Atlantic Union Bankshares Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT CONTENTS Chair’s Message CEO’s Message Directors’ Report Environmental, Social and Governance Report Auditor’s Independence Declaration Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Dividend Details Corporate Information 1 3 5 53 74 75 76 77 79 80 140 141 147 149 150 AUB GROUP ANNUAL REPORT 2023CHAIR’S MESSAGE David Clarke Chair Dear Shareholders, On behalf of the Board of Directors, it is my great pleasure to present AUB Group’s 2023 Financial Year (FY23) performance and Annual Report. FY23 has seen a continuing cycle of economic uncertainties, including inflation, geopolitical headwinds, environmental challenges, and capital constraints for the insurance markets. AUB Groups’ partner businesses play a pivotal role in assisting clients navigate the environment by providing risk management and certainty to their business operations. FINANCIAL PERFORMANCE AND CAPITAL STRENGTH FY23 was a strong year for AUB Group as we delivered against our strategic agenda. The financial performance exceeded the top-end of our upgraded guidance with the Underlying Net Profit After Tax (UNPAT) increasing by 74.4% compared to FY22, to $129.1m, while maintaining a strong balance sheet and capital position. Divisionally, all key metrics across all operating divisions delivered growth. Despite a challenging and uncertain macroeconomic environment, our balance sheet remains strong, with the corporate entity being cash generative with $133.2m in operating cashflow, and access to ~$256.8m in cash and debt funding. The Group also successfully completed a $165m equity capital raising in May 2023 to create funding capacity for our pipeline of acquisition opportunities. PROGRESS ON STRATEGIC AGENDA The Group’s focus and delivery of its strategic priorities remains core to our strong financial performance. Key highlights during the year include strategically important and accretive acquisitions of SRS Broking in Australian Broking, ICIB in New Zealand, Strata Unit Underwriters in Agencies, as well as a number of bolt-ons, equity steps and restructures across the network. The business also completed five divestments to realign our portfolio. Our agencies portfolio is positioned for continued growth, writing more than $900m premium in FY23, an increase of 34% compared to FY22, with opportunities being explored to deliver increased capacity to existing binders as well as expanding capability into new segments, via Tysers. In FY23 we completed our significant and transformative acquisition of leading London and Lloyd’s broker Tysers with its specialist capabilities and global distribution. The transaction is designed to expand our role across the insurance broking value chain and increase our broker and client proposition by providing enhanced insurance capacity and market access. The transaction was completed on 30 September 2022 and has resulted in a much larger, more dynamic, and pleasingly, a more balanced (geographically and market segment) portfolio for the Group. Since completion, the business has performed ahead of forecasts, with both revenue and profitability growing strongly. A key driver has been AUB’s execution of cost reduction levers including optimising the operating and governance model. Looking ahead, the Group’s FY23 strategic focus will be primarily a continuation of FY23 objectives, with a particular focus on New Zealand business performance, technology delivery, and the successful integration of Tysers. DIVIDENDS As a result of our financial performance, the Directors have declared a final fully franked dividend of 47.0 cents per share, payable on 9 October 2023. This, together with the interim dividend of 17.0 cents, results in a full year fully franked dividend of 64.0 cents, an increase of 16.4% and translates into a payout ratio of 52.8% of UNPAT. Strong business results as well as disciplined M&A also led to underlying Earnings per Share increasing by 33.7% compared to FY22. 1 AUB GROUP ANNUAL REPORT 2023CHAIR’S MESSAGE (CONTINUED) ENVIRONMENT, SOCIAL AND GOVERNANCE Our recent focus on improving the Group’s environmental, social and governance (ESG) practices have resulted in a number of key initiatives being implemented and further planned. Our approach as well as progress in FY23 is reported on page 53 of this report. Key highlights include: – AUB Group was recertified as a ‘Great Place to Work’ – Roll-out of AUB Giving (employees contribute pre-tax donations, with AUB Group matching) and Community Day (day of paid volunteer leave to participate in community activities) – Continued support via donations to, and sponsorship of, community and sporting clubs around Australia – Ongoing trusted partner relationships with clients demonstrated by premium retention of 91% With respect to Governance, in FY23 Richard Deutsch joined the board. Richard