wig - june 2014 annual financial report
TRANSCRIPT
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Industrialandpropertyboom
Strongcommodityprices and trade balance
Oil, miningand Poseidonbooms
Techwreck
SuperannuationGuarantee introduced.
Strongoverseasinvestmentand property boom.
Commodityprices recover.Industrialrationalisation.Oil, gas
andnickeldiscoveries
1960creditsqueeze
USCreditcrisis
A$ falls 30%.Commodityprices fall.Globalsharemarketsfall in value.
Sept 11Terroristattackson US.
US/Europeequitybubblebursts,overseasmarketsfall 70%.
Worldsharepricecollapse.Propertyboom.
Deregulation.Credit boom.Commoditieslift
.
$Afloated
CBDproperty
crash hitsbanks.
Recession.Interest ratesand inflation
fall.Privatisation
starts.
10
20
40
60
80
100120140160180200
300
400
600
800
1000
120014001600180020002200
3000
4000500060007000
Energyand metalsharesboom
Commoditiesplunge. Interestrates peak.Severe recession.Rising deficit.
OPEC oil crisis,inflation, creditsqueeze. Propertycompany failures.
Bond yields at 20 year low. Banksand media revive.EC currency turmoil.Gold price up.
Inflationdown.
Industrialsrecover.
Commoditiesweak.
$A fall attracts
overseas investors.
01 JAN TO30 JUN 2009
Wilson HTMInvestmentGroup Ltd
Annual Report 2009
2009
For
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PerformanceOur Investment Philosophy
Eliminating biases through our integrated investment process
Energetic and thorough research using the three “c’s”:
- company; - competitors; and- customers.
Identifying high growth industries early
Selecting the best of breed – companies and people
Peer accountability through measurement of predictions
Valuation not momentum
Putting our money where our mouth is – risk heightens focus
Wilson HTM Priority Growth FundEmbodies our
investment philosophy
Capturing of the ideas
generated across the
business
Accessing 45 research,
corporate finance and
investment
professionals
Wilson HTM has over
110 years of experience
guiding investors
through all market
cycles
No.1 ranked Australian
Equity Fund* with a
26.6% p.a. return since
inception to 30 June
2009^
Footnotes are referenced in inside back cover.
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Performance is our Priority
Our Flagship
Priority Growth Fund performanceAlpha through 30 June 2009
Benchmark: S&P/ASX Small Ordinaries Accumulation IndexInception date: 4 Jul 2005
6 month 1 year 3 year Since inception0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Bespokeinvestment
solutions
Authorised Investment Manager (AIM) AEQ Alpha through 30 June 2009
Wilson HTM AIM AEQ Benchmark is made up of 92% S&P/ASX 300 Accumulation Index (ex property trusts), 5% S&P/ASX 300 Property Trusts Accumulation Index, and 3% 30 Day Bank Bill Swap Rate.
6 month 1 year 3 year 5 year 10 year0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Diversifiedportfolio
of boutiques
Pinnacle funds performanceAlpha through 30 June 2009
Plato Core RCL Core Solaris CoreHyperion AEQ
Benchmarks:Hyperion AEQ - S&P/ASX 300 Accumulation Index. Inception date was on 1 November 1996.Plato Core - S&P/ASX 300 Accumulation Index. Inception date was on 30 October 2006RCL Core - S&P/ASX 200 Property Trust Accumulation IndexSolaris Core - S&P/ASX 200 Accumulation Index. Inception date was on 9 January 2008
1 year 3 year 5 year 10 year Since inception6 month
-10%
45%40%35%30%25%20%15%10%5%0%
-5%
50%
Pinnacle
Wilson HTM
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Contents
01 Executive Chairman’s Letter 2
02 Managing Director’s Report 4
03 Pinnacle Investment Management 10
04 Directors’ Profi les 12
05 Executive Management 16
06 Directors’ Report 18
07 Auditor’s Independence Declaration 31
08 Corporate Governance 32
09 Financial Statements 36
10 Directors’ Declaration 99
11 Independent Audit Report 100
12 Shareholder Information 102
13 Corporate Directory IBC
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Executive Chairman’s Letter
Dear Shareholder,
Last year I commented that 2008 was a year of two halves, a good fi rst and poor second caused by very poor stockmarket performance. That was mild compared with the year in review, 2009. Now we can refl ect upon a period of share price collapses only rivalled by 1974 and 1931. Such turmoil tests all business models and ours has been no exception.
Our Managing Director comments on the year in detail and whilst our profi ts are sharply lower it is encouraging that the measures of success we have most ability to control, client alpha and FUM growth, have both recorded excellent results.
We consider that the worst of the fi nancial markets are now behind us and have continued to steer our business, as we do our advice to clients, towards long term value growth. To this end we have grown the total scale of the business by signifi cant growth in Pinnacle Investment Management, boosting support to the Wilson HTM Priority Growth Fund and the acquisition of Next Financial.
At the same time we are committing to improvements in the infrastructure of Capital Markets and where cuts have been necessary they have been less than our main competitors.
Prudently managed, we see the current down market as an opportunity to position the Company for much higher profi ts, dividends and share price in the future as inevitably the cycle turns. The graph on the front cover is a reminder that the Australian sharemarket has always retraced its losses to reach sustainable new highs.
None of our views matter much if we cannot translate our thoughts into results for clients. This commitment to deliver client performance has always been our core promise. I am very pleased to again report excellent numbers as shown in the tables preceding my letter. The performance of the Priority Growth Fund deserves special mention as its return for the year of positive 8.8% versus benchmark of negative (28.6%) is exemplary but highlights that the diligent and selective approach taken by our analysts in Research and Corporate Finance is worthwhile.
Ideas, hard work, energy and some pain are produced by our people for the benefi t of clients and shareholders. I thank you all for sticking with us during this extraordinarily tough year. I also thank my Board colleagues for putting in an extra eff ort which has helped us govern and position for growth much better than so many giant household names in the fi nancial services sector.
We have been committed to service and results since 1895 and I am confi dent that there are many more years of prudent outperformance ahead.
Yours sincerely,
Steven Wilson
EXECUTIVE CHAIRMANWILSON HTM INVESTMENT GROUP LTD
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Wilson HTM Investment Group NPAT of $2.2 million vs $12 million in FY2008
NPAT in established businesses (including Next Financial) of $7.4 million
FUM CAGR since 2004 is 39.7%
Note: WIG listed on the ASX on 19 June 2007
WIG share price has tracked its peer group
How we performed in FY2009
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
WIG Share Price vs S&P/ASX 200 Financials Index since listing (value of $1 invested)
WIG S&P/ASX 200 Financials
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Wilson HTM Investment Group Ltd - Net Revenue & NPAT
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FY04 FY05 FY06 FY07 FY08 FY09
NP
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Rev
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Advisory Transactional NPAT NPAT - Established business
56.4
85.2 94.1
131.7 124.7
85.7
Wilson HTM Investment Group Ltd FUM Growth
0.7 0.91.3
2.0 1.8 2.00.50.6
1.0
1.7
3.5
4.4
1.21.5
2.3
3.7
5.3
6.4
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1.0
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3.0
4.0
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Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09
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Wilson HTM Pinnacle
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ortDear Shareholder,
The 2009 fi nancial year was an important year in the history of the fi nancial markets, also in the history of our business. It was a year which tested our investment group model, challenged our FUM growth strategy and on the Capital Markets side of the business, our growth company focus.
During this period the Company’s established business Wilson HTM achieved a net profi t after tax of $7.4 million. The continued investment in Pinnacle Investment Management (Pinnacle) ($4.7 million) and losses on Principal Investments ($0.5 million), reduced the net profi t after tax attributable to shareholders for the year to $2.2 million.
We consider this to be a solid performance in the context of the fi nancial environment which included historic falls across all global fi nancial market indices. During the period, the All Ordinaries index fell by 41% from 1 July 2008 to a low of 3112 on 6 of March 2009. This sharp decline signifi cantly curbed trading volumes and slowed equity capital market activity, particularly impacting the small/mid cap sector.
From the March 2009 low to the end of FY2009, the All Ordinaries recovered 27% to end the year down 26%. The recovery in the markets supported a reversal in the $4.9 million pre-tax loss (after minorities) incurred by Principal Investments at the 2009 half year and resulted in a full year loss from those investments of $0.7 million before tax.
Performance fee revenues rose to $4.4 million as a result of alpha achieved in the Wilson HTM Priority Growth Fund as well as in client funds managed by Wilson HTM’s Authorised Investment Managers.
The Company’s integration of the Next Financial business, which was acquired in April, is proceeding according to plan.
During the year, the Group continued to invest in Pinnacle Investment Management (Pinnacle) which has established a foundation of quality investment boutiques with a track record of performance.
Garry Lowrey, Managing DirectorWilson HTM Investment Group Ltd
Managing Director’s Report
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FY04 FY05 FY06 FY07 FY08 FY09 Transactional Advisory Performance Fee Principal Investments/Other Next Financial (net revenue) NPAT
NPAT - Established business
56.4
85.2 94.1
131.7 124.7
85.7
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Wilson HTM Investment Group Ltd - Net Revenue & NPAT
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Group FUM as at 30 June 2009 rose by 21% to $6.4 billion versus $5.3 billion in the prior year. FUM growth was driven largely by net infl ows across the Pinnacle boutiques and the acquisition of Next Financial. At the end of FY2009 Pinnacle had $4.4 billion in FUM.
Wilson HTM Investment Group Ltd FUM Growth
0.7 0.9 1.32.0 1.8 1.3
0.70.5 0.6
1.0
1.73.5
4.4
1.2 1.5
2.3
3.7
5.3
6.4
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1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09
$ bi
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Wilson HTM Next Financial Pinnacle
I will now provide further detail on the fi nancial and operational performance of the Company’s Capital Markets and Investment Management business segments.
Financial PerformanceCapital MarketsCapital Markets Revenue & Profi t before Tax
42.6
69.4 71.7
82.4 87.9
51.7
0.0
2.0
4.0
6.0
8.0
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16.0
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70.0
80.0
90.0
100.0
FY04 FY05 FY06 FY07 FY08 FY09
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Total Revenue Profit Before Tax
Our Capital Markets business focuses on Australian growth companies primarily in the mid-market. Capital Markets revenues declined by 41% to $51.7 million, profi t before tax also declined by 80% to $2.5 million.
With the poor market conditions, both the Institutional and Private Wealth Management stockbroking transaction volumes declined, and equity capital markets activity slowed. Wilson HTM Corporate Finance, however, remained active in mergers and acquisitions and other strategic advisory roles.
Equity capital markets activity for much of the year was slow with some pick-up in activity experienced closer to the end of the last quarter of FY 2009.
Five mergers and acquisitions transactions were completed during the year valued at over $1.8 billion. In Equity Capital Markets, Sole Lead or Joint Lead Managed equity raisings totalled over $120 million while other external equity raisings totalled over $54 million.
Investment Management
Investment Management Net Revenue & Profi t before Tax
In Investment Management, the operating environment, characterised by high levels of market volatility, impacted FUM balances and resulted in a decline in advisory revenue over the prior year.
Investment Management Net Revenues declined 8% to $34.0 million ($36.8 million in FY2008). Profi t before tax in established business increased by 9% to $5.8 million ($5.3 m FY2008)
Declines in advisory revenue were off set to some extent by performance fees generated by both the Wilson HTM Priority Growth Fund and funds managed by Authorised Investment Managers within the Private Wealth Management business. Net Revenues of $3.8 million were also achieved in the Next Financial business which was acquired in April 2009.
Impact of Principal Investments in FY2009Principal Investments are investments the Company makes as principal in:
Seed FUM in Wilson HTM Specialty Funds and Pinnacle’s •boutiques; and
Selected direct equity investments that are a function of the •Company’s Equity Capital Markets transactions.
It is the Company’s strategy to provide seed FUM to Pinnacle boutiques in start-up phase as well as similarly placed Wilson HTM Specialty Funds, to enable those funds to establish performance track records.
Whilst these are medium to long-term investments, holdings are required to be revalued to current market values, with the resulting gains or losses being taken to the profi t and loss account. Consistent with its strategy to build the Pinnacle business, the Company employed hedging strategies to insulate its profi tability from any mark-to-market losses that may result from those investments.
The recovery in the equity markets in the fourth quarter of FY2009 had a positive impact on Principal Investments which had reported a $4.9 million pre-tax loss (after minorities) at the half year. This loss was reduced to $0.7 million before tax at the end of FY2009.
Operational ReviewCapital MarketsWithin Capital Markets our strategy is to identify, through detailed analysis and screening, high growth and high performance companies, primarily in the mid-market, in industry segments expected to outperform the broader economy. Over FY2009, Research provided coverage on some 140 companies across Energy and Resources, Industrial, Healthcare and LifeScience, Financial Services, Infrastructure, Utilities and Clean Energy.
Whilst some of those segments, such as Energy (in particular Coal Seam Gas) performed exceptionally well during the year, others such as LifeSciences, Infrastructure, Utilities and Financial Services were weighed down by investor aversion to riskier industries and a scarcity of capital. Slower global growth reduced demand for commodities, resulting in lower prices and slower activity across both the Resources and Mining Services segments. Locally, economic growth and fears of global recession undermined Mid-cap Industrials and IT Services.
ResearchThe Company’s Research team comprises one of Australia’s largest dedicated mid-market research teams. Through our Research capability we have been able to identify emerging segments such as Coal Seam Gas, which had another year of exceptional growth
and delivered similarly exceptional returns for our clients.
The quality of the insight generated by our Research is underpinned by an in depth understanding developed through fundamental analysis of the industry segments they cover. Our industry sector team leaders have on average over 16 years of
industry and fi nancial market experience.
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36.8 34.0
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FY04 FY05 FY06 FY07 FY08 FY09
Advisory Revenue
Performance Fee
Next Financial (Net Revenue) Profit Before Tax
Principal Investments m-t-mProfit before tax - Established Business
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Managing Director’s Report- Continued
Corporate FinanceDespite the market environment over the 2009 fi nancial year, we continued to grow the strength and skills of the Corporate Finance and Equity Capital Markets teams. The strategy of focusing on growth industries and the provision of both strategic advice and capital markets expertise was rewarded with a number of quality
mandates.
Continuing to support our core industries Every year the Company supports its clients and industry segments through its investor conference program. This year, notwithstanding the challenging market conditions we held three industry conferences including, our annual LifeSciences Conference, Focus on Coal, and Focus on Oil and Gas. We were very encouraged by the continued strong attendance levels at each of these events and have received feedback from both our Corporate and Institutional clients that these are valued.
Nearly 250 clients and staff attended these conferences. The 35 industry specialists provided expert commentary, analysis and signifi cant insight to their respective market niches. The Company acknowledges the importance of these forums and looks forward to continuing its investor conference program in FY2010.
In addition to our internal conferences we continued to support external forums that we know are valuable to our corporate clients and the industries they operate in, such as McCloskey’s coal conferences and BioShares annual Bio-tech conference.
Investment ManagementWilson HTM Priority Growth Fund Performance – through 30 June 2009
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
6 Month 1 Year 3 Year Since Inception
Priority Growth Fund S&P/ASX Small Ordinaries Accumulation Index
Benchmark: S&P/ASX Small Ordinaries Accumulation Index
Inception date: 4 Jul 2005
Returns are expressed gross of fees
As at 30 June 2009, the Wilson HTM Priority Growth fund had FUM of $61 million and has again outperformed its benchmark, the S&P/ASX Small Ordinaries Index. In the year to 30 June 2009, Wilson HTM Priority Growth achieved alpha of 45%. The Wilson HTM Priority Growth fund has also out-performed its benchmark every year since its inception in FY2006. This is an enviable track record which is increasingly attracting the attention of some of the industry’s leading research houses, including Morningstar which now ranks Priority Growth in Australia’s top performing funds.
Equity Issues and M&A Transactions FY2009
$60,000,000
Adviser to British AmericanTobacco (Australia) on its
divestment of Anzpac Services(Australia) Pty Ltd
October 2008
British American Tobacco(Australia)
$ Undisclosed
Adviser to CHAMP PrivateEquity in relation to its
acquisition ofLCR Lindores Group
August 2008
$1.1 billion
Adviser to Sunshine Gason a takeover offer by
Queensland Gas Company
November 2008
~$32,000,000Wilson HTM Corporate
Finance adviser toWilson HTM InvestmentGroup on the purchase
of 100% of the issued capitalof Next Financial Limited
April 2009
$528,400,000(value of 14.81% not owned
at offer price)
Adviser to Cleveland-Cliffson its acquisition of remaining
shares in Portman LimitedNovember 2008
$9,300,000Placement & Rights Issue
Lead Manager
June/July 2009
$6,900,000Placement & Rights Issue
Lead Manager
June/July 2009
$47,000,000Placement
Lead Manager
June 2009
$14,000,000Placement & Rights Issue
Joint Lead Manager
February 2009
$9,800,000Placement
Joint Lead Manager
February 2009
$12,000,000Placement & Rights Issue
Lead Manager
June 2009
$21,300,000Placement & NR Rights Issue
Lead Manager
June 2009
Comet Ridge
$7,900,000NR Rights Issue
Lead Manager
December 2008
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Authorised Investment Manager (AIM) AEQ Performance – through 30 June 2009
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
6 Month 1 Year 3 Year 5 Year 10 Year
AIM AIM AEQ Benchmark
Wilson HTM AIM AEQ Benchmark is made up of 92% S&P/ASX 300 Accumulation Index (ex
property trusts), 5% S&P/ASX 300 Property Trusts Accumulation Index, and 3% 30 Day Bank
Bill Swap Rate.
Returns are expressed gross of fees.
FUM managed across our Private Wealth Management Private Portfolio Discretionary, Non-Discretionary and externally managed products declined as a result of poor market returns and net fund outfl ows.
Private Portfolio Discretionary products are managed by the Company’s Authorised Investment Managers (AIMs), of which there were 14 at the end of FY2009. All AIMs are accredited investment professionals whose performance is closely monitored. Portfolios are tailored to specifi c clients’ needs and AIMs can access ideas and participate, on behalf of clients, in opportunities that are generated by the Company’s Capital Markets business.
This has assisted our AIMs to generate alpha for clients every year since inception. This fi nancial year the AIM AEQ delivered exceptional performance generating alpha of 10% notwithstanding the challenging market conditions.
Pinnacle Investment ManagementPinnacle FUM Growth - as at 30 June 2009
0.5 0.6 1.0
1.7
3.5
4.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09
FUM
$ b
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Pinnacle, which is led by Managing Director Ian Macoun, continued to expand during the year, adding Pinnacle Private Equity and Plenary Investment Management to its portfolio of boutique fund managers and growing the number of boutiques under its umbrella to seven. Pinnacle also grew its fund distribution capability with the addition of three senior distribution specialists. The growth in Pinnacle FUM since its inception has been substantial and has been a key driver of revenue for that business.
In FY2009, Pinnacle and Capital International, one of the world’s most respected investment management fi rms, entered into an agreement for the distribution of global equities funds to Australian retail investors. Under the agreement, Pinnacle, in conjunction with the Wilson HTM Investment Group administers the Capital International Global Equities Fund and the Capital International Global Equities Fund (Hedged).
The agreement combines Pinnacle’s distribution and administrative strengths with Capital’s unparalleled global research and equity management experience. The Capital Group Companies, Inc. (CGC) is one of the oldest major investment fi rms in the world. Since its founding in 1931, Capital has focused exclusively on investment management.
Pinnacle Revenue Growth - through 30 June 2009
0.02.04.06.08.0
10.012.0
14.016.0
18.0
FY2004 FY2005 FY2006 FY2007 FY2008 FY2009
Rev
enue
$ m
illion
*Revenue shown is 100% of all boutique revenue (equity accounted). Revenue derived from
Pinnacle itself is not equity accounted.
The Pinnacle business today generates over $16 million in Revenue, a CAGR of 54% since its launch in FY2006.
Pinnacle Funds Performance – Alpha through 30 June 2009
-10% -5% 0% 5%
10% 15% 20% 25% 30% 35% 40% 45% 50%
Plato Core RCL Core Solaris Core Hyperion AEQ
1 year 3 year 5 year 10 year since inception6 month
Benchmarks:
Hyperion AEQ - S&P/ASX 300 Accumulation Index. Inception date was on 1 November 1996.
Plato Core - S&P/ASX 300 Accumulation Index. Inception date was on 30 October 2006
RCL Core - S&P/ASX 200 Property Trust Accumulation Index
Solaris Core - S&P/ASX 200 Accumulation Index. Inception date was on 9 January 2008
Returns are expressed gross of fees
On page 10 we have provided a summary of the performance achieved in each of the Pinnacle boutiques along with the progress made during the year. As each boutique off ers a diff erent investment proposition, performance will vary according to investment style and mandate. However, I am pleased to report that since inception to the end of FY 2009, all of Pinnacle’s Australian equity investment funds have delivered alpha.
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Wilson HTM Investment Group Ltd
Growth in Funds under Administration - as at 30 June 2009
Through service agreements with Deutsche Asset Management and Capital International, the Group has also substantially grown its funds under administration (FUA) to $4.9 billion at the end of FY2009.
Management TeamFollowing the acquisition of Next Financial, the executive management team was restructured with the aim of streamlining the business and ensuring the integration of that business into the Group. Alex Ihlenfeldt was appointed as Head of Private Wealth Management, Mark Burns to Head of Capital Markets and Deane Sweeney replaced Alex Ihlenfeldt in the role of Chief Operating Offi cer. Neal McCulloch remains the Chief Financial Offi cer and we recently announced the appointment of Andrew Blakemore as our new Head of Human Resources. We have provided a detailed organisational chart of the new structure, roles and responsibilities on page 16.
CommunityWIG has developed a broad CSR framework which refl ects our mission of creating prosperity for our clients, people and community. The approach focuses on the following three main strategies:
Our Community •
Our People •
Our Governance •
A community focusIn the past year the Company has built on its long established commitment to community engagement, and to helping those in need within society with links to employees, clients and the business.
The Wilson HTM FoundationFor more than twenty years the Wilson HTM Foundation and its predecessor has been an important part of this philosophy, gifting more than $1.3 million to date.
The Foundation is overseen by an independent Board of Directors, with an internal donations committee in place to assess annual submissions from employees and to make formal recommendations.
The Foundation donates approximately 6% of capital each year to a small number of employee chosen charities. It also has a long term national partnership with the Reach Foundation, which has a vision “that every young Australian has the support and self belief to fulfi l their potential and dare to dream.”
Workplace givingThe Company off ers an employee payroll giving program, through which employees can make regular donations through automatic deductions from pre-tax pay. These are matched dollar for dollar by the Company up to $3,000 per person per annum, and can be made to any charity of choice which holds tax deductibility status. The program is managed through external providers to ensure regulatory compliance, and approximately 17% of employees participate. In 2008-2009 this resulted in more than $80,000 being distributed to 45 diff erent charities across the country, with the Wilson HTM Foundation being the most popular recipient.
Company supported events in FY2009
In addition, the Company is directly involved in and off ers sponsorship or donations to a range of industry, community and charitable activities which employees and clients initiate or actively take part in.
Examples during the past year include:
“Classic Wallabies Annual Luncheon” (benefi ciary is the Spinal •Injuries Association)
“Brisbane Big City Barbecue” (benefi ciaries are DRUG ARM •Australasia, Guide Dogs Queensland and the Lord Mayor’s Community Trust)
NSW “MS Angels” (benefi ciary is MS Research Australia) •
Arrow Energy’s “Kick for a Cure” (benefi ciary is Prostate Cancer •Research)
“Australian Stockbrokers’ Foundation Awards Charity Dinner” •(various benefi ciaries)
“Wilson HTM Brisbane to the Gold Coast Cycle Challenge” •(benefi ciaries are Diabetes Australia QLD and the Heart Foundation)
“Spin to Cure Diabetes” (benefi ciary is Juvenile Diabetes) •
PeopleDue to the poor market conditions experienced in FY2009, the Company implemented a number of cost-cutting measures including some reductions in staff members. However, with the acquisition of Next Financial we added 56 new staff members to the Group.
We now have 316 full time equivalent staff across Wilson HTM and 49 full time staff across Pinnacle.
Wilson HTM Investment Group Pinnacle
4
7
11
12
11
5
INST. STOCKBROKING
CORPORATE FINANCE PRIVATE CLIENT ADVISORY
RESEARCH
Next
HYPERION
RESOLUTION CAPITAL LTD
PALISADE
PINNACLE
SOLARIS
PLATO
27
10
103
100
22
55
MANAGEMENT & SUPPORT
Managing Director’s Report- Continued
0.6 0.7 1.1
2.0 2.3
3.2
1.7
0.6 0.7
1.1
2.0 2.3
4.9
0.0
1.0
2.0
3.0
4.0
5.0
Jun 04 Jun 05 Jun 07 Jun 06 Jun 08 Jun 09
$ bi
llions
Wilson HTM Pinnacle
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As an integrated investment group Wilson HTM has a diverse group of activities united by a shared focus on delivering outperformance. Across the businesses practices and disciplines have been established supporting our activities and allowing Wilson HTM to establish track records which, in the case of some of our funds, now run 3, 5 and in the case of Hyperion to 10 years.
It is with this focus on outperformance that we are pursuing growth in the Private Wealth Management market. In the past year our capabilities in meeting the investment needs of retail clients in our Private Wealth Management business have been enhanced with the acquisition of Next Financial. This acquisition has added Structured Product and Protection strategies to our capabilities and expanded our client base to include Financial Planning dealer groups. We anticipate that the acquisition of Next Financial will allow us to introduce new product off erings and services to existing and new retail clients of the group and to facilitate the continued growth of Funds Under Management.
Our Capital Markets operations are orientated to the identifi cation and delivery of outperforming investment ideas to both Institutional and Retail investors. Our Capital Markets focus remains largely on the mid market space and in industry segments that are expected to outperform the broader economy. While the last fi nancial year was characterised by a dramatic drop in both the capitalisation of the Australian market and in trading volumes we were able to deliver outperforming Research recommendations and Equity Capital Markets opportunities in emerging sectors such as Energy and in particular Coal Seam Gas.
Pinnacle’s boutiques focus on delivering outperformance. The Pinnacle model provides its boutique managers with equity participation and independence while Pinnacle itself supports marketing and the growth of FUM and Wilson HTM provides support services. This allows the boutique managers to concentrate on investment. The boutique strategy has achieved meaningful success as measured by growth in FUM in the past year and will continue to be expanded.
OutlookWith the recent reduction in equity market volatility trading volumes in our businesses have improved from the levels experienced through the 2008/09 fi nancial year. We have also been able to complete a number of Equity Capital Markets mandates. FUM growth in both Wilson HTM and Pinnacle is being experienced as a result of infl ows and the rising market. While this improved environment is encouraging the performance of the business remains dependant upon the factors previously identifi ed; the performance of the Australian market, the level of alpha (outperformance) generated and the growth of FUM.
Garry LowreyManaging DirectorWilson HTM Investment Group Ltd
Man
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rtIn April 2009, the Company acquired Next Financial, a product manufacturer and investment manager specialising in protected equity products and discretionary and non-discretionary investment accounts. Next Financial’s clients are primarily high-net-worth investors and fi nancial planning dealer groups.
The acquisition has secured another source of intellectual property to help generate alpha for our clients. It is also an extension to our business model, adding additional investment management, product structuring expertise and distribution to Wilson HTM. Next Financial has provided access to new relationships including over 80 fi nancial planning dealer groups servicing over 4,500 retail clients.
In addition, Next Financial also directly services over 200 active high-net-worth clients. We are working closely with the Next team to leverage those relationships which will enable us to off er other investment management products and services to these dealer groups over time.
