Thorney Opportunities Ltd
ABN 41 080 167 264
Appendix 4E and
2018 Annual Report
THORNEY OPPORTUNITIES LTD
ABN 41 080 167 264
APPENDIX 4E (Listing Rule 4.3A)
Preliminary final report for the year ended 30 June 2018
RESULTS FOR ANNOUNCEMENT TO THE MARKET
(All comparisons to year ended 30 June 2017)
$’000s
Up/Down
Movement
Revenue from ordinary activities
Profit (loss) before tax for the year
Profit (loss) after tax for the year
18,882
12,845
11,109
Down
Down
Down
47%
54%
45%
Dividend information
2018 Final dividend cents per share
2018 Interim dividend cents per share
2018 Final dividend dates
Ex-dividend date
Record date
Payment date
Cents
per
share
0.90
0.60
Franked
amount
per share
0.90
0.60
Taxing rate
for
franking
27.5%
27.5%
11 September 2018
12 September 2018
2 October 2018
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (DRP) will not operate in respect of the 2018 Final dividend.
Net tangible asset backing (after tax) per share
30 June 2018
75.7 cents
30 June 2017
71.6 cents
Movement
Up 6%
This information should be read in conjunction with the 2018 Annual Report of Thorney Opportunities Ltd and
any public announcements made in the period by Thorney Opportunities Ltd in accordance with the
continuous disclosure requirements of the Corporations Act 2001 and Listing Rules.
This report is based on the financial statements of Thorney Opportunities Ltd which have been audited by
Ernst and Young.
Company particulars
Thorney Opportunities Ltd is a disclosing entity under the Corporations Act 2001 and currently considered an
investment entity pursuant to ASX Listing Rules. The Company is primarily an investor in listed equities on the
Australian securities market.
ASX Code: TOP
Security: Thorney Opportunities Ltd fully paid ordinary shares
Directors: Alex Waislitz, Chairman
Ashok Jacob
Henry Lanzer AM
Dr Gary Weiss
Secretary: Craig Smith
Country of incorporation: Australia
Registered office: Level 39, 55 Collins Street
Melbourne Vic 3000
Contact details: Level 39, 55 Collins Street
Melbourne Vic 3000
T: + 613 9921 7116
F: + 613 9921 7100
E: craig.smith@thorney.com.au
W: www.thorneyopportunities.com.au
Investment Manager: Thorney Management Services Pty Ltd
Level 39, 55 Collins Street
Melbourne Vic 3000
AFSL: 444369
Auditor: Ernst & Young, Melbourne
8 Exhibition Street
Melbourne Vic 3000
Solicitors: Arnold Bloch Leibler
333 Collins Street
Melbourne Vic 3000
Share Registry: Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
T: + 612 9290 9600
F: + 612 9279 0664
W: www.boardroomlimited.com.au
For all shareholder related enquiries please contact the share registry.
Annual
General
Meeting:
When: Thursday 22 November 2018¹
¹ The proposed date of the 2018 AGM is subject to change. The Company will
advise shareholders of meeting details in mid-October 2018.
Thorney Opportunities Ltd 2018 Annual Report
Page | 2
Contents
Chairman’s letter .................................................................................................................................................. 4
Directors’ report ................................................................................................................................................... 6
1.
2.
3.
4.
5.
6.
7.
8.
Directors ...................................................................................................................................................... 6
Company Secretary ..................................................................................................................................... 7
Principal activities ........................................................................................................................................ 8
Result ........................................................................................................................................................... 8
Dividends ..................................................................................................................................................... 8
Review of operations ................................................................................................................................... 8
Financial position ......................................................................................................................................... 9
Prospects ..................................................................................................................................................... 9
9. Material business risks ................................................................................................................................ 9
10. Events subsequent to balance date ............................................................................................................ 9
11. 2018 Remuneration report (Audited) ....................................................................................................... 10
12. KMP relevant interests .............................................................................................................................. 13
13. Board and committee meetings ................................................................................................................ 13
14. Environmental regulation .......................................................................................................................... 13
15.
Indemnification and insurance of officers and auditor ............................................................................. 14
16. Auditor’s independence declaration ......................................................................................................... 14
17. Non-audit services ..................................................................................................................................... 14
Auditor’s independence declaration ................................................................................................................... 15
Corporate governance statement ...................................................................................................................... 16
Consolidated statement of comprehensive income ........................................................................................... 22
Consolidated statement of financial position ..................................................................................................... 23
Consolidated statement of changes in equity..................................................................................................... 24
Consolidated statement of cash flows ................................................................................................................ 25
Notes to the consolidated financial statements ................................................................................................. 26
Directors’ declaration .......................................................................................................................................... 43
Independent audit report ................................................................................................................................... 44
Shareholder information ..................................................................................................................................... 49
Thorney Opportunities Ltd 2018 Annual Report
Page | 3
Chairman’s letter
TOP continues its growth and declares record final dividend
Dear fellow shareholder,
I'm delighted to report that for the year ended 30 June 2018, Thorney Opportunities Ltd (TOP) has delivered a
net profit before tax of A$12.8 million and declared a record final dividend of 0.9 cents per share (cps), up
38.5% on last year.
As at 30 June 2018, TOP’s net tangible assets (NTA) after tax per share stood at 75.7 cents (cps). The NTA
performance since 30 June has been particularly strong, with the NTA closing at 78.5 cps, an increase of 3.7%
in the first two months of the 2019 financial year.
Since inception TOP has consistently produced strong growth in its NTA, as summarized in the below table.
