Topdanmark Annual Report 2017

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Thorney Opportunities Ltd
ABN 41 080 167 264

Appendix 4E and
2017 Annual Report

THORNEY OPPORTUNITIES LTD
ACN 080 167 264

APPENDIX 4E (Listing Rule 4.3A)

Preliminary final report for the year ended 30 June 2017

RESULTS FOR ANNOUNCEMENT TO THE MARKET

(All comparisons to year ended
30 June 2016)

Revenue from ordinary activities
Profit (loss) before tax for the year
Profit (loss) after tax for the year

Dividend information
2017 Final dividend per share
2017 Interim dividend per share

2017 Final dividend dates
Ex-dividend date
Record date
DRP Election date
Final dividend payment date

$’000s

Up/Down

Movement

35,650
27,890
20,189

Amount per
share
(cents)
0.65
0.60

Up
Up
Up

Franked
amount per
share
(cents)
0.65
0.60

59%
77%
21%

Tax rate
for
franking
credit
27.5%
30.0%

13 September 2017
14 September 2017
15 September 2017
4 October 2017

A Dividend Reinvestment Plan (DRP) will operate in respect of the 2017 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 2017.

Net tangible assets after tax per ordinary
share

30 June 2017
71.6 cents

30 June 2016
60.8 cents

Movement
Up 18%

This information should be read in conjunction with the 2017 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

Contact details:

Registered office:

Level 39, 55 Collins Street
Melbourne Vic 3000
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.

When:
Where: Arnold Bloch Leibler

Friday 24 November 2017 at 11:00 am Melbourne time¹

Annual
General
Meeting:

Level 21, 333 Collins Street
Melbourne Vic 3000
¹ The proposed date, time and place of the 2017 AGM is subject to change. The Company will advise shareholders of any
changes as soon as practicable.

Thorney Opportunities Ltd 2017 Annual Report

Page | 2

Contents

Chairman’s letter ............................................................................................................................................ 4

Directors’ report ............................................................................................................................................. 5

Directors ................................................................................................................................................ 5

Company Secretary ................................................................................................................................ 6

Principal activities .................................................................................................................................. 7

Result..................................................................................................................................................... 7

Dividends ............................................................................................................................................... 7

Review of operations ............................................................................................................................. 7

Financial position ................................................................................................................................... 8

Prospects ............................................................................................................................................... 8

9. Material business risks ........................................................................................................................... 8

10. Events subsequent to balance date ........................................................................................................ 8

11. 2017 Remuneration report (Audited) ..................................................................................................... 9

12. Directors’ relevant interests ................................................................................................................. 12

13. Board and committee meetings ........................................................................................................... 12

14. Environmental regulation ..................................................................................................................... 12

15.

Indemnification and insurance of officers and auditor .......................................................................... 13

16. Auditor’s independence declaration ..................................................................................................... 13

17. Non-audit services ............................................................................................................................... 13

Auditor’s independence declaration .............................................................................................................. 14

Corporate governance statement ................................................................................................................. 15

Consolidated statement of comprehensive income ....................................................................................... 21

Consolidated statement of financial position ................................................................................................. 22

Consolidated statement of changes in equity ................................................................................................ 23

Consolidated statement of cash flows ........................................................................................................... 24

Notes to the consolidated financial statements ............................................................................................. 25

Directors’ declaration .................................................................................................................................... 43

Independent audit report .............................................................................................................................. 44

Shareholder information ............................................................................................................................... 48

Thorney Opportunities Ltd 2017 Annual Report

Page | 3

Chairman’s letter continued

Dear fellow shareholder,

I am delighted to report that for the year ended 30 June 2017, Thorney Opportunities Ltd (TOP) has delivered a
net profit before tax of $27,890,175, an increase of 77% over 2016.

The TOP net tangible assets after tax (NTA) per share as at 30 June 2017 closed at 71.6 cents per share
representing an increase of 17.8% over the twelve month period. TOP’s gross operating performance for the
twelve month period was an outstanding 34.6% (2016: 26.2%), a result which maintains our position amongst
the top echelon of funds management performances in the country. Since year end, TOP’s NTA has continued
to strengthen, being 73.4 cents per share as at 31 July 2017.

These results were achieved in an equity markets and political environment which continues to challenge the
stock-picking ability and management skills of all financial markets fund managers.

I confirm my commitment to shareholders to provide consistent distributions and in that regard, the Board has
declared a 2017 final dividend of 0.65 cents per share, fully franked, up 0.05 cents per share from the 2016 final
dividend. This dividend has a record date of 14 September 2017 and will be paid to registered shareholders on
4 October 2017. This takes total dividends paid to shareholders during the twelve month period ended 30 June
2017 to 1.2 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 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 following completion of this current statutory
financial
found on TOP’s website,
http://thorneyopportunities.com.au/chairmans-updates/.