is a Non-Executive Director and Chair of the Board Audit Committee of Bendigo & Adelaide Bank Limited, Chair of the Movember Foundation and the Stephenson Mansell Group. Previously, Richard was the Chief Executive Officer of Deloitte Australia from 2018 to 2021. Prior to the CEO role, Richard was the Managing Partner of the Audit & Advisory Practice and a member of the Global Audit & Advisory Leadership Team. Richard’s career includes more than 25 years working with PwC, including nine years on PwC’s Australian executive and brings considerable experience in finance and domestic and international insurance auditing to the AUB Board. Post completion of the Tysers acquisition, the business appointed Andrew Kendrick as a Non-Executive Director to the Tysers Board. The AUB Group Board also welcomed Andrew to the Group Board as a Non-Executive Director. Andrew is a former Non-Executive Director of Lloyd’s of London, Lloyd’s Market Association and Russian Reinsurance Co. and has more than 40 years’ experience in the insurance industry in the UK, Europe and Bermuda. Andrew’s executive career includes leadership positions with Chubb and Ace, culminating in the role of President & Chairman, Chubb European Group. Andrew’s strong knowledge, experience, expertise, and relationships in the London Wholesale Insurance market have added further depth to the AUB Board. Shareholders will be asked to formally elect both Andrew and Richard at the 2023 Annual General Meeting. On 23 August Paul Lahiff retires from the AUB Group Board after almost 8 years as a Non-Executive director. Paul has made an outstanding contribution to the Company during a period of strong growth, particularly in his role as Chair of the Remuneration and People Committee. We wish him every success in the future. CONCLUSION I would like to conclude by thanking all our employees and partners for their contributions during the year. Another strong result in FY23 is testament to their effort, discipline, and commitment to the success of the business. I’d also like to acknowledge the ongoing support from our clients and shareholders who continue to place their trust in our business and look forward to further updating you on our progress at our AGM in November. David Clarke Chair 2 AUB GROUP ANNUAL REPORT 2023CEO’S MESSAGE Michael Emmett Chief Executive Officer and Managing Director Dear Shareholders, I am delighted with AUB Group’s FY23 results and we delivered another strong performance across all divisions. Australian Broking continued its focus on portfolio optimisation activities, Agencies accelerated its scale-up and market expansion, we created momentum for the turn- around in New Zealand and BizCover leveraged the benefits of platform scale and business maturity. These results were delivered against the successful completion of our strategically important acquisition of Tysers in October 2022. OVERALL FINANCIAL PERFORMANCE In FY23, we grew underlying revenue of $1.11bn by 61.2% in comparison to FY22, while Underlying NPAT grew by 74.4% to $129.1mn. To deliver these Underlying NPAT results, our business achieved 12.3% organic growth and 17.2% acquisition growth, excluding Tysers, while our acquisition of Tysers enabled a further 44.9% net growth, after allowing for the increased net cost of funding. All divisions delivered growth in revenue and profitability with revenue growth ranging between 13.7% to 34.3%, margin expansion between 140bps and 290bps and increases in Profit before tax attributable to AUB shareholders of between 18.9% and 59.4%. As a result, EPS grew by 33.7% on the prior year and our three-year average Return on Invested Capital ending on 30 June 2023 was 12.6%. The business continues to be strongly cash generative with underlying NPAT fully converted to cash for FY23. The Group’s net debt position has reduced from $690mn on 31 Dec 2022 to $474mn on 30 June 2023, with our leverage ratio reducing to 1.71 on 30 June 2023. Cash and undrawn debt on 30 June 2023 was $256.8mn, allowing substantial headroom for future acquisition activity. DIVISIONAL PERFORMANCE Australian Broking had another very active year as we continued to optimise our portfolio. During FY23, we completed three acquisitions, four equity step-ups, six equity step-downs, five divestments, and two portfolio consolidations with several other restructures in parallel, indicating the ongoing opportunity to optimise the broking portfolio and the consequential potential for margin expansion. The division continues to grow revenue strongly while expanding margin. BizCover delivered further margin improvement as the platform continues to scale. In FY23, BizCover exceeded AUB’s medium-term margin target for this business of 40% with margin expanding both in Australian and international markets. In addition to the financial performance, BizCover continues to operate with a market-leading NPS of +71 and added new insurers and products to the platform, enhancing its future growth potential. During FY23, Agencies grew revenue by 34.3%, expanded margin by 140bps while EBIT grew by 39.5%. In early FY21 we communicated our strategy to build the Agency division to $1bn of premium within five years, split across three areas of General Commercial, Specialty, and Strata. We are delighted with the strong progress toward this goal with agency premium in FY23 exceeding $900mn. Our strategic focus on a turn-around in the New Zealand business has progressed strongly with the business achieving organic growth of 42.5%, as well as acquisition growth of 17.9%. The acquisition of ICIB and its merger with BWRS created one of New Zealand’s leading brokerages. This supported by the ongoing quality of the remaining broking businesses and the NZbrokers network have delivered a strong rebound in our results. Our new broking technology solution, Lola, achieved some key milestones, including integrating with three primary insurance partners and implementation across two pilot branches. We are now working with the systems vendor to resolve some technical issues before recommencing. 3 AUB GROUP ANNUAL REPORT 2023CEO’S MESSAGE (CONTINUED) TYSERS UPDATE In FY23, we completed our acquisition of Tysers. During the nine-month period of ownership, the business delivered an EBIT margin of 26.1% which compares favorably with the ~20% normalised margin we announced as part of the acquisition in May 2022. At the time of acquisition, we also communicated overall cost and revenue run-rate synergy targets of $25mn per annum. In FY23, we have made strong progress in implementing the planned cost reduction initiatives and achieved $2.9mn of in-year savings with these expected to deliver annual run-rate savings of $7.6mn. Various additional cost actions have been identified for implementation that will deliver the balance of the $15mn cost target on a run-rate basis during FY24. We also committed to a synergy target of $10mn from increased income arising largely from the placement of individual risks and binders by members of the AUB network. Already during the latter stages of FY23, Tysers earned $0.4mn income from AUB brokers’ client risk placements while a focus by AUB has resulted in incremental income of $2.6mn earned from a more disciplined approach to investment. OUTLOOK In FY24, we forecast underlying net profit after tax to be in the range of $154mn to $164mn, representing growth of 19.3% to 27% on FY23. The profit contribution from acquisition activity of 3.9% reflects only those M&A activities that are known and of a very high certainty. The Group continued to expand margins across all divisions in FY23. The strong momentum and good progress made over the past few years has enabled us to upgrade the medium-term margin targets for four of the five divisions with Australian Broking, New Zealand and Tysers targets increasing by 2% and BizCover increasing the target by 10% to 50%. The target for Agencies is unchanged. 4 ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) AUB Group’s business model entails distributed ownership and partnership with hundreds of operating shareholders who take individual ownership in supporting the ESG goals that are specific and relevant to the communities in which they operate. The model works well because we allow for differences in culture, processes, work styles and ambitions in each of these businesses. Gender diversity in most businesses and at most levels is excellent however we need to improve significantly at senior levels. Our teams across our businesses and geographies are passionate about workplace giving and supporting those in need. The Group has adopted corporate platforms such as the Do Good Be Better donation matching and volunteering programme for Head Office and Agency staff. In parallel, every one of our businesses has an active involvement in charitable giving and a focus on diversity and equality in each workplace. We are pleased to be once again accredited as a Great Place to Work. With regards to the Environment, we identified and implemented actions to reduce our carbon impacts from air travel by implementing a validated and audited carbon- offset partner for all flights, transitioned our Corporate Head Office energy consumption to renewable sources and rolled out new workplace technologies, including energy-efficient wide-screen monitors that reduce the need for printing. We are also commencing a programme to work with each of our teams to identify ways for them to transition to renewable energy sources for their homes, with company assistance offered as a way to afford the transition. In FY23, we were pleased to maintain our AA rating of our ESG initiatives from MSCI. CONCLUSION FY23 was a busy year with multiple imperatives, and our progress and performance is a testament to the AUB