Period
12 months to 30 June 2018
14 months to 31 August 2018
Three years to 30 June 2018
Since inception
¹ After all fees and costs and including dividends
% growth in NTA after tax¹
8.5%
14.2%
56.8% (18.9% annualised)
80.5% (17.3% annualised)
While still solid, TOP's NTA growth during the financial year just ended was held back by the serial
underperformance of TPI Enterprises Limited (TPE) about which I have commented previously. After
consistent calls for change from TOP and others, TPE recently replaced its Chairman and has vowed renewed
focus on delivering value from the integrated production, manufacture and distribution model it has created.
We will be looking for signs of improvement in the 2019 financial year.
For the 2018 financial year, the Board has declared a final dividend of 0.9 cps, fully franked, an increase of
38.5% when compared to 2017. Total dividends for 2018 are 1.5 cps, fully franked, an increase of 20% on
2017. This represents a gross yield of about 3.0%. The Board is committed to maintaining or increasing
dividend payments when possible in the future. The final dividend has a record date of 12 September 2018,
and will be paid to registered shareholders on 2 October 2018.
However, the Board has decided to suspend the dividend reinvestment plan (DRP) at this time, due largely to
the persistent and unjustifiable discount which exists between the underlying share price and the NTA. I have
moved personally to take advantage of the discount to NTA by purchasing an additional 2,296,596 shares since
the beginning of the financial year taking my interest in the Company to 29.1%.
During the period, TOP successfully raised an additional A$24.1 million of investment capital, some of which
has already been deployed into new opportunities. This new capital plus the proceeds from recent profit‐
taking trading places TOP in an enviable financial position, especially as we closely assess a number of new
opportunities.
Early in September, following completion of the 2018 financial reporting season, I will send you a Chairman’s
Update which will provide both highlights from TOP’s portfolio companies and some of my insights. My team
and I will continue to monitor the activities of all the investment portfolio positions as well as seek out new
and compelling investments.
Thorney Opportunities Ltd 2018 Annual Report
Page | 4
Chairman’s letter continued
All Chairman’s Updates can be found on TOP’s website, http://thorneyopportunities.com.au/chairmans-
updates/.
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
31 August 2018
Thorney Opportunities Ltd 2018 Annual Report
Page | 5
Directors’ report
The directors present their report, together with the financial statements of Thorney Opportunities Ltd (TOP or
Company), for the year ended 30 June 2018 and the auditor’s report thereon.
1.
Directors
The directors of TOP in office during the financial year and at the date of this report are as follows:
Name:
Alex Waislitz
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 Chairman of Thorney Technologies Ltd and 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 and he is Chairman of the
TOP Audit and Risk Committee.
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.
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 2018 Annual Report
Page | 6
Directors’ report continued
1.
Directors continued
Information on directors continued
Ashok Jacob BSc, MBA, Non-executive Director
Ashok Jacob was appointed a director of the Company on 21 November 2013.
Mr Jacob is the current Chairman and Chief Investment Officer of Ellerston Capital Limited. Mr Jacob is a
current director of MRF Limited 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, Visy Australia Advisory Board, 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 Ardent Leisure Group Limited, Ridley Corporation Limited and Estia Health Limited.
Other current directorship includes The Straits Trading Company Limited. Dr Weiss is also a Commissioner of
the Australian Rugby League Commission.
Dr Weiss’ previous directorships include Guinness Peat Group plc, Premier Investments Limited, Pro-Pac
Packaging Limited, Tag Pacific Limited, Westfield Group, Coats plc (Chairman), ClearView Wealth Limited
Investment Company Limited, Tower Australia Limited, Australian Wealth
(Chairman), Mercantile
Management Limited, Tyndall Australia Limited (Deputy Chairman), Joe White Maltings Limited (Chairman),
CIC Limited, Whitlam Turnbull & Co Limited and Industrial Equity Limited.
2.
Company Secretary
Craig Smith B.Bus (Acct), GIA(Cert), Secretary
Craig Smith CPA, ACIS was appointed secretary of the Company on 21 November 2013.
Mr Smith has been the Chief Financial Officer of the private Thorney Investment Group since 2008 and was
appointed secretary of Thorney Technologies Ltd in 2016.
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 2018 Annual Report
Page | 7
Directors’ report continued
3.
Principal activities
Thorney Opportunities Ltd is an investment company listed on the Australian Securities Exchange (ASX: TOP).
Its principal activity is making investments in listed securities.
There have been no changes in the nature of these activities during the 2018 financial year.
4.
Result
The Group’s net profit before tax for the 2018 financial year was $12,845,205 (2017: $27,890,175 and the net
profit after tax was $11,109,436 (2017: $20,189,353).
Net tangible assets after tax were 75.7 cents per share (2017: 71.6 cents per share).
5.
Dividends
On 31 August 2018 the Board declared a fully franked final dividend of 0.9 cents per share (2017 Final
dividend: 0.65 cents per share). The Board has suspended the Dividend Reinvestment Plan (DRP).
The dividend will be paid to shareholders on 2 October 2018. The dividend of approximately $1,832,573 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, 12 September 2018.
The fully franked 2017 Final dividend of 0.65 cents per share was paid on 4 October 2017 and the fully franked
2018 Interim dividend of 0.6 cents per share was paid on 4 April 2018.
6.
Review of operations
Over the course of the financial year ended 30 June 2018 the Group increased its net tangible assets to
$154,148,545 (2017: $121,399,380). The net tangible assets after tax per share increased 6% from 71.6 cents
per share to 75.7 cents per share during the period.
Cash and cash equivalents as at 30 June 2018 was $14,589,511 (2017: $1,067,310). This increase in cash
reflects $14,000,000 of gross proceeds from the redemption of bonds during the period and via the Placement
and Share Purchase Plan which raised a net $23,539,078 less a steady deployment of capital into certain
existing investment positions and new investment opportunities.