All Chairman’s Updates

reporting period.

can be

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.

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

21 August 2017

Thorney Opportunities Ltd 2017 Annual Report

Page | 4

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 2017 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.

Directors

The directors of TOP in office during the financial year and at the date of this report are as follows:
Name:
Alex Waislitz
Henry Lanzer
Ashok Jacob
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 2016 Mr
Lanzer was appointed as a Member of the Order of Australia.

Thorney Opportunities Ltd 2017 Annual Report

Page | 5

Directors’ report continued

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 2015.

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 and Estia Health Limited.

Other current directorships include Premier Investments 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.

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 2017 Annual Report

Page | 6

Directors’ report continued

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 2017 financial year.

Result

The Group’s net profit after tax for the 2017 financial year was $20,189,353 (2016: $16,640,718).

Net tangible assets after tax were 71.6 cents per share (2016: 60.8 cents per share). Earnings per share were
11.91 cents per share (2016: 9.85 cents per share).

Dividends

On 21 August 2017 the Board declared a fully franked final dividend of 0.65 cents per share (2016: 0.6 cents per
share).

The dividend will be paid to shareholders on 4 October 2017. 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 2017.

A fully franked 2016 Final dividend of 0.6 cents per share was paid on 4 October 2016 and a fully franked 2017
Interim dividend of 0.6 cents per share was paid on 6 April 2017.

Review of operations

Over the course of the financial year ended 30 June 2017 the Group increased its net profit before tax by 77.0%
over the prior corresponding period to $27,890,175 and net profit after tax increased by 21.3%.

The net tangible assets after tax per share increased 17.8% from 60.8 cents per share to 71.6 cents per share
during the period.

Cash and cash equivalents as at 30 June 2017 was $1,067,310 (2016: $8,091,960). This decrease in the net cash
position reflects the steady deployment of capital into both new investment opportunities and certain existing
investment positions.

During 2017 TOP became a substantial shareholder of OneVue Holdings Limited following the anticipated take-
over of Diversa Limited by OneVue in September 2016. Also during the year, TOP increased its investment in TPI
Enterprises Limited lodging substantial holder notices in August 2016 and June 2017.

Thorney Opportunities Ltd 2017 Annual Report

Page | 7

Directors’ report continued

Financial position

The Group’s net tangible assets can be summarised as follows:

Net tangible asset backing per share
Net tangible assets ($)
Shares on issue
Net tangible assets after tax per share

Prospects

2017
121,399,380
169,661,399
71.6 cents

2016
103,012,577
169,324,894
60.8 cents

The Group 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 Group will continue to emerge over the coming period.

Material business risks

The Group’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 2017 Annual Report

Page | 8

Directors’ report continued

11.

2017 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 dependent 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 2017, the Investment Manager was entitled to:
•

a Base Fee of $1,982,017 (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 $5,079,083 (GST exclusive), payable in respect of the year ended 30 June 2017. 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 2017 Annual Report

Page | 9

Directors’ report continued

11.

2017 Remuneration report (Audited) continued

Key Management Personnel (KMP) received the following remuneration amounts:

2017

Short term benefits

Fees
$

Other
$

Alex Waislitz
Ashok Jacob
Henry Lanzer¹
Dr Gary Weiss
Total KMP remuneration

0
50,000
54,750
50,000
154,750

2016

Short term benefits

Fees
$

Other
$

Alex Waislitz
Ashok Jacob
Henry Lanzer¹
Dr Gary Weiss
Total KMP remuneration

0
50,000
54,750
50,000
154,750

¹ Mr Lanzer’s fees are paid or payable to Arnold Bloch Leibler and exclude GST

Post-employment
benefits
Superannuation
$

0
4,750
0
4,750
9,500

Post-employment
benefits
Superannuation
$

0
4,750
0
4,750
9,500

0
0
0
0
0

Total

0
54,750
54,750
54,750
164,250

Total

0
54,750
54,750
54,750
164,250

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 2017 Annual Report

Page | 10

Directors’ report continued

11.

2017 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

Earnings before tax
$

2017
2016
2015
2014
2013

27,890,175
15,759,953
9,373,547
(2,669,210)
(258,150)

EPS
(cents per share)
11.91
9.85
5.57
(2.47)
(0.81)

Share price
(cents per share)
69.5
58.0
46.5
44.5
36.4

NTA (after tax)
(cents per share)
71.6
60.8
52.1
46.6
45.3

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 2013.

History of TOP Performance Last 5 Years

NTA
cps

Thorney
appointed
investment
manager

↓

2013

2016

2015

2014

NTA

EPS

2017

EPS

-2

-4

Thorney Management Services Pty Ltd (Investment Manager) assumed investment management responsibilities
from 21 November 2013 pursuant to an Investment Management Agreement approved by shareholders at the
2013 Annual General Meeting.

Thorney Opportunities Ltd 2017 Annual Report

Page | 11

Directors’ report continued

12.