With its established income streams and products that target wealth accumulators and the growing self-managed superannuation market, the acquisition is expected to enhance the value of our business for some time to come.
This acquisition has both grown our pool of talented people and built our Sydney presence.
As at 30 June 2009, Next Financial had client account balances of $1.4 billion. This has materially increased Wilson HTM’s funds under management and administration.
Next Financial Clients Assets & Liabilities ('CAL')
0.4
0.6
0.90.9
0.5
0.61.0
1.7
1.5 0.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
30 Jun 2005 30 Jun 2006 30 Jun 2007 30 Jun 2008 30 Jun 2009
$ bi
llion
Assets Liabilities
Acquisition of Next Financial
“Th is acquisition has both grown our pool of talented people and built our Sydney presence.”
For
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An
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Investment Management Limited (Pinnacle). During the year we added two further boutiques to the group, Pinnacle Private Equity and Plenary Investment Management, bringing the total number of boutiques under our umbrella to seven. I am also pleased with the success our boutiques have had winning signifi cant funds under management. As at 30 June 2009, Pinnacle boutiques had a total of $4.4 billion in FUM.
In addition to growing our funds, we have established a solid distribution capability. In April 2009, Pinnacle entered into an agreement with Capital International, one of the world’s most respected investment management fi rms, to distribute global equities funds to Australian retail investors. Under the agreement, Pinnacle, in conjunction with Wilson HTM Investment Group, is also responsible for administering the Capital International Global Equities Fund and the Capital International Global Equities Fund (Hedged).
Below is an overview of the performance of each of our boutiques.
Solaris Investment ManagementBoutique funds manager, Solaris, enjoyed a successful fi nancial year with funds under management reaching over $1.4 billion as at 30 June 2009. Several key institutional mandates were won during the year and Solaris’ pooled funds received steady infl ow. The Brisbane-based, nine person Australian Equities investment team off ers both core and high alpha strategies and is supported by two client service representatives and a Chief Operating Offi cer. Since its inception, Solaris’ Core Australian Equity Fund achieved alpha of 5.7% pa.
During the year, Solaris was rated by most major researchers and was awarded the highest possible rating by two prominent rating houses. Solaris also won the Morningstar Fund Manager of the Year 2008 – Emerging award. The Solaris Core Australian Equity Fund was added to major platforms and the Solaris Core Australian Equity Fund (Performance Fee Option) was launched to provide a performance fee alternative, which off ers very strong alignment of interest between fund manager and investor.
Plato Investment ManagementThe fi scal year ended 30 June 2009 proved a diffi cult investment environment, with the fall of Lehman Brothers bringing forth what is now called the Global Financial Crisis. The year was also diffi cult for quantitative investment processes, with most Australian quantitative managers sitting in the bottom quartile of performances in the Mercer Australian Shares Survey.
For Plato the year was one of consolidation, featuring the seeding of two further 130/30 mandates, including the Plato Australian Shares 130/30 Fund. Investment performance proved diffi cult with stock movements dominated by macroeconomic factors rather than bottom-up fundamentals such as analyst earnings revisions. Despite the Australian shares market falling more than 20%, funds under management increased over the year to $436m due to net fund infl ows in excess of $170m.
Hyperion Asset ManagementHyperion Asset Management outperformed all other Australian long-only equity fund managers for the 2009 fi nancial year, fi nishing fi rst in the Mercer and Intech surveys for the twelve months to 30 June 2009 in Australian Equities. Hyperion’s disciplined focus on buying the highest quality companies was rewarded as many listed companies suff ered the eff ects of the Global Financial Crisis and the market focused on companies with strong balance sheets and organic growth opportunities.
The Hyperion Australian Growth Companies Fund returned -0.51%, outperforming the benchmark ASX 300 Accumulation Index by 19.8%.
Hyperion’s small cap fund also produced an outstanding result, returning a gross return of 13.7% representing an out-performance over the S&P ASX Small Ordinaries Accumulation Index of 42.3%
Hyperion’s focus on long-term performance has also paid off handsomely for clients with a 13.9% pa return and a 5.3% pa outperformance of the S&P ASX 300 Accumulation Index for its composite of Australian Equity portfolios since inception in October 1996.
Pinnacle Investment Management
Ian Macoun, Managing DirectorPinnacle Investment Management
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Resolution Capital achieved outstanding investment performance in diffi cult market conditions. Whilst absolute returns were disappointing, strong positive alpha performance was attributed to management’s strategy, embarked upon in Q4 2007, of focusing on real estate vehicles with lower fi nancial gearing and higher quality property rental income streams.
Resolution Capital’s core fund achieved alpha of 5.7% in the year to 30 June 2009.
Two new pooled funds were launched during the period: Resolution Capital Global Property Securities Fund; and Resolution Capital Core Plus Property Securities Fund. Steady progress was achieved in having the funds rated by leading ratings agencies.
Palisade Investment PartnersPalisade’s Diversifi ed Infrastructure Fund and Palisade’s Regional Infrastructure Fund are unlisted vehicles giving wholesale clients access to experienced and specialised investment management in the economic infrastructure sector. Palisade’s strategy is a sector-specifi c focus to maximise investor returns through market specialisation and positioning. Palisade’s focus continues on the development of its Regional Infrastructure Fund with investment in the Agri Infrastructure and Clean Tech sectors.
In the year to 30 June 2009, Palisade’s Funds successfully demonstrated their defensive attributes during what was a diffi cult year for investment markets generally. The Diversifi ed Infrastructure Fund returned -1.60% and Palisade’s Regional Fund returned 3.8%.
Pinnacle Private EquityPinnacle Private Equity Limited is seeking to raise its initial Fund for investment in mid-market private equity opportunities in Australia and New Zealand. The Pinnacle Private Equity management team has an outstanding track record of successful investment in companies with strong entrepreneurs, cogent growth opportunities and an enterprise value at the time of the investment of up to $200 million.
Previous mid-market portfolios managed by the team place it in the upper quartile of comparable private equity fund managers. Completion of the current fund raising eff ort will enable Pinnacle Private Equity to continue that business at a portentous time in the economic cycle without the burden of legacy assets. Pinnacle Private Equity facilitates and drives the execution of growth strategies by portfolio companies to target returns of more than 20%.
Plenary Investment ManagementPlenary Investment Management was established in May 2009 by Plenary Group, a leading specialist social infrastructure originator, and Pinnacle, to provide institutional investors with access to the growing pipeline of social infrastructure opportunities both in Australia and off shore.
Plenary Investment Management is currently raising its fi rst Australian Fund, which is capped at $500 million and ‘seeded’ with a diverse pipeline of existing Plenary Group assets.
Social infrastructure is proving to be an attractive option for institutional investors, particularly superannuation funds, given its growing global pipeline and the surety of steady payment streams from government and long term, generally infl ation-linked returns.
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“As at 30 June 2009, Pinnacle boutiques had a total of $4.4 billion in FUM.”
Pinnacle Investment Management- Continued
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Directors’ Profi les
Garry LowreyManaging Director Group & Chairman, Wilson HTM
Mr Garry Lowrey was appointed to the role of Managing Director in February 2006. He joined the Company in 1999 as a Business Director of Corporate Finance. He was appointed Head of Corporate Finance in 2001.
Prior to joining the Company, he spent 12 years with UBS Warburg and its predecessor fi rms. From 1992, he was a Director of UBS Warburg’s Corporate Finance team, specialising in capital markets and mergers and acquisitions advice to small and Mid-market companies.
Special Responsibilities:
Managing Director -
Other Current Directorships:
Chairman and Managing Director, Wilson HTM Ltd -
Chairman and Managing Director, Wilson HTM Corporate Finance Ltd -
Chairman and Managing Director, Wilson HTM Services Pty Ltd -
Director, Pinnacle Investment Management Limited -
Director, WHTM Capital Management Limited -
Director, Next Financial Ltd -
Director, Next Financial Investment Management Ltd -
Director, Mosaic Risk Management Pty Ltd -
Director, Pinnacle Private Equity Limited -
Qualifi cations & Associations:
Bachelor of Business, NSW Institute of Technology -
Master of Applied Finance, Macquarie University -
Member, Institute of Chartered Accountants in Australia -
Master Stockbroker, Securities and Derivatives Industry Association -
Steven WilsonExecutive Chairman Group
Mr Steven Wilson was appointed Executive Chairman of the Company in 2004. Steven has 30 years of professional investment experience, including four years with Cazenove & Co. in London. He has been with the Company and its predecessor entities since 1984 in a number of senior positions including Head of Research, Institutional Sales, Corporate Finance, Investment Management and as Managing Director.
Steven has previously served as a Director on the Boards of City of Brisbane Airport Corporation, Telstra Corporation, Tourism Queensland and The Council of Queensland University of Technology.
Listed Company Directorships held in last 3 years (current & recent):
Director, Hyperion Flagship Investments Limited, from 1997 to 2009 (resigned June 2009) -
Special Responsibilities:
Chairman of the Board -
Chairman of the Nominations & Corporate Governance Committee -
Other Current Directorships:
Chairman, Wilson HTM Investment Management Pty Ltd -
Chairman, South Bank Corporation -
Chairman, Barambah Wines Pty Ltd -
Deputy Chairman, Queensland Rugby Union Ltd -
Director, Pinnacle Investment Management Limited -
Director, The Centre for Independent Studies -
Director, National Trust St John’s Cathedral Completion Fundraising Board -
Trustee for University of Queensland Rugby Union Foundation -
Qualifi cations & Associations:
Bachelor of Commerce, University of Queensland -
Bachelor of Laws, University of Queensland -
Honorary Doctor of Philosophy, Queensland University of Technology -
Solicitor of the Supreme Court of Queensland -
Master Stockbroker, Securities & Derivatives Industry Association -
Fellow, Australian Institute of Company Directors -
Fellow, Financial Services Institute of Australasia -
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Chum DarvallNon-executive Director
Mr Chum Darvall joined the Board in October 2005. He is presently Chief Executive Offi cer of Deutsche Bank Australia and New Zealand, a position he has held since July 2002. He joined Deutsche Bank in September 1994 as Director of Treasury and in 1998 became Head of Global Markets with responsibility for all debt market-related activities.
Prior to his fi rst appointment at Deutsche Bank, he worked in the fi nancial markets divisions of Westpac (1985-1994) and BA Australia Ltd (1981-1985), a subsidiary of Bank of America.
Special Responsibilities:
Member of the Audit Compliance & Risk Management Committee -
Other Current Directorships:
Director of various Deutsche Bank entities -
Director, Australian Financial Markets Association -
Director, The Centre for Independent Studies -
Council Member, Business Council of Australia -
Director, Financial Markets Foundation for Children -
Director, Victor Chang Cardiac Research Institute -
Qualifi cations & Associations:
Bachelor of Arts, Macquarie University -
Fellow, Australian Institute of Company Directors -
Fellow, Financial Services Institute of Australasia -
Ian FraserDeputy Chairman and Non-executive Director
Mr Ian Fraser joined the Board in 2006. He is a Chartered Accountant practising as a Non-executive Company Director with more than 40 years’ experience as a business and accounting professional including 27 years as a Partner with KPMG. He retired as an audit and corporate advisory partner with KPMG in 2004.
Special Responsibilities:
Deputy Chairman -
Chairman, Audit Compliance & Risk Management Committee -
Listed Company Directorships held in last 3 years (current & recent):
Chairman, RP Data Ltd from October 2008 and Director from September 2006 to current -
Director, Cellnet Group Limited from March 2006 to August 2007 -
Other Current Directorships:
Director, Property IQ NZ Limited -
Member Board, Queensland Bulk Water Supply Authority -
Director, South East Queensland Water Corporation Limited -
Director, Pemsoft Pty Ltd -
Director, Diversifi ed Mining Services Ltd -
Qualifi cations & Associations:
Bachelor of Commerce, University of Queensland -
Fellow, Institute of Chartered Accountants in Australia -
Fellow, Australian Institute of Company Directors -
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Steven SkalaNon-executive Director
Mr Steven Skala joined the Board in 2002. Since 2004, he has been Vice Chairman, Australia and New Zealand of Deutsche Bank AG. He is a former commercial lawyer with more than 20 years’ experience in corporate law. Between 1982 and 1985, he was a partner of Brisbane law fi rm Morris Fletcher and Cross (now Minter Ellison). Between 1985 and 2004 he was a partner of law fi rm, Arnold Bloch Leibler, and was Head of its Corporate and Commercial Practice for several years.
Special Responsibilities:
Member of the Nominations & Corporate Governance Committee -
Member of the Remuneration Committee -
Listed Company Directorships held in last 3 years (current & recent):
Director, Hexima Limited, from 2002 to current (Chairman 2002-2008) -
Other Current Directorships:
Vice Chairman, Australia & New Zealand, Deutsche Bank AG -
Director, Deutsche Australia Limited -
Director, Australian Broadcasting Corporation -
Director, Max Capital Group Ltd -
Vice President, The Walter and Eliza Hall Institute of Medical Research -
Director, The Centre for Independent Studies -
Director, The Australian Ballet -
Qualifi cations & Associations:
Bachelor of Arts, University of Queensland -
Bachelor of Laws (Honours), University of Queensland -
Bachelor of Civil Law, Oxford University -
Solicitor of the Supreme Courts of Queensland, Victoria and -Northern Territory and the High Court of Australia
Paul HarrisNon-executive Director
Mr Paul Harris joined the Board and its predecessor entities in October 1998. He has worked for more than 30 years in the securities industry, being a member of the Sydney Stock Exchange Ltd and a director of a number of its member fi rms until the time of the public listing of ASX Limited in October 1998.
He has recently held Directorships with Gresham CEA Management Ltd, Gresham Technology Management Ltd and was a Governor of the Centenary Institute for Cancer Research and Cell Biology.
Special Responsibilities:
Member of the Nominations & Corporate Governance Committee -
Member of the Remuneration Committee (Chairman until 30 June 2008) -
Listed Company Directorships held in last 3 years (current & recent):
Director, Ten Network Holdings Ltd (Group of Companies), from 1998 to 2007 -
Other Current Directorships:
Director, Fulcrum Capital Partners Ltd -
Governor, WWF Australia -
Qualifi cations & Associations:
Master of Arts (Law), University of Cambridge -
Fellow, Financial Services Institute of Australasia -
Directors’ Profi les - Continued
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Ann Sherry AONon-executive Director
Ms Ann Sherry joined the Board in June 2008. Ann is currently the Chief Executive Offi cer of Carnival Australia, a division of Carnival Corporation. Prior to this, Ann was with Westpac for 12 years. Her roles with Westpac were Chief Executive Offi cer, Westpac New Zealand and Group Executive, Westpac New Zealand and the Pacifi c. Previously, Ann was the CEO of the Bank of Melbourne and Group Executive, People & Performance. Prior to Westpac, Ann was First Assistant Secretary of the Offi ce of the Status of Women in Canberra.
Special Responsibilities:
Member of the Remuneration Committee -
Listed Company Directorships held in last 3 years (current & recent):
None -
Other Current Directorships:
Chair, Public Service Commission of Queensland -
Director, Tourism & Transport Forum Australia Ltd -
Director, Indigenous Enterprise Partnerships -
Director, the Catherine Freeman Foundation -
Board Member, Tourism Queensland -
Director, Company B Ltd -
Qualifi cations & Associations:
Bachelor of Arts, University of Queensland -
Graduate Diploma in Industrial Relations Queensland -University of Technology
Member, Australian Institute of Company Directors -
Fellow, Financial Services Institute of Australasia -
Fellow, Institute of Public Administration Australia -
Warren McLelandNon-executive Director
Mr Warren McLeland joined the Board in March 2007. He began his career with the Reserve Bank of Australia as a research scholar. He then became a partner and member of the Sydney Stock Exchange Ltd for Bain and Company (subsequently purchased by Deutsche Bank), then Chase Manhattan Bank in New York, Hong Kong and Europe where he managed Chase’s UK securities business and European funds management business.
He was also a member of the London Stock Exchange, a part-time lecturer at the University of London, and a Director of the International Primary Markets Association and the International Securities Markets Association.
Special Responsibilities:
Chairman of the Remuneration Committee (from 1 July 2008) -
Member of the Audit Compliance & Risk Management Committee -
Listed Company Directorships held in last 3 years (current & recent):
Chairman, Ellect Holdings Limited, from April 2005 to current -
Director, Trust Company Limited, from 2005 to current -
Other Current Directorships:
Director, RESIMAC Limited -
Director, Eclectic Investment Trust PLC -
Director, Utilico Limited PLC -
Director, Pain Management Research Institute Limited -
Qualifi cations & Associations:
Bachelor of Science, University of Sydney -
Master of Business Administration, Australian Graduate School of Management, University of New South Wales -
Fellow, Financial Services Institute of Australasia -
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Alex IhlenfeldtHead of Private Wealth ManagementAlex Ihlenfeldt joined the Company in 2000. He was General Manager, prior to taking the role of Chief Operating Offi cer from July 2006 to April 2009 when he was appointed to the role of Head of Private Wealth Management. He has over 20 years’ fi nance and accounting experience in both Australia and South Africa. Prior to joining the Company he held senior positions with PKF (Chartered Accountants) and Indevco Business Consultants.
Bachelor of Accounting Science (Honours), University of South Africa -
Member, Securities & Derivatives Industry Association -
Fellow, Australian Institute of Company Directors -
Andrew BlakemoreHead of Human Resources
Andrew Blakemore joined the Company in June 2009 as Head of Human Resources. Prior to joining, Andrew was with Macquarie Group Limited for six years where his roles included the Regional Head of HR (Australia/NZ) and Global Head of Remuneration. Andrew also worked for nine years with the BT Financial Group and Bankers Trust Australia where he was Head of Human Resources and Head of Compensation and Benefi ts. He has also worked in corporate superannuation roles with Lend Lease Financial Services and National Mutual.
Bachelor of Economics, University of Sydney -
Diploma of Superannuation Management, ASFA -
Fellow, Australian Human Resources Institute -
GROUP
BOARD
WILSON HTM
Steven Wilson
Executive Chairman
Group
PINNACLE
BOARD
Ian MacounChairman & Managing
DirectorPinnacle Investment Management Limited
Andrew Blackmore
Head of Human
Resources
Deane Sweeney
Chief Operating Officer
& Legal Counsel
IT
Services
Marketing
Operations
Compliance
Investment
Management
Services
Neal McCulloch
Chief Financial
Officer
Risk
Management
Company
Secretarial
Business &
Management
Reporting
Financial &
External
Reporting
Administration
& Procurement
Project
Management
Mark Burns
Head of
Capital Markets
Corporate
Finance
Equity
Capital
Markets
Research Institutional
Sales
Alex Ihlenfeldt
Head of Private Wealth
Management
Investment
Advisory
Financial
Advisory
Next
Financial
Garry LowreyManaging Director
Group& Chairman Wilson HTM
Executive Management
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Neal McCullochChief Financial Offi cer
Neal McCulloch joined the Company in January 2007. He has over 25 years’ experience in fi nance and management positions, most recently as Chief Financial Offi cer of Orrcon Limited, a signifi cant business within the listed Hills Industries Limited group. Before that, he was Group Financial Controller of Queensland Cotton Holdings Limited, a listed multinational agribusiness, and spent 12 years in the audit and corporate services division of KPMG.
Bachelor of Business, Queensland University of Technology -
Member, Institute of Chartered Accountants in Australia -
Deane SweeneyChief Operating Offi cer
Deane Sweeney is the Chief Operating Offi cer for Wilson HTM Investment Group. Deane has 13 years legal and fi nancial services experience. Prior to joining Wilson HTM, Deane practiced as a solicitor, before working for Credit Suisse First Boston and Challenger International in legal and compliance roles. Deane holds a Bachelor of International Business and a Bachelor of Laws, and is a solicitor of the Supreme Court of Queensland.
Bachelor of Laws (Honours), Griffi th University -
Bachelor of International Business, Griffi th University -
Member, Queensland Law Society -
Member, Australian Corporate Lawyers Association -
Mark BurnsHead of Capital Markets
Mark Burns joined the Company in May 2007. Prior to that he spent over eleven years at Deutsche Bank in its investment banking division. At Deutsche Bank he held the position of Head of the Telecommunications and Media Team in Australia and New Zealand from 1997 to 2000, before becoming Managing Director, Head of e-Business, Australia and New Zealand until mid 2001. From 2001 to 2007 Mark managed his own boutique corporate advisory business, TMT Partners.
Bachelor of Arts (Double Major in Accounting & Economics), Macquarie University -
Master of Applied Finance, Macquarie University -
Fellow, Financial Services Institute of Australasia -
Graduate Member, Australian Institute of Company Directors -W
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Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Wilson HTM Investment Group Ltd (the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2009.
DirectorsThe following persons were Directors of Wilson HTM Investment Group Ltd during the whole of the fi nancial year and up to the date of this report:
Mr S M Wilson
Mr G P Lowrey
Mr C Darvall
Mr I H Fraser
Mr P P A Harris
Mr W J McLeland
Ms A C Sherry AO
Mr S M Skala
Information on the qualifi cations, experience and responsibilities of Directors is included in the Director’s Profi les on pages 12 to 15 of this Annual Report.
Principal activitiesDuring the year the principal continuing activities of the Group consisted of:
Investment Management(a) managing Specialty Fund investments
(b) developing and operating boutique funds management businesses
(c) providing fi nancial planning and funds management services to Private Wealth Management clients
(d) providing investment management services to retail and wholesale clients
(e) investing in selected equity and fund investments as principal
(f) providing infrastructure and administration services to fund managers
Capital Markets(a) providing equity capital markets and merger and acquisition advisory services
(b) provision of research on ASX listed entities
(c) providing full-service stockbroking services to both private and institutional clients
(d) investing in selected equity investments from time to time as principal
During the year, the Group acquired Next Financial Limited, which was a privately owned, structured fi nancial product manufacturer and investment manager that specialises in providing protected equity products and discretionary and non-discretionary investment accounts to high-net-worth clients and fi nancial planning dealer groups.
Other than the above, there has been no signifi cant change in the nature of the principal continuing activities during the year.
Dividends - Wilson HTM Investment Group LtdDividends paid to members during the fi nancial year were as follows:
2009$’000
2008$’000
Interim ordinary dividend for the year ended 30 June 2009 of $0.01 (2008: $0.03) per fully paid share paid on
3 April 2009 (2008: 28 March 2008)957 2,871
Final ordinary dividend for the year ended 30 June 2008 of $0.04 per fully paid share paid on 3 October 2008 3,829 -
4,786 2,871
In addition to the above dividends, since the end of the fi nancial year the Directors have recommended the payment of a fi nal ordinary dividend of $1,030,000 (1.0 cent per fully paid share) to be paid on 2 October 2009 out of retained profi ts at 30 June 2009.
Directors’ Report 30 June 2009
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Review of operationsThe Group reported net profi t after tax attributable to its shareholders of $2.2 million which was 82% lower than the previous fi nancial year. Reported revenue declined by 14% to $107 million from $125 million. Reported revenue includes Next Financial revenue for the fi nal quarter. Excluding the Next Financial contribution, revenue declined 31% to $86 million. Group revenue (excluding Next Financial) was impacted by the sharp decline in equity market values which reduced trading volumes and FUM values.
Further information on the operations of the Group is set out in the Managing Director’s Report on pages 4 to 9 of this Annual Report.
Earnings per share
2009 Cents 2008 Cents
(a) Basic earnings per share
Profi t from continuing operations attributable to the ordinary equity holders of the Company 2.4 13.2
(b) Diluted earnings per share
Profi t from continuing operations attributable to the ordinary equity holders of the Company 2.2 12.0
Alternate diluted earnings per share 2.4 12.2
Alternate diluted earnings per share is presented after adjusting the number of shares on issue used in the basic calculation (91,126,368) for potential ordinary shares, which comprise the weighted average of options on issue (2009: 7,437,186; 2008: 8,717,017), and as if the net proceeds from the exercised options achieved a return comparable with the Company’s cost of debt during the year.
Signifi cant changes in the state of aff airsDuring the year, the Group acquired Next Financial Limited, which was a privately owned structured fi nancial product manufacturer and investment manager that specialises in providing protected equity products and discretionary and non-discretionary investment accounts to high-net-worth clients and fi nancial planning dealer groups.
Other than as outlined above, there have been no signifi cant changes in the state of aff airs of the Company from the date of the last fi nancial report to the date of this fi nancial report.
Matters subsequent to the end of the fi nancial yearThere has not arisen in the interval between the end of the fi nancial year and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to signifi cantly aff ect:
(a) the Group’s operations in future fi nancial years, or
(b) the results of those operations in future fi nancial years, or
(c) the Group’s state of aff airs in future fi nancial years.
Likely developments and expected results of operationsThe consolidated entity will continue to pursue its policy of increasing its presence in Investment Management and Capital Markets in Australia during the next fi nancial year. The recovery in equity market values from the low of March 2009 has seen a recovery in trading volumes and equity capital markets activity which, if sustained through the current fi nancial year, will result in revenues and profi ts materially higher than in the 2009 fi nancial year.
Environmental regulationThe Group is not aff ected by any signifi cant environmental regulation in respect of its operations.
Company SecretaryThe Company Secretary is Mr I W Harrison B Bus (Acc), FCPA, CSA (Affi liate). Mr Harrison was appointed to the position of Company Secretary in 1996 and has worked for the Company for 17 years. He has 29 years experience in the accounting and fi nance industries.
Directors’ Report- Continued
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Meetings of DirectorsThe numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2009, and the numbers of meetings attended by each Director were:
Meetings of committees
Full meetings of DirectorsNominations and Corporate
GovernanceAudit Compliance & Risk
ManagementRemuneration
A B A B A B A B
Mr S M Wilson 13 13 - - - - - -
Mr G P Lowrey 13 13 - - - - - -
Mr C Darvall 11 13 - - 4 6 - -
Mr I H Fraser 12 13 - - 6 6 - -
Mr P P A Harris 10 13 - - - - 2 3
Mr W J McLeland 12 13 - - 6 6 3 3
Mr S M Skala 10 13 - - - - 2 3
Ms A C Sherry AO 13 13 - - - - 3 3
A = Number of meetings attended
B = Number of meetings held during the time the Director held offi ce or was a member of the committee during the year
Remuneration reportThe remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remunerationA.
Details of remunerationB.
Service agreementsC.
Share-based compensationD.
Additional information.E.
The information in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
A Principles used to determine the nature and amount of remunerationThe objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market practice for delivery of reward. The Board ensures that executive reward satisfi es the following key criteria for good reward governance practices:
competitiveness and reasonableness •
acceptability to shareholders •
performance linkage / alignment of executive compensation •
transparency •
capital management. •
The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.
Alignment to shareholders’ interests:
has economic profi t as a core component of plan design •
focuses on sustained growth in shareholder wealth, as well as focusing the executive on key non-fi nancial drivers of value •
attracts and retains high calibre executives. •
Alignment to program participants’ interests:
rewards capability and experience •
refl ects competitive reward for contribution to growth in shareholder wealth •
provides a clear structure for earning rewards •
provides recognition for contribution. •
The framework provides a mix of fi xed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the Group, the balance of this mix shifts to a higher proportion of at risk rewards.
Non-executive Directors
Fees and payments to Non-executive Directors refl ect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Executive Chairman does not receive fees in his
Directors’ Report- Continued
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capacity as Chairman. Mr C Darvall receives no fees, as he is an executive offi cer and representative of Deutsche Bank Australia, which is a substantial shareholder in the Company.
Non-executive Directors are eligible to participate in the Employee Option Share Plan.
