includes all financial liabilities, other than those classified as at fair value through profit or loss.
Other financial liabilities are measured at their nominal amounts. Amounts are generally settled within 30
days of being recognised as other financial liabilities. Given the short‐term nature of other financial liabilities,
the nominal amount approximates fair value.
Thorney Opportunities Ltd 2016 Annual Report
Page | 29
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
a) Financial instruments continued
(ii) Recognition
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Purchases or sales of financial assets that require delivery of assets within the time frame generally established
by regulation or convention in the marketplace are recognised on the trade date, i.e. the date that the
Company commits to purchase or sell the asset.
(iii) De‐recognition
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognised where:
i. The rights to receive cash flows from the asset have expired; or
ii. The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass‐through’
arrangement; and
iii. Either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled
or expires.
(iv) Initial measurement
Both the long‐term and trading portfolios are classified at initial recognition as financial assets at fair value
through profit or loss. All transaction costs for such instruments are recognised directly in profit or loss.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value
with net changes in fair value presented in the statement of profit or loss.
Dividend income earned on investments held at fair value through profit or loss is recognised in the statement
of comprehensive income.
Loans and receivables and financial liabilities (other than those classified as at fair value through profit or loss)
are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue.
For financial assets and liabilities where the fair value at initial recognition does not equal the transaction
price, the Company recognises the difference in the statement of comprehensive income, unless specified
otherwise.
Thorney Opportunities Ltd 2016 Annual Report
Page | 30
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
a)
Financial instruments continued
(v) Subsequent measurement
After initial measurement, the Company remeasures financial instruments which are classified as at fair value
through profit or loss at fair value (see Note 7). Subsequent changes in the fair value of those financial
instruments are recorded in ‘Change in fair value of financial assets and liabilities at fair value through profit or
loss’. Interest earned is recorded in ‘Interest revenue’ according to the terms of the contract. Dividend
revenue is recorded in ‘Dividend revenue’.
Fair value measurement
b)
The Company measures financial assets and liabilities at fair value through profit or loss, such as equity
securities and debt instruments, at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the
fair value measurement as a whole:
Level 1
Level 2
Level 3
Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Valuation techniques for which the lowest level
measurement is directly or indirectly observable
Valuation techniques for which the lowest level
measurement is unobservable
input that is significant to the fair value
input that is significant to the fair value
Thorney Opportunities Ltd 2016 Annual Report
Page | 31
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
Functional and presentation currency
c)
The Company’s functional and presentation currency is the Australian Dollar, which is the currency of the
primary economic environment in which it operates. The Company’s performance is evaluated and its liquidity
is managed in Australian Dollars. Therefore, the Australian Dollar is considered as the currency that most
faithfully represents the economic effects of the underlying transactions, events and conditions.
Interest revenue and expense
d)
Interest earned on financial assets classified as ‘at fair value through the profit or loss’ is recorded in ‘Interest
revenue’ according to the terms of the contract.
Dividend revenue
e)
Dividend revenue is recognised when the Company’s right to receive the payment is established. Dividend
revenue is presented gross of any non‐recoverable withholding taxes, which are disclosed separately as tax
expense in the Statement of profit and loss.
Fees, commissions and other expenses
f)
Except where included in the effective interest calculation (for financial instruments carried at amortised cost),
fees and commissions are recognised on an accrual basis. Legal and audit fees are included within ‘Legal and
professional fees’, and are recorded on an accrual basis.
Cash, and cash equivalents
g)
Cash and cash equivalents in the Statement of financial position comprise cash on hand, demand deposits,
short term deposits in banks with original maturities of three months or less and short‐term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
h)
Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date where the Company operates and
generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the
statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect
to situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Thorney Opportunities Ltd 2016 Annual Report
Page | 32
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
h)
Taxes continued
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised.