During 2018 TOP became a substantial shareholder of Southern Cross Electrical Engineering Limited, MMA
Offshore Limited, Murray River Organics Group Limited, Angel Seafood Holdings Limited, Zenith Energy Limited
and AMA Group Limited. Also during the year, TOP increased its investment in Money3 Corporation Limited
and TPI Enterprises Limited lodging substantial holder notices in May 2018 and March 2018 respectively. Also
TOP decreased its investment in Service Stream Limited lodging substantial holder notices in September 2017
and March 2018.
In May 2018 TOP held an investment forum in Sydney (jointly with Thorney Technologies Ltd) and several TOP
investee companies presented including Money3 Corporation Limited, MMA Offshore Limited, Zenith Energy
Limited and Service Stream Limited.
Thorney Opportunities Ltd 2018 Annual Report
Page | 8
Directors’ report continued
7.
Financial position
The Group’s net tangible assets can be summarised as follows:
Net tangible asset backing per share
Net tangible assets ($)
Shares on issue
Net tangible assets after tax per share
8.
Prospects
2018
154,148,545
203,619,230
75.7 cents
2017
121,399,380
169,661,399
71.6 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.
9.
Material business risks
The Group’s risk management and compliance framework operated effectively throughout the financial year
ensuring that the two 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 2018 Annual Report
Page | 9
Directors’ report continued
11.
2018 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. There was no change in remuneration
during the period and annual fees paid to each Director have remained unchanged since 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 2018, the Investment Manager was entitled to:
•
a Base Fee of $2,427,465 (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 $2,794,827 (GST exclusive), payable in respect of the year ended 30 June 2018. 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 2018 Annual Report
Page | 10
Directors’ report continued
11.
2018 Remuneration report (Audited) continued
(c) Details of Remuneration
Key Management Personnel (KMP) received the following remuneration amounts:
2018
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
2017
Short term benefits
Fees
$
Other
$
Alex Waislitz
Ashok Jacob
Henry Lanzer¹
Dr Gary Weiss
Total KMP remuneration
¹ Mr Lanzer’s fees are paid or payable to Arnold Bloch Leibler and exclude GST
0
50,000
54,750
50,000
154,750
Post-employment
benefits
Superannuation
$
Total
$
0
4,750
0
4,750
9,500
0
54,750
54,750
54,750
164,250
Post-employment
benefits
Superannuation
$
Total
$
0
4,750
0
4,750
9,500
0
54,750
54,750
54,750
164,250
0
0
0
0
0
0
0
0
0
0
There were no short-term cash profit sharing and other bonuses, non-monetary benefits, other post-
employment benefits, termination benefits or share based payments to Key Management Personnel for the
current or the prior year. Arnold Bloch Leibler is a legal firm of which Henry Lanzer is the managing partner.
(d) Service Arrangements
The following service arrangements have been agreed between the Company and the Non-executive Directors
with respect to remuneration and other terms of employment.
Ashok Jacob
• Commenced 21 November 2013
• No term has been set unless the Director is not re-elected by shareholders of the Company
• Base annual fee of $50,000 plus superannuation
Henry Lanzer
• Commenced 21 November 2013
• No term has been set unless the Director is not re-elected by shareholders of the Company
• Base annual fee of $54,750 (GST exclusive)
Dr Gary Weiss
• Commenced 21 November 2013
• No term has been set unless the Director is not re-elected by shareholders of the Company
• Base annual fee of $50,000 plus superannuation
Thorney Opportunities Ltd 2018 Annual Report
Page | 11
Directors’ report continued
11.
2018 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
2018
2017
2016
2015
2014
Earnings after tax
(PAT)
$
11,109,436)
20,189,353)
15,759,953)
9,373,547)
(2,669,210)
EPS
Share price
NTA (after tax)
(cents per share)
5.94)
11.91)
9.33)
5.57)
(2.47)
(cents per share)
69.0
69.5
58.0
46.5
44.5
(cents per share)
75.7
71.6
60.8
52.1
46.6
Earnings are for continuing operations only.
History of TOP Performance Last 5 Years
60.0
100
NTA
cps
90
80
70
60
50
40
2018
2017
2014
2016
2015
PAT
$M
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
NTA
Cumulative PAT since Thorney began as Investment Manager ($M)
investment management
Thorney Management Services Pty Ltd
responsibilities from 21 November 2013 pursuant to an Investment Management Agreement approved by
shareholders at the 2013 Annual General Meeting.
(Investment Manager) assumed
Thorney Opportunities Ltd 2018 Annual Report
Page | 12
Directors’ report continued
12.
KMP relevant interests
The number of TOP ordinary shares held by KMP in the Company is as follows:
Balance
30 June
2016
Additions/
(Disposals)
Balance
30 June
2017
Additions/
(Disposals)
Balance
30 June
2018
Directors
Alex Waislitz¹
Ashok Jacob
Henry Lanzer
Dr Gary Weiss
Other key management personnel
Thorney Management Services Pty Ltd
4,415,417 56,979,159
(TMS)¹
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 and Tiga Trading Pty Ltd.
4,415,417 56,979,159
1,061,846
125,700
9,971
- 52,563,742
1,053,151
102,836
9,971
52,563,742
1,034,934
101,057
9,971
8,695
22,864
-
18,217
1,779
-
- 52,563,742
52,563,742
Since the end of the financial year Thorney Holdings Proprietary Limited has purchased 2,296,596 shares on
market taking Alex Waislitz and TMS’s total holding to 59,275,755. There have been no other 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
2018 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
4
5
6
4
No. of
meetings
held while
a Director
4¹
4¹
4¹
4¹
No. of
meetings
attended
3
3
4
3
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 2018 Annual Report
Page | 13
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 15.