Directors’ fees
Non-executive Directors (excluding Mr C Darvall) are paid an annual fee for their service on the Board. Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $600,000 per annum and was approved by shareholders at the Annual General Meeting on 24 October 2006. The current base remuneration was reviewed with eff ect from 1 January 2009. After reviewing the fi nancial conditions and considering the ongoing fi nancial crisis affl icting the world, the Non-executive Directors agreed to a 10% reduction in their fees. Non-executive Directors who chair, or are a member of, a committee receive additional yearly fees.
From 1 January 2009From 1 July 2008 to 31
December 2008
Base fees amounts shown are annual fees, applicable for the periods indicated
Chairman $NIL $NIL
Other Non-executive Directors $67,500 $75,000
Audit Compliance and Risk Management Committee – Chairman $9,000 $10,000
Audit Compliance & Risk Management Committee – Member $4,500 $5,000
Nomination & Corporate Governance Committee – Member $4,500 $5,000
Remuneration Committee – Chairman $9,000 $10,000
Remuneration Committee – Member $4,500 $5,000
Retirement allowances for Directors
The Company does not provide for retirement allowances for Directors, in line with recent guidance on Non-executive Directors’ remuneration. Superannuation contributions required under the Australian superannuation guarantee legislation continue to be made and are deducted from the Directors’ overall fee entitlements.
Executive pay
The executive pay and reward framework has three components:
base pay and benefi ts, including superannuation •
short-term performance incentives, and •
long-term incentives through participation in the Equity Participation Plan, Employee Option Share Plan, or Long-term Incentive Share •Plan.
The combination of these comprises the executive’s total remuneration.
Base pay
Structured as a package which may be delivered as a combination of cash and prescribed non fi nancial benefi ts.
Executives are off ered competitive base pay that comprises the fi xed component of pay and rewards. Base pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market in the context of total remuneration. An executive’s base pay is also reviewed on promotion.
There are no guaranteed base pay increases included in any executives’ contracts.
Short-term incentives
If the Group achieves a pre-determined profi t target, a short term incentive (STI) pool is available to executives during the annual review. Cash incentives (bonuses) are payable after conclusion of the fi nancial year. Using a profi t target ensures variable reward is available when value has been created for shareholders and when profi t is consistent with the business plan. The incentive pool is leveraged for performance above the threshold to provide an incentive for executive out performance. The Remuneration Committee may also take into consideration other infl uences such as staff retention, business acquisitions and/or relative business unit profi tability to make available additional monies to the STI pool on an ad hoc basis. Each executive has a target STI opportunity depending on the accountabilities of the role and impact on the organisation or business unit performance.
The Board sets appropriate targets and key performance indicators (KPIs) for the Executive Chairman, who in turn sets appropriate targets and KPIs for the Managing Director, who in turn sets appropriate targets and KPIs for his direct reports, to link the STI plan and the level of payout if targets are met. This includes setting minimum levels of performance to trigger payment of STI.
Each year, the Remuneration Committee considers the appropriate targets and key performance indicators (KPIs) to link the STI plan and the level of payout if targets are met. This includes setting any maximum payout under the STI plan, and minimum levels of performance to trigger payment of STI.
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For the year ended 30 June 2009, the KPIs linked to STI plans were based on Group, individual business and personal objectives. The KPIs required performance in achieving specifi c targets in relation to fi nancial and non-fi nancial measures linked to drivers of performance in past, current and future reporting periods.
The Remuneration Committee is responsible for assessing whether the Executive Chairman’s KPIs are met. To help make this assessment, the Committee receives detailed reports on performance.
The short term bonus payments may be adjusted up or down in line with over or under achievement against the target performance levels.
The STI target annual payment is reviewed annually.
Long-term incentives
Long-term incentives are provided to certain employees via four diff erent instruments: Equity Participation Plan, Employee Option Share Plan, Long-term Incentive Share Plan, and Employee Share Acquisition Plan (see page 24 for further information).
B Details of remunerationAmounts of remuneration
Details of the remuneration of the Directors and the key management personnel (as defi ned in AASB 124 Related Party Disclosures) of Wilson HTM Investment Group Ltd are set out in the following tables.
The key management personnel of the Group are the Directors of Wilson HTM Investment Group Ltd (see pages 12 to 15 above) and those executives that report directly to the Managing Director or Executive Chairman being:
A J Blakemore - Head of Human Resources (from 15 June 2009) •
M A Burns - Head of Capital Markets •
A Ihlenfeldt - Head of Private Wealth Management (from 1 March 2009) •
I Macoun - Chairman and Managing Director of Pinnacle Investment Management Limited •
N A McCulloch - Chief Financial Offi cer •
A D Sweeney - Chief Operating Offi cer (from 1 March 2009) •
Key management personnel and other executives of Wilson HTM Investment Group Ltd
Short-term employee benefi ts
Post employment
benefi ts
Long-
term
benefi ts
Share-
based
payments
Cash salary and fees
Cash bonus
(STI)
Non-monetary
benefi tsSuperan-
nuationRetirement
benefi ts
Long service
leave
Options and rights
(LTI) Total
Portion of remuneration performance
related - STI
Portion of remuneration performance
related - LTI
Portion of
STI vested
Name $ $ $ $ $ $ $ $ % % %
Directors
Non-executive Directors
C Darvall 2009 - - - - - - 1,585 1,585 - % 100% - %
2008 - - - - - - 2,499 2,499 - % 100% - %
I H Fraser 2009 77,933 - - 5,506 - - 793 84,232 - % 1% - %
2008 64,178 - - 21,330 - - 1,250 86,758 - % 1% - %
P P A Harris 2009 80,739 - - - - - 1,585 82,324 - % 2% - %
2008 33,500 - - 56,500 - - 2,499 92,499 - % 3% - %
W J McLeland 2009 16,750 - - 68,750 - - 793 86,293 - % 1% - %
2008 79,361 - - 5,635 - - 1,250 86,246 - % 1% - %
S M Skala 2009 55,752 - - 25,000 - - 1,585 82,337 - % 2% - %
2008 81,456 - - 3,544 - - 2,499 87,499 - % 3% - %
A C Sherry AO (i) 2009 79,783 - - - - - - 79,783 - % - % - %
2008 - - - - - - - - - % - % - %
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Directors’ Report- Continued
Short-term employee benefi ts
Post employment
benefi ts
Long-
term
benefi ts
Share-
based
payments
Cash salary and fees
Cash bonus
(STI)
Non-monetary
benefi tsSuperan-
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benefi ts
Long service
leave
Options and rights
(LTI) Total
Portion of remuneration performance
related - STI
Portion of remuneration performance
related - LTI
Portion of
STI vested
Name $ $ $ $ $ $ $ $ % % %
Executive Directors
S M Wilson 2009 340,712 - (6,161) 49,519 - 6,476 5,549 396,095 - % 1% 100%
2008 379,271 124,619 11,297 15,840 - (48,956) 8,748 490,819 25% 2% 100%
G P Lowrey 2009 385,316 - 1,387 34,678 - 6,976 11,799 440,156 - % 3% 100%
2008 385,319 275,229 (8,056) 59,450 - 7,013 19,700 738,655 37% 3% 100%
Key management personnel
A J Blakemore (ii) 2009 - - - - - - - - - % - % - %
2008 - - - - - - - - - % - % - %
M A Burns 2009 272,878 - (2,831) 76,052 - - 3,963 350,062 - % 1% 100%
2008 317,710 376,145 (9,888) 62,405 - - 6,248 752,620 50% 1% 100%
A Ihlenfeldt 2009 275,500 - (1,218) 24,795 - 4,988 10,213 314,278 - % 3% 100%
2008 297,185 247,706 12,749 25,958 - 5,025 17,200 605,823 41% 3% 100%
I Macoun 2009 231,996 - (1,308) 88,000 - - 119,883 438,571 - % 27% 100%
2008 293,574 - 2,472 96,422 - - 121,711 514,179 - % 24% 100%
N A McCulloch 2009 184,300 - 800 42,758 - - 1,189 229,047 - % 1% 100%
2008 192,650 68,807 (784) 23,518 - - 1,874 286,065 24% 1% 100%
A D Sweeney (iii) 2009 72,932 - 5,110 6,564 - 1,106 793 86,505 - % 1% 100%
2008 - - - - - - - - - % - % - %
D D G Gamble (iv) 2009 (v) 194,740 - (18,068) 19,260 - 4,832 13,395 214,159 - % 6% 100%
2008 347,483 479,285 8,113 35,435 - 5,840 22,410 898,566 53% 2% 100%
D N Groth (iv) 2009 (v) 168,333 - (8,923) 15,150 - 3,801 10,213 188,574 - % 5% 100%
2008 252,500 352,752 7,444 54,473 - (51,509) 17,200 632,860 56% 3% 100%
B J Usasz (iv) 2009 (v) 169,913 - (5,240) 15,150 - - 10,213 190,036 - % 5% 100%
2008 254,992 224,770 (3,167) 41,061 - - 17,200 534,856 42% 3% 100%
M S Walsh (iv) 2009 (v) 198,777 - (26,762) 17,890 - - 10,755 200,660 - % 5% 100%
2008 275,500 355,963 (1,141) 56,832 - - 17,749 704,903 50% 3% 100%
Total compensation: Key Management Personnel (Consolidated)
2009 2,806,354 - (63,214) 489,072 - 28,179 204,306 3,464,697 - % 6% -
2008 3,254,679 2,505,276 19,039 558,403 - (82,587) 260,037 6,514,847 39% 4% -
Total compensation: Key Management Personnel (Company)
2009 1,036,984 - (4,774) 183,453 - 13,452 23,689 1,252,805 - % 2% -
2008 1,023,085 399,848 3,241 162,299 - (41,943) 38,445 1,584,975 25% 2% -
(i) AC Sherry AO was appointed as a Director on 17 June 2008
(ii) A J Blakemore joined the Group on 15 June 2009
(iii) A D Sweeney was appointed to the position of Chief Operating Offi cer on 1 March 2009
(iv) Following a change in management structure eff ective 1 March 2009, these employees ceased to be classifi ed as key management personnel. They all continue in senior management roles
within the Group.
(v) Figures shown represent remuneration for the eight months of the year up until the date of the change.
The above disclosure relates to the key management personnel and other executives of the Group. The Directors are the only offi cers of the Company requiring disclosure, therefore no further disclosure is required.STI is a combination of an amount based on achievement of KPIs and a discretionary amount and the portion vested above represents 100% of that combined amount.
Non-monetary benefi ts represent movement in accrued annual leave.
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C Service agreementsOn appointment to the Board, new Directors are provided with a letter of appointment setting out the Company’s expectations, their responsibilities, rights and the terms and conditions of their employment. All new Directors participate in a review program which covers the operation of the Board and its Committees and fi nancial, strategic, operations and risk management issues.
Remuneration and other terms of employment for the Executive Chairman, Managing Director and key management personnel are also formalised in service agreements. Each of these agreements provide for the provision of performance related cash bonuses, other benefi ts including participation, when eligible, in the Employee Option Share Plan. Other major provisions of the agreements relating to remuneration are set out below.
All contracts with executives may be terminated early by either party with one month’s notice, subject to termination payments as detailed below.
S M Wilson, Executive ChairmanTerm of agreement - on going, commencing 1 July 2003. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $390,000, to be reviewed annually by the Remuneration •Committee.
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
G P Lowrey, Managing DirectorTerm of agreement - on going, commencing 9 February 2006. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $420,000, to be reviewed annually by the Executive •Chairman.
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
A J Blakemore, Head of Human ResourcesTerm of agreement - on going, commencing 15 June 2009. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $250,000, to be reviewed annually by the Managing Director. •
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
M A Burns, Head of Capital MarketsTerm of agreement - on going, commencing 14 May 2007. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $350,000, to be reviewed annually by the Managing Director. •
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
A Ihlenfeldt, Head of Private Wealth ManagementTerm of agreement - on going, commencing 1 July 2003. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $300,295, to be reviewed annually by the Managing Director. •
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
I Macoun, Chairman and Managing Director of Pinnacle Investment Management LimitedTerm of agreement - on going, commencing 25 August 2006. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $320,000, to be reviewed annually by the Pinnacle •Investment Management Limited Board.
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
At the time of his employment, entities associated with I Macoun received a loan for the purpose of funding equity investment in •Pinnacle Investment Management Limited. The loan has limited recourse to the equity and is only repayable in the event of all of the equity being disposed of.
N A McCulloch, Chief Financial Offi cerTerm of agreement - on going, commencing 8 January 2007. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $225,000, to be reviewed annually by the Managing Director. •
Payment of a termination benefi t on termination by the Company, other than for gross misconduct, equal to one month base salary. •
A D Sweeney, Chief Operating Offi cerTerm of agreement - on going, commencing 1 March 2009. •
Base salary, inclusive of superannuation, for the year ended 30 June 2009 of $239,800, to be reviewed annually by the Managing Director. •
D Share-based compensationOptions
Options over shares in Wilson HTM Investment Group Ltd are granted under the Wilson HTM Investment Group Employee Option Share Plan (EOSP) which was approved by shareholders at the 20 April 2007 general meeting. The EOSP is designed to provide long-term incentives for executives to deliver long-term shareholder returns. Under the plan, participants are granted options which only vest if the employees are still employed by the Group at the end of the vesting period. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefi ts.
Directors’ Report- Continued
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Rights
Rights to shares in Wilson HTM Investment Group Ltd were off ered to eligible executives under the Equity Participation Plan (EPP). The EPP was established by the Company in 2006 to provide equity incentives to selected executives by providing shares paid for by the provision of an interest free, non-recourse loan, in trust, subject to service and performance conditions. All performance conditions have been deemed by the Board to have been met and no longer apply as of 4 April 2007.
No further off ers are proposed under this plan.
The terms and conditions of each grant of options or rights aff ecting remuneration in the previous, this or future reporting periods are as follows:
Grant date Category Expiry date Exercise price Number of rights / options
8 March 2006 Rights 28 February 2011 $0.67 1,150,000
20 November 2006 Rights 15 November 2011 $0.89 1,815,000
14 May 2007 Options 11 May 2011 $1.33 4,725,000
Options granted under the EOSP carry no dividend or voting rights. Rights granted under the EPP carry full dividend rights.
Details of options and rights over ordinary shares in the Company provided as remuneration to each Director of Wilson HTM Investment Group Ltd and each of the key management personnel of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Wilson HTM Investment Group Ltd. Further information on the options and rights is set out in note 46 to the fi nancial statements.
The plan rules contain a restriction on removing the ‘at risk’ aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the ‘at risk’ aspect of an instrument before it vests.
Name Number of options / rights granted during the year Number of options / rights vested during the year
2009 2008 2009 2008
Non-executive Directors of Wilson HTM Investment Group Ltd
C Darvall - - 50,000 50,000
I H Fraser - - 25,000 25,000
P P A Harris - 50,000 50,000
W J McLeland - - 25,000 25,000
S M Skala - - 50,000 50,000
AC Sherry AO - - - -
Executive Directors of Wilson HTM Investment Group Ltd
S M Wilson - 175,000 175,000
G P Lowrey - 262,500 225,000
Key management personnel of the Group
A J Blakemore - - - -
M A Burns - - 125,000 125,000
A Ihlenfeldt - - 212,500 175,000
I Macoun - - 100,000 100,000
N A McCulloch - - 37,500 37,500
A D Sweeney - - 25,000 25,000
D D G Gamble (i) - - 287,500 237,500
D N Groth (i) - - 212,500 175,000
B J Usasz (i) - - 212,500 175,000
M S Walsh (i) - - 237,500 187,500
(i) Following a change in management structure eff ective 1 March 2009, these employees ceased to be classifi ed as key management personnel. They all continue in senior management roles
within the Group.
Directors’ Report- Continued
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The assessed fair value at grant date of rights or options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the right or option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right or option.
The model inputs for options granted during the year ended 30 June 2007 included:
(a) options are granted for no consideration and vest based on the service conditions set out on page 24. Vested options are exercisable for a period of one year after vesting
(b) exercise price: $1.33
(c) grant date: 14 May 2007
(d) expiry date: 11 May 2011
(e) share price at grant date: $0.85
(f) expected price volatility of the Company’s shares: 30%
(g) expected dividend yield: 6%
(h) risk-free interest rate: 6.16%
The model inputs for rights granted during the year ended 30 June 2007 included:
(a) interests are granted for consideration of $0.89 per share, have a three year life, and 33% of each tranche vests and is exercisable after each of the three vesting periods
(b) exercise price: $0.89
(c) grant date: 20 November 2006
(d) share price at grant date: $0.89
(e) expected price volatility of the Company’s shares: 15.8%
(f) expected dividend yield: 7%
(g) risk-free interest rate: 5.91%
The rights granted under the scheme are treated as an equity settled share-based payment. The accounting treatment is to expense the fair value of the interest over the vesting period with a corresponding increase in share based payments equity reserve.
Directors’ Report- Continued
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Directors’ Report- Continued
Shares provided on exercise of remuneration optionsDetails of ordinary shares in the Company provided as a result of the exercise of remuneration options to each Director of Wilson HTM Investment Group Ltd and other key management personnel of the Group are set out below.
Date of exercise of options
Number of ordinary shares issued on exercise of options during the year
Name 2009 2008
Directors of Wilson HTM Investment Group Ltd
Non-executive Directors
C Darvall – – –
I H Fraser – – –
P P A Harris – – –
W J McLeland – – –
S M Skala – – –
A C Sherry AO – – –
Executive Directors
S M Wilson 12/05/2009 175,000 –
G P Lowrey 12/05/2009 50,000 –
Key management personnel of the Group
A J Blakemore – – –
M A Burns – – –
A Ihlenfeldt – – –
I Macoun – – –
N A McCulloch 12/05/2009 37,500 –
A D Sweeney – – –
D D G Gamble (i) – – –
D N Groth (i) – – –
B J Usasz (i) – – –
M S Walsh (i) 12/05/2009 50,000 –
(i) Following a change in management structure eff ective 1 March 2009, these employees ceased to be classifi ed as key management personnel. They all continue in senior management roles
within the Group.
Other Employee Share Plans
Long-term Incentive Share PlanShareholders approved the Long-term Incentive Share Plan (LTISP) at the 20 April 2007 general meeting. This plan allows invited employees, including Directors, to receive Shares as an incentive or as a remuneration (STI , salary or commission) sacrifi ce. Shares acquired under the LTISP may be subject to forfeiture conditions and administrative holding blocks. An off er was made in September 2008 under this plan to invited employees . The gross value of the award is to be off set against future STI and/or commission payments over the next three years with the applicable shares vesting in line with the frequency of STI or commission payments during this three year period. F
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E Additional information
Options and / or rights
Name Year granted Vested % Next exercise date Last exercise dateMinimum total value of
grant yet to vest $Maximum total value of
grant yet to vest $
Non-executive Directors
C Darvall 2007 67% 11/05/10 11/05/11 – 1,933
I H Fraser 2007 67% 11/05/10 11/05/11 – 967
P P A Harris 2007 67% 11/05/10 11/05/11 – 1,933
W J McLeland 2007 67% 11/05/10 11/05/11 – 967
S M Skala 2007 67% 11/05/10 11/05/11 – 1,933
A C Sherry AO – – – – – –
Executive Directors of Wilson HTM Investment Group Ltd
S M Wilson 2007 67% 11/05/10 11/05/11 – 6,767
G P Lowrey 2007 33% 20/11/09 11/11/11 – 11,463
2007 67% 11/05/10 11/05/11 – 6,767
2006 67% 08/03/10 28/02/11 – 5,708
Key management personnel of the Group
A J Blakemore – – – – – –
M A Burns 2007 67% 11/05/10 11/05/11 – 4,833
A Ihlenfeldt 2007 33% 20/11/09 15/11/11 – 11,463
2007 67% 11/05/10 11/05/11 – 4,833
2006 67% 08/03/10 28/02/11 – 5,708
I Macoun 2007 67% 11/05/10 11/05/11 – 3,867
N A McCulloch 2007 67% 11/05/10 11/05/11 – 1,450
A D Sweeney 2007 67% 11/05/10 11/05/11 – 967
D D G Gamble (i) 2007 33% 20/11/09 15/11/11 – 15,267
2007 67% 11/05/10 11/05/11 – 7,250
2006 67% 08/03/10 28/02/11 – 5,708
D N Groth (i) 2007 33% 20/11/09 15/11/11 – 11,463
2007 67% 11/05/10 11/05/11 – 4,833
2006 67% 08/03/10 28/02/11 – 5,708
B J Usasz (i) 2007 33% 20/11/09 15/11/11 – 11,463
2007 67% 11/05/10 11/05/11 – 4,833
2006 67% 08/03/10 28/02/11 – 5,708
M S Walsh (i) 2007 33% 20/11/09 15/11/11 – 15,267
2007 67% 11/05/10 11/05/11 – 7,250
(i) Following a change in management structure eff ective 1 March 2009, these employees ceased to be classifi ed as key management personnel. They all continue in senior management roles
within the Group.
Directors’ Report- Continued
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Directors’ Report- Continued
Share-based compensation: Options
Further details relating to options are set out below.
A B C D E
NameRemuneration
consisting of optionsValue at grant date
$Value at exercise date
$Value at lapse date
$Total of columns B-D
$
Executive Directors of Wilson HTM Investment Group Ltd
S M Wilson 1% – 3,500 – 3,500
G P Lowrey 1% – 1,000 2,500 3,500
Key management personnel of the Group
A J Blakemore % – – – –
M A Burns 1% – – 2,500 2,500
A Ihlenfeldt 1% – – 2,500 2,500
I Macoun 1% – – 2,000 2,000
N A McCulloch 1% – 750 – 750
A D Sweeney 1% – – 500 500
A = The percentage of the value of remuneration consisting of options, based on the value of options expensed during the current year.
B = The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options at that date.
D = The value at lapse date of options that were granted as part of remuneration and that lapsed during the year.
End of Remuneration Report
Loans to Directors and ExecutivesInformation on loans to Directors and Executives, including amounts, interest rates and repayment terms are set out in note 35 to the fi nancial statements.
Shares under optionUnissued ordinary shares of Wilson HTM Investment Group Ltd under option at the date of this report are as follows:
Date options granted Expiry date Exercise price of options Number under option
14 May 2007 11 May 2011 $1.33 4,725,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Insurance of offi cersThe Company has paid a premium for a contract insuring all Directors and Executive Offi cers of the Company and related bodies corporate against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors and Executive Offi cer’ s insurance liability contract, as disclosure is prohibited under the terms of the contract.
The Company has agreed to indemnify each person who is or has been a Director, offi cer or agent of the Company and/or of its related bodies corporate against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Director, offi cer or agent, except where the liability arises out of conduct involving a lack of good faith. The Company is required to meet the full amount of any such liabilities, including costs and expenses.
No liability has arisen since the end of the previous fi nancial year which the Company would, by operation of the above indemnities, be required to meet.
Non-audit servicesThe Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the Auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit Compliance & Risk Management Committee, is satisfi ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfi ed that the provision of non-audit services by the Auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
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all non-audit services have been reviewed by the Audit Compliance & Risk Management Committee to ensure they do not impact the •impartiality and objectivity of the Auditor
none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, •including reviewing or auditing the Auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
During the year the following fees were paid or payable for services provided by the Auditor of the parent entity, its related practices and non-related audit fi rms:
Consolidated
2009
$
2008
$
Assurance services
1. Audit services
PricewaterhouseCoopers Australian fi rm:
Audit and review of fi nancial reports and other audit work under the Corporations Act 2001* 290,405 232,450
Total remuneration for audit services 290,405 232,450
2. Other assurance services
PricewaterhouseCoopers Australian fi rm:
Audit of regulatory returns 77,144 95,350
Audit of compliance plans 51,733 40,000
Due diligence services 63,850 –
Other agreed-upon procedures 12,470 26,860
Total remuneration for other assurance services 205,197 162,210
Total remuneration for assurance services 495,602 394,660
Taxation services
PricewaterhouseCoopers Australian fi rm:
Tax compliance services, including review of company income tax returns 282,336 180,100
Total remuneration for taxation services 282,336 180,100
Advisory services
PricewaterhouseCoopers Australian fi rm:
Other advisory services 31,806 51,315
Non-PricewaterhouseCoopers fi rm 61,838 104,103
Total remuneration for advisory services 93,644 155,418
* PricewaterhouseCoopers were auditors of Next Financial Limited for the full year and the amount in the table includes $70,209, which is the proportion of audit fee expense incurred since
Next Financial Limited joined the Group. Total audit fees incurred by Next Financial Limited during the June 2009 year were $280,835.
Auditor’s independence declarationA copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 31.
Rounding of amountsThe Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off ’’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Auditor PricewaterhouseCoopers continues in offi ce in accordance with section 327 of the Corporations Act 2001.This report is made in accordance with a resolution of Directors.
Mr S M WilsonExecutive ChairmanWilson HTM Investment Group LtdSydney26 August 2009
Directors’ Report- Continued
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PricewaterhouseCoopersABN 52 780 433 757
Riverside Centre123 Eagle StreetBRISBANE QLD 4000GPO Box 150BRISBANE QLD 4001DX 77 BrisbaneAustraliaTelephone +61 7 3257 5000Facsimile +61 7 3257 5999
Auditor’s Independence DeclarationAs lead auditor for the audit of Wilson HTM Investment Group Ltd for the year ended 30 June 2009, I declare that 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 Wilson HTM Investment Group Ltd and the entities it controlled during the period.
Timothy J. Allman BrisbanePartner 26 August 2009 PricewaterhouseCoopers
Auditor’s Independence Declaration
Liability limited by a scheme approved under Professional Standards Legislation
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The Board is committed to achieving and demonstrating high standards of corporate governance to ensure it meets the interests of shareholders.
The relationship between the Board and senior management is critical to the Company’s long-term success. The Directors are responsible to the shareholders for the performance of the Company and seek to direct the Company in the interests of the shareholders and of the Company as a whole.
Day to day management of the Company and the implementation of the corporate strategy and policy initiatives are delegated by the Board to the Managing Director as set out in the Company’s Board Charter. These delegations are reviewed regularly.
A description of the Company’s main corporate governance practices is set out below. All these practices, unless otherwise stated, were in place for the entire year. These practices have been applied to Next Financial Limited and its associated entities from date of acquisition on 1 April 2009.
1. Th e Board of DirectorsDetails of the Directors (their experience, expertise, qualifi cations, term of offi ce and independence status) are set out on pages 12-15. Currently the Board consists of six Non-executive Directors (four of whom are considered independent under the ASX Corporate Governance Council Principles of Good Corporate Governance and Best Practice Recommendations (ASX Principles)) and two Executive Directors. The Board operates in accordance with the principles set out in its charter which is available from the corporate governance information section of the Company website at www.wilsonhtm.com.au. The charter details the Board’s composition and responsibilities.
The charter provides:
(a) (Board composition): the Board is to be comprised of at least half Non-executive and at least two independent Directors (as defi ned in the ASX Principles) having a mix of complementary skills and experience. The Company does not comply with ASX Principles 2.1 and 2.2. The Chairman and Deputy Chairman are appointed by the Board. The Chairman and a majority of Directors are not independent. The Board has determined that the Executive Chairman is the appropriate person to lead the governance of the organisation and that the Board as constituted, notwithstanding non compliance with the ASX Principles 2.1 and 2.2, has the appropriate mix of skills and experience for the Company.
(b) (term): Directors (other than the Managing Director) must retire from offi ce (and may seek re-election) no later than the third Annual General meeting following their last election. Deutsche Australia Limited as the major shareholder is entitled under the Constitution to appoint a number of Directors based on the percentage of shares held (currently 2 Directors). The Deutsche Australia Limited appointed Directors are required to seek re-election.
(c) (responsibilities): the responsibilities of the Board include providing a strategic direction for the Company, approving business plans and budgets and major capital expenditure initiatives, monitoring fi nancial and operational performance and management practices and appointment and assessment of the Chairman and Managing Director.