Due to and due from brokers
i)
Amounts due to brokers (refer to note 10) are payables for securities purchased (in a regular way transaction)
that have been contracted for but not yet delivered on the reporting date. Refer to the accounting policy for
‘other financial liabilities’ for recognition and measurement of these amounts.
Amounts due from brokers include margin accounts and receivables for securities sold (in a regular way
transaction) that have been contracted for but not yet delivered on the reporting date. Refer to accounting
policy for ‘loans and receivables’ for recognition and measurement of these amounts.
Goods and services tax (GST)
j)
Revenue, expenses and assets are recognised net of the amount of GST except:
i. When the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
ii. Receivables and payables are stated with the amount of GST included.
Reduced input tax credits (RITC) recoverable by the Company from the ATO are recognised as a receivable in
the Statement of financial position.
Cash flows are included in the Statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
is classified as part of operating cash flows.
Thorney Opportunities Ltd 2016 Annual Report
Page | 33
Notes to the financial statements continued
3.
Total investment income
The major components of investment income in the Statement of comprehensive income are:
Realised gains
Unrealised gains
Interest income
Dividend income
Underwriting fees
Other income
Total investment income
4.
Income tax
2016
$
2,755,291
15,780,727
1,558,814
2,143,801
200,659
11,526
22,450,818
2015
$
491,693
10,015,160
2,403,981
888,629
15,000
235
13,814,698
The income tax (expense)/benefit attributable to the year differs from the prima facie amount payable on the
profit/(loss) before tax. The difference is reconciled as follows:
Profit before income tax expense
Prima facie tax expense on profit from ordinary activities
before income tax (expense) / benefit at 30% (2015: 30%)
Deferred income tax (expense)
‐ Origination and reversal of temporary differences
‐
Imputation credits on dividends received
Carried forward tax losses utilised / (increased)
Carried forward tax losses brought to account
Income tax benefit recognised in the Statement of profit or loss
Deferred tax
Trading stock
Business establishment costs
Other
Losses available for offsetting against future taxable income
Tax losses not brought to account
Net deferred tax assets
2016
$
2015
$
15,759,953
9,373,547
(4,727,986)
(2,812,064)
7,209,104
(255,022)
(2,226,096)
880,765
880,765
(10,682,589)
290,466
10,437
11,262,451
‐
880,765
3,483,771
(114,252)
(557,455)
‐
‐
(3,622,316)
437,125
12,610
8,186,282
(5,013,701)
‐
At 30 June 2016, the Company has estimated unused gross capital tax losses of $30,714,116 (2015:
$30,714,116) and gross revenue tax losses of $37,541,505 (2015: $27,287,607) that are available to offset
against future taxable capital and revenue profits, subject to continuing to meet relevant statutory tests.
Thorney Opportunities Ltd 2016 Annual Report
Page | 34
Notes to the financial statements continued
5.
Dividends
(a) Final Dividend FY 2016 not recognised at year end
Since the end of the year, the Directors have declared a 0.6 cent per
share fully franked dividend which has not been recognised as a
liability at the end of the financial year (2015: 0.5 cent per share).
(b) Dividend franking account
Balance at 1 July
Franking credits received on dividends from investments
Franked dividends paid during the period
Balance at 30 June
Subsequent to reporting period, the franking account will reduce by
the dividend proposed above
2016
$
2015
$
1,015,951
842,184
490,064
850,073
(759,614)
580,523
435,408
145,115
109,223
380,841
‐
490,064
360,936
129,128
The Company’s ability to pay franked dividends is fully dependent upon the receipt of franked dividends from
investments as while the Company continues to utilise its available tax losses, it will not pay tax.
6.