17.
Non-audit services
Details of the amounts paid or payable to Ernst & Young for audit services provided during the year are set out
in note 17 to the financial statements on page 39 of this report.
There were no non-audit services performed by the Company’s auditor, Ernst & Young, during the 2018
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, 31 August 2018
Thorney Opportunities Ltd 2018 Annual Report
Page | 14
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 2018, 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
31 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Corporate governance statement
2018 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 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 2018 with no
material changes proposed to the Board processes or individual director contributions.
Thorney Opportunities Ltd 2018 Annual Report
Page | 16
Corporate governance statement continued
Principle 1: Lay solid foundations for management and oversight continued
The Independent directors meet at least once a year to review and evaluate the performance of the
Investment Manager.
A satisfactory evaluation of the Investment Manager’s performance for the financial year ended 30 June 2018
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
All directors
All directors
All directors
All directors
Strategy
All directors
The Board skills matrix sets out the key skills and experience of the
Directors and the extent to which they are represented on the current
Board and its Committees.
In addition to the skills and experience outlined in this table the Board
considers that each Director has the appropriate attributes such as
• honesty and integrity;
• an understanding of shareholder value;
• has sufficient time to undertake the role appropriately;
• an enquiring mind; and
• a demonstrated commitment to appropriate standards of
governance.
Background information on Directors in office at the date of this Annual Report is set out in the Directors’
Report.
The Company’s Constitution provides that there must be a minimum of three and a maximum of ten 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 2018 Annual Report
Page | 17
Corporate governance statement continued
Principle 2: Structure the board to add value continued
Majority of independent directors
The Board currently comprises two independent, non-executive directors (Ashok Jacob and Dr Gary Weiss) and
two 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
24 November 2017
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 2013, 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 2018 Annual Report
Page | 18
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;
•
• not engage in conduct likely to adversely affect the reputation of Thorney Opportunities.
treat others with dignity and respect; and
The Code of Conduct also sets out details of how conflicts of interest should be avoided. Directors must
disclose to the Company any material personal interest they or their associates may have in a matter that
relates to the affairs of the 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 provides 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 5 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 2018 Annual Report
Page | 19
Corporate governance statement continued
Principle 5: Make timely and balanced disclosure
Thorney Opportunities has adopted a Disclosure Policy which has procedures designed to ensure compliance
with ASX Listing Rule and Corporations Act disclosure requirements and to ensure accountability of Directors
and senior management of the Investment Manager for that compliance.
The policy, which is available on the Company’s website, has procedures designed to ensure that material
information is communicated to the Chairman and Company Secretary and for the assessment of information
for the disclosure of material information to the market.
The Board acknowledges the importance of promoting timely and balanced disclosure of all material matters
concerning Thorney Opportunities and believes it is fully compliant with Principle 5 and its recommendations.
Principle 6: Respect the rights of shareholders
Thorney Opportunities has a Communications Policy which seeks to promote effective communication with our
shareholders. The Company communicates in several ways including via its Annual Report and Half-yearly
accounts, monthly net tangible asset backing announcements, regular shareholder updates from the Chairman
and other ASX announcements regarding material investments and other developments.
Thorney Opportunities Ltd maintains a website at: www.thorneyopportunities.com.au.
Annual General Meeting
TOP’s AGM is proposed to be held on 22 November 2018. Details will be sent to all shareholders in mid-
October 2018.
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 2018 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 2018 Annual Report
Page | 20
Corporate governance statement continued
Principle 7: Recognise and manage risk continued
The Board believes that commensurate with the size and nature of the business that an internal audit function
is not warranted at this time. TOP utilises highly effective internal control processes and systems, developed
over 2 decades by the Investment Manager to manage the multifaceted investment activities of the private
Thorney Group. The Investment Manager employs staff and consultants who are responsible for evaluating
and continually improving the effectiveness of the risk management and internal control systems. These
systems are subject to an annual external audit.
The 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 2018 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 2018 Annual Report
Page | 21
Consolidated statement of comprehensive income
For the year ended 30 June 2018
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
2018
$
2017
$
3
3
3
3
3
14,132,978)
1,331,072)
3,418,253)
-)
31,890,512)
1,371,262)
2,387,170)
1,036)
18,882,303)
35,649,980)
(2,488,152)
(2,864,697)
(169,725)
(58,054)
(200,587)
(204,584)
(51,299)
(2,031,567)
(5,206,060)
(169,725)
(37,245)
(108,322)
(161,322)
(45,564)
(6,037,098)
(7,759,805)
12,845,205)
27,890,175)
4
(1,735,769)
(7,700,822)
11,109,436)
20,189,353)
2018
Cents
2017
cents
Basic and diluted earnings per share
15
5.94)
11.91)
The Consolidated statement of comprehensive income should be read in conjunction with the notes to the
financial statements.
Thorney Opportunities Ltd 2018 Annual Report
Page | 22
Consolidated statement of financial position
As at 30 June 2018
ASSETS
Current assets
Cash and short-term deposits
Financial assets
Receivables
Prepayments
Total current assets
Non-current assets
Financial 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
Accumulated losses
TOTAL EQUITY
Note
2018
$
2017
$
6
8
9
8
10
11
12
14,589,511)
152,423,912)
54,191)
8,983)
1,067,310)
128,793,223)
620,412)
10,491)
167,076,597)
130,491,436)
-)
-)
4,253,600)
4,253,600)
167,076,597)
134,745,036)
4,308,226)
-)
64,000)
6,515,599)
-)
10,000)
4,372,226)
6,525,599)
4
8,555,826)
6,820,057)
8,555,826)
6,820,057)
12,928,052)
13,345,656)
154,148,545)
121,399,380)
13
14
105,585,376)
56,649,833)
(8,086,664)
81,623,698)
39,775,682)
-)
154,148,545)
121,399,380)
The Consolidated statement of financial position should be read in conjunction with the notes to the financial
statements.