Specifi cally, the Chairman is responsible for leading the Board, ensuring Directors are properly briefed, facilitating Board discussions and working with the Board and Managing Director to grow the sustainable per share value of the business. The Managing Director is responsible for implementing Company strategies and policies. The Board charter requires that the role of Chairman and Managing Director be undertaken by separate people i.e. S Wilson (Chairman) and G Lowrey (Managing Director).
(d) (Non-executive and independent Directors): The Board has adopted the test of Director independence as set out in the ASX Principles. The independent Directors are I Fraser, W McLeland, P Harris and A Sherry AO. C Darvall and S Skala are representatives of Deutsche Australia Limited. These Directors have been determined to not be independent as Deutsche Bank is a substantial shareholder. The Non-executive Directors meet regularly, without the Executive Directors or management present to discuss the operation of the Board and other matters. Relevant matters arising from these meetings are tabled with the full Board at the following Board meeting.
(e) (management representations): The Managing Director and Chief Financial Offi cer make representations that the Company’s fi nancial reports are complete and present a true and fair view, in all material respects, of the fi nancial condition and operational results of the Company and are in accordance with relevant accounting standards (as founded on a sound system of risk management and internal compliance and control). Certifi cations are provided to each Board meeting attesting that the fi nancial statements provided, give a true and fair view, all statutory and legal obligations have been met and that the Company will be able to pay its debts and obligations as and when they fall due.
(f) (confl icts, advice and assessment): Directors are required to declare any confl icts of interests and where deemed necessary not participate in any discussions or any decisions relating to the confl ict. Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. The Board undertakes assessment of its collective performance, individual Director performance, the performance of the Chairman and of its committees. Every two of years a formal appraisal process is facilitated by an independent third party.
2. Board CommitteesThe Board has established three committees to assist in the execution of its duties and to allow more detailed consideration of complex issues. Current committees of the Board are:
Nominations and Corporate Governance •
Remuneration •
Audit Compliance & Risk Management •
Each is comprised of a majority of Non-executive Directors. The committee structure and membership is reviewed on a regular basis.
Corporate Governance StatementF
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Each committee has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate (available on the Company website). Matters determined by committees are submitted to the full Board as recommendations for Board decisions. Details of the Directors’ qualifi cations are set out on pages 12 to 15 and attendance at committee meetings are set out in the Directors’ Report on page 20.
2.1 Nominations & Corporate Governance CommitteeThe Nominations and Corporate Governance Committee consists of S Wilson (Chairman), S Skala and P Harris. The role of the Committee is to identify and assess new Directors and review and maintain the corporate governance practices of the Company. An external consultant is hired to assist the committee to obtain the person with the appropriate skills and experience identifi ed for the position.
2.2 Remuneration CommitteeThe Remuneration Committee consists of W McLeland (Chairman), S Skala, P Harris and A Sherry AO. P Harris stepped down as Chairman eff ective 1 July 2008 and was replaced by W McLeland. The role of the committee is to ensure that there are remuneration policies and practices to attract and retain executives and Directors. Details of the Director and senior executive remuneration are set out in the Remuneration Report commencing on page 20.
2.3 Audit Compliance & Risk Management CommitteeThe Audit Compliance & Risk Management Committee consists of I Fraser (Chairman), C Darvall, W McLeland. The role of the Committee is to oversee the preparation and audit of the fi nancial statements, review the fi nancial statements, monitor the establishment and maintenance of an internal control framework, risk management systems and appropriate ethical standards. The Committee has appropriate fi nancial expertise and all members are fi nancially literate and have an appropriate understanding of the industry in which the Company operates. The Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.
3. External AuditorsThe Company policy is to appoint external auditors who demonstrate quality and independence. The performance of the external auditor is reviewed annually and appointments made as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. PricewaterhouseCoopers (appointed in 2002) is the Company’s auditor. It is PricewaterhouseCoopers policy to rotate audit engagement partners on listed companies at least every fi ve years.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ Report and in the fi nancial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Compliance & Risk Management Committee.
The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.
4. Risk Assessment and ManagementThe Company considers risk management as a critical discipline and a core competency that enables it to meet its strategic and business-level objectives. The Company’s risk management framework consists of established policies, procedures, systems, monitoring & reporting tools and the core business risk management competencies of staff . It has the fundamental objective of ensuring adequate controls are in place to manage the Company’s regulatory / compliance risks, and to facilitate the Company in building and preserving shareholder value.
The Company has in place a continuous improvement program for its risk management framework, and is committed to maintaining a robust framework that considers the range of risk exposures the Company encounters in executing its business activities, and importantly the context and profi le in which it manages these risks. As part of this improvement program the Company has appointed during the year a dedicated risk manager to add further independent oversight and monitoring of key risk profi les. The risk manager reports through to the Chief Financial Offi cer and prepares detailed risk profi le and key risk indicator reporting for distribution to management, the Audit Compliance and Risk Management Committee and the Board on a regular basis.
The Board has delegated to the Audit Compliance and Risk Management Committee the responsibility for ensuring that an appropriate risk management framework is in place to manage the range of risk exposures encountered by the Company in carrying out its business activities. The committee ensures that there is regular review of all current and emerging risks of the Company, and that appropriate risk identifi cation / assessment techniques and internal controls are established and eff ective in helping to manage these risks. The risk management framework is based on the recommendations from industry risk management standards and guidelines such as the AS / NZS4360:2004 (ISO: 31000) Risk Management Standard. A summary of the Company’s risk management framework is available on the Company’s website.
The key risk focuses of the Company include (but are not limited to) the credit/counterparty, market, liquidity, fi nancial performance, operational, regulatory compliance and strategic risks that it encounters through its regular business activities.
An important component of the risk management framework is the Company’s regulatory compliance programme. This programme includes the policies, procedures, systems, monitoring and reporting that occurs across the Company to ensure compliance with the various industry and regulatory standards and licensing requirements that the Company holds as part of its business activities.
In addition to the regular risk monitoring and reporting that occurs at management and Audit Compliance & Risk Management Committee level, the Board has requested and is receiving regular summary updates of the key risks for the Company. The Board also
Corporate Governance Statement- Continued
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receives regular written assurances from the Managing Director and the Chief Financial Offi cer that the statements they provide to the Board with regard to the integrity of the fi nancial statements are based on a robust and appropriate system of risk management and internal control, and that this system is operating eff ectively in relation to fi nancial reporting risks.
5. Codes of Ethics & Values & Conduct for Transactions in SecuritiesThe Company has developed a Code of Ethics & Values (the Code) which has been fully endorsed by the Board and applies to all Directors and employees. The Code refl ects the high standards of behaviour and professionalism expected of Directors and employees and the practices necessary to maintain confi dence in the Company’s integrity. The Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Company policies.
A Code of Conduct for Transactions in Securities has been established. The purchase and sale of Company securities by Directors and employees is only permitted during the six week periods following the release of the half yearly and annual fi nancial results to the market and Annual General Meeting. Any transactions undertaken must be pre approved. Copies of the Codes are available on the Company’s website.
6. Continuous DisclosureThe Company has written policies and procedures to refl ect its continuous disclosure obligations to ensure compliance with the Corporations Act and ASX Listing Rules. These procedures also promote communication with shareholders and encourage eff ective participation at general meetings. A summary of these policies and procedures is available on the Company’s website. All information disclosed to the ASX is posted on the Company’s website after it is disclosed to the ASX.
Wilson HTM Investment Group Ltd
ASX Corporate Governance Council Best Practice Recommendations
For the year ended 30 June 2009
ASX Principle ReferenceComply / Non-comply
Principle 1: Lay solid foundations for management and oversight
1.1 Establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. 1(c) and Board Charter Comply
1.2 Disclose the process for evaluating the performance of senior executives. Remuneration Report Comply
1.3 Provide the information indicated in the ASX Principles Guide to reporting on Principle 1.
Remuneration Report, Board Charter
Comply
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be independent Directors. 1(a) and 1(d) Non-comply
2.2 The Chair should be an independent Director. 1 (a) Non-comply
2.3 The roles of Chairperson and Chief Executive Offi cer should not be exercised by the same individual. 1 (c) Comply
2.4 The Board should establish a nomination committee. 2.1 Comply
2.5 Disclose the process for evaluating the performance of the Board, its committees and individual Directors. 1 (f) Comply
2.6 Provide the information indicated in the ASX Principles Guide to reporting on Principle 2.
2.1 & Directors' Report and website
Comply
Principle 3: Promote ethical and responsible decision-making
3.1 Establish a code of conduct and disclose the code or a summary of the code as to:
– the practices necessary to maintain confi dence in the Company’s integrity
– the practices necessary to take into account the Board’s legal obligations and the reasonable expectations of stakeholders
– the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
5
5
5
Comply
Comply
Comply
3.2 Establish a policy concerning trading in company securities by Directors, senior executives and employees, and disclose the policy or a summary of that policy.
5 Comply
3.3Provide the information indicated in the ASX Principles Guide to reporting on Principle 3.
Website Comply
Corporate Governance Statement- Continued
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Corporate Governance Statement- Continued
Wilson HTM Investment Group Ltd
ASX Corporate Governance Council Best Practice Recommendations
For the year ended 30 June 2009
ASX Principle ReferenceComply / Non-comply
Principle 4: Safeguard integrity in fi nancial reporting
4.1 Establish an Audit Committee. 2.3 Comply
4.2 The Audit Committee should be structured so that it:
• consists only of Non-executive Directors
• consists of a majority of independent Directors
• is chaired by an independent chair, who is not Chair of the Board
• has at least three members.
2.3
2.3
2.3
2.3
Comply
Comply
Comply
Comply
4.3 The Audit Committee should have a formal charter. 2 Comply
4.4 Provide the information indicated in the ASX Principles Guide to reporting on Principle 4.
3 & Directors’ Report and website
Comply
Principle 5: Make timely and balanced disclosure
5.1 Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.
6 Comply
5.2Provide the information indicated in the ASX Principles Guide to reporting on Principle 5.
Website Comply
Principle 6: Respect the rights of shareholders
6.1 Design a communications policy for promoting eff ective communication with shareholders and encouraging their participation at general meetings and disclose the policy or a summary of the policy.
6 and Board Charter Comply
6.2 Provide the information indicated in the ASX Principles Guide to reporting on Principle 6.
Website Comply
Principle 7: Recognise and manage risk
7.1 Establish policies for the oversight and management of material business risks and disclose a summary of those policies.
4 Comply
7.2 Require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to the Board on whether those risks are being managed eff ectively. The Board should disclose that management has reported to it as to the eff ectiveness of the Company’s management of its material business risks.
4 Comply
7.3 Disclose whether the Board has received assurance from the Chief Executive Offi cer (or equivalent) and the Chief Financial Offi cer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating eff ectively in all material respects in relation to fi nancial reporting risks.
4 Comply
7.4 Provide the information indicated in the ASX Principles Guide to reporting on Principle 7.
4 and Website Comply
Principle 8: Remunerate fairly and responsibly
8.1 The board should establish a Remuneration Committee. 2.2 Comply
8.2 Clearly distinguish the structure of Non-executive Directors’ remuneration from that of executive Directors and senior executives.
Remuneration Report Comply
8.3 Provide the information indicated in the ASX Principles Guide to reporting on Principle 8.
Directors' Report and Remuneration Report
Comply
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Financial Statements
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Contents page
01 Income statements 38
02 Balance sheets 39
03 Statements of changes in equity 40
04 Cash fl ow statements 41
05 Notes to the fi nancial statements 43
06 Directors’ Declaration 99
07 Independent Auditor’s Report to the members 100
This fi nancial report covers both Wilson HTM Investment Group Ltd as an individual entity and the consolidated entity consisting of Wilson HTM Investment Group Ltd and its subsidiaries. The fi nancial report is presented in Australian currency.
Wilson HTM Investment Group Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered offi ce and principal place of business is:
Wilson HTM Investment Group LtdLevel 38, 71 Eagle StreetBrisbane QLD 4000.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report commencing on page 18, both of which are not part of this fi nancial report.
The fi nancial report was authorised for issue by the Directors on 26 August 2009.
The Directors have the power to amend and reissue the fi nancial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, fi nancial reports and other information are available at the Investor Relations page on our website:
www.wilsonhtm.com.au.
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Consolidated Parent
Notes2009$’000
2008$’000
2009$’000
2008$’000
Revenue from continuing operations 5 107,392 124,675 4,022 17,259
Employee benefi ts expense (37,233) (37,783) (123) -
Finance cost expense 6 (22,229) (2,632) (1,404) (2,428)
Commissions and incentives expense (15,536) (35,558) (117) -
Property expense (4,600) (3,537) - -
Depreciation and amortisation expense (3,248) (2,008) - -
Structured product expense (3,119) - - -
Market information expense (2,477) (2,690) - -
Computers and communications expense (2,261) (2,228) - -
Transaction processing expense (2,137) (2,873) - (5)
Fair value losses on fi nancial assets at fair value through profi t or loss 6 (2,064) (2,999) (333) (1,284)
Travel and entertainment expense (1,696) (2,987) - (1)
Corporate fi nance service fee (1,457) (3,376) - -
Marketing and advertising expense (1,141) (2,509) - -
Consultants fees (968) (1,271) (6) -
Management fees (480) - - -
Trail fee - (325) - -
Other expenses from ordinary activities (6,170) (5,064) (775) (684)
Share of net profi ts / (losses) of entities accounted for using the equity method 43 (523) 137 - -
Total expenses (107,339) (107,703) (2,758) (4,402)
Profi t before income tax 53 16,972 1,264 12,857
Income tax (expense) / benefi t 7 (220) (4,048) 681 893
(Loss)/profi t for the year (167) 12,924 1,945 13,750
Wilson HTM Investment Group Ltd profi t 2,189 12,022 1,945 13,750
Minority interests (loss) / profi t
- entities (389) 293 - -
- funds (1,967) 609 - -
(Loss)/profi t for the year (167) 12,924 1,945 13,750
Earnings per share from continuing operations attributable to the ordinary equity holders of the Company:
Cents
Basic earnings per share 45 2.4 13.2
Diluted earnings per share 45 2.2 12.0
The above income statements should be read in conjunction with the accompanying notes.
Income statementsfor the year ended 30 June 2009
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Consolidated Parent
Notes2009$’000
2008$’000
2009$’000
2008$’000
ASSETS
Current assets
Cash and cash equivalents 8 27,101 24,189 2 4
Trade and other receivables 9 92,796 68,991 131 383
Financial assets at fair value through profi t or loss 10 45,717 60,889 1,024 1,357
Derivative fi nancial assets 11 176,147 - - -
Other current assets 12 1,102 102 57,034 86,059
Tax related receivables from controlled entities 13 - - 7,936 10,385
Loans to investors 14 563,390 - - -
Total current assets 906,253 154,171 66,127 98,188
Non-current assets
Other fi nancial assets 15 - - 38,869 15,864
Property, plant and equipment 16 8,700 7,418 - -
Deferred tax assets 17 73,351 8,337 3,796 498
Intangible assets 18 3,370 921 - -
Other non-current assets 19 6,599 3,496 1,370 484
Investments accounted for using the equity method 43 13,044 16,960 - -
Total non-current assets 105,064 37,132 44,035 16,846
Total assets 1,011,317 191,303 110,162 115,034
LIABILITIES
Current liabilities
Trade and other payables 20 104,478 87,484 1,189 251
Borrowings 21 520,443 26,065 7,271 26,025
Derivative fi nancial liabilities 11 178,180 - - -
Provisions 22 2,057 2,045 - -
Non interest bearing liabilities 23 - - 36,256 22,207
Current tax liabilities 24 3,081 5,745 - 6,517
Other current liabilities 25 62,339 1,961 - -
Total current liabilities 870,578 123,300 44,716 55,000
Non-current liabilities
Deferred tax liabilities 27 68,563 - - -
Provisions 28 886 864 - -
Other payables 29 843 357 - -
Other non-current liabilities 30 2,028 752 1,039 -
Total non-current liabilities 72,320 1,973 1,039 -
Total liabilities 942,898 125,273 45,755 55,000
Net assets 68,419 66,030 64,407 60,034
EQUITY
Contributed equity 31 49,567 44,662 55,918 49,026
Reserves 32(a) 1,731 1,175 321 -
Retained profi ts 32(b) 16,585 19,181 8,168 11,008
Parent entity interest 67,883 65,018 64,407 60,034
Minority interest 33 536 1,012 - -
Total equity 68,419 66,030 64,407 60,034
The above balance sheets should be read in conjunction with the accompanying notes.
Balance sheetsas at 30 June 2009
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Consolidated Parent
Notes2009$’000
2008$’000
2009$’000
2008$’000
Total equity at the beginning of the fi nancial year 66,030 59,198 60,034 49,571
Restatement of prior year tax balance 1,32 - 1,680 - -
Restatement of prior year trade and other receivables balance 1,32 - (969) - (969)
Restated total equity at the beginning of the fi nancial year 66,030 59,909 60,034 48,602
Profi t for the year 2,189 12,022 1,945 13,750
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs 31 6,892 - 6,892 -
Dividends provided for or paid 34 (4,785) (2,871) (4,785) (2,871)
Movement in treasury stock held by employee share trust 31(d) (1,987) 1,186 - -
Total changes in minority interest 33 (476) (5,119) - -
Share based payments reserve 32 556 582 321 -
Tax eff ect of IPO costs booked to equity 31(b) - 553 - 553
Dividends paid to minority interests in subsidiaries - (232) - -
Total equity at the end of the fi nancial year 68,419 66,030 64,407 60,034
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Statements of changes in equityfor the year ended 30 June 2009
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Consolidated Parent
Notes2009$’000
2008$’000
2009$’000
2008$’000
Cash fl ows from operating activities
Receipts from customers (inclusive of goods and services tax) 91,478 129,500 256 -
Payments to suppliers and employees (inclusive of goods and services tax) (84,727) (106,730) (2,733) (1,866)
6,751 22,770 (2,477) (1,866)
Receipts of premiums on put options over listed securities 4,384 - - -
Payments of premiums on put options over listed securities (6,272) - - -
Investor loans repaid 40,559 - - -
Dividends received-external 1,332 1,850 - 16,264
Dividends received from entities accounted for under the equity method 480 999 - -
Interest received 5 1,341 2,164 863 995
Borrowing costs (5,878) - - -
Interest and fi nance charges paid 6 (1,570) (2,632) (1,404) (2,428)
Income taxes paid (6,637) (7,026) (6,740) (841)
34,490 18,125 (9,758) 12,124
Proceeds on sale of fi nancial assets at fair value through profi t and loss 10 126,831 69,474 - 18,786
Payment to purchase fi nancial assets at fair value through profi t and loss (96,711) (75,908) - (12,447)
Net cash infl ow/ (outfl ow) from operating activities 44 64,610 11,691 (9,758) 18,463
Cash fl ows from investing activities
Payments / (funding) of loans to shareholders (1,378) (341) (856) -
Payments for property, plant and equipment (1,168) (5,050) - -
Loans (to)/from other entities (483) (203) 48,028 (26,213)
Payments for investments in entities under joint control - (14,148) - -
Payments for intangible assets (505) (976) - -
Payments for investments in subsidiaries 40 (827) - (15,369) (1,140)
Payments for investments accounted for using equity method (2,021) - - -
Net cash (outfl ow) / infl ow from investing activities (6,382) (20,718) 31,803 (27,353)
Cash fl ows from fi nancing activities
Proceeds from issues of shares and other equity securities-treasury stock 1,968 1,187 1,352 -
Purchase of treasury stock (1,429) - - -
Proceeds from applications by fund unitholders 11,740 44,199 - -
Payments for redemptions to fund unitholders (7,413) (45,863) - -
Loan facility advances – corporate 45,000 45,000 45,000 45,000
Loan facilities advances – clients 11,831 - - -
Loan facility repayment – corporate (64,000) (34,000) (64,000) (34,000)
Loan facilities repayment – client (48,574) - - -
Dividends paid to Company’s shareholders 34 (4,645) (2,871) (4,645) (2,871)
Net cash (outfl ow) / infl ow from fi nancing activities (55,522) 7,652 (22,293) 8,129
Net increase / decrease in cash and cash equivalents 2,706 (1,375) (248) (761)
Cash and cash equivalents at the beginning of the fi nancial year 24,124 25,499 (21) 740
Cash and cash equivalents at end of year 8(a) 26,830 24,124 (269) (21)
The above cash fl ow statements should be read in conjunction with the accompanying notes.
Cash fl ow statementsfor the year ended 30 June 2009
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Contents of the notes to the fi nancial statements1 Summary of signifi cant accounting policies 43
2 Financial risk management 51
3 Critical accounting estimates and judgements 58
4 Segment information 59
5 Revenue 60
6 Expenses 61
7 Income tax expense / (benefi t) 61
8 Current assets – Cash and cash equivalents 63
9 Current assets – Trade and other receivables 63
10 Current assets – Financial assets at fair value through profi t or loss 64
11 Derivative fi nancial instruments 64
12 Current assets – Other current assets 65
13 Current assets – Tax related receivables from controlled entities 65
14 Current assets – Loans to investors 65
15 Non-current assets – Other fi nancial assets 66
16 Non-current assets – Property, plant and equipment 67
17 Non-current assets – Deferred tax assets 68
18 Non-current assets – Intangible assets 69
19 Non-current assets – Other non-current assets 70
20 Current liabilities – Trade and other payables 70
21 Current liabilities – Borrowings 70
22 Current liabilities – Provisions 71
23 Current liabilities – Non interest bearing liabilities 71
24 Current liabilities – Current tax liabilities 72
25 Current liabilities – Other current liabilities 72
26 Current liabilities – Financing arrangements 72
27 Non-current liabilities – Deferred tax liabilities 74
28 Non-current liabilities – Provisions 74
29 Non-current liabilities – Other payables 75
30 Non-current liabilities – Other non-current liabilities 75
31 Contributed equity 75
32 Reserves and retained profi ts 77
33 Minority interest 77
34 Dividends 78
35 Key management personnel disclosures 79
36 Remuneration of auditors 83
37 Contingencies 84
38 Commitments 84
39 Related party transactions 85
40 Business combinations 87
41 Subsidiaries 89
42 Deed of cross guarantee 90
43 Investments accounted for using the equity method 92
44 Reconciliation of profi t after income tax to net cash infl ow from operating activities 94
45 Earnings per share 95
46 Share based payments 96
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1 Summary of signifi cant accounting policiesThe principal accounting policies adopted in the preparation of the fi nancial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The fi nancial report includes separate fi nancial statements for Wilson HTM Investment Group Ltd as an individual entity and the consolidated entity consisting of Wilson HTM Investment Group Ltd and its subsidiaries.
(a) Basis of preparation
This general purpose fi nancial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the fi nancial report of Wilson HTM Investment Group Ltd complies with International Financial Reporting Standards (IFRS).
Historical cost convention
These fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of fi nancial assets and liabilities (including derivative instruments) at fair value through profi t or loss.
Critical accounting estimates
The preparation of fi nancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements, are disclosed in note 3.
Adjustment of prior period balances
Prior period balances have been adjusted:
(a) where changes in the business have resulted in additional or altered disclosures in the current year, appropriate changes in the prior year fi gures have also been made.
(b) by a restatement of: for the Group; retained earnings (increase by $1.68 million) and current tax liability (decrease by $1.68 million) at 30 June 2008, and for the Parent; current tax liability (decrease $1.68 million) and the tax related receivables from controlled entities (decrease by $1.68 million) at 30 June 2008. The reconciliation of the income tax return to the provision for income tax at June 2008 revealed the error, which emanated from the consolidation process related to income tax consolidation legislation and International Financial Reporting Standards (IFRS). This restatement has no eff ect on both basic and diluted earnings per share at 30 June 2008.
(c) by a restatement of retained earnings (decrease by $0.968 million) and trade and other receivables (decrease by $0.968 million) at 30 June 2008. This relates to income accrued in error in the 2007 year.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated fi nancial statements incorporate the assets and liabilities of all subsidiaries of Wilson HTM Investment Group Ltd (‘’Company’’ or ‘’parent entity’’) as at 30 June 2009 and the results of all subsidiaries for the year then ended. Wilson HTM Investment Group Ltd and its subsidiaries together are referred to in this fi nancial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the fi nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and eff ect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (note 1(h))
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statements. Purchases from minority interests result in goodwill, being the diff erence between any consideration paid and the relevant share acquired of the carrying value of identifi able net assets of the subsidiary.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statements and balance sheets respectively.
Investments in subsidiaries are accounted for at cost in the individual fi nancial statements of Wilson HTM Investment Group Ltd.
Notes to the Financial StatementsF
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Notes to the Financial Statements- Continued
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(ii) Employee Share Trusts
The Group has formed three trusts to administer the Group’s employee share schemes. These trusts are consolidated, as the substance of the relationships is that the risks and rewards rest with the Group.
Shares held by the Wilson HTM Employee Share Trusts are disclosed as treasury stock and deducted from contributed equity.
(iii) Entities under joint control
Entities under joint control are all entities over which the Group has signifi cant infl uence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. They are deemed by the relevant accounting standards to be under ‘joint control’ due to the requirement for unanimous decision making in relation to a number of strategic matters contained in the shareholders agreements. Investments in entities under joint control are accounted for in the parent entity fi nancial statements using the cost method and in the consolidated fi nancial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in entities under joint control includes goodwill (net of any accumulated impairment loss) identifi ed on acquisition (note 43).
The Group’s share of the post-acquisition profi ts or losses of entities under joint control is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from entities under joint control are recognised in the parent entity’s income statement, while in the consolidated fi nancial statements they reduce the carrying amount of the investment.
When the Group’s share of losses in an entity under joint control equals or exceeds its interest in the entity under joint control, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the entity under joint control.
Unrealised gains on transactions between the Group and entities under joint control are eliminated to the extent of the Group’s interest in the entities under joint control. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of entities under joint control have been changed where necessary to ensure consistency with the policies adopted by the Group.
(c) Segment reporting
A business segment is identifi ed for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are diff erent to those of other business segments. A geographical segment is identifi ed when products or services are provided within a particular economic environment subject to risks and returns that are diff erent from those of segments operating in other economic environments.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated fi nancial statements are presented in Australian dollars, which is Wilson HTM Investment Group Ltd’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statements, except when they are deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable net of the amount of Goods and Services Tax (GST).
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefi ts will fl ow to the entity and specifi c criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifi cs of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Brokerage, commission and management fees
Brokerage, commission and management fee income is recognised when the economic entity has performed the related service.
(ii) Performance fees
Performance fee income is recognised when the economic entity has performed the related service.
(iii) Equity capital markets and corporate advisory income
Equity capital markets and corporate advisory income is recognised when the economic entity has performed the related service.
(iv) Interest income
Interest income is recognised on a time proportion basis using the eff ective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash fl ow discounted at the original eff ective interest
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rate of the loan, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original eff ective interest rate.
(v) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary diff erences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary diff erences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated fi nancial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction aff ects neither accounting nor taxable profi t or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary diff erences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary diff erences and losses.
Deferred tax liabilities and assets are not recognised for temporary diff erences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary diff erences and it is probable that the diff erences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are off set when there is a legally enforceable right to off set current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are off set where the entity has a legally enforceable right to off set and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Tax consolidation legislation
Wilson HTM Investment Group Ltd and its wholly owned Australian controlled entities implemented the tax consolidation legislation as at 1 July 2003.
Next Financial Limited and its subsidiaries joined the tax consolidated group on 1 April 2009.
The head entity, Wilson HTM Investment Group Ltd, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.
In addition to its own current and deferred amounts, Wilson HTM Investment Group Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding agreements are disclosed in note 7.