Cash and short‐term deposits
Cash at bank
Total cash and short‐term deposits
2016
$
8,091,960
8,091,960
2015
$
33,793,023
33,793,023
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short‐term deposits are made
for varying periods of between 1 day and 90 days, depending on the immediate cash requirements of the
Company, and earn interest at the respective short‐term deposit rates. The carrying value of Cash and short‐
term deposits approximates Fair Value.
a) Reconciliation of net profit/(loss) after tax to net cash provided by operating activities:
Profit/(loss) for the year
Adjustments for non‐cash items:
Net gain on disposal of investments
Unrealised component of change in fair value of
investments
Changes in Assets & Liabilities:
(Increase)/decrease in receivables
Increase in creditors & accrued expenses
(Increase) in financial assets
Decrease in other assets
(Increase) in deferred tax assets
(Decrease) in provisions
Net cash (used in)/provided by operating activities
Thorney Opportunities Ltd 2016 Annual Report
2016
$
16,640,718
2015
$
9,373,547
(2,755,291)
(491,693)
(15,780,727)
(10,015,160)
(57,684)
1,956,495
(27,109,826)
7,253
(880,765)
‐
(27,979,827)
206,799
2,422,634
(20,355,425)
8,208
‐
(234)
(18,851,324)
Page | 35
Notes to the financial statements continued
7.
Fair value measurement
To reflect the source of valuation inputs used when determining the fair value of its financial assets and
financial liabilities, the Company uses the fair value hierarchy prescribed in AASB 13:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair value of these
investments is based on the last sale price for the security as quoted on the relevant exchange;
Level 2: valuation techniques using market observable inputs, either directly or indirectly. The fair value of
assets and liabilities with short‐term maturities are valued at the amount at which the asset or
liability could be exchanged in a current transaction between willing parties; and
Level 3: valuation techniques using non‐market observable data with the fair value for investments based on
inputs determined by Directors’ valuation.
The fair value measurement hierarchy of the Company’s financial assets and financial liabilities is as follows:
Listed equities
Receivables¹, prepayments¹, unlisted equities
Long‐term financial assets² and listed options³
Assets measured at fair value
Level 1:
Level 2:
Level 3:
Total financial assets
Total current
Total non‐current
2016
$
92,244,033
135,056
14,601,492
106,980,581
93,459,089
13,521,492
2015
$
44,334,439
7,109,411
10,277,672
61,721,522
51,443,850
10,277,672
Liabilities measured at fair value
Listed equities
Level 1:
Payables¹, borrowings4
Level 2:
Level 3:
‐
Total financial liabilities
¹ Given the short maturities, the fair value of the assets and liabilities are recognised at the face value on the invoice.
² Long‐term financial assets are valued using a discounted cash flow model.
³ Listed options are valued using a Black‐Scholes option pricing model (due to lack of trading activity during the period).
⁴ Borrowings are valued using bank valuation.
241,332
12,699,397
‐
12,940,729
240,240
7,548,197
‐
7,788,437
For assets and liabilities that are recognised at fair value on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re‐assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period. Reconciliation of recurring fair value measurements categorised within Level 3 is as follows:
Financial assets: Level 3
Balance at 1 July 2015
Unrealised gain recognised in Statement of comprehensive income
Transfers from Level 1
Purchases of long‐term financial assets
Balance at 30 June 2016
Financial
assets
10,277,672
243,307
‐
3,000,513
13,521,492
Listed
options
Total
‐ 10,277,672
323,307
1,000,000
3,000,513
1,080,000 14,601,492
80,000
1,000,000
‐
Balance at 1 July 2014
Unrealised gain recognised in Statement of comprehensive income
Transfers to Level 1 (and current financial assets)
Balance at 30 June 2015
9,500,000
777,672
‐
10,277,672
2,000,000
(2,500,000)
500,000 10,000,000
2,777,672
(2,500,000)
‐ 10,277,672
Thorney Opportunities Ltd 2016 Annual Report
Page | 36
Notes to the financial statements continued
8.