Thorney Opportunities Ltd 2018 Annual Report
Page | 23
Consolidated statement of changes in equity
For the year ended 30 June 2018
Balance at 1 July 2017
81,623,698)
39,775,682)
-)
121,399,380)
Issued
capital
$
Reserves
$
Accumulated
profits
$
Total
equity
$
-)
-)
-)
-)
-)
11,109,436)
11,109,436)
11,109,436)
11,109,436)
19,196,100)
(19,196,100)
-)
Profit for the year
Total comprehensive income for the year
Transfer to Profits reserve
Transactions with shareholders:
Dividends paid
Shares issued via Placement
Shares issued via Share Purchase Plan
Shares issued via DRP
Cost of shares issued
-)
21,300,000)
2,712,872)
422,600)
(473,794)
(2,321,949)
-)
-)
-)
-)
-)
-)
-)
-)
-)
-)
(2,321,949)
21,300,000)
2,712,872)
422,600)
(473,794)
21,639,729)
Total transactions with shareholders
23,961,678)
(2,321,949)
Balance at 30 June 2018
105,585,376)
56,649,833)
(8,086,664)
154,148,545)
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
profits
$
Total
equity
$
-)
-)
-)
-)
-)
20,189,353)
20,189,353)
20,189,353)
20,189,353)
20,189,353)
(20,189,353)
-)
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
230,390)
(2,032,940)
Balance at 30 June 2017
81,623,698)
39,775,682)
-)
(2,032,940)
230,390)
-)
-)
-)
-)
-)
-)
-)
-)
(2,032,940)
230,390)
-)
(1,802,550)
121,399,380)
The Consolidated statement of changes in equity should be read in conjunction with the notes to the financial
statements.
Thorney Opportunities Ltd 2018 Annual Report
Page | 24
Consolidated statement of cash flows
For the year ended 30 June 2018
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
2018
$
2017
$
1,331,072)
3,365,603)
12,174,159)
(30,862,058)
(8,043,605)
(58,054)
-)
1,371,262)
2,387,170)
25,920,669)
(19,964,806)
(6,592,831)
(37,245)
124,828)
Net cash (used in)/provided by operating activities
6(a) (22,092,883)
3,209,047)
Cash flows from investing activities:
Proceeds from redemption of bonds
Payments for long-term investments
Net cash provided by/(used in) investing activity
Cash flows from financing activities:
Net (repayments of) proceeds from borrowings
Proceeds from issuance of shares
Payment for transaction costs
Dividends paid (net of DRP)
Net cash provided by/(used in) financing activities
14,000,000)
-)
-)
(1,000,192)
14,000,000)
(1,000,192)
-)
24,012,871)
(473,794)
(1,923,993)
(7,413,726)
-)
-)
(1,819,779)
21,615,084)
(9,233,505)
Net increase/(decrease) in cash held
Cash at the beginning of the year
Cash at the end of the year
13,522,201)
1,067,310)
(7,024,650)
8,091,960)
6
14,589,511)
1,067,310)
The Consolidated statement of cash flows should be read in conjunction with the notes to the financial
statements.
Thorney Opportunities Ltd 2018 Annual Report
Page | 25
Notes to the financial statements
1.
Corporate information
The consolidated financial statements of Thorney Opportunities Ltd and its subsidiary (collectively, the Group)
for the year ended 30 June 2018 were authorised for issue in accordance with a resolution of the directors on
31 August 2018. 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:
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.
The adoption of these new and amended standards did not have an impact in the reporting of the Group.
Thorney Opportunities Ltd 2018 Annual Report
Page | 26
Notes to the financial statements continued
2.1
Summary of accounting policies continued
(a)
Basis of preparation continued
Standards issued that might have an impact but not yet effective
The Group has not applied any Australian Accounting Standards or AASB Interpretations that have been issued
as at balance date but are not yet effective for the year ended 30 June 2018 except for AASB 9 (2009) which
was adopted in December 2009.
The Group only intends to adopt new standards when they become effective, at the date at which their
adoption becomes mandatory. The impact of the standards issued but not yet effective has been assessed and
the impact has been identified as not being material. The only standard issued but not yet effective at year
end that the Group has determined may have an impact when effective is as follows:
AASB 16 Leases
This standard applies from 1 July 2020 but is not expected to impact the Group as the Group currently does
not have lease arrangements
Financial Instruments — Amendments to AASB 9 Financial Instruments
AASB 9 (2015) is a new standard which replaces AASB 139 Financial Instruments: Recognition and
Measurement and supersedes AASB 9 issued in December 2009 (version early adopted by the Group) and AASB
9 (issued in December 2010). AASB 9 (2015) brings together all three aspects of the accounting for financial
instruments project: classification and measurement, impairment and hedge accounting. AASB 9 (2015) is
effective to the Group from 1 July 2018. The Group did not early adopt this version, although assessed that the
impact as not being material. Key changes to AASB 9 (2015) since early adoption in 2009 is discussed below.
Classification and measurement
AASB 9 (2015) 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.
Impairment
Impairment was not included in the 2009 version of AASB 9. Lifetime expected credit losses will be determined
under the simplified approach. These will not be materially different to the amount determined under AASB
139 impairment requirements.