Any diff erence between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.
(g) Leases
Leases in which a signifi cant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classifi ed as operating leases (note 38). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statements on a straight line basis over the period of the lease.
Lease incentive income from operating leases is recognised in other income on a straight line basis over the lease term.
The deferred lease incentive at note 29 is the amount of lease incentive received.
(h) Business combinations
The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under joint control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded as goodwill (note 1(q). If the cost of acquisition is less than the Group’s share of the fair value of the identifi able net assets of the subsidiary acquired, the diff erence is recognised directly in the income statements as negative goodwill, but only after a reassessment of the identifi cation and measurement of the net assets acquired.
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Notes to the Financial Statements- Continued
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent fi nancier under comparable terms and conditions.
(i) Impairment of assets
Goodwill and intangible assets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash infl ows which are largely independent of the cash infl ows from other assets or groups of assets (cash generating units). Where non fi nancial assets other than goodwill have suff ered an impairment, the assets are reviewed for possible reversal of the impairment at each reporting date.
(j) Cash and cash equivalents
For cash fl ow statements presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with fi nancial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheets.
Cash held in trust for clients is reported as other cash and cash equivalents and is included within trade payables.
(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. Trade receivables are due for settlement no more than 3 working days from the date of recognition for ASX related balances and 30 days from the date of recognition for all other balances.
Recoverability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off . A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the diff erence between the assets carrying amount and the present value of estimated future cash fl ows, discounted at the original eff ective interest rate. Cash fl ows relating to short term receivables are not discounted if the eff ect of discounting approximates to the assets carrying amount. The amount of the provision is recognised in the income statements in other expenses.
(l) Loans to investors
Loans are non derivative fi nancial assets with fi xed and determinable payments that are not quoted in an active market. They arise when the Group provides money directly to a debtor with no intention of selling the receivable. Loans to investors are measured at amortised cost using the eff ective interest method. To determine the amortised cost balance, the loan balance is also adjusted by fees received and paid as part of the instalment product. These fees include the initial establishment and advisory fees which are capitalised and included in the loan balance.
Loans to investors under the instalment warrant products include an embedded derivative which enables the client to put its share portfolio to the consolidated entity for the original investment amount at maturity or during the period of the instalment. Under AASB 139, the embedded derivative is separated from the loan balance by grossing up the loan balance by the fair value of the derivative. The embedded derivative is then accounted for in accordance with note 1(n) Derivative instruments.
(m) Investments and other fi nancial assets
The Group classifi es its investments in the following categories: fi nancial assets at fair value through profi t or loss and loans and receivables. The classifi cation depends on the purpose for which the investments were acquired. Management determines the classifi cation of its investments at initial recognition.
(i) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are classifi ed as held for trading unless they are designated as hedges. Assets in this category are classifi ed as current assets.
(ii) Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classifi ed as non-current assets. Loans and receivables are included in Trade and other receivables in the balance sheet (note 9).
Recognition and de recognition
Regular purchases and sales of fi nancial assets are recognised on trade date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all fi nancial assets not carried at fair value through profi t or loss. Financial assets carried at fair value through profi t or loss are initially recognised at fair value and transaction costs are expensed in the
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Notes to the Financial Statements- Continued
income statements. Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Loans and receivables and held to maturity investments are carried at amortised cost using the eff ective interest method.
Financial assets at fair value through profi t or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘fi nancial assets at fair value through profi t or loss’ category are presented in the income statements within other income or other expenses in the period in which they arise. Dividend income from fi nancial assets at fair value through profi t or loss is recognised in the income statements as part of revenue from continuing operations when the Group’s right to receive payments is established.
Fair value
The fair values of quoted investments are based on current bid prices. If the market for a fi nancial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to recent arm’s length transactions, or to other instruments that are substantially the same, discounted cash fl ow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity specifi c inputs.
Impairment
The Group assesses at each balance date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired.
(n) Derivative instruments
Derivative instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivative instruments include equity futures, interest rate futures and equity options. The Group uses derivative instruments to hedge against the risks associated with its instalment warrant product and the interest rate risk associated with individually managed account loans.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statements and are included in other income or other expenses.
(o) Fair value estimation
The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of fi nancial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for fi nancial assets held by the Group is the current bid price; the appropriate quoted market price for fi nancial liabilities is the current ask price.
The carrying values less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of fi nancial liabilities is estimated by discounting the future contractual cash fl ows at the current market interest rate that is available to the Group for similar fi nancial instruments.
(p) Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statements during the reporting period in which they are incurred.
Depreciation is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:
Leasehold improvements 3 – 10 years •
Plant and equipment 2 – 5 years •
Furniture and fi ttings 2 – 5 years •
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(v)).
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statements.
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Notes to the Financial Statements- Continued
(q) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifi able assets of the acquired subsidiary/entity under joint control at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of entities under joint control is included in investments in entities under joint control. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment testing. Each of those cash generating units represents the Group’s investment in each primary reporting segment (note 4).
(ii) Stock Exchange membership
Stock Exchange membership is carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight line method to allocate the cost over its estimated useful life of 20 years.
(iii) IT development and software
Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period fi nancial benefi ts through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and services and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight line basis over periods generally ranging from 3 to 5 years.
IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset.
(r) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of fi nancial year which are unpaid. The amounts are unsecured and are usually paid within 3 days of recognition for ASX related balances and within 30 days of recognition for all other balances.
(s) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any diff erence between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statements over the period of the borrowings using the eff ective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility.
Borrowings are removed from the balance sheets when the obligation specifi ed in the contract is discharged, cancelled or expired. The diff erence between the carrying amount of a fi nancial liability that has been extinguished or transferred to another party and the consideration paid, including any non cash assets transferred or liabilities assumed, is recognised in other income or other expenses.
(t) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred.
(u) Provisions
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outfl ow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outfl ow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outfl ow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value refl ects current market assessments of the time value of money and the risks specifi c to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(v) Employee benefi ts
(i) Wages and salaries, annual leave and long service leave
Provision is made for the liabilities for employee benefi ts arising from services rendered by employees to the reporting date. Employee benefi ts that are expected to be settled within one year are measured at the amounts expected to be paid when the liabilities are settled. Employee benefi ts payable after more than one year are measured at the present value of the estimated future cash outfl ows to be made for those benefi ts. Those cash fl ows are discounted using Government bond rates which match the maturity dates of the liabilities.
(ii) Share based payments
Share based compensation benefi ts are provided to employees via the Wilson HTM Investment Group Equity Performance Plan, Wilson HTM Investment Group Employee Option Share Plan and Wilson HTM Investment Group Long Term Incentive Share Plan. (note 46).
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Notes to the Financial Statements- Continued
The fair value of rights and options granted under the Wilson HTM Investment Group Equity Performance Share Plan and Wilson HTM Investment Group Employee Option Share Plan is recognised as an employee benefi t expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the rights and options.
The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the right or option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right or option.
The fair value of the rights and options granted is adjusted to refl ect market vesting conditions, but excludes the impact of any Non-market vesting conditions (for example, profi tability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of rights or options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of rights or options that are expected to become exercisable. The employee benefi t expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statements with a corresponding adjustment to equity.
(iii) Profi t sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profi t sharing based on a formula that takes into consideration the profi t attributable to the Company’s shareholders. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(w) Contributed equity
Ordinary shares are classifi ed as equity (note 31).
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
(x) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of fi nancial year but not distributed at balance date.
(y) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profi t attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the fi nancial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the determination of basic earnings per share to take into account the after income tax eff ect of interest and other fi nancing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(z) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheets.
Cash fl ows are presented on a gross basis. The GST components of cash fl ows arising from investing or fi nancing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash fl ows.
(aa) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off ’’ of amounts in the fi nancial report. Amounts in the fi nancial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(ab) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 (eff ective from 1 January 2009)
AASB 8 and AASB 2007-3 are eff ective for annual reporting periods commencing on or after 1 January 2009. AASB 8 may result in a change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to reporting on fi nancial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding
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Notes to the Financial Statements- Continued
how to allocate resources to operating segments. The Group has decided not to early adopt AASB 8. Application of AASB 8 may result in diff erent segments, segment results and information being reported in the segment note of the fi nancial report. However, at this stage, it is not expected to aff ect any of the amounts recognised or disclosures made in the fi nancial statements.
(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 (eff ective from 1 January 2009)
The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and, when adopted, will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the fi nancial report of the Group, as the Group does not currently hold any qualifying assets.
(iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 (eff ective from 1 January 2009)
The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not aff ect any of the amounts recognised in the fi nancial statements. If an entity has made a prior period adjustment or has reclassifi ed items in the fi nancial statements, it will need to disclose a third balance sheet (statement of fi nancial position), this one being as at the beginning of the comparative period. The Group will apply the revised standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting Standard-Share based Payments: Vesting Conditions and Cancellations (eff ective from 1 January 2009)
AASB 2008-1 clarifi es that vesting conditions are service conditions and performance conditions only and that other features of a share based payment are not vesting conditions. It also specifi es that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group will apply the revised standard from 1 July 2009, but it is not expected to aff ect the accounting for the Group’s share based payments.
(v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (eff ective from 1 July 2009)
The revised AASB 3 continues to apply the acquisition method to business combinations, but with some signifi cant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classifi ed as debt subsequently remeasured through the income statements. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition related costs must be expensed. This is diff erent to the Group’s current policy which is set out in note 1(b).
The revised AASB 127 requires the eff ects of all transactions with non controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses, refer note 1(b). The standard also specifi es the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profi t or loss. This is consistent with the Group’s current accounting policy if signifi cant infl uence is not retained.
The Group will apply the revised standards prospectively to all business combinations and transactions with non controlling interests from 1 July 2009.
(vi) AASB 2008 6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (eff ective from 1 July 2009)
The amendments to AASB 5 Discontinued Operations and AASB 1 First Time Adoption of Australian Equivalents to International Financial Reporting Standards are part of the IASB’s annual improvements project published in May 2008. They clarify that all of a subsidiary’s assets and liabilities are classifi ed as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosures should be made for this subsidiary if the defi nition of a discontinued operation is met. The Group will apply the amendments prospectively to all partial disposals of subsidiaries from 1 July 2009.
(vii) AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (eff ective from 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1 First Time Adoption of Australian Equivalents International Financial Reporting Standards and AASB 127 Consolidated and Separate Financial Statements. The Group will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre acquisition profi ts, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair value.
(viii) AASB 2008-8 Amendment to IAS 39 Amendment to Australian Accounting Standards - Eligible Hedged Items (eff ective from 1 July 2009)
AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two signifi cant changes. It prohibits designating infl ation as a hedgeable component of a fi xed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. It is not expected to have a material impact on the Group’s fi nancial statements.
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Notes to the Financial Statements- Continued
(ix) AASB 2009-2 Amendments to Australian Accounting Standards - Improving Disclosures about Financial Instruments (eff ective from 1 January 2009).
In April 2009, the AASB published amendments to AASB 7 Financial Instruments: Disclosure to improve the information that entities report about their liquidity risk and the fair value of their fi nancial instruments. The amendments require fair value measurement disclosures to be classifi ed into a new three-level hierarchy and additional disclosures for items whose fair value is determined by valuation techniques rather than observable market values. The AASB also clarifi ed and enhanced the existing requirements for the disclosure of liquidity risk of derivatives. The Group has not early adopted the amendments. The amendments will not aff ect any of the amounts recognised in the fi nancial statements but may aff ect certain disclosures.
2 Financial risk managementThe Group’s activities expose it to a variety of fi nancial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the volatility of the fi nancial markets and seeks to minimise potential adverse eff ects on the fi nancial performance of the Group.
Risk governance is managed through the Board’s Audit Compliance and Risk Management Committee, which provides direct oversight of the Group risk management framework and performance. The Board provides written principles for risk management covering areas such as principal investments, including the use of appropriate hedging strategies, underwriting risk and cash fl ow management. The management of risk throughout the Group is achieved through the procedures, policies, systems, people competencies and risk monitoring functions that form part of the overall Group risk management framework. This is achieved through regular updates in the form of targeted risk management analysis and reporting functions that provide an assessment of the Group’s risk exposure levels and performance to benchmarks / tolerance limits.
The Group and the parent entity hold the following fi nancial instruments:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Financial assets
Cash and cash equivalents 27,102 24,190 2 4
Trade and other receivables 92,796 68,991 131 383
Financial assets at fair value through profi t or loss 45,717 60,889 1,024 1,357
Derivative fi nancial assets 176,147 - - -
Loans to investors 563,390 - - -
Loans to controlled entities and entities under joint control (current) 1,102 102 57,034 86,059
Tax related receivables from controlled entities - - 7,936 10,385
Loans to shareholders and entities under joint control (non-current) 6,599 3,496 1,370 484
912,853 157,668 67,497 98,672
Financial liabilities
Trade payables and accrued expenses 104,478 87,484 1,189 251
Non interest bearing liabilities - - 36,256 22,207
Borrowings 520,443 26,065 7,271 26,025
Derivative fi nancial liabilities 178,180 - - -
Other fi nancial liabilities - - - -
803,101 113,549 44,716 48,483For
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Notes to the Financial Statements- Continued
(a) Market risk(i) Foreign exchange risk
A subsidiary is exposed to foreign exchange risk through the issue of structured products to investors denominated in a foreign currency. The risk has been mitigated by funding the loan through borrowing in the same functional currency. The loan to investors includes an embedded derivative, the risk of which has been managed by purchasing over-the-counter options in the same functional currency.
The carrying amounts of the Group’s and parent entity’s fi nancial assets and liabilities are denominated in Australian dollars except as set out below:
JYP$’000
USD$’000
Other$’000
2009
Assets
Cash and cash equivalents - 2 -
Trade and other receivables - 6 2
Derivative fi nancial assets 237 - -
237 8 2
Liabilities
Derivative fi nancial liabilities 237 - -
237 - -
2008
Assets
Cash and cash equivalents – – –
Trade and other receivables – – –
Derivative fi nancial assets – – –
– – –
Liabilities
Derivative fi nancial liabilities – – –
– – –
(ii) Price risk
Through its business transactions and investments, the Group is exposed to equity securities price risk. This risk is the potential for losses in Group earnings as a result of adverse market movements and arises from investments held by the Group and classifi ed on the balance sheet as fi nancial assets at fair value through profi t or loss.
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Notes to the Financial Statements- Continued
The Group manages market risk on a daily basis through an established risk management framework. This includes the procedures, policies and functions undertaken by the business to manage market risk within tolerances set by the Board’s Capital Risk Committee. Equity derivatives are used as an active risk mitigation function, and the Group currently utilises such derivatives to reduce market risk on its equity exposures. The performance of the Group’s direct equity exposures and market risk mitigants are monitored on a daily basis.
The majority of the Group’s and the parent entity’s equity investments are Australian listed equity securities and listed and unlisted unit trusts.
Sensitivity Analysis
The table below summarises the impact of increases/decreases in equity securities prices on the Group’s and the Parent entity’s after tax profi t for the year. The analysis is based on the assumption that the fi nancial assets at fair value through profi t or loss had increased/decreased by 5.0% (2008 – 5.0%) with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation with the index.
Impact on post-tax profi t Impact on equity
2009$’000
2008$’000
2009$’000
2008$’000
Group 1,273 253 1,273 253
Parent 36 63 36 63
(iii) Cash fl ow interest rate risk
The Group’s main interest rate risk arises from borrowings to fund the loans to structured product investors, holding cash and cash equivalents and from short term borrowings at variable rates. During 2009 and 2008, the Group’s cash and cash equivalents and borrowings were denominated in Australian Dollars. The Group reviews its interest rate exposure as part of the Group’s cash fl ow management and takes into consideration the yields, duration and alternative fi nancing options as part of the renewal of existing positions.
As at the reporting date, the Group had the following cash and cash equivalents and borrowings:
30 June 2009 30 June 2008
Weighted average interest rate
%Balance
$’000
Weighted average interest rate
%Balance
$’000
Group
Cash and cash equivalents 4.70% 27,102 5.66% 24,190
Bank overdraft and bank bills 4.83% (520,443) 8.07% (26,065)
Net exposure to cash fl ow interest rate risk (493,341) (1,875)
Parent
Cash and cash equivalents 4.70% 2 5.66% 4
Bank overdraft and bank bills 4.18% (7,271) 8.07% (26,025)
Net exposure to cash fl ow interest rate risk (7,269) (26,021)
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Notes to the Financial Statements- Continued
Fixed interest rate
Floating interest rate
$’0001 year or less
$’000Over 1 to 5 years
$’000
Non-interest bearing
$’000Total
$’000
2009
Financial assets
Cash and cash equivalents 26,293 28 - 781 27,102
Trade and other receivables - - - 92,796 92,796
Financial assets at fair value through profi t or loss - - - 45,717 45,717
Derivative fi nancial assets - - - 176,147 176,147
Loans to investors 78,455 483,377 (1,332) 2,890 563,390
Other current assets - - - 1,102 1,102
Other non-current assets - - - 6,599 6,599
104,748 483,405 (1,332) 326,032 912,853
Weighted average interest rate 6.69% 7.32% 11.75%
Financial liabilities
Trade payables and accrued expenses - - - 104,478 104,478
Derivative fi nancial liabilities - - - 178,180 178,180
Borrowings 100,510 419,933 - - 520,443
100,510 419,933 - 282,658 803,101
Weighted average interest rate 4.85% 6.04%
Net fi nancial assets/(liabilities) 4,238 63,472 (1,332) 43,374 109,752
2008
Financial assets
Cash and cash equivalents 24,190 - - - 24,190
Trade and other receivables - - - 68,991 68,991
Financial assets at fair value through profi t or loss - - - 60,889 60,889
Other current assets - - - 102 102
Other non-current assets - - - 3,496 3,496
24,190 - - 133,478 157,668
Weighted average interest rate 5.66% - % - %
Financial liabilities
Trade payables and accrued expenses - - - 87,484 87,484
Borrowings 26,065 - - - 26,065
26,065 - - 87,484 113,549
Weighted average interest rate 8.07% - %
Net fi nancial assets/(liabilities) (1,875) - - 45,994 44,119
Group sensitivity
At 30 June 2009, if interest rates had changed by -/+100 basis points from the year end rates with all other variables held constant, after tax profi t and equity for the year would have been $3,453,000 lower/higher (2008 – change of 100 bps: $142,000 lower/higher).
Parent entity sensitivity
At 30 June 2009, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant, after tax profi t and equity for the year would have been $50,883 lower/higher (2008 – change of 100 bps: $182,000 lower/higher).
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Notes to the Financial Statements- Continued
(b) Credit riskCredit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, fi nancial assets at fair value through profi t or loss, loans to controlled entities and entities under joint control, tax related receivables from controlled entities, loans to shareholders, loans to investors, outstanding receivables and deposits with banks and fi nancial institutions as well as credit exposures to wholesale and retail clients including outstanding receivables and committed transactions.
Credit risk relates to the risk of a client or counterparty defaulting on their fi nancial obligations resulting in a loss to the Group. These obligations primarily relate to brokerage, equity capital markets and corporate advisory transactions and management fees. Trade receivables include receivables resulting from equity brokerage transactions. Credit risk in relation to these receivables is mitigated by the Group having the contracted right to liquidate the underlying equity securities to settle the receivable. The Group does not carry material trade receivable exposure to either a single counterparty or a group of counterparties. For banks and fi nancial institutions, only independently rated parties with a minimum rating of A are accepted as counterparties. The Group has a concentration risk in relation to utilising three fi nancial services providers. The providers are rated as A and AA by Standard and Poor’s (S&P).
The credit risk on loans issued to investors under the instalment warrant product is mitigated via the structure of the instalment. Shares purchased as part of the investment which are held benefi cially for the investor, along with the option issued by the Group (embedded within the instalment product) are held as security for the loan. As a result there is no recourse to the investor. To hedge the embedded option issued by the Group to the investor, the Group purchases American style (exercise) put options over the individual underlying shares. They are either over the counter (OTC) or exchange traded options (ETO). For all options purchased, these can only be purchased from counterparties that have a minimum S&P long-term credit rating of AA at the time of issuing the OTC option. They also must be approved in accordance with the relevant funding provider/fi nancier. As part of the instalment product, Investors can also borrow the initial upfront costs including the establishment fee and interest costs. A strict approval process is performed to ensure that loans are only issued to investors with appropriate credit history. All shares purchased as part of the instalments product are held with third party custodians (Berndale Securities Limited or Fortis Clearing Sydney Pty Ltd).
The credit risk on loans issued to investors under the leveraged alpha instalment is monitored on a daily basis to assess whether investors securities held are adequate to cover the value of the loan to the investor. Leveraged alpha investment positions are monitored against a loan-to-value ratio (LVR) benchmark. The Group can reduce the loan exposure under the terms of the Product Disclosure Statement. The assets purchased under the leveraged alpha instalment are held by third party custodians (Berndale Securities Limited or Fortis Clearing Sydney Pty Ltd).
Credit facilities are off ered as part of an Individually Managed Account (IMA) and Separately Managed Account (SMA) off ering. Loans provided under the IMA and SMA have full recourse to the investor. The security for the loan is the listed equities and options the Group holds on behalf of clients through a third party custodian (Fortis Clearing Sydney Pty Ltd). The monitoring of credit risk on this facility is performed on a daily basis using a Value at Risk (VAR) calculation. The objective of the VAR calculation is to determine the Groups exposure in the event of a sudden shock in the share market. The VAR calculation is calculated by decreasing the underlying share values by 40% in client portfolios and then determining the equity value of the portfolio. The total of the negative equity values is then calculated. The limitation to this calculation is that it assumes all other variables remain constant. This includes factors such as market volatilities which are applied within option valuations.
The Group and the parent entity held the following credit risks:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Cash and cash equivalents 27,102 24,190 2 4
Financial assets at fair value through profi t or loss 45,717 60,889 1,024 1,357
Loans to controlled entities and entities under joint control (current) 1,102 102 57,034 86,059
Loans to investors 563,390 - - -
Derivative fi nancial assets 176,147 - - -
Tax related receivables from controlled entities - - 7,936 10,385
Loans to shareholders and entities under joint control (non-current) 6,599 3,496 1,370 484
Trade and other receivables 92,796 68,991 131 383
912,853 157,668 67,497 98,672
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Notes to the Financial Statements- Continued
The Group records trade receivables and loans to investors in the following classifi cations:
Performing trade receivables and loans to investors are those that are within their relevant contractual payment terms and there is no evidence to suggest that the client or counterparty will fail to meet their obligations.
Performing-past due trade receivables and loans to investors are those that have fallen outside of their contractual settlement terms. However there remains an expectation of full recovery based on value of the underlying equities and the fi nancial position of the client or counterparty.
Non performing-impaired trade receivables and loans to investors are those that have fallen outside of the prescribed settlement terms and/or there is evidence to suggest that the client or counterparty will fail to meet their obligations. Refer to note 1(k) for more information on the trade receivables policy of the Group.
Consolidated
2009$’000
2008$’000
Trade receivables
Performing 92,343 66,166
Performing – past due 208 2,825
Non-performing (impaired) 245 -
92,796 68,991
Loans to investors
Performing 563,336 -
Performing – past due - -
Non-performing (impaired) 54 -
563,390 -
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Cash at bank and short term bank deposits
AA 22,410 24,190 2 4
BBB+ 3,554 - - -
BB 1,138 - - -
27,102 24,190 2 4
Derivative fi nancial assets - - -
ETO 6,047 - - -
AA 19,365 - - -
A+ 88,089 - - -
A 62,646 - - -
176,147 - - -
The credit quality of fi nancial assets can be assessed by reference to external credit ratings. These credit ratings are only available for cash assets and derivative fi nancial assets.
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Notes to the Financial Statements- Continued
(c) Liquidity riskPrudent liquidity risk management implies maintaining suffi cient cash & marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. The Group manages liquidity risk by continuously monitoring on a daily basis the actual and forecast cash fl ows. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining fl exibility in funding by keeping suffi cient committed credit lines available. Surplus funds are invested in interest bearing deposit accounts.
A subsidiary of the Company, Wilson HTM Limited, is a participant of the Australian Securities Exchange (ASX) and is required to maintain a defi ned liquid capital ratio in relation to its trading risk requirements. This liquid capital requirement is monitored on a daily basis and reported to the ASX as required. Subsidiaries of the Company, Next Financial Limited, Next Financial Investment Management Limited, Mosaic Risk Management Limited, WHTM Capital Management Ltd and Wilson HTM Corporate Finance Limited hold Australian Financial Services Licences (AFSL) and hold amounts in liquid assets as per regulations of the Australian Securities and Investments Commission (ASIC).
Financing arrangements
The Group and the parent entity had access to the following undrawn borrowing facilities at the reporting date:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Bank bill and overdraft facilities
Expiring within one year 227,133 - 77,229 -
Expiring between one and two years 117,997 73,935 - 58,475
Expiring beyond two years 255,366 - - -
600,496 73,935 77,229 58,475
The bill acceptance facilities and overdraft facilities may be drawn at any time and are subject to annual review. These facilities expire on 31 December 2009 and renewal is subject to discussions with fi nanciers.
Maturities of fi nancial liabilities
The table below analyses the Group’s fi nancial liabilities. The fi nancial liabilities are broken down into maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows.
Group – 20093 days or less
$’0004-30 days
$’00030 days plus
$’000
Total contractual cash fl ows
$’000
Carrying Amount (assets) / liabilities
$’000
Financial liabilities
Non-interest bearing 42,106 59,705 2,667 104,478 104,478
Variable rate 271 7,000 513,172 520,443 520,443
Derivative fi nancial liabilities - - 178,180 178,180 178,180
Total fi nancial liabilities 42,377 66,705 694,019 803,101 803,101
Group – 20083 days or less
$’0004-30 days
$’00030 days plus
$’000
Total contractual cash fl ows
$’000
Carrying Amount (assets) / liabilities
$’000
Financial liabilities
Non-interest bearing 75,041 8,725 3,718 87,484 87,484
Variable rate 65 26,000 - 26,065 26,065
Total fi nancial liabilities 75,106 34,725 3,718 113,549 113,549
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Notes to the Financial Statements- Continued
Parent 20093 days or less
$’0004-30 days
$’00030 days plus
$’000
Total contractual cash fl ows
$’000
Carrying Amount (assets) / liabilities
$’000
Financial liabilities
Non-interest bearing 36,256 – 1,189 37,445 37,445
Variable rate 271 7,000 - 7,271 7,271
Total fi nancial liabilities 36,527 7,000 1,189 44,716 44,716
Parent 20083 days or less
$’0004-30 days
$’00030 days plus
$’000
Total contractual cash fl ows
$’000
Carrying Amount (assets) / liabilities
$’000
Financial liabilities
Non-interest bearing 22,207 154 97 22,458 22,458
Variable rate 25 26,000 - 26,025 26,025
Total fi nancial liabilities 22,232 26,154 97 48,483 48,483
(d) Settlement riskThe Group is exposed to settlement risk through the non-payment of equity buy positions within the prescribed timeframe for payment of such transactions (usually 3 days from the date of transaction). A review of all outstanding balances is completed on a daily basis to ensure clients are able to settle positions as they fall due. The Group has not incurred any material loss resulting from non settlement. The Company has no material exposure to settlement risk.
(e) Fair value estimationThe fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement, or for disclosure purposes. The fair value of fi nancial instruments traded in active markets (such as Australian listed equity securities, listed unit trusts and other listed equity securities) is based on quoted market prices at the reporting date. The quoted market price used for fi nancial assets held by the Group is the current bid price. The fair value of fi nancial instruments that are not traded in an active market (such as unlisted unit trusts and equity securities) are determined using valuation techniques such as estimated discounted cash fl ow. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of fi nancial liabilities for disclosure purposes are the current values due to their short term nature.