team’s ability to manage a complex portfolio of initiatives and deliver strongly against our priorities. I want to thank our clients who trust us with their business- critical risks; grateful to our teams who go above and beyond to deliver for our clients; and acknowledge our people for their commitment to the success of the Group. Given our foundations, I am confident that AUB is well placed for continued out-performance in future years. I look forward to updating you on our progress. Michael Emmett Chief Executive Officer and Managing Director AUB GROUP ANNUAL REPORT 2023DIRECTORS’ REPORT 5 AUB GROUP ANNUAL REPORT 2023DIRECTORS’ REPORT YEAR ENDED 30 JUNE 2023 BOARD OF DIRECTORS Your Directors submit their report for the year ended 30 June 2023. The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. David C. Clarke LLB, MAICD Independent Non-Executive Chair Appointed: Non-Executive Director from 3 February 2014; Chair from 26 November 2015 Board Committees: Board Audit & Risk, Nomination (Chair), Remuneration & People Background and experience: David Clarke was Chief Executive Officer of Investec Bank (Australia) Limited from 2009 to 2013. Prior to joining Investec Bank, he was the CEO of Allco Finance Group and a Director of AMP Limited, following five years at Westpac Banking Corporation where he held a number of senior roles, including Chief Executive of BT Financial Group. David has 40 years’ experience in investment banking, funds management, property and retail banking. He was previously employed at Lend Lease Corporation Limited where he was an Executive Director and Chief Executive of MLC Limited. David is the Chair of Charter Hall Group Limited, Fisher Funds Management Limited and Resolution Life Australasia Limited. Directorships of other listed entities (last 3 years): – Charter Hall Group Limited (April 2014 to present) Michael P.C. Emmett B Com, H.Dip. Acc CA (SA) CEO and Managing Director Appointed: 11 March 2019 Board Committees: Nil Background and experience: Mike Emmett is a Director of various companies within the Group, including Tysers Insurance Brokers Limited. Prior to joining AUB Group, he was Group CEO for Cover-More, previously an ASX-listed global travel insurer and now part of the Zurich Group. Earlier, Mike was QBE Group Executive of Operations and EY Managing Partner for Financial Services Advisory. Prior to moving to Australia, Mike held senior roles in Finance and Consulting in the UK and South Africa. Directorships of other listed entities (last 3 years): – 1ST Group Limited (January 2019 to May 2021) 6 AUB GROUP ANNUAL REPORT 2023BOARD OF DIRECTORS (CONTINUED) Richard D. Deutsch B Econ, FCA Independent Non-Executive Director Peter G. Harmer Harvard Advanced Management Program Independent Non-Executive Director (from 22 July 2021) Appointed: 3 November 2022 Board Committees: Board Audit & Risk, Nomination, Remuneration & People (from 3 November 2022) Appointed: 22 July 2021 Board Committees: Board Audit & Risk, Nomination, Remuneration & People Background and experience: Richard Deutsch was the Chief Executive Officer of Deloitte Australia from 2018 to 2021. Prior to the CEO role, Richard was the Managing Partner of the Audit & Advisory Practice and a member of the Global Audit & Advisory Leadership Team. Richard’s career also includes more than 25 years working with PwC, including nine years on PwC’s Australian executive. Richard is a Non-Executive Director of Bendigo & Adelaide Bank Limited. He is the Chair of the Movember Foundation and Chair of the Stephenson Mansell Group, a Champions of Change Coalition Convenor and Advisor to CEOs and Boards. Directorships of other listed entities (last 3 years): – Bendigo and Adelaide Bank Limited (September 2021 to present) Background and experience: Peter Harmer was previously Managing Director and Chief Executive Officer of Insurance Australia Group (IAG) Limited and is currently a Non-Executive Director of Commonwealth Bank of Australia Limited and nib holdings limited, and the Chair of Lawcover Insurance Pty Limited. Prior to IAG he was Chief Executive Officer of Aon Limited UK and a member of Aon’s Global Executive Board, and spent seven years as Chief Executive Officer of Aon’s Australian, New Zealand and Pacific operation. Peter has over 40 years’ experience in the industry spanning insurance, reinsurance broking, and insurance broking. He is a Non-Executive Director of Tysers Insurance Brokers Limited. Directorships of other listed entities (last 3 years): – Commonwealth Bank of Australia Limited (March 2021 to present) – nib holdings limited (July 2021 to present) – Insurance Australia Group Limited (November 2015 to November 2020) 7 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023BOARD OF DIRECTORS (CONTINUED) Andrew J. Kendrick Independent Non-Executive Director Appointed: 27 January 2023 Board Committees: Board Audit & Risk, Nomination, Remuneration & People (from 27 January 2023) Background and experience: Andrew Kendrick is a former Non-Executive Director of Lloyd’s of London, Lloyd’s Market Association and Russian Reinsurance Co. He has more than 40 years’ experience in the insurance industry in the UK, Europe and Bermuda. Andrew’s executive career includes leadership positions with Chubb and Ace, culminating in the role of President & Chairman, Chubb European Group. He began his career at Sturge Syndicate 210, and held a number of senior underwriting positions with Ockham Underwriting. Andrew is the Chair of Everest Insurance (Ireland) DAC and the Chair of Tysers Insurance Brokers Limited. Directorships of other listed entities (last 3 years): – Nil Paul A. Lahiff BSc Agr, GAICD Independent Non-Executive Director Appointed: 1 October 2015 Board Committees: Board Audit & Risk, Nomination, Remuneration & People (Chair) Background and experience: Paul Lahiff was previously Managing Director of Mortgage Choice Limited (2003 - 2009) and prior to that was CEO and an Executive Director of Heritage Bank and Permanent Trustee and held senior roles in Westpac in Sydney and London. Paul is the Chair of Harmoney Corp Limited, 86400 Holdings Limited and NESS Super, and Lead Independent Director of Sezzle Inc. He is also the Chair of the Steering Committee for ISO 20022 Migration for the Australian Payments System. Directorships of other listed entities (last 3 years): – Sezzle Inc. (May 2019 to present) – Harmoney Corp Limited (February 2021 to present) 8 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023BOARD OF DIRECTORS (CONTINUED) Robin J. Low B Com, FCA, GAICD Independent Non-Executive Director Cath L. Rogers C FA, B Com, MBA, GAICD Independent Non-Executive Director Appointed: 3 February 2014 Board Committees: Board Audit & Risk (Chair), Nomination, Remuneration & People Appointed: 3 May 2018 Board Committees: Board Audit & Risk, Nomination, Remuneration & People Background and experience: Robin Low was a partner at PricewaterhouseCoopers. She has over 30 years’ experience in financial services, particularly insurance, and specialises in assurance and risk management. She is a Director of Appen Limited, IPH Limited and Marley Spoon SE. Robin also serves on the boards of not-for-profit organisations: Guide Dogs NSW/ACT and the Sax Institute. Robin is a member of the audit committee of the University of New South Wales, and is a past Deputy Chair of the Auditing and Assurance Standards Board and past member of Australian Reinsurance Pool Corporation. Directorships of other listed entities (last 3 years): – IPH Limited (September 2014 to present) – Appen Limited (October 2014 to present) – Marley Spoon AG (January 2020 to present) Background and experience: Cath Rogers is a partner at Antler, a global early-stage venture capital firm. She is a member of the Commercialisation Committee of the Heart Research Institute and was previously a Non-Executive Director of fintech Digital Wallet Pty Limited which trades as Beem It (2018-2021) and McGrath Limited (2016-2018). Cath has a background in financial services, private equity and venture capital both in Australia and overseas including with AirTree Ventures, Anchorage Capital Partners, Masdar Capital and Credit Suisse. Directorships of other listed entities (last 3 years): – Nil 9 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023INTERESTS IN THE SHARES AND RIGHTS OF THE COMPANY Details of shares and rights held by Directors and KMPs are set out in the Remuneration Report. DIRECTORS’ MEETINGS The number of Directors’ meetings held (including meetings of Committees of Directors) and attendance of Directors during the year ended 30 June 2023 is as follows: Director Board Scheduled Board Unscheduled Board Audit & Risk Committee Remuneration & People Committee Nomination Committee Held1 Attended Held1 Attended Held1 Attended Held1 Attended Held1 Attended David Clarke Michael Emmett2 Richard Deutsch3 Peter Harmer Andrew Kendrick4 Paul Lahiff Robin Low Cath Rogers 8 8 5 8 4 8 8 8 8 8 5 8 4 8 8 8 10 10 5 10 4 10 10 10 10 10 5 7 3 7 9 7 6 6 4 6 3 6 6 6 6 6 4 6 3 6 6 6 8 8 5 8 3 8 8 8 8 8 5 8 3 8 8 8 4 4 3 4 2 4 4 4 4 4 3 4 2 4 4 4 The number of meetings held during the time the Director was a member of the Board or of the relevant Committee. 1 2 Michael Emmett was not a member of any Committee and attended Committee meetings as an invitee. 