Thorney Opportunities Ltd 2018 Annual Report
Page | 27
Notes to the financial statements continued
2.1
Summary of accounting policies continued
(a)
Basis of preparation continued
Standards issued that might have an impact but not yet effective continued
Hedge accounting
Hedge accounting was not included in the 2009 version of AASB 9. The Group does not have any existing
designated hedging relationships for accounting purposes and therefore does not expected the impact to be
material to the Group.
(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:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
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.
Thorney Opportunities Ltd 2018 Annual Report
Page | 28
Notes to the financial statements continued
2.3
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
a)
Financial instruments
(i) Classification
The Group classifies its financial assets and financial liabilities into the categories below in accordance with
AASB 9.
Financial assets and liabilities at fair value through profit or loss
The 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.
(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.
Thorney Opportunities Ltd 2018 Annual Report
Page | 29
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
a)
Financial instruments continued
(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.
(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’.
Thorney Opportunities Ltd 2018 Annual Report
Page | 30
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
b)
Fair value measurement
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 input that is significant to the fair value
measurement is directly or indirectly observable
Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
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 comprehensive income.
Thorney Opportunities Ltd 2018 Annual Report
Page | 31
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
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 is presented 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.
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:
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
ii. 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
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.
Thorney Opportunities Ltd 2018 Annual Report
Page | 32
Notes to the financial statements continued
2.3
Summary of significant accounting policies continued
Profits reserve
i)
The profits reserve is made up of amounts transferred from current and retained earnings that are preserved
for future dividend payments.
Due to and due from brokers
j)
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)
k)
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 2018 Annual Report
Page | 33
Notes to the financial statements continued
3.
Total investment income
The major components of investment income in the Statement of comprehensive income are:
Realised gains
Unrealised gains
Interest income
Dividend income
Other income
Total investment income
4.
Income tax
2018
$
5,104,884)
9,028,094)
1,331,072)
3,418,253)
-)
18,882,303)
2017
$
1,521,968)
30,368,544)
1,371,262)
2,387,170)
1,036)
35,649,980)
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 27.5% (2017: 30%)
Deferred income tax expense
-
-
Non-deductible expenses
Adjustment for change in corporate tax rate
Income tax (expense)/benefit recognised in the
Statement of profit or loss
Imputation credits converted to losses
Imputation credits on dividends received
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
2018
$
2017
$
(2,124,197)
421,671)
3,859,966)
1,735,769)
7,279,151)
7,700,822)
12,845,205)
27,890,175)
(3,532,431)
(8,367,053)
1,419,109)
(390,255)
(313)
768,121)
951,757
(285,526)
-)
-)
(1,735,769)
(7,700,822)
(19,968,395)
-)
104,235)
14,876)
11,293,458)
(8,555,826)
(17,744,106)
(75,869)
143,807)
15,330)
10,840,781)
(6,820,057)
At 30 June 2018, the Group has estimated gross revenue tax losses of $41,067,119 (2017: $36,135,936) that
are available to offset against future taxable capital and revenue profits, subject to continuing to meet relevant
statutory tests and have been recognised as a deferred tax asset.
At 30 June 2018, the Group has estimated unused gross capital tax losses of $30,714,116 (2017: $30,714,116)
for which no deferred tax asset has been recognised.
Thorney Opportunities Ltd 2018 Annual Report
Page | 34
Notes to the financial statements continued
5.
Dividends
(a) Final Dividend FY 2018 not recognised at year end
Since the end of the year, the Directors have declared a 0.9 cents
per share fully franked dividend which has not been recognised as a
liability at the end of the financial year (2017: 0.65 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
2018
$
2017
$
1,832,573)
1,102,799)
661,019)
1,419,109)
(935,065)
1,145,063)
540,644)
604,419)
580,523)
951,756)
(871,260)
661,019)
418,303)
242,716)
The Company’s ability to pay franked dividends is fully dependent upon the receipt of franked dividends from
investments as while the Company continues to utilise its available tax losses, it will not pay tax.
6.
Cash and short-term deposits
Cash at bank
Total cash and short-term deposits
2018
$
14,589,511)
14,589,511)
2017
$
1,067,310)
1,067,310)
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.
a) Reconciliation of net profit after tax to net cash provided by operating activities:
Profit for the year
Adjustments for non-cash items:
Unrealised component of change in fair value of investments
Net gain on disposal of investments
Changes in Assets & Liabilities:
Decrease/(increase) in receivables
(Increase)/decrease in financial assets
(Increase)/decrease in deferred tax assets
Decrease/(increase) in other assets
(Decrease)/increase in creditors & accrued expenses
Increase/(Decrease) in other financial liabilities
Increase in deferred tax liabilities
Net cash (used in)/provided by operating activities
Thorney Opportunities Ltd 2018 Annual Report
2018
$
2017
$
11,109,436)
20,189,353)
(9,028,094)
705)
(30,368,544)
-)
566,221)
(24,468,939)
-)
1,508)
(2,066,252)
56,763)
1,735,769)
(22,092,883)
(495,373)
5,317,434)
880,765)
(474)
1,130,681)
(264,852)
6,820,057)
3,209,047)
Page | 35
Notes to the financial statements continued
7.
Fair value measurement
To reflect the source of valuation inputs used when determining the fair value of its financial assets and
financial liabilities, the Group uses the fair value hierarchy prescribed in AASB 13:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair value of these
investments is based on the last sale price for the security as quoted on the relevant exchange;
Level 2: valuation techniques using market observable inputs, either directly or indirectly. The fair value of
assets and liabilities with short-term maturities are valued at the amount at which the asset or
liability could be exchanged in a current transaction between willing parties; and
Level 3: valuation techniques using non-market observable data with the fair value for investments based on
inputs determined by Directors’ valuation.