3 Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a fi nancial impact on the entity and that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.
(i) Estimated impairment of assets
The Group tests at least annually whether assets have suff ered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of assumptions. Refer to notes 15, 18 and 41 for details of these assumptions and the potential impact of changes to the assumptions.
(ii) Income taxes
The Group is subject to income taxes in Australia. Signifi cant judgement is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is diff erent from the amounts that were initially recorded, such diff erences will impact the current and deferred tax provisions in the period in which such determination is made.
(iii) Provisions for legal claims
The Group makes judgements concerning the potential impact of legal claims brought by clients as per note 1(u). These calculations require the use of assumptions concerning the likely success of each claim and the potential amount of compensation payable. Amounts recognised in respect of claims outstanding at balance date are disclosed in note 22.
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Notes to the Financial Statements- Continued
(iv) Valuation of ‘Over the Counter’ (OTC) option instruments
The Group purchases derivative instruments from high quality fi nancial institutions, for which the fair values of the OTC options are assessed monthly at mark-to-market. The Group receives valuation confi rmations from counterparties to the derivatives to substantiate closing value. Changes in fair value are recognised immediately in the income statement.
(v) Loans to investors-amortised cost using eff ective interest rate
Loans under instalment warrants are recognised at their amortised cost using the eff ective interest method. The embedded derivative, which enables the client to put its share portfolio to the consolidated entity for the original investment amount at maturity or during the period of the instalment, is recognised in the balance sheet at fair value (note 11).
4 Segment information(a) Description of segmentsBusiness segments
The consolidated entity is primarily involved in the businesses of Investment Management and Capital Markets as detailed below.
Investment Management
The Investment Management business is focused on developing a recurring revenue stream via growth in funds under management and investment outperformance. The Investment Management business is structured across fi ve separate units: Pinnacle Investment Management, Specialty Funds Management, Private Wealth Management Funds-Management and Financial Planning, Next Financial and Funds Management Services.
Capital Markets
The Capital Markets business services corporate, institutional and private clients and provides research, corporate fi nance and equity capital markets and stockbroking services. The Capital Markets business is structured across four separate units: Corporate Finance and Equity Capital Markets, Research; Institutional Sales and Private Wealth Management-Stockbroking.
Geographical segments
The entity operates predominantly within Australia and as such does not present geographical segments.
(b) Primary reporting format-business segments
2009
Investment Management
$’000Capital Markets
$’000Group / Common
$’000Consolidated
$’000
Segment revenue
Total revenue 55,684 51,708 - 107,392
Total segment revenue 55,684 51,708 - 107,392
Segment result (2,461) 2,514 - 53
Profi t before income tax 53
Income tax expense (220)
Profi t for the year (167)
Segment assets and liabilities
Segment assets 910,032 74,451 26,834 1,011,317
Total assets 1,011,317
Segment liabilities 867,099 51,974 23,825 942,898
Total liabilities 942,898
Other segment information
Investments accounted for using the equity method 13,044 - - 13,044
Share of net losses of entities accounted for using the equity method (523) - - (523)
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Notes to the Financial Statements- Continued
2008
Investment Management
$’000Capital Markets
$’000Group / Common
$’000Consolidated
$’000
Segment revenue
Total revenue 36,817 87,858 - 124,675
Total segment revenue 36,817 87,858 - 124,675
Segment result 4,691 12,281 - 16,972
Profi t before income tax 16,972
Income tax expense (4,048)
Profi t for the year 12,924
Segment assets and liabilities
Segment assets 70,346 94,895 26,062 191,303
Total assets 191,303
Segment liabilities 31,307 70,318 23,648 125,273
Total liabilities 125,273
Other segment information
Investments accounted for using the equity method 16,960 - - 16,960
Share of net profi ts of entities accounted for using the equity method
137 - - 137
5 RevenueConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Services revenue
Brokerage 34,703 51,516 - -
Interest income on structured products 21,988 - - -
Fund management fees and commissions 21,685 35,250 - -
Corporate fi nance advisory revenue 13,510 9,110 - -
Corporate fi nance ECM revenue 5,273 23,628 - -
Performance fee income 4,399 97 - -
Management and advisor fees 951 - - -
Amortisation of loan establishment fees 534 - - -
103,043 119,601 - -
Other revenue
Interest received or due 1,341 2,497 863 995
Dividends received 1,183 1,516 3,159 16,264
Directors fees 131 153 - -
Other 1,694 908 - -
4,349 5,074 4,022 17,259
107,392 124,675 4,022 17,259
Other revenue includes revenues received by the Plato Funds of $1,976,709 (2008 – $2,233,907).
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Notes to the Financial Statements- Continued
6 ExpensesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Profi t before income tax includes the following specifi c expenses:
Finance costs
Interest and fi nance charges – corporate 1,570 2,632 1,404 2,428
Amortisation using eff ective interest rate 10,856 - - -
Interest and fi nance charges – client 9,803 - - -
Finance costs expensed 22,229 2,632 1,404 2,428
Rental expense relating to operating leases
Minimum lease payments 4,268 2,841 - -
Total rental expense relating to operating leases 4,268 2,841 - -
Fair value (gains) / losses on fi nancial assets at fair value through profi t or loss
Companies (1,443) 1,908 333 1,284
Funds 3,507 1,091 - -
2,064 2,999 333 1,284
Depreciation and amortisation
Depreciation 2,359 1,834 - -
Amortisation – software and intangibles 601 174 - -
Amortisation – management rights 288 - - -
Total depreciation and amortisation expense 3,248 2,008 - -
Interest and fi nance charges are shown divided into two components, those attributable to the corporate treasury functions and those related to the client operations of Next Financial Limited.
7 Income tax expense / (benefi t)(a) Income tax expense / (benefi t)
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Current tax (3,229) 11,234 (826) 556
Deferred tax 4,080 (6,717) 258 (1,924)
Adjustments for tax of prior periods (631) (469) (113) 475
220 4,048 (681) (893)
Deferred income tax expense / (benefi t) included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (note 17) 21,258 (4,320) 258 280
Decrease in deferred tax liabilities (note 27) (17,178) (2,397) - (2,204)
4,080 (6,717) 258 (1,924)
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Notes to the Financial Statements- Continued
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Profi t from continuing operations before income tax expense 53 16,972 1,264 12,857
Tax at the Australian tax rate of 30% (2008-30%) 16 5,092 379 3,857
Tax eff ect of amounts which are not deductible / (taxable) in calculating taxable income:
Dividends from subsidiaries' - - (947) (4,425)
Dividends from entities under joint control - 300 - -
Imputation credits - (389) - (479)
Share of net losses / (profi ts) of funds consolidated 590 (183) - -
Share of net losses / (profi ts) of entities under joint control 157 (41) - -
Entertainment 72 140 - -
Non deductible expenses - 49 - -
Amortisation of software - (120) - -
Tax deferred revenue - (324) - (324)
Sundry items 16 (7) - 3
851 4,517 (568) (1,368)
Adjustments for current tax of prior periods (631) (469) (113) 475
Total income tax expense 220 4,048 (681) (893)
(c) Tax consolidation legislationWilson HTM Investment Group Ltd and its wholly owned Australian controlled entities implemented the tax consolidation legislation from 1 July 2003. Next Financial Limited and its subsidiaries joined the tax consolidated group on 1 April 2009. The accounting policy in relation to this legislation is set out in note 1(f).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Wilson HTM Investment Group Ltd.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Wilson HTM Investment Group Ltd for any current tax payable assumed and are compensated by Wilson HTM Investment Group Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Wilson HTM Investment Group Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ fi nancial statements.
The amounts receivable / payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which may be issued as soon as practicable after the end of each fi nancial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current inter-company receivables or payables (note 39).
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Notes to the Financial Statements- Continued
8 Current assets – Cash and cash equivalentsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Cash at bank and on hand 21,827 15,185 2 4
Deposits at call 1,740 5,767 - -
Cash held in trust 3,534 3,237 - -
27,101 24,189 2 4
(a) Reconciliation to cash at the end of the year
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Balances as above 27,101 24,189 2 4
Bank overdrafts (note 21) (271) (65) (271) (25)
Balances per statement of cash fl ows 26,830 24,124 (269) (21)
(b) Restrictions on the use of cashCash held in trust is held on behalf of clients and represents settlement by clients of current or future trade receivables. These amounts include funds which are due to Wilson HTM Investment Group Ltd as brokerage income and as trade receivables. A corresponding liability is recognised within trade and other payables (note 20).
Included within cash at bank and on hand is an amount of $15,437,000 (2008– $14,604,000) which is attributable to the Plato Funds within the fi nancial statements of the Group.
(c) Deposits at callThe deposits are bearing fl oating interest rates between 2.90% and 7.20% (2008 – 6.15% and 7.15%). These deposits have an average maturity of 30 days.
(d) Fair valueThe carrying amount for cash and cash equivalents equals the fair value.
9 Current assets – Trade and other receivablesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Trade receivables 46,756 65,786 50 275
Related party receivable 47 - - -
Other income receivable 21,229 2,322 81 108
Prepayments 483 883 - -
Instalment income receivable 24,281 - - -
92,796 68,991 131 383
(a) Eff ective interest rates and credit riskAll of the Group’s receivables are classifi ed as current and are non-interest bearing.
There is no concentration of credit risk with relation to current receivables as the Group has a large number of clients across a range of investor categories. Refer to note 2 for more information on the fi nancial risk management policy of the Group.
(b) Fair value and credit riskDue to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. Refer to note 2 for more information on the fi nancial risk management policy of the Group and the credit quality of the Group’s trade receivables.
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Notes to the Financial Statements- Continued
10 Current assets – Financial assets at fair value through profi t or lossConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
At beginning of year 60,889 57,454 1,357 53,233
Revaluation (2,064) (2,999) (333) (1,284)
Additions 113,723 75,908 - 12,447
Disposals (sale, redemption and intra group transfers) (126,831) (69,474) - (63,039)
At end of year 45,717 60,889 1,024 1,357
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Australian listed equity securities 31,777 23,826 - -
Other unlisted equity securities 1,024 1,357 1,024 1,357
Listed and unlisted unit trusts 10,467 31,537 - -
Derivative fi nancial instruments 2,449 4,169 - -
45,717 60,889 1,024 1,357
Changes in fair values of fi nancial assets at fair value through profi t or loss are detailed in note 6.
11 Derivative fi nancial instrumentsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Current assets
Exchange traded put options 6,047 - - -
Over the counter put options 170,100 - - -
Exchange traded call options - - - -
Total current derivative fi nancial instrument assets 176,147 - - -
Current liabilities
Over the counter put options 342 - - -
Over the counter call options 3,836 - - -
Capital Protected Instalment 4,814 - - -
Embedded options in loan agreements 167,270 - - -
Short listed equity investments 1,918 - - -
Total current derivative fi nancial instrument liabilities 178,180 - - -
Net derivative fi nancial liability (2,033) - - -
Instruments used by the Group
A subsidiary of the Group purchases exchange traded options and over the counter options to specifi cally hedge against market risks associated with the capital protection which is granted to investors on the value of the investors’ portfolios. These embedded derivatives give investors the right, but not obligation, to put the portfolio of shares to the subsidiary at an amount that approximates the principal value of the loan made to the investors.
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Notes to the Financial Statements- Continued
12 Current assets – Other current assetsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Loans - controlled entities - - 57,034 86,059
Loans - entities under joint control 1,102 102 - -
1,102 102 57,034 86,059
Loans to entities under joint control includes the written down value of the investment where that value is less than zero as a result of accumulated losses being greater than the cost of the investment (note 43).
13 Current assets – Tax related receivables from controlled entitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Tax related receivables from controlled entities - - 7,936 10,385
- - 7,936 10,385
14 Current assets – Loans to investorsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Loans under instalment products 474,253 - - -
Loans under other products 89,137 - - -
563,390 - - -
Loans under the instalment warrant business conducted by a subsidiary generally have a term of fi ve years. Interest is payable in advance on the anniversary date of the loan.
The instalment loan proceeds are used by the investor to purchase a portfolio of shares in ASX listed entities and to purchase an over the counter option in respect of this portfolio of shares from the subsidiary. The over the counter option is an American style option issued by a subsidiary which entitles the investor to put the portfolio to the subsidiary at an amount approximating the principal amount of the loan relating to the warrant at any time up to maturity of the warrant. The subsidiary purchases exchange traded options (ETO) and over the counter options (OTC) in respect of the individual shares included in the portfolio acquired by the investor to protect against any change in the value of the portfolio which might impair recoverability of the loan.
Warrant holders may choose to exit the transaction at any time without incurring exit fee penalties. If this scenario arises, the over the counter option or exchange traded option may be exercised and the sale proceeds will be used to pay the outstanding loan.
Loans on other products comprise loans under individually managed accounts and loans under the leveraged alpha product. Interest on loans under individually managed accounts, payable in advance is fi xed for one year. Loans under the leveraged alpha product have a 10 year term. Interest is payable monthly in arrears. On the anniversary of the commencement date, the loan amount is adjusted to ensure the original gearing ratio is maintained against the investors total asset value.
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Notes to the Financial Statements- Continued
15 Non-current assets – Other fi nancial assetsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Shares in subsidiaries (note 41) - - 38,869 15,864
- - 38,869 15,864
These fi nancial assets are carried at cost.
The Parent assesses its investment in each subsidiary for indications of impairment at least annually. Where such indicators are deemed to exist impairment testing is conducted in order to establish whether the recoverable amount is greater than the carrying amount. Where the carrying amount exceeds the recoverable amount, the asset is deemed to be impaired and the amount is charged to the income statement.
For impairment testing purposes, the recoverable amount of a cash generating unit (CGU) is determined based upon value- in-use calculations. These calculations use cash fl ow projections based upon fi nancial budgets approved by management covering a fi ve year period. The growth rates do not exceed the long-term average growth rate for the business in which the CGU exists. Sensitivity analysis is also undertaken to test the sensitivity of the recoverable amount to movements in the various underlying assumptions.
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Notes to the Financial Statements- Continued
16 Non-current assets – Property, plant and equipment
Consolidated
Plant and equipment
$’000
Fixtures and fi ttings
$’000
Leasehold improvements
$’000Total
$’000
At 1 July 2007
Cost or fair value 3,650 545 5,730 9,925
Accumulated depreciation (2,782) (317) (2,403) (5,502)
Net book amount 868 228 3,327 4,423
Year ended 30 June 2008
Opening net book amount 868 228 3,327 4,423
Additions 1,172 905 2,973 5,050
Disposals (122) - (86) (208)
Deconsolidation of subsidiary (11) (2) - (13)
Depreciation charge (741) (200) (893) (1,834)
Closing net book amount 1,166 931 5,321 7,418
At 30 June 2008
Cost or fair value 4,458 1,411 8,345 14,214
Accumulated depreciation (3,292) (480) (3,024) (6,796)
Net book amount 1,166 931 5,321 7,418
Year ended 30 June 2009
Opening net book amount 1,166 931 5,321 7,418
Additions 872 61 235 1,168
Acquisition of subsidiary – cost 1,166 318 2,568 4,052
Acquisition of subsidiary – accumulated depreciation (614) (152) (839) (1,605)
Fair value adjustment on acquisition - - (488) (488)
Reclassifi cation of assets 514 - - 514
Depreciation charge (928) (258) (1,173) (2,359)
Closing net book amount 2,176 900 5,624 8,700
At 30 June 2009
Cost or fair value 7,010 1,790 10,660 19,460
Accumulated depreciation (4,834) (890) (5,036) (10,760)
Net book amount 2,176 900 5,624 8,700
All property, plant and equipment is held by subsidiary entities – Wilson HTM Services Pty Ltd, Next Financial Limited and Pinnacle Services Administration Pty Ltd.
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Notes to the Financial Statements- Continued
17 Non-current assets – Deferred tax assetsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
The balance comprises temporary diff erences attributable to:
Unrealised loss on fair value assets 1,765 4,010 - -
Embedded derivatives 50,181 - - -
Non-refundable interest prepayment on instalments 10,968 - - -
Option premium received 1,952 - - -
Securities issued 1,211 - - -
Capitalised instalment establishment and advisor fees 867 - - -
Employee benefi ts 1,677 1,167 349 -
Amortisation – Offi ce lease incentive 339 107 - -
S40-880 deductions 630 - 287 -
Pre-received administration fees 59 - - -
Other 3 - - -
Loans to shareholders 291 42 77 -
Provisions 581 428 - 75
Accruals 317 2,658 12 -
Tax losses * 4,702 - 3,071 -
Borrowing costs - 8 - 8
Capital Allowance 166 522 - 415
75,709 8,942 3,796 498
Set-off of deferred tax liabilities pursuant to set-off provisions (note 27) (2,358) (605) - -
Net deferred tax assets 73,351 8,337 3,796 498
Movements:
Opening balance at 1 July 8,942 4,622 498 778
Credited/(charged) to the income statement (note 7) (21,258) 4,320 258 (280)
True up of prior year balances 675 - (31) -
Acquisition of subsidiary (note 40) 82,648 - - -
Tax losses carried forward 4,702 - 3,071 -
Closing balance at 30 June 75,709 8,942 3,796 498
Deferred tax assets to be recovered within 12 months 59,695 8,541 69 222
Deferred tax assets to be recovered after more than 12 months 16,014 401 3,727 276
75,709 8,942 3,796 498
* A deferred tax asset in relation to tax losses is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profi ts against which to recover the losses and from which the future reversal of underlying timing diff erences can be deducted.
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Notes to the Financial Statements- Continued
18 Non-current assets – Intangible assets
Consolidated
Stock Exchange membership
$’000
Computer software
$’000
Management Rights$’000
Total$’000
At 1 July 2007
Cost 250 1,743 633 2,626
Accumulated amortisation and impairment (222) (1,582) - (1,804)
Net book amount 28 161 633 822
Year ended 30 June 2008
Opening net book amount 28 161 633 822
Additions - 976 - 976
Disposals - (70) - (70)
Deconsolidation of subsidiary - - (633) (633)
Amortisation charge - (174) - (174)
Closing net book amount 28 893 - 921
At 30 June 2008
Cost 250 2,524 - 2,774
Accumulated amortisation and impairment (222) (1,631) - (1,853)
Net book amount 28 893 - 921
Year ended 30 June 2009
Opening net book amount 28 893 - 921
Additions - 505 - 505
Acquisition of subsidiary – cost - 4,621 - 4,621
Acquisition of subsidiary – accumulated amortisation - (1,543) - (1,543)
Fair value adjustment on acquisition - (19) - (19)
Reclassifi cation of assets - (514) - (514)
Amortisation charge (21) (580) - (601)
Closing net book amount 7 3,363 - 3,370
At 30 June 2009
Cost 250 7,136 - 7,386
Accumulated amortisation and impairment (243) (3,773) - (4,016)
Net book amount 7 3,363 - 3,370
No individual intangible asset is material to the Group.
Impairment tests for management rights
Management rights are held by Hyperion Holdings Limited (and its controlled entities). Hyperion Holdings Limited was de-consolidated from 1 November 2007 and from that date was equity accounted as an entity under joint control. Consequently the management rights are no longer included in the consolidated assets of the Group. The Group, and its subsidiaries, do not hold any other management rights.
For impairment testing purposes, the recoverable amount of a CGU is determined based upon value-in-use calculations. These calculations use cash fl ow projections based upon fi nancial budgets approved by management covering a fi ve year period. The growth rate does not exceed the long-term average growth rate for the business in which the CGU exists. Sensitivity analysis is also undertaken to test the sensitivity of the recoverable amount to movements in the various underlying assumptions.
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Notes to the Financial Statements- Continued
19 Non-current assets – Other non-current assetsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Loans to shareholders 3,909 2,296 1,370 484
Loan to entity under joint control 2,690 1,200 - -
6,599 3,496 1,370 484
Loans to shareholders are used by employees for the purpose of purchasing shares in Wilson HTM Investment Group Ltd and Pinnacle Investment Management Limited, are repayable on sale of shares or termination of employment and are primarily repaid via dividends received from those entities.
20 Current liabilities – Trade and other payablesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Trade payables 44,870 68,308 - -
Accrued expenses 6,495 4,327 28 251
Accrued bonuses and commissions 5,023 8,327 1,161 -
Instalment payables 35,791 - - -
Minority interests in funds consolidated 8,151 4,143 - -
Other payables 3,366 2,379 - -
Other payables structured products 782 - - -
104,478 87,484 1,189 251
Included in trade payables is an amount of $3,534,000 (2008 – $3,327,000) related to cash held in trust on behalf of clients (note 8(b)).
21 Current liabilities – BorrowingsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Secured
Bank overdrafts (note 8) 271 65 271 25
Bank loans 7,000 26,000 7,000 26,000
Loans to clients – instalment products 431,093 - - -
Loans to clients – other products 82,079 - - -
Total secured current borrowings 520,443 26,065 7,271 26,025
(a) Bank loans
Bank loans are repayable at call and bear an average interest rate of 4.18% per annum (2008 – 8.07%).
(b) Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 2.
(c) Security
Information about the security relating to each of the secured liabilities and further information on the bank overdrafts and bank loans are set out in note 26.
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Notes to the Financial Statements- Continued
22 Current liabilities – ProvisionsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Employee benefi ts –long service leave 1,783 1,587 - -
Legal claims 247 250 - -
Other provisions 27 208 - -
2,057 2,045 - -
(a) Legal claims
The amounts represent a provision for certain legal claims brought against the Group by clients of the Private Wealth Management, Research and Corporate Finance business units. The balance at 30 June 2009 is expected to be utilised within twelve months. In the Directors’ opinion, the outcome of these legal claims is unlikely to give rise to any signifi cant loss beyond the amounts provided at 30 June 2009.
(b) Movements in provisions
Movements in each class of provision during the fi nancial year, other than employee benefi ts, are set out below:
Legal claims $’000
Other provisions$’000
Consolidated – 2009
Current
Carrying amount at start of year 250 208
additional provisions recognised 247 -
unused amounts reversed (250) -
Amounts used during the period - (181)
Carrying amount at end of year 247 27
23 Current liabilities – Non interest bearing liabilitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Unsecured
Loans advanced from:
Subsidiaries - - 36,256 22,207
- - 36,256 22,207
Loans from related parties
Further information relating to loans from the parent entity and entities under joint control is set out in note 39.For
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Notes to the Financial Statements- Continued
24 Current liabilities – Current tax liabilitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Income tax 3,081 5,745 - 6,517
3,081 5,745 - 6,517
25 Current liabilities – Other current liabilitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Employee benefi ts 2,271 1,961 - -
Unearned interest and administration fee income 23,306 - - -
Unearned non-refundable interest prepayment 36,561 - - -
Other unearned income 201 - - -
62,339 1,961 - -
26 Current liabilities – Financing arrangementsAssets pledged as security
The bank loans and overdraft are secured by a fl oating charge over the assets of the Group (excluding entities within the Pinnacle Investment Management Limited and Next Financial Limited Groups) (note 21).
These loans are also secured by a negative pledge that imposes certain covenants on the Group. The negative pledge states that (subject to certain exceptions) the Group will not provide any other security over its assets, and will ensure that the following fi nancial ratio is met:
(i) debt to EBITDA ratio of the Group (excluding entities within the Pinnacle Investment Management Limited Group) will not, at any time, exceed 3 times
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Current
Floating charge
Cash and cash equivalents 5,055 7,029 2 4
Receivables 52,333 66,385 131 383
Other fi nancial assets at fair value through profi t or loss 63,438 68,410 1,024 1,357
Other 2,635 14,132 57,034 86,059
Total current assets pledged as security 123,461 155,956 58,191 87,803
Non-current
Floating charge
Other fi nancial assets - 5,685 38,869 15,864
Plant and equipment 6,476 8,306 - -
Total non-current assets pledged as security 6,476 13,991 38,869 15,864
Total assets pledged as security 129,937 169,947 97,060 103,667
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Notes to the Financial Statements- Continued
(a) Financing arrangementsAccess was available at balance date to the following lines of credit:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Credit standby arrangements
Total facilities
Bank overdrafts 20,000 20,000 4,500 4,500
Bank facility 100,000 80,000 80,000 80,000
Client loan facilities 1,000,939 - - -
1,120,939 100,000 84,500 84,500
Used at balance date
Bank overdrafts 271 65 271 25
Bank facility 7,000 26,000 7,000 26,000
Client loan facilities 513,172 - - -
520,443 26,065 7,271 26,025
Unused at balance date
Bank overdrafts 19,729 19,935 4,229 4,475
Bank facility 93,000 54,000 73,000 54,000
Client loan facilities 487,767 - - -
600,496 73,935 77,229 58,475
Bank loan facilities
Total facilities 1,120,939 100,000 84,500 84,500
Used at balance date 520,443 26,065 7,271 26,025
Unused at balance date 600,496 73,935 77,229 58,475
These facilities comprise fi xed and fl oating rate secured facilities. Certain facilities are also subject to debt covenant arrangements which require the Group to comply with specifi c minimum fi nancial requirements. Amounts which are denominated in foreign currencies are translated at exchange rates ruling at balance date.
(b) Interest rate risk exposuresInformation about the Group’s and Parent entity’s exposure to interest rate and foreign currency changes is provided in note 2.
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Notes to the Financial Statements- Continued
27 Non-current liabilities – Deferred tax liabilitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
The balance comprises temporary diff erences attributable to:
Put option premiums 53,489 - - -
Unamortised loans to investors 15,968 - - -
Swaptions 185 - - -
Property, plant & equipment 124 (9) - -
Financial assets at fair value through profi t or loss 780 614 - -
Receivables 140 - - -
Capitalised advisor fees 235 - - -
70,921 605 - -
Set-off of deferred tax liabilities pursuant to set-off provisions (note 17) (2,358) (605) - -
Net deferred tax liabilities 68,563 - - -
Movements:
Opening balance at 1 July 605 3,002 - 2,204
Credited to the income statement (note 7) (17,178) (2,397) - (2,204)
True up of prior year balances 129 - - -
Acquisition of subsidiary (note 40) 87,365 - - -
Closing balance at 30 June 70,921 605 - -
Deferred tax liabilities to be settled within 12 months 56,872 605 - -
Deferred tax liabilities to be settled after more than 12 months 14,049 - - -
70,921 605 - -
28 Non-current liabilities – ProvisionsConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Employee benefi ts 337 342 - -
Make good provisions 549 522 - -
886 864 - -
(a) Movements in provisionsMovements in each class of provision during the fi nancial year, other than employee benefi ts, are set out below:
Make good$’000
Consolidated – 2009
Carrying amount at start of year 522
Charged to the income statement 27
Carrying amount at end of year 549
Make good provisions comprise liabilities for make good of rented premises. The gross value of the estimated liability is discounted to its present value at balance date and any discounting adjustment recognised as interest income on initial recognition.