KMP relevant interests

The number of TOP ordinary shares held by KMP in the Company is as follows:

Directors
Alex Waislitz¹
Ashok Jacob
Henry Lanzer
Dr Gary Weiss
Other key management personnel
Thorney Management Services Pty Ltd
(TMS)¹

Balance
30 June
2015

51,749,305
1,034,934
100,000
9,971

Additions/
(Disposals)

Balance
30 June
2016

Additions/
(Disposals)

Balance
30 June
2017

814,437
-
1,057
-

52,563,742
1,034,934
101,057
9,971

-
18,217
1,779
-

52,563,742
1,053,151
102,836
9,971

51,749,305

814,437

52,563,742

¹ Pursuant to the Corporations Act 2001, Alex Waislitz and TMS have a deemed relevant interest in the ordinary shares in
the Company held by Thorney Holdings Proprietary Limited.

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
2017 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
5
5
6

No. of
meetings
held while
a Director
3
-
3
-

No. of
meetings
attended
3
2¹
3
2¹

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 committee meetings during the year.

14.

Environmental regulation

The operations of TOP are not subject to any particular or significant environmental regulations under a
Commonwealth, State or Territory law.

Thorney Opportunities Ltd 2017 Annual Report

Page | 12

Directors’ report continued

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 14.

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 38 of this report.

There were no non-audit services performed by the Company’s auditor, Ernst & Young, during the 2017 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, 21 August 2017

Thorney Opportunities Ltd 2017 Annual Report

Page | 13

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

Auditor’s Independence Declaration to the Directors of Thorney Opportunities
Ltd

As lead auditor for the audit of Thorney Opportunities Ltd for the financial year ended 30 June 2017, I
declare to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation

to the audit; and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Thorney Opportunities Ltd and the entity it controlled during the financial
year.

Ernst & Young

Kester Brown
Partner
21 August 2017

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

Corporate governance statement

2017 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 as included in the ASX
Corporate Governance Principles and Recommendations 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 2017 with no
material changes proposed to the Board processes or individual director contributions.

Thorney Opportunities Ltd 2017 Annual Report

Page | 15

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 2017
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
Group 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 Group 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 Group, 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

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 Group.

Thorney Opportunities Ltd 2017 Annual Report

Page | 16

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
25 November 2016
25 November 2016

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 Group and that the current structure is appropriate for the Group
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 2017, 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 Group 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 Group on matters arising in the
course of their Board duties. The payment for the cost of the advice by the Group is subject to the approval of
the Chairman, which will not be unreasonably withheld.

1 Lead Independent Director

Thorney Opportunities Ltd 2017 Annual Report

Page | 17

Corporate governance statement continued

Principle 3: Act ethically and responsibly

Code of Conduct and Conflicts of Interest
The Group 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 Group’s integrity;
perform their duties to high standards of honest, ethical and law-abiding behaviour;
treat others with dignity and respect; and
not engage in conduct likely to adversely affect the reputation of Thorney Opportunities.

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 Group, 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
and 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 Group 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 Group; 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 4 under the partner
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 2017 Annual Report

Page | 18

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 Friday 24 November 2017 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 Group.

For the year ended 30 June 2017 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 2017 Annual Report

Page | 19

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 Group 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 Group and the fact the Group 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 Group 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 Group.

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 2017 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 Group.

Further details on the fees paid to the Investment Manager are included in the financial statements.

Thorney Opportunities Ltd 2017 Annual Report

Page | 20

Consolidated statement of comprehensive income
For the year ended 30 June 2017

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 (expense)/benefit

Total comprehensive profit for the year

Note

2017
$

2016
$

3
3
3
3
3

31,890,512
1,371,262
2,387,170
1,036

35,649,980

(2,031,567)
(5,206,060)
(169,725)
(37,245)
(108,322)
(161,322)
(45,564)

18,536,018
1,558,814
2,143,801
212,185

22,450,818

(1,721,396)
(4,243,177)
(169,725)
(210,915)
(109,032)
(183,411)
(53,209)

(7,759,805)

(6,690,865)

27,890,175

15,759,953

(7,700,822)

880,765

20,189,353

16,640,718

2017
cents

2016
cents

Basic and diluted earnings per share

11.91

9.85

The Consolidated statement of comprehensive income should be read in conjunction with the notes to the
financial statements.

Thorney Opportunities Ltd 2017 Annual Report

Page | 21

Consolidates statement of financial position
As at 30 June 2017

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

Non-current liabilities

Deferred tax liabilities

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY
Issued capital
Reserve

TOTAL EQUITY

Note

2017
$

2016
$

6
8
9

8
4

10
11
12

1,067,310
128,793,223
620,412
10,491

8,091,960
93,324,033
125,039
10,017

130,491,436

101,551,049

4,253,600
-

13,521,492
880,765

4,253,600

14,402,257

134,745,036

115,953,306

6,515,599
-
10,000

5,285,671
7,413,726
241,332

6,525,599

12,940,729

6,820,057

13,345,656

12,940,729

121,399,380

103,012,577

13
14

81,623,698
39,775,682

81,393,308
21,619,269

121,399,380

103,012,577

The Consolidated statement of financial position should be read in conjunction with the notes to the financial
statements.