The fair value measurement hierarchy of the Group’s financial assets and financial liabilities is as follows:
-
Assets measured at fair value
Level 1: Listed equities
Level 2:
Level 3: Short-term and long-term financial assets¹ and listed options²
Total financial assets
Total current
Total non-current
2018
$
2017
$
151,585,353)
-)
838,559)
152,423,912)
152,423,912)
-)
117,567,767)
-)
15,479,056)
133,046,823)
128,793,223)
4,253,600)
Liabilities measured at fair value
Exchange traded options
Level 1:
-
Level 2:
Level 3:
-
Total financial liabilities
¹ Short-term and long-term financial assets are valued using a discounted cash flow model.
² Listed options are valued using a Black-Scholes option pricing model (due to lack of trading activity during the period).
64,000)
-)
-)
64,000)
10,000)
-)
-)
10,000)
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 2017
Realised loss recognised in SOCI
Transfers from Level 1
Transfers to Level 1 upon exercise of options
Redemption of bonds
Balance at 30 June 2018
Balance at 1 July 2016
Unrealised gain/(loss) recognised in SOCI
Purchases of long-term financial assets
Balance at 30 June 2017
Financial)
assets)
14,529,056)
(529,056)
838,559)
-)
(14,000,000)
838,559)
Listed)
options)
950,000)
-)
-)
(950,000)
-)
-)
Total)
15,479,056)
(529,056)
838,559)
(950,000)
(14,000,000)
838,559)
13,521,492)
7,372)
1,000,192)
14,529,056)
1,080,000)
(130,000)
-)
950,000)
14,601,492)
(122,628)
1,000,192)
15,479,056)
Thorney Opportunities Ltd 2018 Annual Report
Page | 36
Notes to the financial statements continued
8.
Financial assets
Financial assets at fair value through profit or loss
Listed equities and listed options¹
Bonds2
Total financial assets
Total current
Total non-current
2018
$
2017
$
152,423,912)
-)
152,423,912)
152,423,912)
-)
118,517,767)
14,529,056)
133,046,823)
128,793,223)
4,253,600)
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 FY18 options previously deemed
to be Level 3 were transferred to Level 1 upon exercise. 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). All short-term and
long-term financial assets were redeemed during the financial year.
9.
Receivables
Sundry debtor
GST
Total receivables
2018
$
52,650)
1,541)
54,191)
2017
$
618,688)
1,724)
620,412)
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
2018
$
1,270,364)
2,864,697)
173,165)
4,308,226)
2017
$
1,035,852)
5,206,060)
273,687)
6,515,599)
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 2018 Annual Report
Page | 37
Notes to the financial statements continued
11.
Borrowings
Prime broker
Total borrowings
2018
$
2017
$
-)
-)
-)
-)
The Company has a Prime Broker Agreement with UBS AG, Australia Branch to provide services including
borrowing and lending of securities, settlement of third party transactions and cash loans. The agreement
allows UBS to take a custodial charge over assets lodged with UBS as security for payments and performance
obligations of the Company under the Prime Brokerage Agreement. Interest accrues daily on all cash advances
at a rate equivalent to a benchmark rate of interest plus an agreed margin. Amounts drawn are repayable on
demand.
The carrying amount of the borrowing has been measured at fair value through profit or loss which is deemed
to be a Level 2 input under the Fair Value hierarchy as prescribed in AASB 13 and disclosed in note 2.3 (b).
12.
Derivative financial instruments
Exchange traded options at fair value¹
Total derivative financial instruments
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).
64,000)
64,000)
2018
$
2017
$
10,000)
10,000)
13.
Issued capital
(a) Ordinary shares
Balance at 1 July
Ordinary shares issued:
Dividend Reinvestment Plan
Placement
Share Purchase Plan
Costs of share issue
Total issued and authorised capital
(b) Terms and conditions:
(i) Ordinary shares
2018
Number of
shares
2017
Number of
shares
2018
$
169,661,399)
169,324,894)
81,623,698)
606,738)
29,583,333)
3,767,760)
-)
203,619,230)
336,505)
-)
-)
-)
169,661,399)
422,600)
21,300,000)
2,712,872)
(473,794)
105,585,376)
2017
$
81,393,308)
)
230,390)
-)
-)
-)
81,623,698)
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 2018 Annual Report
Page | 38
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
2018
$
2017
$
56,649,833)
39,775,682)
39,775,682)
19,196,100)
(2,321,949)
56,649,833)
21,619,269)
20,189,353)
(2,032,940)
39,775,682)
The profits reserve details an amount preserved for future dividend payments.
15.
Earnings per share
Basic and diluted earnings per share (cents)
5.94)
11.91)
Earnings used in calculating basic and diluted earnings per share ($)
11,109,436)
20,189,353)
2018
2017
2018
Number
of Shares
2017
Number
of shares
Weighted average number of ordinary shares used in calculating
basic and diluted earnings per share
187,171,994)
169,492,088)
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
2018
$
2017
$
57,680)
61,600)
Thorney Opportunities Ltd 2018 Annual Report
Page | 39
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.
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 $152,423,912 (2017:
$118,517,767). A decrease of 10% in share value of securities held could have an impact of approximately
$15,242,391 (2017: $11,851,777) 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 2018 Annual Report
Page | 40
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 2018:
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
2018
$
2017
$
5,222,292)
52,000)
87,495)
7,061,100)
52,000)
56,842)
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 2018 a
base fee of $2,427,465 (2017: $1,982,017) and a performance fee of $2,794,827 (2017: $5,079,083) 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 2018 financial year (2017: $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 $32,745 (2017: $2,092).