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Notes to the Financial Statements- Continued
29 Non-current liabilities – Other payablesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Deferred lease incentive 843 357 - -
843 357 - -
30 Non-current liabilities – Other non-current liabilitiesConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Straight-line lease liability 989 752 - -
Deferred consideration on acquisition of subsidiary (note 40) 1,039 - 1,039 -
2,028 752 1,039 -
31 Contributed equity(a) Share capital
Consolidated Consolidated
2009Shares
2008Shares
2009$’000
2008$’000
Ordinary shares
Fully paid 102,924,169 95,707,675 55,918 48,474
Shares to be issued as deferred consideration 1,385,018 - - -
Tax eff ect of costs associated with IPO - - - 553
Balance – parent entity 104,309,187 95,707,675 55,918 49,027
Treasury stock held by employee share trusts (6,052,168) (4,305,615) (6,351) (4,365)
Balance – consolidated 98,257,019 91,402,060 49,567 44,662
(b) Movements in ordinary share capital:
Date Details Number of shares Issue price $’000
1 July 2007 Opening balance 95,707,675 48,474
Tax eff ect of cost associated with IPO - 553
Less: Treasury stock held by employee share trusts (4,305,615) (4,365)
30 June 2008 Balance 91,402,060 44,662
1 July 2008 Opening balance 95,707,675 49,026
1 April 2009 Shares issued as consideration for the acquisition of Next Financial Limited
6,000,000 $0.75 4,500
Provisional estimate of shares to be issued as deferred consideration for the acquisition of Next Financial Limited
1,385,018 $0.75 1,039
Shares issued to Deutsche Bank 803,994 $1.00 804
13 June 2009 Shares issued on exercise of options 412,500 $1.33 549
104,309,187 55,918
Less: Treasury stock held by the employee share trust at year end (6,052,168) (6,351)
30 June 2009 Balance 98,257,019 49,567
The maximum number of shares to be issued as deferred consideration for the acquisition of Next Financial Limited is 5,625,000. On the basis of the provisional business combination calculation at the date of this fi nancial report, 1,385,018 shares are included above as to be issued as deferred consideration. The deferred consideration will be fi nalised as at 30 June 2010.
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Notes to the Financial Statements- Continued
(c) Ordinary sharesOrdinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.
(d) Treasury stockTreasury stocks are shares in Wilson HTM Investment Group Ltd that are held by the WHTM Employee Share Trust for the purpose of issuing shares under the WHTM Employee share scheme (note 46).
Date Details Number of shares $’000
1 July 2008 Opening balance 4,305,615 4,364
Various Release of shares by the Trust (18,009) (20)
15 September 2008 Shares acquired by the Trust 1,764,562 2,007
30 June 2009 Balance 6,052,168 6,351
(e) Employee share schemesInformation relating to the employee share schemes, including details of shares issued under the schemes, is set out in note 46.
(f) OptionsInformation relating to the WHTM Employee Option Share Plan, including details of options issued, exercised and lapsed during the fi nancial year and options outstanding at the end of the fi nancial year, is set out in note 46.
(g) Deutsche Australia Limited (Deutsche Bank)In 2005 Wilson HTM Investment Group Ltd formed a strategic relationship with Deutsche Bank (a holder of 19.9% of the Company’s ordinary shares). Deutsche Bank provides its Australian equities research product to Wilson HTM Investment Group Ltd for use as the basis for the preparation of publications or briefi ng notes for distribution solely to the Company’s Private Wealth Management clients under the Wilson HTM brand. Deutsche Bank and Wilson HTM Corporate Finance Limited each provide referrals to the other in their respective market segments (note 39(c)).
Under the Constitution of the Company, Deutsche Bank is entitled to appoint two directors to the board of Wilson HTM Investment Group Ltd for as long as Deutsche Bank holds 15% or more of the Company’s ordinary shares.
Under the Constitution of the Company, Deutsche Bank is entitled to maintain its percentage interest in the issued capital of Wilson HTM Investment Group Ltd until October 2010 in the event of any issue of shares or other securities by the Company. As such, Wilson HTM Investment Group Ltd issued 803,994 shares to Deutsche Bank and Deutsche Bank purchased 550,000 shares on market during the year ended 30 June 2009 following the acquisition of Next Financial Limited.
(h) Capital risk managementThe Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of both Group liquidity and capital and liquidity ratios required under various licences held by subsidiaries.
There have been no material instances of non-compliance with externally imposed capital requirements.
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Notes to the Financial Statements- Continued
32 Reserves and retained profi ts(a) Reserves
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Share-based payments reserve 1,731 1,175 321 -
1,731 1,175 321 -
Movements:
Share-based payments reserve
Balance 1 July 1,175 593 - -
Share-based payments expense 556 582 321 -
Balance 30 June 1,731 1,175 321 -
(b) Retained profi tsMovements in retained profi ts were as follows:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Balance 1 July 19,181 10,244 11,008 1,098
Net profi t for the year 2,189 12,022 1,945 13,750
Dividends (4,785) (2,871) (4,785) (2,871)
Restatement of prior year tax balances - 1,680 - -
Restatement of prior year trade receivables - (969) - (969)
Retained earnings gain on disposal of subsidiary - (925) - -
Balance 30 June 16,585 19,181 8,168 11,008
(c) Nature and purpose of reservesShare-based payments reserve
The share-based payments reserve is used to recognise:
the fair value of options issued to employees but not exercised •
the fair value of shares issued to employees •
in the parent entity – the fair value of shares and options issued to employees of subsidiaries and the funding of the share purchase by •the Wilson HTM Employee Share Trust.
33 Minority interestConsolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Minority interests in net assets of subsidiaries 536 1,012 - -
536 1,012 - - For
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Notes to the Financial Statements- Continued
34 Dividends(a) Ordinary shares
Parent
2009$’000
2008$’000
Interim dividend for the year ended 30 June 2009 of $0.01 (2008 – $0.03) per fully paid share paid on 3 April 2009 (2008 – 28 March 2008)
Fully franked based on tax paid @ 30% 957 2,871
Final ordinary dividend for the year ended 30 June 2008 of $0.04 per fully paid share paid on 3 October 2008
Fully franked based on tax paid @ 30% 3,828 -
Total dividends provided for or paid 4,785 2,871
Dividends paid in cash or satisfi ed by the repayment of loans under Employee Share Plans during the years ended 30 June 2009 and 2008 were as follows:
Paid in cash 4,645 2,699
Satisfi ed by repayment of loan 140 172
4,785 2,871
In addition to the above dividends, since the end of the fi nancial year the Directors have recommended the payment of a fi nal ordinary dividend of $1,030,000 (1.0 cent per fully paid share) to be paid on 2 October 2009 out of retained profi ts at 30 June 2009.
(b) Franked dividendsThe franked portions of the fi nal dividends recommended after 30 June 2009 will be franked out of existing franking credits.
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Franking credits available for subsequent fi nancial years based on a tax rate of 30% (2008 – 30%)
16,143 17,930 16,143 17,930
16,143 17,930 16,143 17,930
The above amounts represent the balance of the franking account as at the end of the fi nancial year, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profi ts of subsidiaries were paid as dividends.
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Notes to the Financial Statements- Continued
35 Key management personnel disclosures(a) Key management personnel compensation
Consolidated Parent
2009$
2008$
2009$
2008$
Short-term employee benefi ts 2,743,140 5,778,994 1,032,211 1,426,174
Post-employment benefi ts 489,072 558,403 183,453 162,299
Long-term benefi ts 28,179 (82,587) 13,452 (41,943)
Share-based payments 204,306 260,037 23,689 38,445
3,464,697 6,514,847 1,252,805 1,584,975
Detailed remuneration disclosures are provided in sections A – E of the remuneration report on pages 20-29.
(b) Equity instrument disclosures relating to key management personnel(i) Option and rights holdings
The numbers of options and rights over ordinary shares in the Company held during the fi nancial year by each Director of Wilson HTM Investment Group Ltd and other key management personnel of the Group, including their personally related parties, are set out below.
2009Balance at start
of the yearGranted as
compensation Exercised ExpiredBalance at end
of the yearVested and exercisable Unvested
Directors of Wilson HTM Investment Group Ltd
Mr S M Wilson 525,000 - (175,000) - 350,000 175,000 175,000
Mr G P Lowrey 787,500 - (50,000) (125,000) 612,500 312,500 300,000
Mr C Darvall 150,000 - - (50,000) 100,000 50,000 50,000
Mr I H Fraser 75,000 - - (25,000) 50,000 25,000 25,000
Mr P P A Harris 150,000 - - (50,000) 100,000 50,000 50,000
Mr S M Skala 150,000 - - (50,000) 100,000 50,000 50,000
Mr W J McLeland 75,000 - - (25,000) 50,000 25,000 25,000
Ms A C Sherry AO - - - - - - -
Other key management personnel of the Group
Mr A J Blakemore (i) - - - - - - -
Mr M A Burns 375,000 - - (125,000) 250,000 125,000 125,000
Mr A Ihlenfeldt 637,500 - - (125,000) 512,500 262,500 250,000
Mr I Macoun 300,000 - - (100,000) 200,000 100,000 100,000
Mr N A McCulloch 112,500 - (37,500) - 75,000 37,500 37,500
Mr A D Sweeney (ii) 75,000 - - (25,000) 50,000 25,000 25,000
Mr D D G Gamble (iii) 862,500 - - (187,500) 675,000 337,500 337,500
Mr D N Groth (iii) 637,500 - - (125,000) 512,500 262,500 250,000
Mr B J Usasz (iii) 637,500 - - (125,000) 512,500 262,500 250,000
Mr M S Walsh (iii) 712,500 - (50,000) (137,500) 525,000 237,500 287,500
(i) Mr A J Blakemore joined the Group on 15 June 2009
(ii) Mr A D Sweeney was appointed to the position of Chief Operating Offi cer on 1 March 2009
(iii) Following a change in management structure eff ective 1 March 2009, Mr D D G Gamble, Mr D N Groth, Mr B J Usasz and Mr M S Walsh ceased to be classifi ed as key management personnel. They all continue in senior management roles within the Group.
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Notes to the Financial Statements- Continued
2008Balance at start
of the yearGranted as
compensation Exercised Other changesBalance at end
of the yearVested and exercisable Unvested
Directors of Wilson HTM Investment Group Ltd
Mr S M Wilson 525,000 - - - 525,000 175,000 350,000
Mr G P Lowrey 787,500 - - - 787,500 225,000 562,500
Mr C Darvall 150,000 - - - 150,000 50,000 100,000
Mr I H Fraser 75,000 - - - 75,000 25,000 50,000
Mr P P A Harris 150,000 - - - 150,000 50,000 100,000
Mr S M Skala 150,000 - - - 150,000 50,000 100,000
Mr W J McLeland 75,000 - - - 75,000 25,000 50,000
Other key management personnel of the Group
Mr M A Burns 375,000 - - - 375,000 125,000 250,000
Mr A Ihlenfeldt 637,500 - - - 637,500 175,000 462,500
Mr I Macoun 300,000 - - - 300,000 100,000 200,000
Mr N A McCulloch 112,500 - - - 112,500 37,500 75,000
Mr D D G Gamble 862,500 - - - 862,500 237,500 625,000
Mr D N Groth 637,500 - - - 637,500 175,000 462,500
Mr B J Usasz 637,500 - - - 637,500 175,000 462,500
Mr M S Walsh 712,500 - - - 712,500 187,500 525,000
(ii) Share holdings
The numbers of shares in the Company held during the fi nancial year by each Director of Wilson HTM Investment Group Ltd and other key management personnel of the Group, including their related parties, are set out below. Shares were granted during the reporting period as compensation under the LTSIP (note 46).
2009Balance at the
start of the yearReceived during the year
by allocation of rightsOther changes during the year
Balance at the end of the year
Directors of Wilson HTM Investment Group Ltd
Ordinary shares
Mr S M Wilson 15,363,933 - 1,848,067 17,212,000
Mr G P Lowrey 2,884,268 - 165,934 3,050,202
Mr C Darvall 50,000 - - 50,000
Mr I H Fraser 37,500 - - 37,500
Mr P P A Harris 554,248 - - 554,248
Mr W J McLeland 37,500 - - 37,500
Mr S M Skala 803,753 - - 803,753
Ms A C Sherry AO - - 42,000 42,000
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Notes to the Financial Statements- Continued
2009Balance at the
start of the yearReceived during the year
by allocation of rightsOther changes during the year
Balance at the end of the year
Other key management personnel of the Group
Ordinary shares
Mr A J Blakemore (i) - - - -
Mr M A Burns 200,000 - 124,835 324,835
Mr A Ihlenfeldt 2,248,068 - (138,666) 2,109,402
Mr I Macoun - - - -
Mr N A McCulloch 20,000 - 62,467 82,467
Mr A D Sweeney (ii) 339,623 - 12,483 352,106
Mr D D G Gamble (iii) 644,093 - 41,611 685,704
Mr D N Groth (iii) 3,629,948 - (107,649) 3,522,299
Mr B J Usasz (iii) 1,135,123 - (108,000) 1,027,123
Mr M S Walsh (iii) 380,175 - 133,223 513,398
(i) Mr A J Blakemore joined the Group on 15 June 2009
(ii) Mr A D Sweeney was appointed to the position of Chief Operating Offi cer on 1 March 2009
(iii) Following a change in management structure eff ective 1 March 2009, Mr D D G Gamble, Mr D N Groth, Mr B J Usasz and Mr M S Walsh ceased to be classifi ed as key management personnel. They all continue in senior management roles within the Group.
2008Balance at the
start of the yearReceived during the year
by allocation of rightsOther changes during the year
Balance at the end of the year
Directors of Wilson HTM Investment Group Ltd
Ordinary shares
Mr S M Wilson 15,363,933 - - 15,363,933
Mr G P Lowrey 2,884,268 - - 2,884,268
Mr C Darvall 50,000 - - 50,000
Mr I H Fraser 37,500 - - 37,500
Mr P P A Harris 554,248 - - 554,248
Mr W J McLeland 37,500 - - 37,500
Mr S M Skala 803,753 - - 803,753
Ms A C Sherry AO - - - -
Other key management personnel of the Group
Ordinary shares
Mr M A Burns 200,000 - - 200,000
Mr A Ihlenfeldt 2,248,068 - - 2,248,068
Mr I Macoun - - - -
Mr N A McCulloch 20,000 - - 20,000
Mr D D G Gamble 644,093 - - 644,093
Mr D N Groth 3,629,948 - - 3,629,948
Mr B J Usasz 1,135,123 - - 1,135,123
Mr M S Walsh 380,175 - - 380,175
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Notes to the Financial Statements- Continued
(c) Loans to key management personnelDetails of loans made to Directors of Wilson HTM Investment Group Ltd and other key management personnel of the Group, including their related parties, are set out below.
(i) Aggregates for key management personnel
Group
Balance at the start of the year
$
Interest paid and payable for the year
$Interest not charged
$
Balance at the end of the year
$Number in Group at the
end of the year
2009 1,601,703 - 102,341 1,481,897 9
2008 2,261,117 - 167,786 1,565,250 7
(ii) Individuals with loans above $100,000 during the fi nancial year
2009
Balance at the start of the year
$
Interest paid and payable for the year
$Interest not charged
$
Balance at theend of year
$
Highest indebtedness during the year
$
Key management personnel
Mr A Ihlenfeldt 163,726 - 10,851 213,694 213,694
Mr G P Lowrey 163,726 - 10,851 213,694 213,694
Mr I Macoun 476,083 - 27,375 - 476,083
Mr D D G Gamble (i) 192,809 - 12,194 231,344 231,344
Mr D N Groth (i) 163,726 - 9,126 153,694 163,726
Mr B J Usasz (i) 200,179 - 10,455 163,487 200,179
Mr M S Walsh (i) 205,003 - 14,275 291,512 291,512
Mr M A Burns - - 4,313 150,000 150,000
(i) Following a change in management structure eff ective 1 March 2009, Mr D D G Gamble, Mr D N Groth, Mr B J Usasz and Mr M S Walsh ceased to be classifi ed as key management personnel. They all continue in senior management roles within the Group.
2008
Balance at the start of the year
$
Interest paid and payable for the year
$Interest not charged
$
Balance at theend of year
$
Highest indebtedness during the year
$
Key management personnel
Mr A Ihlenfeldt 169,519 - 12,497 163,726 169,519
Mr G P Lowrey 169,519 - 12,497 163,726 169,519
Mr I Macoun 1,124,000 - 84,300 476,083 1,149,000
Mr D D G Gamble 199,430 - 14,709 192,809 199,430
Mr D N Groth 169,519 - 12,497 163,726 169,519
Mr B J Usasz 216,161 - 15,613 200,179 216,161
Mr M S Walsh 212,969 - 15,674 205,003 212,969
The loans are advanced from Wilson HTM Services Pty Ltd and Wilson HTM Investment Group Ltd and are for the purpose of acquiring shares in Wilson HTM Investment Group Ltd and Pinnacle Investment Management Limited respectively.
The amounts shown for interest not charged in the tables above represent the diff erence between the amount paid and payable for the year and the amount of interest that would have been charged on an arm’s-length basis.
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Notes to the Financial Statements- Continued
36 Remuneration of auditorsDuring the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit fi rms:
(a) Audit services
Consolidated Parent
2009$
2008$
2009$
2008$
Audit services – PricewaterhouseCoopers Australian fi rm:
Audit of fi nancial report of Wilson HTM Investment Group Ltd and controlled entities *
290,405 232,450 - -
Other audit services – PricewaterhouseCoopers Australian fi rm:
Audit of regulatory returns Group 77,144 95,350 - -
Audit of compliance plan – Responsible Entity 51,733 40,000 - -
Due diligence services 63,850 - - -
Other agreed upon procedures 12,470 26,860 - -
Total remuneration for audit services 495,602 394,660 - -
(b) Non-audit servicesConsolidated Parent
2009$
2008$
2009$
2008$
Advisory services PricewaterhouseCoopers Australian fi rm:
Other advisory services 31,806 51,315 - -
Taxation services – PricewaterhouseCoopers Australian fi rm
Tax compliance services, including review of company income tax returns 282,336 180,100 - -
Total remuneration for non-audit services 314,142 231,415 - -
809,744 626,075 - -
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally tax advice and due diligence reporting on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the Group’s policy to seek competitive tenders for all major consulting projects.
* PricewaterhouseCoopers were auditors of Next Financial Limited for the full year and the amount in the table represents the proportion of audit fee expense incurred since Next joined the
Group. Total audit fees incurred by Next Financial Limited during the June 2009 year were $280,835.
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Notes to the Financial Statements- Continued
37 ContingenciesContingent liabilitiesThe parent entity and Group had contingent liabilities at 30 June 2009 in respect of:
Guarantees
The Group has provided unsecured guarantees in respect of the following items:
(a) leases of subsidiaries amounting to $3,519,000 (2008 – $2,393,000)
(b) Australian Securities and Investments Commission deposit of $40,000 (2008 – $40,000).
These guarantees may give rise to liabilities in the Parent entity if the subsidiaries do not meet their obligations under the terms of the leases or other liabilities subject to the guarantees.
No material losses are anticipated in respect of any of the above contingent liabilities.
38 Commitments(a) Capital commitmentsCapital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Property, plant and equipment
Payable:
Within one year 144 - - -
144 - - -
(b) Lease commitments – Group as lessee
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:
Within one year 5,124 2,851 - -
Later than one year but not later than fi ve years 16,006 12,491 - -
Later than fi ve years 1,259 3,733 - -
22,389 19,075 - -
Non-cancellable operating leases 22,389 19,075 - -
22,389 19,075 - -
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Notes to the Financial Statements- Continued
39 Related party transactions(a) SubsidiariesInterests in subsidiaries are set out in notes 40 and 41.
(b) Transactions with key management personnel or entities related to themInformation on transactions with key management personnel or entities related to them, other than compensation, is set out below.
(i) Loan transactions and balances
Disclosures relating to loans to key management personnel are set out in note 35.
(ii) Other transactions and balances
Transactions with key management personnel (including their related parties) included share brokerage services, advisory management fees, loans under instalment warrants and individually managed accounts. These transactions were conducted on an arm’s-length basis in the ordinary course of business and under normal terms and conditions for customers and employees.
(c) Transactions with related partiesThe following transactions occurred with related parties:
Consolidated Parent
2009$
2008$
2009$
2008$
Purchases of services from related parties
Service fee payable to Deutsche Bank 1,457,229 3,375,797 - -
Trail fee payable to Deutsche Bank - 325,000 - -
Commission paid to Deutsche Bank 1,970 7,558 - 5,279
1,459,199 3,708,355 - 5,279
All transactions were made on normal commercial terms and conditions and at market rates.
Tax consolidation legislation
Current tax payable assumed from wholly owned tax consolidated entities - - 10,881,109 12,065,452
- - 10,881,109 12,065,452
Dividend revenue
Subsidiaries - - 3,158,813 16,118,000
- - 3,158,813 16,118,000
Revenue and other income received from related parties
Corporate fi nance fees received from Deutsche Bank 186,444 248,130 - -
Corporate fi nance fees received from minorities - 43,500 - -
Interest revenue received from Deustche Bank 101,112 127,550 - -
Responsible entity type fee received from Deutsche Bank 126,467 - - -
Management fees, performance fees and brokerage received from investments in managed funds managed by subsidiaries
3,579,586 1,002,136 - -
3,993,609 1,421,316 - -
Deutsche Bank provides its Australian equities research product to Wilson HTM Investment Group Ltd for use as the basis for the preparation of publications or briefi ng notes for distribution solely to the Company’s Private Wealth Management clients under the Wilson HTM brand. A trail fee was payable to Deutsche Bank under the agreement for a defi ned period. Deutsche Bank and Wilson HTM Corporate Finance Limited have entered into a Corporate Finance Service agreement whereby Deutsche Bank receives a fee equivalent to 22% of revenue (capped at 40% of profi t) of the Corporate Finance business. Also under this agreement, Deutsche Bank and Wilson HTM Corporate Finance Limited share in the fees of certain nominated clients (note 31(g)).
Managed funds managed by subsidiaries
Subsidiary companies receive responsible entity, management and performance fees in relation to the management of the Wilson HTM Priority Growth Fund and while it was operational, the Wilson HTM Healthcare and Biotech Fund. The Group also holds investments in these funds and these are included in other fi nancial assets at fair value through profi t and loss (note 39(e)). The gains and losses related to these investments are included in fair value gains and losses on fi nancial assets at fair value through profi t or loss.
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Notes to the Financial Statements- Continued
(d) Loans to / from related parties
Consolidated Parent
2009$
2008$
2009$
2008$
Loans to subsidiaries
Beginning of the year - - 86,059,422 2,695,078
Loans advanced - - - 83,364,344
Loan repayments received - - (29,025,511) -
End of year - - 57,033,911 86,059,422
Loans to jointly controlled entities and shareholders
Beginning of the year 4,420,863 1,439,000 - -
Loans advanced - 2,981,863 - -
Loan repayments received (3,555,988) - - -
End of year 864,875 4,420,863 - -
Loans from subsidiaries
Beginning of the year - - 22,206,988 11,875,849
Loans advanced - - 14,048,919 19,448,275
Loan repayments - - - (9,117,136)
Loans written off - - - -
Elimination of loan on consolidation / acquisition - - - -
End of year - - 36,255,907 22,206,988
(e) Investments in managed funds managed by subsidiaries
Consolidated Parent
2009$
2008$
2009$
2008$
Investments in managed funds managed by subsidiaries
Beginning of the year 11,103,693 11,442,726 - 11,442,726
Revaluation (2,145,302) (3,339,033) - (2,089,952)
Additions 5,959,319 3,000,000 - 3,000,000
Disposals (4,451,687) - - (12,352,774)
End of year 10,466,023 11,103,693 - -
No provisions for impairment have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties other than that listed above.
Investments held by the Parent in 2008 were transferred to a subsidiary entity prior to the end of that year.
(f) GuaranteesThe parent entity provides a deed of cross guarantee as set out in note 42.
The Group has provided unsecured guarantees in relation to lease commitments as set out in note 37.
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Notes to the Financial Statements- Continued
40 Business combinationsNext Financial Limited
(a) Summary of acquisition of subsidiaryOn 1 April 2009 the parent entity acquired 100% of the issued share capital of Next Financial Limited. Next Financial Limited was a privately owned structured fi nancial product manufacturer and investment manager that specialises in providing protected equity products and discretionary and non-discretionary investment accounts to high-net-worth clients and fi nancial planning dealer groups. The acquired business contributed revenues of $27,526,367 and net profi t of $313,632 to the Group for the period from 1 April 2009 to 30 June 2009. If the acquisition had occurred on 1 July 2008, consolidated revenue and consolidated profi t for the year ended 30 June 2009 would have been $126,419,114 and $686,458 respectively. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of Next Financial Limited to refl ect the depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 July 2008, together with the consequential tax eff ects.
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
$’000
Purchase consideration (refer to (b) below):
Cash paid 15,000
Fair value of shares issued 4,500
Deferred consideration 2,077
Direct costs relating to the acquisition 369
Total purchase consideration 21,946
Fair value of net identifi able assets acquired 21,946
Goodwill -
(b) Purchase consideration
$’000
Outfl ow of cash to acquire subsidiary 15,369
Less cash acquired (14,542)
Outfl ow of cash on acquisition 827
In addition to the outfl ow of cash in relation to the acquisition, 6,000,000 ordinary shares were issued in settlement of the equity component of the consideration. The fair value of the ordinary shares issued was $4,500,000.
In the event that certain pre-determined net sales volumes are achieved by the subsidiary, deferred consideration of up to $11,250,000 is payable. Of the deferred consideration, 50% is due to be settled in cash, with the remainder by an issue of ordinary shares. At the date of this fi nancial report, the fair value of the deferred consideration is $2,077,526.
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Notes to the Financial Statements- Continued
(c) Assets and liabilities acquiredThe assets and liabilities arising from the acquisition are as follows:
Acquiree’s carrying amount
$’000
Fair value$’000
Cash assets 14,542 14,542
Receivables 1,478 1,478
Financial assets at fair value through profi t or loss 3,045 3,045
Derivative fi nancial assets 226,151 226,151
Loans to investors 625,438 625,438
Plant and equipment 2,447 1,902
Intangible assets 3,078 3,069
Deferred tax assets 82,648 82,648
Other 11,833 11,833
Payables (3,738) (3,738)
Derivative fi nancial liabilities (227,666) (227,666)
Borrowings (563,063) (563,063)
Deferred tax liability (87,365) (87,365)
Other (66,328) (66,328)
Net assets 22,500 21,946
Net identifi able assets acquired 21,946
The initial book value of the plant and equipment and intangible assets acquired was adjusted to refl ect the fair value in accordance with Group policies.
Resolution Capital Limited
(a) Summary of acquisition of entity under joint control - prior yearPinnacle lnvestment Management Limited (‘Pinnacle’) (a majority owned subsidiary of Wilson HTM lnvestment Group Ltd) acquired, on 12 September 2007, 40% of the issued share capital of Foray Enterprises Ltd (‘Foray’), which owns 100% of the share capital of Resolution Capital Limited (‘Resolution’), a Sydney based asset manager which manages funds directly for a range of institutional clients across both domestic and global real estate securities portfolios. The purchase consideration in relation to this acquisition was fi nalised during the current fi nancial year.
An estimated purchase price allocation, which included an estimated deferred consideration component of $2,400,000, was completed and disclosed in the annual report of the Company for the year ended 30 June 2008.
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
$’000
Purchase consideration (refer to (b) below):
Cash paid 11,829
Direct costs relating to the acquisition 330
Total purchase consideration 12,159
Fair value of net identifi able assets acquired 3,147
Goodwill 9,012
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Notes to the Financial Statements- Continued
(b) Purchase consideration fi nalisation
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Outfl ow of cash to acquire interest in entity under joint control
Cash consideration 1,829 10,000 - -
Outfl ow of cash 1,829 10,000 - -
In the event that certain pre-determined revenue targets were achieved from the mandated clients of Resolution as at 30 September 2008, additional consideration of up to $8,800,000 was payable in cash. During the fi nancial year, an additional amount of $1,828,827 was paid in fi nal consideration, with an adjustment for the diff erence to the estimated amount being made to the cost of the investment in Foray as disclosed in (a) above.