Thorney Opportunities Ltd 2017 Annual Report

Page | 22

Conslidated statement of changes in equity
For the year ended 30 June 2017

Balance at 1 July 2016

81,393,308

21,619,269

103,012,577

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 DRP
Cost of shares issued

Total transactions with shareholders

20,189,353

(20,189,353)

-
230,390
-

230,390

(2,032,940)
-
-

(2,032,940)

-
-
-

(2,032,940)
230,390
-

(1,802,550)

121,399,380

Balance as at 30 June 2017

81,623,698

39,775,682

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 DRP

Cost of shares issued

Total transactions with shareholders

420,003

(1,820)

418,183

16,640,718

11,839,815

(11,839,815)

(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

The Consolidated statement of changes in equity should be read in conjunction with the notes to the financial
statements.

Thorney Opportunities Ltd 2017 Annual Report

Page | 23

Consolidated statement of cash flows
For the year ended 30 June 2017

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

2017
$

2016
$

1,371,262
2,387,170
25,920,669
(19,964,806)
(6,592,831)
(37,245)
124,828

1,624,922
2,143,801
8,792,696
(35,902,522)
(4,516,202)
(210,915)
88,393

Net cash (used in)/provided by operating activities

6(a)

3,209,047

(27,979,827)

Cash flows from investing activities:
Payments for long-term investments

Net cash (used in)/provided by investing activity

Cash flows from financing activities:
Net (repayments of) proceeds from borrowings
Payment for transaction costs
Dividends paid (net of DRP)

Net cash provided by/(used in) financing activities

Net (decrease)/increase in cash held
Cash at the beginning of the year

Cash at the end of the year

(1,000,192)

(3,000,513)

(1,000,192)

(3,000,513)

(7,413,726)
-
(1,819,779)

6,561,018
(1,819)
(1,279,922)

(9,233,505)

5,279,277

(7,024,650)
8,091,960

(25,701,063)
33,793,023

1,067,310

8,091,960

The Consolidated statement of cash flows should be read in conjunction with the notes to the financial
statements.

Thorney Opportunities Ltd 2017 Annual Report

Page | 24

Notes to the financial statements continued

Corporate information

The consolidated financial statements of Thorney Opportunities Ltd and its subsidiary (collectively, the Group)
for the year ended 30 June 2017 were authorised for issue in accordance with a resolution of the directors on
21 August 2017. Thorney Opportunities Ltd (TOP, the Group or the parent) is a Group limited by shares,
incorporated and domiciled in Australia. The nature of the operations and principal activities of the Group are
described in the director’s report.

The Group’s investment activities are managed by Thorney Management Services Pty Ltd (Investment Manager)
pursuant to an Investment Management Agreement approved by shareholders.

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 Group 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 Group 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 2016-3 - Amendments to Australian Accounting Standards arising from the Withdrawal of AASB
1031 Materiality
AASB 2015-8 – Limits the application of the existing versions of AASB9 (AASB 9 (December 2009) and
AASB 9 (December 2010)) from 1 February 2016 and applies to annual reporting periods beginning on
after 1 January 2016

The adoption of these new and amended standards did not have an impact in the reporting of the Group.

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 Group’s
financial statements are listed below. The Group intends to adopt applicable standards when they become
effective. The Group has not yet completed an impact assessment on these standards.

Thorney Opportunities Ltd 2017 Annual Report

Page | 25

Consolidated statement of cash flows
For the year ended 30 June 2017

2.1

Summary of accounting policies continued

(a)

Basis of preparation continued

Financial Instruments — Amendments to AASB 9
AASB 9 (December 2015) 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 loss’ impairment model and a substantially-reformed
approach to hedge accounting. The Group 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.

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.

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 2016) 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 2016) 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 2017 Annual Report

Page | 26

Notes to the financial statements continued

2.1

Summary of accounting policies continued

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Group and entities (including
structured entities) controlled by the Group and its subsidiaries. Control is achieved when the Group:
(cid:127) has power over the investee;
(cid:127) is exposed, or has rights, to variable returns from its involvement with the investee; and
(cid:127) has the ability to use its power to affect its returns.

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

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

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

2.2

Accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, 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.

Financial instruments

(i) Classification
The Group classifies its financial assets and financial liabilities into the categories below in accordance with AASB
9.

Thorney Opportunities Ltd 2017 Annual Report

Page | 27

Notes to the financial statements continued

2.3

Summary of significant accounting policies continued

Financial assets and liabilities at fair value through profit or loss
The Group 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 2017 Annual Report

Page | 28

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 Group
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 Group 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 Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.