Financial assets
Financial assets at fair value through profit or loss
Listed equities¹
Unlisted equities²
Long‐term financial assets³
Total financial assets
Total current
Total non‐current
2016
$
2015
$
93,324,033
‐
13,521,492
106,845,525
44,334,439
7,006,250
10,277,672
61,618,361
93,324,033
13,521,492
51,340,689
10,277,672
¹ Measured at fair value using quoted market prices which are deemed a Level 1 input under the Fair Value
hierarchy as prescribed in AASB 13 and disclosed in note 2.3 (b). During FY16, options previously deemed
to be Level 1 were transferred to Level 3 due to lack of trading activity. The Black‐Scholes option pricing
model was used to value the options, with key inputs to the model including the exercise price ($1.296),
the stock price at 30 June 2016 ($1.200) and volatility. There were no other transfers between levels.
² Measured at fair value, calculated with inputs deemed to be Level 2 under the Fair Value hierarchy as
prescribed in AASB 13 and disclosed in note 2.3 (b). Valuation techniques, such as comparisons to similar
investments for which market observable prices are available, or the last sale price, are also adopted to
determine the fair value of investments included in level 2 of the hierarchy.
³ Measured at fair value using a discounted cash flow model, calculated with inputs deemed to be Level 3
under the Fair Value hierarchy as prescribed in AASB 13 and disclosed in note 2.3 (b). This model involves
the projection of a series of cash flows on an unlisted interest bearing security and is reviewed each
month by the Manager when calculating the TOP NTA. Key inputs to the discounted cash flow model
include the principal value of unlisted interest bearing securities, the applicable coupon rate (9% ‐ 11.5%)
and a discount rate of 7.82% ‐ 8.32% (2015: 8.77%).
9.
Receivables
Accrued interest
Unearned income
Sundry debtor
GST
Total receivables
The carrying value of Receivables approximates Fair Value.
2016
$
‐
‐
123,792
1,247
125,039
2015
$
66,107
18,749
‐
1,035
85,891
Thorney Opportunities Ltd 2016 Annual Report
Page | 37
Notes to the financial statements continued
10.
Payables (current)
Management fee payable
Performance fee payable
Sundry creditors and accruals
Outstanding settlements
Total payables
2016
$
889,924
4,243,177
152,570
‐
5,285,671
2015
$
734,268
2,417,078
122,790
3,421,353
6,695,489
Payables are non‐interest bearing and unsecured. Outstanding settlements include amounts due to brokers
for settlement of security purchases and are settled within 3 days of the transaction. Sundry creditors are
generally paid in accordance with the terms negotiated with each individual creditor. The Management Fee
and Performance Fee are paid within 60 days of receiving an invoice from the Investment Manager.
The carrying value of Payables approximates Fair Value.
11.
Borrowings
Prime broker
Total borrowings
2016
$
7,413,726
7,413,726
2015
$
852,708
852,708
The Company has a Prime Broker Agreement with UBS AG, Australia Branch to provide services including
borrowing and lending of securities, settlement of third party transactions and cash loans. The agreement
allows UBS to take a custodial charge over assets lodged with UBS as security for payments and performance
obligations of the Company under the Prime Brokerage Agreement. Interest accrues daily on all cash advances
at a rate equivalent to a benchmark rate of interest plus an agreed margin. Amounts drawn are repayable on
demand.
The carrying amount of the borrowing has been measured at fair value through profit or loss which is deemed
to be a Level 2 input under the Fair Value hierarchy as prescribed in AASB 13 and disclosed in note 2.3 (b).
12.
Derivative financial instruments
Exchange traded options at fair value¹
Total derivative financial instruments
2016
$
241,332
241,332
2015
$
240,240
240,240
¹ Measured at fair value using quoted market prices which are deemed a Level 1 input under the Fair Value
hierarchy as prescribed in AASB 13 and disclosed in note 2.3 (b).
Thorney Opportunities Ltd 2016 Annual Report
Page | 38
Notes to the financial statements continued
13.