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 (2017: $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 2018 Annual Report
Page | 41
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
2018
$
154,750)
9,500)
164,250)
2017
$
154,750)
9,500)
164,250)
Other than as described in Note 7, the Group has no contingent liabilities as at 30 June 2018.
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
Australia
Ownership
2018
2017
100%
100%
Thorney Opportunities Ltd 2018 Annual Report
Page | 42
Directors’ declaration
In accordance with a resolution of directors of Thorney Opportunities Ltd, I state that:
1.
In the opinion of the Directors:
(a) the financial statements and notes of Thorney Opportunities Ltd for the financial year ended 30 June 2018
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 2018 and of
its performance for the year ended on that date;
(ii)
complying with Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.1; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018.
On behalf of the Board,
Alex Waislitz
Chairman
Melbourne, 31 August 2018
Thorney Opportunities Ltd 2018 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 2018, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the
financial statements, including a summary of significant accounting policies, 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 2018
and of its consolidated 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 auditor
independence requirements of 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. We have also
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 judgement, 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 report. 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.
The investment portfolio at year-end was
comprised of $151.6m in quoted equity
investments, and $0.8m in unlisted investments.
The valuation and existence of the investment
portfolio was a key audit matter because
investments represent the principal element of the
Group’s total assets.
Our audit procedures included the following:
►
►
►
Agreed the quantity of all quoted equity
investments held at year end to asset custodian
statements, and further agreed prices to market
closing prices.
Obtained and considered the assurance report
that describes the effectiveness of the
operational processes and controls of the
Group’s asset custodian.
Assessed the adequacy of the disclosures
included in Note 8 Financial Assets.
Investment management and performance fees
Why significant
How this matter was addressed in the audit
The Group pays its Investment Manager, Thorney
Management Services Pty Ltd (TMS) a base
management fee of 0.75% of gross assets and a
performance fee of 20% of the increase in net
asset value net of base fee for the year, as
stipulated in the Investment Management
Agreement (IMA). The base management fee is
calculated half yearly while the performance fee is
calculated on an annual basis.
For the year ended 30 June 2018, $2.5m and
$2.9m of base management fee and performance
fee were recognised, respectively.
The measurement of investment management and
performance fees was a key audit matter because
it is of interest to key stakeholders as these fees
are significant expenses that reduce the net
tangible assets of the Group.
Refer to Note 19 of the financial statements.
Our audit procedures included the following:
►
►
►
Determined whether the calculation of the base
management fee and performance fee expenses
was made in accordance with the IMA.
Agreed key inputs used in the management fee
and performance fee calculations, including
gross assets in the case of management fees
and the net asset increase in the case of
performance fees to the consolidated statement
of financial position.
Recalculated the management fee and
performance fee and compared the recalculated
amounts to the expenses recognised in the
consolidated statement of comprehensive
income.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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 2018, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
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 relating to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to 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 the 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.
As part of an audit in accordance with the 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 Group’s internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
•
•
•
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
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group 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 financial report represents 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 Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 12 of the Directors' Report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Thorney Opportunities Ltd for the year ended
30 June 2018, complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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
31 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Shareholder information
As at 30 August 2018
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
ELPHINSTONE HOLDINGS PTY LTD
NCOBF PTY LTD
LANGBURGH PTY LTD
FRANK COSTA SUPERANNUATION PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
MRS NOLA ISABEL CRIDDLE
JAIN FAMILY SUPER PTY LTD
AUSTIN SUPERANNUATION PTY LTD
TAMIT NOMINEES PTY LTD
PICTON COVE PTY LTD
BLACKCAT HOLDINGS PTY LTD
NOLA CRIDDLE FOUNDATION PTY LTD
THIRTY-FIFTH CELEBRATION PTY LTD
DEEMCO PTY LIMITED
FIFTY SECOND CELEBRATION PTY LTD
OBRIEN PF PTY LTD
Substantial shareholders
Name
THORNEY HOLDINGS PROPRIETARY LIMITED
RUBI HOLDINGS PTY LTD
Ordinary
Shareholders
299
424
269
1,100
243
2,335
202
Number
of
shares
51,800,234
20,954,890
6,570,159
5,780,000
2,589,000
2,500,000
2,000,000
1,864,447
1,795,000
1,608,395
1,572,687
1,497,304
1,352,025
1,272,131
1,055,000
1,020,833
1,000,000
945,277
873,609
829,356
% of
issued
capital
25.440
10.291
3.227
2.839
1.271
1.228
0.982
0.916
0.882
0.790
0.772
0.735
0.664
0.625
0.518
0.501
0.491
0.464
0.429
0.407
Number
of
shares
59,275,755
20,954,890
Voting
Power
%
29.111
10.291
Thorney Opportunities Ltd 2018 Annual Report
Page | 49
Shareholder information continued
List of investments
Service Stream Limited
AMA Group Limited
Money3 Corporation Limited
OneVue Holdings Limited
Austin Engineering Limited
TPI Enterprises Limited
Fairfax Media Limited
Aveo Group
Zenith Energy Ltd
MMA Offshore Ltd
Monadelphous Group Ltd
Cooper Energy Ltd
Southern Cross Electrical Engineering Ltd
Domain Holdings Australia Ltd
Ardent Leisure Group
Mesoblast Ltd
Other listed investments
Total listed investments
Market value)
as at)
30 June 2018)
$)
31,995,018)
28,222,120)
27,280,789)
11,560,234)
10,669,607)
8,195,585)
8,046,420)
4,860,000)
3,921,750)
3,419,561)
3,237,900)
1,949,904)
1,740,998)
1,699,548)
1,599,750)
1,110,000)
2,914,728)
152,423,912)
Thorney Opportunities Ltd 2018 Annual Report
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