The Group 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 Group recognises the difference in the statement of comprehensive income, unless specified otherwise.

Thorney Opportunities Ltd 2017 Annual Report

Page | 29

Notes to the financial statements continued

2.3

Summary of significant accounting policies continued

Financial instruments continued

(v) Subsequent measurement
After initial measurement, the Group 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 Group 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 Group.

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 Group 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

Thorney Opportunities Ltd 2017 Annual Report

Page | 30

Notes to the financial statements continued

2.3

Summary of significant accounting policies continued

Functional and presentation currency

c)
The Group’s functional and presentation currency is the Australian Dollar, which is the currency of the primary
economic environment in which it operates. The Group’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 Group’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 Group 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 2017 Annual Report

Page | 31

Notes to the financial statements continued

2.3

Summary of significant accounting policies continued

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 liabilities are recognised for all taxable temporary differences, except:

Standards issued that might have an impact but not yet effective

i. When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future

ii.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.

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 Group 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 2017 Annual Report

Page | 32

Notes to the financial statements continued

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

Income tax

2017
$
1,521,968
30,368,544
1,371,262
2,387,170
-
1,036
35,649,980

2016
$
2,755,291
15,780,727
1,558,814
2,143,801
200,659
11,526
22,450,818

The income tax expense attributable to the year differs from the prima facie amount payable on the profit before
tax. The difference is reconciled as follows:

Current tax
Current income tax charge / (benefit)
Deferred tax
Origination and reversal of temporary differences
Income tax expense recognised in the Statement of profit or loss

Profit before income tax expense
Prima facie tax expense on profit from ordinary activities
before income tax expense at 30% (2016: 30%)
Deferred income tax expense
-
-
-
Income tax (expense)/benefit recognised in the
Statement of profit or loss

Imputation credits converted to losses
Imputation credits on dividends received
Tax losses not previously recognised

Deferred tax
Trading stock
Long term financial assets
Business establishment costs
Other
Losses available for offsetting against future taxable income
Net deferred tax (liabilities)/assets

2017
$

2016
$

421,671

(3,076,169)

7,279,151
7,700,822

2,195,404
(880,765)

27,890,175

15,759,953

(8,367,053)

(4,727,986)

951,757
(285,526)
-

850,073
(136,742)
5,013,700

(7,700,822)

880,765

(17,744,106)
(75,869)
143,807
15,330
10,840,781
(6,820,057)

(10,682,589)
-
290,466
10,437
11,262,451
880,765

At 30 June 2017, the Group has estimated unused gross capital tax losses of $30,714,116 (2016: $30,714,116)
and gross revenue tax losses of $36,135,936 (2016: $37,541,505) that are available to offset against future
taxable capital and revenue profits, subject to continuing to meet relevant statutory tests.

Thorney Opportunities Ltd 2017 Annual Report

Page | 33

Notes to the financial statements continued

Dividends

(a) Final Dividend FY 2017 not recognised at year end
Since the end of the year, the Directors have declared a 0.65 cents
per share fully franked dividend which has not been recognised as a
liability at the end of the financial year (2016: 0.60 cents 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

2017
$

2016
$

1,102,799

1,015,951

580,523
951,756
(871,260)
661,019

418,303
242,716

490,064
850,073
(759,614)
580,523

435,408
145,115

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.

Cash and short-term deposits

Cash at bank
Total cash and short-term deposits

2017
$
1,067,310
1,067,310

2016
$
8,091,960
8,091,960

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 Group,
and earn interest at the respective short-term deposit rates. The carrying value of Cash and short-term deposits
approximates Fair Value.

Reconciliation of net profit/(loss) after tax to net cash provided by operating activities:

Profit/(loss) for the year

Adjustments for non-cash items:
Unrealised component of change in fair value of
investments

Changes in Assets & Liabilities:
(Increase) in receivables
Decrease/(increase) in financial assets
Decrease/(increase) in deferred tax assets
(Increase)/decrease in other assets
Increase in creditors & accrued expenses
(Decrease)/increase in other financial liabilities
Increase in deferred tax liabilities
Net cash provided by/(used in) operating activities

Thorney Opportunities Ltd 2017 Annual Report

2017
$

2016
$

20,189,353

16,640,718

(30,368,544)

(15,780,727)

(495,373)
5,317,434
880,765
(474)
1,130,681
(264,852)
6,820,057
3,209,047

(57,684)
(30,015,685)
(880,765)
7,253
1,956,495
150,568
-
(27,979,827)

Page | 34

Notes to the financial statements continued

Fair value measurement

To reflect the source of valuation inputs used when determining the fair value of its financial assets and financial
liabilities, the Group uses the fair value hierarchy prescribed in AASB 13:

Level 1:

Level 2:

Level 3:

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;
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
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 Group’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

2017
$

2016
$

117,567,767
630,903
15,479,056
133,677,726
129,424,126
4,253,600

92,244,033
135,056
14,601,492
106,980,581
93,459,089
13,521,492

Liabilities measured at fair value
Exchange traded options
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

10,000
6,515,599
-
6,525,599

For assets and liabilities that are recognised at fair value on a recurring basis, the Group 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 2016
Unrealised gain recognised in Statement of comprehensive income
Transfers from Level 1
Purchases of long-term financial assets
Balance at 30 June 2017

Balance at 1 July 2015
Unrealised gain recognised in Statement of comprehensive income
Transfers to Level 1 (and current financial assets)
Purchases of long-term financial assets
Balance at 30 June 2016

Financial
assets
13,521,492
7,372
-
1,000,192
14,529,056

10,277,672
243,307
-
3,000,513
13,521,492

Listed
options
1,080,000
(130,000)
-
-
950,000

-
80,000
1,000,000
-
1,080,000

Total
14,601,492
(122,628)
-
1,000,192
15,479,056

10,277,672
323,307
1,000,000
3,000,513
14,601,492

Thorney Opportunities Ltd 2017 Annual Report

Page | 35

Notes to the financial statements continued

Financial assets

Financial assets at fair value through profit or loss
Listed equities and listed options¹
Short-term financial assets2
Long-term financial assets²
Total financial assets

Total current
Total non-current

2017
$

2016
$

118,517,767
10,275,456
4,253,600
133,046,823

93,324,033
-
13,521,492
106,845,525

128,793,223
4,253,600

93,324,033
13,521,492

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 2017 ($1.28) and volatility. There were no other transfers between levels.

² 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 7.72% (2016: 7.82% - 8.32%).

Receivables

Sundry debtor
GST
Total receivables

2017
$
618,688
1,724
620,412

2016
$
123,792
1,247
125,039

Outstanding settlements include amounts due from brokers for settlement of securities sold and are settled
within 2 days of the transaction. The carrying value of Receivables approximates Fair Value.

10.

Payables (current)

Management fee payable
Performance fee payable
Sundry creditors and accruals
Total payables

2017
$
1,035,852
5,206,060
273,687
6,515,599

2016
$
889,924
4,243,177
152,570
5,285,671

Payables are non-interest bearing and unsecured. Outstanding settlements include amounts due to brokers for
settlement of security purchases and are settled within 2 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.

Thorney Opportunities Ltd 2017 Annual Report

Page | 36

Notes to the financial statements continued

11.

Borrowings

Prime broker
Total borrowings

2017
$

2016
$

-
-

7,413,726
7,413,726

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

2016
$
241,332
241,332
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).

Exchange traded options at fair value¹
Total derivative financial instruments

10,000
10,000

2017
$

13.

Issued capital

(a) Ordinary shares
Balance at 1 July
Ordinary shares issued:
Dividend Reinvestment Plan
Costs of share issue
Total ordinary shares

2017
Number of
shares

2016
Number of
shares

2017

2016

169,324,894

168,436,720

81,393,308

80,975,125

336,505
-
169,661,399

888,174
-
169,324,894

230,390
-
81,623,698

420,003
(1,820)
81,393,308

Total issued and authorised capital

169,661,399

169,324,894

81,623,698

81,393,308

(b) 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.

Thorney Opportunities Ltd 2017 Annual Report

Page | 37

Notes to the financial statements continued

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.

15.

Earnings per share

2017
$

2016
$

39,775,682

21,619,269

21,619,269
20,189,353
(2,032,940)
39,775,682

11,551,886
11,839,815
(1,772,432)
21,619,269

2017

2016

Basic and diluted earnings per share (cents)

11.91

9.85

Earnings used in calculating basic and diluted earnings per share ($)

20,189,353

16,640,718

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

169,492,088

168,979,606

2017
Number
of Shares

2016
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

2017
$

2016
$

61,600

66,131

Thorney Opportunities Ltd 2017 Annual Report

Page | 38

Notes to the financial statements continued

18.

Financial risk management

The Group’s objective in managing risk is the creation and protection of shareholder value. Risk is inherent in
the Group’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 Group’s
continuing profitability. The Group 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 Group by
failing to discharge an obligation.

The Group 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 Group has a maximum counterparty exposure to Money3 Corporation Limited through its investment in two
different series of bonds of $14 million. 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.

It is the Group’s policy to enter into financial instruments with reputable counterparties. The Investment
Manager closely monitors the creditworthiness of the Group’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 Group will encounter difficulty in meeting obligations associated with
financial liabilities. Liquidity risk arises because of the possibility that the Group could be required to pay its
liabilities earlier than expected.