Issued capital
(a) Ordinary shares
Balance at 1 July
Ordinary shares issued
Dividend Reinvestment Plan
Costs of share issue
2016
Number of
shares
2015
Number of
shares
2016
2015
$
$
168,436,720
‐
888,174
‐
168,363,261
73,459
‐
‐
80,975,125
‐
420,003
(1,820)
80,945,910
38,941
‐
‐
Total ordinary shares
169,324,894
168,436,720
81,393,308
80,984,851
(b) Options
Balance at 1 July
Exercise of options
Options expired
Transaction costs
Total options
‐
‐
‐
‐
84,087,655
(73,459)
(84,014,196)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(9,726)
(9,726)
Total issued and authorised capital
169,324,894
168,436,720
81,393,308
80,975,125
(c) Terms and conditions:
(i) Ordinary shares
Ordinary shares entitle the holder to receive dividends as declared and the proceeds on winding up the
Company in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle
their holder to one vote, either in person, or by proxy, at a meeting of the Company.
(ii)
Options
The options lapsed on 22 April 2015.
14.
Reserve
Profits reserve
Movement in profits reserve:
Balance at 1 July
Transfers from retained earnings
Dividends paid
Balance at 30 June
The profits reserve details an amount preserved for future dividend payments.
2016
$
21,619,269
11,551,886
11,839,815
(1,772,432)
21,619,269
2015
$
11,551,886
‐
11,551,886
‐
11,551,886
Thorney Opportunities Ltd 2016 Annual Report
Page | 39
Notes to the financial statements continued
15.
Earnings per share
Basic and diluted earnings per share (cents)
9.85
5.57
Earnings used in calculating basic and diluted earnings per share ($)
16,640,718
9,373,547
2016
2015
Weighted average number of ordinary shares used in calculating
basic and diluted earnings per share
168,979,606
168,388,834
2016
Number
of Shares
2015
Number
of shares
16.
Financial reporting by segments
The Company is managed as a whole and is considered to have a single operating segment. There is no further
division of the Company or internal segment reporting used by the Directors when making strategic,
investment or resource allocation decisions.
The Company’s assets are located entirely in Australia or are listed on the Australian Securities Exchange.
17.
Auditor’s remuneration
Remuneration of the auditor for:
Audit and review of financial reports
Other services
18.
Financial risk management
2016
$
2015
$
57,300
‐
52,800
5,500
The Company’s objective in managing risk is the creation and protection of shareholder value. Risk is inherent
in the Company’s activities but it is managed through a process of ongoing identification, measurement and
monitoring, subject to risk limits and other controls. The process of risk management is critical to the
Company’s continuing profitability. The Company is exposed to credit risk, liquidity risk and market risk (which
includes interest rate risk and equity price risk) arising from the financial instruments it holds.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company
by failing to discharge an obligation.
The Company is exposed to the risk of credit‐related losses that can occur as a result of a counterparty or
issuer being unable or unwilling to honour its contractual obligations. These credit exposures exist within
financing relationships, derivatives and other transactions.
The Company has counterparty exposure to Money3 Corporation Limited through its investment in two
different series of bonds. The respective bond issuer for each series of bonds has put in place security over
Money3’s assets to provide protection against the risk of default or insolvency by Money3, providing priority
over unsecured creditors. The Investment Manager monitors the counterparty in order to assess its ability to
meet its interest and principal obligations.
Thorney Opportunities Ltd 2016 Annual Report
Page | 40
Notes to the financial statements continued
18.
Financial risk management continued
Credit risk continued
It is the Company’s policy to enter into financial instruments with reputable counterparties. The Investment
Manager closely monitors the creditworthiness of the Company’s counterparties (e.g. brokers, custodian,
banks etc.) by reviewing their credit ratings, financial statements and press releases on a regular basis.
Liquidity risk
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated
with financial liabilities. Liquidity risk arises because of the possibility that the Company could be required to
pay its liabilities earlier than expected.
The Company invests primarily in marketable securities and other financial instruments, which under normal
market conditions are readily convertible to cash. In addition, the Company has no borrowings and has a daily
policy to monitor and maintain sufficient cash and cash equivalents to meet normal operating requirements.
Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to
changes in market variables such as interest rates and equity prices. As the Company is a listed investment
company with a flexible investment mandate, the Company will always be subject to market risks as the prices
of its investment fluctuates with the market.
The Company’s listed equity securities are susceptible to market price risk arising from uncertainties about
future values of the investments. The Company manages the equity price risk through adherence to its
investment policy and objectives.
At the reporting date, the exposure to listed equity securities at fair value was $93,324,033 (2015:
$44,094,189). A decrease of 10% in share value of securities held could have an impact of approximately
$9,332,403 (2015: $4,409,419) on the income or equity attributable to the Company, depending on whether
the decline is significant or prolonged. An increase in 10% in share value of securities held would have a
similar favourable impact on income and equity.
Interest risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows. The
company is not materially exposed to interest rate risk as the majority of its cash is in short‐term deposits with
fixed interest rates. The Company’s exposure to interest rate relates primarily to cash at bank and borrowings
with Prime Broker. Interest rate sensitivities have not been performed as the Company’s exposure to interest
rate risk is not significant.
19.
Contingent liabilities
Other than as described in Note 5, the Company has no contingent liabilities as at 30 June 2016.
20.
Events subsequent to balance date
There were no events subsequent to balance date.
Thorney Opportunities Ltd 2016 Annual Report
Page | 41
Notes to the financial statements continued
21.
Related party transactions
The following table provides the total amount of transactions which have been entered into with related
parties during the year ended 30 June 2016:
Entities with significant influence over the Company:
Thorney Management Services Pty Ltd
TIGA Trading Pty Ltd
¹ All related party transaction amounts are shown exclusive of GST
Services from and reimbursements
to related parties¹
2016
$
2015
$
5,819,096
52,000
3,730,959
52,000
The Company has entered into an investment management agreement with Thorney Management Services
Pty Ltd (TMS) for a period of 10 years and expiring 21 November 2023.
Under this agreement TMS is entitled to a base fee and a performance fee. For the year ending 30 June 2016 a
base fee of $1,679,411 (2015: $1,372,834) and a performance fee of $4,139,685 (2015: $2,358,125) was paid
or payable to TMS. The Company must pay TMS within 60 days of receiving an invoice.
TIGA Trading Pty Ltd, a related entity of TMS, employs personnel to provide company secretarial and financial
accounts preparation services to Thorney Opportunities Ltd. These services are provided on commercial terms
and total $52,000 for the 2016 financial year (2015: $52,000).
TMS, TIGA Trading Pty Ltd, Thorney Holdings Pty Ltd and Thorney Investment Group Australia Pty Ltd are
related bodies corporate controlled by Alex Waislitz by virtue of 608(1) of the Corporations Act (2001).
For the purposes of AASB 101 and AASB 124, the parent and ultimate parent of Thorney Opportunities Ltd is
Thorney Investment Group Australia Pty Ltd.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit
(other than those detailed above) by reason of a contract made by the Company or a related Company with
the Director or with a firm of which he is a member or with a Company in which he has substantial financial
interest.
Key Management Personnel received the following remuneration amounts:
Short‐term benefits
Post‐employment benefits
Total remuneration
2016
$
154,750
9,500
164,250
2015
$
150,000
9,520
159,520
Thorney Opportunities Ltd 2016 Annual Report
Page | 42
Notes to the financial statements continued
22.
List of investments
AMA Group Limited
Austin Engineering Limited
Diversa Limited
Fairfax Media Limited
Money3 Corporation Limited (equity, financial asset, option)
Service Stream Limited
TPI Enterprises Limited
Other listed investments
Total listed investments
Market value
as at
30 June 2016
$
18,958,994
4,226,330
6,015,498
12,911,934
24,675,604
24,255,880
5,974,551
9,793,420
106,812,211
Thorney Opportunities Ltd 2016 Annual Report
Page | 43
Directors’ declaration
In accordance with a resolution of directors of Thorney Opportunities Ltd, I state that:
1.