41 SubsidiariesThe consolidated fi nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):
Equity holding
Name of entity Country of incorporation Class of security2009
%2008
%
Wilson HTM Limited Australia Ordinary Share 100 100
Wilson HTM Corporate Finance Limited Australia Ordinary Share 100 100
TMT Partners Pty Ltd Australia Ordinary Share 100 100
Wilson HTM Services Pty Ltd* Australia Ordinary Share 100 100
Wilson HTM Retirement Pty Ltd* Australia Ordinary Share 100 100
Wilson HTM Option Plan Managers Pty Ltd* Australia Ordinary Share 100 100
WHTM Funds Management Pty Ltd* Australia Ordinary Share 100 100
WHTM Capital Management Limited Australia Ordinary Share 100 100
Wilson HTM Investment Management Pty Ltd* Australia Ordinary Share 100 100
WIG Seed Investments Pty Ltd * Australia Ordinary Share 100 100
Next Financial Limited Australia Ordinary Share 100 –
Mosaic Risk Management Pty Ltd * Australia Ordinary Share 100 –
Next Financial Alternatives Pty Ltd * Australia Ordinary Share 100 –
Next Financial Investment Management Ltd Australia Ordinary Share 100 –
Next Financial Nominees Pty Ltd * Australia Ordinary Share 100 –
Next Financial Nominees No.2 Pty Ltd * Australia Ordinary Share 100 –
Pinnacle Investment Management Limited Australia Ordinary Share 83 86
Pinnacle Services Administration Pty Ltd * Australia Ordinary Share 83 86
Pinnacle RE Services Pty Ltd * Australia Ordinary Share 83 –
Pedmont Pty Ltd * Australia Ordinary Share 100 100
Additionally, the following managed funds have been consolidated in the results and balances of the Group. This is due to their being deemed by the Accounting Standards to be “controlled” by the Group based on the percentage unit holdings in the respective funds. This unit holding relates to the seed FUM invested by the Group in the funds as part of the start-up support provided to the boutique manager responsible for these funds.
Plato Australian Shares Core Fund Australia Units 79 96
Plato Market Neutral Fund Australia Units 63 76
*These subsidiaries have been granted relief from the necessity to prepare fi nancial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments
Commission.
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Notes to the Financial Statements- Continued
The Parent assesses its investment in each subsidiary for indications of impairment at least annually. Where such indicators are deemed to exist impairment testing is conducted in order to establish whether the recoverable amount is greater than the carrying amount. Where the carrying amount exceeds the recoverable amount, the asset is deemed to be impaired and the amount is charged to the profi t and loss statement.
For impairment testing purposes, the recoverable amount of a CGU is determined based upon value-in-use calculations. These calculations use cash fl ow projections based upon fi nancial budgets approved by management covering a fi ve year period. The growth rates do not exceed the long-term average growth rate for the business in which the CGU exists. Sensitivity analysis is also undertaken to test the sensitivity of the recoverable amount to movements in the various underlying assumptions.
42 Deed of cross guaranteeAll members of the Wilson HTM Investment Group Ltd except for Pinnacle Investment Management Limited and its subsidiaries (Pinnacle Services Administration Pty Ltd and Pinnacle RE Services Pty Ltd) and Next Financial Limited and its subsidiaries (Next Financial Alternatives Pty Ltd, Next Financial Investment Management Ltd, Next Financial Nominees Pty Ltd and Next Financial Nominees No.2 Pty Ltd) are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the entities have been relieved from the requirement to prepare a fi nancial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
The Deed of Cross Guarantee supports the banking facilities supplied by the Commonwealth Bank of Australia described in note 26.
(a) Consolidated income statement and a summary of movements in consolidated retained profi tsThe above companies represent a ‘Closed Group’ for the purposes of the Class Order.
Set out below is a consolidated income statement and a summary of movements in consolidated retained profi ts for the year ended 30 June 2009 of the Closed Group consisting of Wilson HTM Investment Group Ltd and all entities party to the deed of cross guarantee.
2009$’000
2008$’000
Income statement
Revenue from continuing operations 83,959 121,690
Employee benefi ts expense (34,079) (36,251)
Commissions and incentives expense (15,028) (27,490)
Depreciation and amortisation expense (2,465) (1,949)
Computers and communications expense (2,822) (2,341)
Transaction processing expenses (2,025) (2,873)
Market information expense (2,317) (2,584)
Travel and entertainment expense (1,540) (2,804)
Marketing and advertising expense (1,083) (2,381)
Property expense (4,177) (3,531)
Consultants fees (901) (739)
Corporate Finance service fee (1,457) (3,376)
Trail Fee - (325)
Finance cost expense (1,568) (2,631)
Legal and professional expense (1,078) (785)
Insurance expense (1,182) (771)
Other expenses (6,067) (10,291)
Fair value losses on fi nancial assets at fair value through profi t or loss (654) (1,908)
Impairment of goodwill - -
Profi t before income tax 5,516 18,660
Income tax expense (1,105) (4,483)
Profi t for the year 4,411 14,177
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Notes to the Financial Statements- Continued
2009$’000
2008$’000
Summary of movements in consolidated retained profi ts
Retained profi ts at the beginning of the fi nancial year 20,707 10,341
Profi t for the year 4,411 14,177
Correction of carried forward retained earnings (127) (940)
Dividends provided for or paid (4,786) (2,871)
Retained profi ts at the end of the fi nancial year 20,205 20,707
(b) Balance sheetSet out below is a consolidated balance sheet of the Closed Group consisting of Wilson HTM Investment Group Ltd and all its entities party to the deed of cross guarantee.
2009$’000
2008$’000
Current assets
Cash and cash equivalents 5,055 7,029
Trade and other receivables 52,333 66,385
Financial assets at fair value through profi t or loss 63,438 68,410
Other current assets 2,635 14,132
Total current assets 123,461 155,956
Non-current assets
Other fi nancial assets - 5,685
Property, plant and equipment 6,476 8,306
Deferred tax assets 7,254 9,946
Intangible assets 1,096 33
Other non-current assets 6,807 2,614
Total non-current assets 21,633 26,584
Total assets 145,094 182,540
Current liabilities
Trade and other payables 53,134 76,759
Borrowings 7,000 26,025
Provisions 2,057 8,205
Current tax liabilities 8 -
Other current liabilities 1,920 3,979
Total current liabilities 64,119 114,968
Non-current liabilities
Provisions 786 856
Other non-current liabilities 2,335 1,109
Total non-current liabilities 3,121 1,965
Total liabilities 67,240 116,933
Net assets 77,854 65,607
Equity
Contributed equity 55,918 43,725
Reserves 1,731 1,175
Retained profi ts 20,205 20,707
Total equity 77,854 65,607
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Notes to the Financial Statements- Continued
43 Investments accounted for using the equity method(a) Carrying amountsInformation relating to entities under joint control is set out below.
Ownership interest Consolidated Parent
Name of company Principal activity2009
%2008
%2009$’000
2008$’000
2009$’000
2008$’000
Unlisted
Plato Investment Management Limited Funds Management 35.9 37.0 - - - -
Palisade Investment Partners Limited Funds Management 32.3 22.8 120 - - -
Hyperion Holdings Limited Funds Management 41.5 42.8 910 1,126 - -
Foray Enterprises Pty Ltd Funds Management 33.2 34.2 11,583 12,436 - -
Solaris Investment Management Limited Funds Management 36.9 38.0 428 3,398 - -
Plenary Investment Management Limited Funds Management 20.7 - 3 - - -
13,044 16,960 - -
Each of the above entities under joint control is incorporated in Australia.
(b) Movements in carrying amounts
Consolidated
2009$’000
2008$’000
Carrying amount at the beginning of the fi nancial year 16,960 10
Share of (loss) / profi t after income tax (523) 137
Investments in entities under joint control 197 16,548
Dividends received (480) (999)
Amortisation of management rights (288) -
Transfer on de-consolidation of subsidiary - 1,134
Return of shareholders contribution (2,350) -
Reduction in deferred compensation payment for investment (571) -
Application of investment in entities under joint control against outstanding loan balance 99 130
Carrying amount at the end of the fi nancial year 13,044 16,960
(c) Share of entities under joint control profi ts or losses
Consolidated
2009$’000
2008$’000
(Loss) / profi t before income tax (747) 197
Income tax benefi t / (expense) 224 (60)
(Loss) / profi t after income tax (523) 137
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Notes to the Financial Statements- Continued
(d) Summary of entities under joint control
Consolidated
2009$’000
2008$’000
Current assets 3,908 4,671
Non-current assets 1,567 1,353
Total assets 5,475 6,024
Current liabilities 2,677 1,957
Non-current liabilities 1,406 543
Total liabilities 4,083 2,500
Net assets 1,392 3,524
(e) Share of entities revenue, expenses and results
Consolidated
2009$’000
2008$’000
Revenues 7,050 4,617
Expenses (7,797) (4,420)
Total share of entities revenue, expenses and results (747) 197
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Notes to the Financial Statements- Continued
44 Reconciliation of profi t aft er income tax to net cash infl ow from operating activities
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Profi t for the year (167) 12,924 1,945 13,750
Depreciation 2,359 1,834 - -
Amortisation 889 174 - -
Provision for bad debts 299 - - -
Other provisions - - - -
Provision for employee entitlements 109 - - -
Share based payments to employees 556 - 117 -
Impairment of investment - - - -
Loss on disposal of property, plant and equipment and intangibles - 278 - -
Non-cash employee expense - 68 - 673
Deferred consideration for entity under joint control - (2,400) - -
Net loss on fi nancial assets at fair value through profi t or loss 2,064 2,999 333 1,284
Derivative fi nancial instruments received in lieu of revenue (807) - - -
Fair value adjustment on loans 218 - - -
Decrease / (increase) in trade and other receivables 13,207 58,757 147 (275)
Decrease / (increase) in investments 20,666 (6,433) - 50,592
(Increase) / decrease in other income receivable (511) 10,228 109 (98)
Decrease / (increase) in deferred tax assets 17,635 (6,133) (353) (1,371)
Decrease / (increase) in other prepayments 805 451 - -
Increase in instalment receivable (24,099) - - -
Decrease in prepaid put option premiums 168 - - -
Decrease in trade and other payables (29,782) (64,321) (1,830) (353)
Increase / (decrease) in investments accounted for using the equity method 1,003 (1,401) - -
(Decrease) / increase in provision for income taxes payable (6,813) 4,528 (7,067) 5,314
(Decrease) / increase in other current assets 185 - - -
Decrease in provision for deferred income tax liability (17,239) (33) - -
(Increase) / decrease in loans to other entities - 130 (3,159) (51,053)
Decrease in loans to investors 64,046 - - -
Increase in employee entitlements - 41 - -
Increase in unearned interest income 5,675 - - -
Increase in instalment payable 20,664 - - -
Decrease in pre-received put option premium (6,520) - - -
Net cash (outfl ow) /infl ow from operating activities 64,610 11,691 (9,758) 18,463
Non cash investing and fi nancing activities
The value of shares issued in relation to the acquisition of Next Financial Limited amounted to $4,500,000 (note 40).
During the year, a subsidiary, Pinnacle Investment Management Limited, entered into a deed of agreement whereby funds which had previously been contributed to an entity under joint control were converted from equity to a loan receivable. The amount of equity converted was $1,850,000.
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Notes to the Financial Statements- Continued
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45 Earnings per share(a) Basic earnings per share
Consolidated
2009Cents
2008Cents
Profi t from continuing operations attributable to the ordinary equity holders of the Company 2.4 13.2
(b) Diluted earnings per share Consolidated
2009Cents
2008Cents
Profi t from continuing operations attributable to the ordinary equity holders of the Company 2.2 12.0
(c) Reconciliations of earnings used in calculating earnings per shareConsolidated
2009$’000
2008$’000
Basic earnings per share
(Loss) / profi t for the year (167) 12,924
Profi t / (loss) for the year attributable to minority interests 2,356 (902)
Profi t from continuing operations attributable to the ordinary equity holders of the Company used in calculating basic earnings per share
2,189 12,022
Diluted earnings per share
(Loss) / profi t for the year (167) 12,924
Profi t / (loss) for the year attributable to minority interests 2,356 (902)
Profi t from continuing operations attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share
2,189 12,022
(d) Weighted average number of shares used as the denominatorConsolidated
2009Number
2008Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
91,126,368 91,402,060
Adjustments for calculation of diluted earnings per share:
Shares to be issued as deferred consideration 1,385,018 -
Options - 4,411,402
Treasury stock held by employee share trusts 6,052,168 4,305,615
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share
98,563,554 100,119,077
(e) Information concerning the classifi cation of securitiesOptions granted to employees under the Wilson HTM Investment Group Employee Option Share Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 46.
(f) Alternate diluted calculation2009
Cents2008
Cents
Alternate diluted earnings per share 2.4 12.2
Alternate diluted earnings per share is presented after adjusting the number of shares on issue used in the basic calculation (91,126,368) for potential ordinary shares, which comprise the weighted average of options on issue (2009: 7,125,103; 2008: 8,221,644) and treasury stock held by employee share trusts (2009: 6,052,168; 2008: 4,305,615), and as if the net proceeds from the exercised options achieved a return comparable with the Company’s cost of debt during the year.
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Notes to the Financial Statements- Continued
46 Share based payments(a) Equity Performance PlanThe establishment of the Wilson HTM Investment Group Ltd Equity Performance Plan was approved by the Board during the 2006 fi nancial year.
Participation in the plan is by invitation only. Participants are provided with an interest free loan to acquire an interest in the scheme trust in proportion to the number of shares allocated under the plan. The scheme trust holds the shares allocated under the scheme for the benefi t of the scheme participant until all vesting conditions are satisfi ed.
The scheme trust has acquired all shares necessary to fulfi l its obligations under the plan. A total of 2,965,000 (2008 – 3,585,225) shares have been allocated under the scheme to 22 (2008 – 26) participating employees. No interests were granted during either the current or the prior year.
Allocated shares may only be redeemed when the service conditions set out in the plan have been satisfi ed. All performance conditions associated with the plan have been deemed by the Board to have been satisfi ed.
Any dividends paid in respect of the shares will be used to repay any amounts owing on the interest free loans provided to participants.
Fair value of interests grantedThe assessed fair value at grant date of interests granted during the year ended 30 June 2007 was $0.46 per interest. The fair value at grant date was independently determined using a Black-Scholes option pricing model taking into account the exercise price, the term of the interest, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the interest.
The model inputs for interests granted during the year ended 30 June 2007 included:
(a) interests are granted for consideration of $0.89 per share, have a three year life, and 33% of each tranche vests and is exercisable after each of the three vesting periods
(b) exercise price: $0.89
(c) grant date: 20 November 2006
(d) share price at grant date: $0.89
(e) expected price volatility of the Company’s shares: 15.8%
(f) expected dividend yield: 7.0%
(g) risk-free interest rate: 5.91%
The interests granted under the scheme are treated as an equity settled share based payment. The accounting treatment is to expense the fair value of the interest over the vesting period with a corresponding increase in share based payments equity reserve.
No further interests will be issued under this scheme.
(b) Employee Option Share PlanThe establishment of the Wilson HTM Investment Group Employee Option Share Plan (‘EOSP’) was approved by the Board during the 2007 fi nancial year. The EOSP is designed to provide long-term incentives for senior managers and above (including Executive and Non-executive Directors) to deliver long-term shareholder returns. Under the plan, participants are granted options which only vest if certain service conditions are met. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefi ts.
Under the plan, participants are granted options which only vest if the employees are still employed by the Group at the end of the vesting period. Once vested, the options remain exercisable for a period of one year.
Options granted under the plan carry no dividend or voting rights.
The options are granted for nil consideration and have an exercise price of $1.33.
Grant Date Expiry date Exercise
price
Balance at start of the
yearNumber
Granted during the
year Number
Exercised during the
yearNumber
Forfeited during the
yearNumber
Balance at end of the year
Number
Vested and exercisable
at end of the yearNumber
Consolidated and parent – 2009
14 May 2007 11 May 2011 $1.33 8,100,000 Nil (412,500) (2,962,500) 4,725,000 2,362,500
Total 8,100,000 - (412,500) (2,962,500) 4,725,000 2,362,500
Weighted average exercise price $1.33 $- $1.33 $1.33 $1.33 $1.33
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Notes to the Financial Statements- Continued
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Consolidated and parent – 2008
14 May 2007 11 May 2011 $1.33 8,250,000 - - (150,000) 8,100,000 2,700,000
Total 8,250,000 - - (150,000) 8,100,000 2,700,000
Weighted average exercise price $1.33 $– $ – $1.33 $1.33 $ 1.33
Options forfeited were as a result of the resignation of plan members from the Group and upon the expiry of the initial tranche of options.
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.3 years (2008 – 1.87 years).
Fair value of interests granted
The assessed fair value at grant date of options granted during the year ended 30 June 2007 was $0.12 per option. The fair value at grant date was independently determined using a Black-Scholes option pricing model taking into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2007 included:
(a) options are granted for no consideration and vest based on fulfi lment of specifi ed service conditions. Vested options are exercisable for a period of one year after vesting.
(b) exercise price: $1.33
(c) grant date: 14 May 2007
(d) vesting date: 14 May 2008, 14 May 2009, 14 May 2010
(e) share price at grant date: $0.85
(f) expected price volatility of the Company’s shares: 30%
(g) expected dividend yield: 6.0%
(h) risk free interest rate: 6.16%
(c) Long-term Incentive Share PlanThe establishment of the Wilson HTM Investment Group Long-term Incentive Share Plan was approved by the Board during the 2008 fi nancial year. Participation in the plan is by invitation only.
Participants are invited to salary sacrifi ce a portion of their salary or incentives in order to acquire shares. The salary sacrifi ce period is over 59 months with contributions made in equal instalments. Shares vest in line with the salary sacrifi ce amounts made. The scheme trust holds the shares allocated under the scheme for the benefi t of the scheme participant until all vesting conditions are satisfi ed.
Participants salary sacrifi ce the cost of the shares in equal allotments over a 59 month period with the applicable number of shares vesting at the end of each month.
During the year ended 30 June 2009 1,680,004 shares were issued to 75 participating employees. The scheme trust has acquired all shares necessary to fulfi l its obligations under the plan. A total of 2,949,602 (2008 –1,403,492) shares have been allocated under the scheme to 95 (2008 – 40) participating employees.
Allocated shares may only be redeemed when the service conditions set out in the plan have been satisfi ed.
Any dividends paid in respect of the shares will be paid by the Trustee to the participants.
Set out below are summaries of options granted under the plan:
Fair value of shares granted
The assessed fair value at grant date of interests granted during the year ended 30 June 2006 was $2.47 per interest and is expensed equally over the period from grant date to vesting date. The fair value at grant date was independently determined using a Binomial Approximation Option model taking into account the exercise price, the term of the interest, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the interest.
The model inputs for shares granted during the year ended 30 June 2007 included:
(a) interests are granted for consideration of $2.00 per share, have a 59 month life, and vest in 60 equal tranches.
(b) grant date: 4 June 2007
(c) share price at grant date: $2.00
(d) expected price volatility of the Company’s shares: 30%
(e) expected dividend yield: 3.631%
(f) risk free interest rate: 6.26%
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(d) Expenses arising from share-based payment transactionsTotal expenses arising from share-based payment transactions recognised during the year as part of employee benefi t expense were as follows:
Consolidated Parent
2009$’000
2008$’000
2009$’000
2008$’000
Equity participation plan 321 162 321 -
Options issued under employee option share plan 87 137 - -
Long-term incentive share plan 148 283 - -
556 582 321 -
Notes to the Financial Statements- Continued
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Directors’ DeclarationIn the Directors’ opinion:
(a) the fi nancial statements and notes set out on pages 36 to 98 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Company’s and consolidated entity’s fi nancial position as at 30 June 2009 and of their performance for the fi nancial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group (note 42) will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 42.
The Directors have been given the declarations by the Managing Director and Chief Financial Offi cer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Mr S M WilsonDirectorSydney26 August 2009
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Independent Audit Report
PricewaterhouseCoopersABN 52 780 433 757
Riverside Centre123 Eagle StreetBRISBANE QLD 4000GPO Box 150BRISBANE QLD 4001DX 77 BrisbaneAustraliawww.pwc.com/auTelephone +61 7 3257 5000Facsimile +61 7 3257 5999
Independant auditor’s report to the members of Wilson HTM Investment Group Ltd Report on the fi nancial report
We have audited the accompanying fi nancial report of Wilson HTM Investment Group Ltd (the Company), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash fl ow statement for the year ended on that date, a summary of signifi cant accounting policies, other explanatory notes and the directors’ declaration for both Wilson HTM Investment Group Ltd and the Wilson HTM Investment Group (the consolidated entity). The consolidated entity comprises the Company and the entities it controlled at the year’s end or from time to time during the fi nancial year.
Directors’ responsibility for the fi nancial report
The directors of the Company are responsible for the preparation and fair presentation of the fi nancial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the fi nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the fi nancial report, comprising the fi nancial statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the fi nancial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
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Independent Audit Report- Continued
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the fi nancial report of Wilson HTM Investment Group Ltd is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entity’s fi nancial position as at 30 June 2009 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 20 - 29 of the directors’ report for the year ended 30 June 2009. 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.
Auditor’s opinion
In our opinion, the Remuneration Report of Wilson HTM Investment Group Ltd for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Timothy J. Allman BrisbanePartner 26 August 2009
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The shareholder information set out below was applicable as at 28 August 2009.
Shares On IssueDistribution of equities securities
Range No. of Shareholders No. of Shares %
1-1,000 406 362,384 0.35
1,001-5,000 688 1,903,974 1.85
5,001-10,000 180 1,532,215 1.49
10,001-100,000 199 6,110,531 5.93
100,001 and over 100 93,117,546 90.38
Total 1,573 103,026,650 100.00
Holdings of less than a marketable parcel 60 – –
Twenty largest shareholders
Ordinary Shares %
Deutsche Australia Limited 20,502,303 19.90
Warragai Investments Pty Ltd 15,538,933 15.08
Mr Alexander William Macdonald Grant 3,797,603 3.69
Meadon NZ 1 Limited 3,284,245 3.19
Mr David Francis Cleary 3,005,925 2.92
Mr David Noel Groth 2,988,919 2.90
Employee Share Plan Managers Pty Ltd <EPP A/C> 2,965,000 2.88
WHTM Employee Share Plan Managers Pty Ltd <LTISP A/C> 2,949,602 2.86
Mr Garry Patrick Lowrey 2,554,268 2.48
Usinoz Pty Ltd <Ihlenfeldt Family A/C> 1,791,968 1.74
CIBAW Pty Ltd <The Bligh Family A/C> 1,511,337 1.47
NIAS Investments Pty Ltd 1,500,000 1.46
Mr Barry Athol Bicknell 1,403,295 1.36
Mr Joseph James Pagliaro & Mrs Michelle Mary Pagliaro
<The Jomipag Growth A/C> 1,366,163 1.33
GWR Financial Services Pty Ltd <Alderley Investments A/C> 1,329,810 1.29
Mast Capital Pty Ltd <The Keyser Family A/C> 1,101,898 1.07
Lodge Road Pty Ltd <Lodge Road Super Fund A/C> 1,081,080 1.05
Earlstone Nominees Pty Ltd <S Wilson Investment A/C> 1,020,000 0.99
Mr Gregory John Burton 969,271 0.94
Mrs Catherine Alexis Grant 958,648 0.93
Total 71,620,268 69.53
Shareholder InformationF
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Substantial ShareholdingsThe names of the shareholders who have notifi ed the Company of a substantial holding in accordance with section 671B of the
Corporations Act 2001 are:
Substantial Shareholder No. of shares % of total
Deutsche Australia Limited 20,502,303 19.90
Warragai Investments Pty Ltd 15,538,933 15.08
Wilson HTM Investment Group Ltd 6,000,000 5.82
Note 1: Wilson HTM Investment Group Ltd has a relevant interest by virtue of various escrow restriction deeds entered into with shareholders.
Voting RightsOn a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Voluntary RestrictionsDetails of the shares that are held in voluntary escrow are as follows:
Escrow Terms No. of shares
Ordinary Fully Paid Shares Escrowed until 1 October 2009 2,000,000
Ordinary Fully Paid Shares Escrowed until 1 April 2010 2,000,000
Ordinary Fully Paid Shares Escrowed until 1 October 2010 2,000,000
Options On IssueDistribution of option securities:There are 4,725,000 options on issue.
The options are held by Wilson HTM Option Plan Managers Pty Ltd as trustee for the WHIG Employee Option Share Plan.
The options are not listed.
Voting RightsThere are no voting rights attaching to the options.
Shareholder Information- Continued
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Corporate DirectoryRegistered and other Offices
Queensland
(Registered and Head Office)
Brisbane
Level 38, Riparian Plaza
71 Eagle Street
Brisbane QLD 4000
Telephone 07 3212 1333
Gold Coast
Suite 2306, Level 3
Southport Central Tower 2
5 Lawson Street
Southport QLD 4215
Telephone 07 5509 5500
Dalby
34 Condamine Street
Dalby QLD 4405
Telephone 07 4660 8000
Hervey Bay
Cnr Bay Drive & Central Avenue
Pialba QLD 4655
Telephone 07 4197 1600
Townsville
Level 1/315 Ross River Road
Aikenvale QLD 4810
Telephone 07 4725 5787
New South Wales
Sydney
Level 26, Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone 02 8247 6600
Level 14
167 Macquarie Street
Sydney NSW 2000
Telephone 02 9251 6700
Victoria
Melbourne
Level 11, 8 Exhibition Street
Melbourne VIC 3001
Telephone 03 9640 3888
Geelong
Suite 5, 74 Gheringhap Street
Geelong VIC 3220
Telephone 03 5225 1500
Wilson HTM Investment Group LtdIncorporated in Queensland on 23 April 2002
ABN22 100 325 184
DirectorsSteven Wilson, Executive Chairman
Ian Fraser, Deputy Chairman and Non-executive Director
Garry Lowrey, Managing Director
Chum Darvall, Non-executive Director
Paul Harris, Non-executive Director
Steven Skala, Non-executive Director
Warren McLeland, Non-executive Director
Ann Sherry AO, Non-executive Director
Company SecretaryIan Harrison
Share RegistryComputershare Investor Services Pty Limited
Level 19, 307 Queen Street
Brisbane QLD 4000
Telephone 1300 552 270
ASX CodeWIG
Wilson HTM Investment Group Ltd
Shares are listed on the Australian Securities Exchange
BankersCommonwealth Bank of Australia
Fortis Bank Nederland (Holding) N.V.
Westpac Banking Corporation
AuditorPricewaterhouseCoopers
Website Addresswww.wilsonhtm.com.au
* The Wilson HTM Priority Growth Fund ARSN 117 083 762 ('Fund') No. 1 ranking is based on 3 year investment returns for all
Australian Equity investment trusts. The 5 star Morningstar rating is based on 3 year risk-adjusted returns for the Australian
mid/small growth funds category. Investment trust returns are to 30 June 2009 and sourced from © Morningstar Australasia Pty
Ltd, visit www.morningstar.com.au/fsg.
^ Net returns as at 30 June 2009. The Fund's inception date is 4 July 2005. Past performance is not a reliable indicator of future
performance. This information has been prepared without taking into account your objectives, financial situation or needs.
Interests in the Fund are issued by WHTM Capital Management Limited ABN 29 082 494 362 AFSL 238371. Please read the Fund’s
Product Disclosure Statement before making an investment decision.
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www.wilsonhtm.com.au
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Source: 2009. For the 6 month period end 30 June 2009 data is from ASX. ©2009 Standard & Poor's, a Division of The McGraw-Hill Companies, Inc (S&P) and ASX Limited ABN 98 008 624 691 (ASX) 2009.All rights reserved. This material is reproduced with the permission of ASX and S&P. This material should not be reproduced, stored in a retrieval system or transmitted in any form whether in whole or in part without the prior written permission of ASX and S&P”.
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