The Group invests primarily in marketable securities and other financial instruments, which under normal
market conditions are readily convertible to cash. In addition, the Group 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 Group is a listed investment company with a
flexible investment mandate, the Group will always be subject to market risks as the prices of its investment
fluctuates with the market.

The Group’s listed equity securities are susceptible to market price risk arising from uncertainties about future
values of the investments. The Group 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 $118,517,767 (2016:
$93,324,033). A decrease of 10% in share value of securities held could have an impact of approximately
$11,851,777 (2016: $9,332,403) on the income or equity attributable to the Group, 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.

Thorney Opportunities Ltd 2017 Annual Report

Page | 39

Notes to the financial statements continued

18.

Financial risk management continued

Interest risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows. The Group
is not materially exposed to interest rate risk as the majority of its cash is in short-term deposits with fixed
interest rates. The Group’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 Group’s exposure to interest rate risk is not
significant.

19.

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 2017:

Services from and reimbursements to related parties¹

Entities with significant influence over the Group:
Thorney Management Services Pty Ltd
TIGA Trading Pty Ltd
Arnold Bloch Leibler

¹ All related party transaction amounts are shown exclusive of GST

2017
$

2016
$

7,061,100
52,000
56,842

5,819,096
52,000
54,750

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 2017 a
base fee of $1,982,017 (2016: $1,679,411) and a performance fee of $5,079,083 (2016: $4,139,685) 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 2017 financial year (2016: $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).

During the year, the Company engaged Arnold Bloch Leibler, a legal firm of which Henry Lanzer is the managing
partner, to provide legal advice totalling $2,092 (2016: $nil).

In accordance with the terms of Mr Lanzer’s appointment, a payment of $54,750 was paid or payable to Arnold
Bloch Leibler as remuneration for his role as a Director of the Company (2016: $54,750).

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.

Thorney Opportunities Ltd 2017 Annual Report

Page | 40

Notes to the financial statements continued

19.

Related party transactions continued

Key Management Personnel received the following remuneration amounts:

Short-term benefits
Post-employment benefits
Total remuneration

20.

Contingent liabilities

2017
$
154,750
9,500
164,250

2016
$
154,750
9,500
164,250

Other than as described in Note 5, the Group has no contingent liabilities as at 30 June 2017.

21.

Events subsequent to balance date

There were no events subsequent to balance date.

22.

Parent entity information

The parent entity information is materially consistent with the consolidated financial information as the
Company’s subsidiary has not commenced trading.

23. Group information

The parent entity of the Group is Thorney Opportunities Ltd and the subsidiary is detailed in the following table:

Name of entity

Parent entity
Thorney Opportunities Ltd
Subsidiary
87 Truca Pty Ltd

Country of
incorporation

Australia

Ownership

2017

2016

100%

Thorney Opportunities Ltd 2017 Annual Report

Page | 41

Notes to the financial statements continued

24.

List of investments

Service Stream Limited
AMA Group Limited
Money3 Corporation Limited (equity, option)
Fairfax Media Limited
Austin Engineering Limited
TPI Enterprises Limited
OneVue Holdings Limited
iSelect Limited
Other listed investments
Total listed investments

Market value
as at
30 June 2017
$
31,908,330
21,392,699
14,306,837
13,501,776
10,543,383
9,338,242
8,649,568
6,056,522
2,820,410
118,517,767

Thorney Opportunities Ltd 2017 Annual Report

Page | 42

Directors’ declaration

In accordance with a resolution of directors of Thorney Opportunities Ltd, I state that:

In the opinion of the Directors:

(a)

the financial statements and notes of Thorney Opportunities Ltd for the financial year ended 30 June 2017
are in accordance with the Corporations Act 2001, including:

(i)

giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 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.

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 2017.

On behalf of the Board,

Alex Waislitz
Chairman

Melbourne, 21 August 2017

Thorney Opportunities Ltd 2017 Annual Report

Page | 43

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

Independent Auditor’s Report

To the Members of Thorney Opportunities Ltd

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Thorney Opportunities Ltd (the Company) and its subsidiary
(collectively the Group), which comprises the consolidated statement of financial position as at
30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated 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.

In our opinion the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:

(i)

giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017
and of its financial performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with
the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying Financial Report.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

Fair value measurement and existence of investments and related disclosures

Why significant

How this matter was addressed in the audit

The Group invests in listed and unlisted financial
assets which are carried at fair value on the
statement of financial position.

In obtaining sufficient audit evidence as to the
existence and valuation of listed and unlisted
investments and the related disclosures, we:

The investment portfolio at year end was
comprised of $118.5m in quoted equity
investments, and $14.5m in unlisted bonds.

The valuation and existence of the investment
portfolio is a key audit matter because it
represents the principal element of the Group’s
net asset value.

The valuation of unlisted investments is a key
audit matter because the valuation models for
these investments use discount rates which can
be subjective in nature and involve various
assumptions, such as the investee risk premium..
The use of different valuation techniques and
assumptions could produce significantly
different estimates of fair value.