In the opinion of the Directors:
(a) the financial statements and notes of Thorney Opportunities Ltd for the financial year ended 30 June 2016
are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position as at 30 June 2016 and of its performance for the
year ended on that date;
(ii)
complying with Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.1; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.
On behalf of the Board,
Alex Waislitz
Chairman
Melbourne, 28 July 2016
Thorney Opportunities Ltd 2016 Annual Report
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Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
To the members of Thorney Opportunities Ltd
Report on the financial report
We have audited the accompanying financial report of Thorney Opportunities Ltd, which comprises
the statement of financial position as at 30 June 2016, the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, notes
comprising a summary of significant accounting policies and other explanatory information, and the
Directors’ declaration.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal controls as the Directors determine are necessary to enable the
preparation of the financial report that is free from material misstatement, whether due to fraud or
error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the financial report, whether due
to fraud or error. In making those risk assessments, the auditor considers internal controls relevant
to the entity's preparation of the financial report that gives a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the Directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We have given to the Directors of the Company a written Auditor’s Independence
Declaration, a copy of which is included in the Directors’ Report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Opinion
In our opinion,
a.
the financial report of Thorney Opportunities Ltd is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of the Company's financial position as at 30 June 2016 and of
its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.1.
Report on the remuneration report
We have audited the Remuneration Report included in Note 11 of the Directors' report for the year
ended 30 June 2016. The Directors of the Company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Thorney Opportunities Ltd for the year ended
30 June 2016 complies with section 300A of the Corporations Act 2001.
Ernst & Young
Kester Brown
Partner
Melbourne
28 July 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Shareholder information
As at 28 July 2016
Voting rights
All ordinary shares carry one vote per share without restriction.
Distribution of shareholders
Category
1 – 1,000 shares
1001 – 5,000 shares
5001 – 10,000 shares
10,001 – 100,000 shares
100,001 or more shares
Total number of holders
Number of shareholders holding less than a marketable parcel
20 largest shareholders of ordinary shares
Name
THORNEY HOLDINGS PROPRIETARY LIMITED
RUBI HOLDINGS PTY LTD
TIGA TRADING PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
RUBI HOLDINGS PTY LTD
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
ELPHINSTONE HOLDINGS PTY LTD
DYNASTY PEAK PTY LTD
TAMIT NOMINEES PTY LTD
FRANK COSTA SUPERANNUATION PTY LTD
OBPF NOMINEES PTY LTD
MRS NOLA ISABEL CRIDDLE
THE TRUST COMPANY (SUPERANNUATION) LTD
PICTON COVE PTY LTD
PALM VILLA PTY LTD
AUSTIN SUPERANNUATION PTY LTD
BLACKCAT HOLDINGS PTY LTD
NOLA CRIDDLE FOUNDATION PTY LTD
JAIN FAMILY SUPER PTY LTD
DAVID PERRY INVESTMENTS PTY LTD
Substantial shareholders
Name
Thorney Holdings Pty Ltd
Rubi Holdings Pty Ltd
Ordinary
shareholders
281
338
208
747
177
1,751
194
Number
of
shares
45,957,538
12,150,608
6,541,921
4,861,468
4,749,392
4,080,000
3,000,000
2,128,000
2,021,153
2,000,000
2,000,000
1,532,342
1,434,000
1,290,131
1,195,225
1,080,082
1,055,000
1,000,000
911,320
753,000
Number
of
shares
52,563,742
16,900,000
% of
issued
capital
27.14%
7.18%
3.86%
2.87%
2.80%
2.41%
1.77%
1.26%
1.19%
1.18%
1.18%
0.90%
0.85%
0.76%
0.71%
0.64%
0.62%
0.59%
0.54%
0.44%
Voting
Power
%
31.04
10.03
Thorney Opportunities Ltd 2016 Annual Report
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