Refer to Note 7, footnote 3 to the financial report
for disclosure.

►

Agreed the prices for all quoted equity
investments to third party sources, and the
number of shares held at year end to custodian
statements.

Obtained and evaluated an assurance report
from an audit firm that describes the
effectiveness of the operational processes and
controls of the Group’s asset custodian.

Assessed the application of the valuation
methodology applied to unlisted investments.
Assessed the key inputs and assumptions
adopted in the valuation models for unlisted
investments including discount rates, coupon
rates and cashflows.

Benchmarked key assumptions for the discount
rates used by the Group to external market data,
where we involved our valuation specialists.
Assessed the adequacy of the disclosures
included in Note 7 Financial Assets.

Recognition and recoverability of deferred tax assets

Why significant

How this matter was addressed in the audit

The Group has gross capital tax losses and
revenue tax losses that are available to offset
against future taxable capital and revenue profits.
Of the gross revenue losses, $10.8m has been
recognised as deferred tax assets as at
30 June 2017 and has been netted against the
deferred tax liabilities of $17.6m to record net
deferred tax liabilities of $6.8m as at
30 June 2017.

The Group has a further $9.2m of capital tax
losses available to offset against future profits
which have not been recognised as deferred tax
assets in the financial report.

In obtaining sufficient audit evidence on the
recognition of deferred tax assets and the related
disclosures, we:

►

Evaluated the Group’s assumptions and
estimates in relation to the likelihood of
generating sufficient future taxable profits such
that deferred tax assets could be recognised.

Involved our audit tax specialists to assess the
assumptions used to determine the tax positions
and corroborated the assumptions used with
supporting evidence such as relevant tax
legislation, tax memorandums and advice
prepared by the Group’s tax experts and
correspondence with the tax authorities.
Assessed the independence and competence of
the Group’s tax experts.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

Why significant

How this matter was addressed in the audit

►

Assessed the adequacy of the disclosures
included in Note 4 Income Tax.

The Group recognises these deferred tax assets to
the extent that it is probable that future taxable
profits will allow the deferred tax assets to be
recovered. The probability of recovery is impacted
by uncertainties regarding the likely timing and
level of future taxable profits, together with tax
planning strategies and the expiration date of
losses.

Refer to Note 4 of the financial report.

Information Other than the Financial Report and Auditor’s Report Thereon

The Directors are responsible for the other information. The other information comprises the
information in the Group’s Annual Report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based upon the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Directors’ Responsibilities 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 control as the Directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

As part of an audit in accordance with Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.

• Obtain an understanding of internal control relevant to the audit 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 control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.

Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in
the financial report about the material uncertainty or, if such disclosures are inadequate, to
modify the opinion on the financial report. However, future events or conditions may cause an
entity to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

We communicate with the Directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

From the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 9 to 11 of the Directors' Report for the
year ended 30 June 2017.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

In our opinion, the Remuneration Report of Thorney Opportunities Ltd for the year ended
30 June 2017, complies with section 300A of the Corporations Act 2001.

Responsibilities

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.

Ernst & Young

Kester Brown
Partner

Melbourne
21 August 2017

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

Shareholder information

As at 21 August 2017

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
RUBI HOLDINGS PTY LTD
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
ELPHINSTONE HOLDINGS PTY LTD
LANGBURGH PTY LTD
FRANK COSTA SUPERANNUATION PTY LTD
MRS NOLA ISABEL CRIDDLE
JAIN FAMILY SUPER PTY LTD
TAMIT NOMINEES PTY LTD
PICTON COVE PTY LTD
NCOBF PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AUSTIN SUPERANNUATION PTY LTD
BLACKCAT HOLDINGS PTY LTD
NOLA CRIDDLE FOUNDATION PTY LTD
FIFTY SECOND CELEBRATION PTY LTD
OBFT PTY LTD
BERNE NO 132 NOMINEES PTY LTD

Substantial shareholders

Name
Thorney Holdings Pty Ltd
Rubi Holdings Pty Ltd

Ordinary
shareholders
293
474
262
953
180
2,162
212

Number
of
shares
45,957,538
12,038,498
6,541,921
4,749,392
4,080,000
3,000,000
2,500,000
2,000,000
1,559,316
1,363,798
1,328,120
1,228,998
1,200,000
1,093,551
1,080,082
1,055,000
1,000,000
837,522
829,356
762,408

Number
of
shares
52,563,742
16,787,890

% of
issued
capital
27.088
7.096
3.856
2.799
2.405
1.768
1.474
1.179
0.919
0.804
0.783
0.724
0.707
0.645
0.637
0.622
0.589
0.494
0.489
0.449

Voting
Power
%
30.982
9.895

Thorney Opportunities Ltd 2017 Annual Report

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Thorney Opportunities Ltd 2017 Annual Report

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