3 4 Richard Deutsch was appointed as a Director on 3 November 2022. Andrew Kendrick was appointed as a Director on 27 January 2023. COMPANY SECRETARIES Richard H. Bell BBus, LLB, B.Comm (Law) (Chief Legal & Risk Officer and Company Secretary) Richard Bell joined AUB Group on 15 June 2021 as Group General Counsel and was appointed Company Secretary on 29 June 2021 and Chief Legal & Risk Officer on 22 November 2022. Before joining AUB Group, he was General Counsel (Corporate) & Group Company Secretary at Aristocrat Leisure Limited and previously in private practice specialising in Mergers & Acquisitions at Allens Linklaters. Elizabeth M. McGregor BA, MBA, FGIA, FCIS, GAICD (Joint Company Secretary) Elizabeth McGregor joined AUB Group on 1 October 2021 and was appointed Joint Company Secretary on 29 October 2021. She was previously company secretary of a number of ASX listed entities, through her work with the professional services companies Automic Group and Mertons Corporate Services. 10 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023OUR PURPOSE AND VALUES We place clients at the heart of everything we do – providing products, services and solutions that help protect them from harm, damage and financial burden. Our partners and advisers provide trusted support and guidance to clients on the optimal combination of physical, people and financial risk solutions. Our approach is backed by the same commitment to high-quality service that we’ve had from the start. Our services are designed to help our partners operate safely, manage the business more profitably and achieve better outcomes for clients. Together we’re providing a safer and stronger future for all. At AUB Group we are guided by a universal set of values that describe the focus of our efforts. AUB GROUP SERVICES SOLUTIONS & PRODUCTS PARTNERS & ADVISERS CLIENTS P e o ple cial risk n a n i F e c n a Fin L e g a l d P artn evelo su p p p ort m er e nt P e o p l e r i s k T e c h n o l o g y g etin k ar M C o m pliance Physical r i s k Acquisition In v est m e nt Our goal is for all of our decisions and actions to reflect these core values. We believe that putting our values into practice creates the greatest benefits for our shareholders, partners, employees, suppliers and communities in which we serve. For further information on our stakeholders and measurements of success please refer to our ESG Report on page 53. 11 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 PRINCIPAL ACTIVITIES AUB Group Limited (ASX: AUB) is an ASX200 listed group comprising insurance brokers and underwriting agencies operating in ~570 locations . Over ~5,000 team members work with our ~950,000 clients to place more than ~$9.5bn in insurance premiums with local and foreign insurers. AUB Group operates through five key business segments. The Group’s core revenue is derived from arranging insurance policies and from related products and services. The amount of revenue earned is determined by premiums placed, sums insured and the general level of economic activity. Australian Broking businesses provide insurance broking and advisory services primarily to SME clients. The division encompasses broking businesses, complemented by established capabilities in member services, life insurance broking, premium funding, and claims management. In New Zealand Broking our businesses provide insurance broking and advisory services primarily to SME clients. AUB Group holds equity stakes in 5 major insurance broker partners as well as ownership of NZbrokers (the largest broking management group in New Zealand). Agencies distribute and manage insurance products on behalf of licensed insurance companies through General Commercial, Strata and Specialty sub-divisions with underwriting agencies with access to delegated global underwriting capacity. These products and services are available to customers of insurance brokers, in and outside the AUB Group’s broking networks. Tysers includes Wholesale and Retail broking and Managing General Agents (MGA) and is headquartered in London. This is a separately reportable segment given Tysers is largely UK based operating mainly in markets outside Australia. Support service businesses provide a diverse range of services to support the Broking, Agency, New Zealand and Tysers segments, and external clients. Services include: a. Platforms division: automated quoting & binding, white-labelling, and technological support. This division includes BizCover, Australia’s leading digital SME insurance platform with multi-channel presence and a comprehensive insurance offering. The business also provides the Austbrokers network with ExpressCover, Australia’s newest SME insurance platform utilising the BizCover quote and bind engine. b. Corporate: AUB Group Head office. These sub segments are not individually reportable. TOTAL INCOME BY SEGMENT1 UNDERLYING PROFIT BEFORE TAX BY SEGMENT 5% 1% 14% (28)% (11)% 34% 37% 2023 2022 27% 28% 58% 2023 2022 14% 7% 16% 19% 8% 58% 43% 21% 81% Australian Broking Agencies New Zealand Tysers Support Services The Group owns equity stakes in its partner businesses, which in turn provide trusted support and guidance to clients relating to physical, people and financial risks. This is backed by services the Group provides that help our partners operate with less risk, manage their businesses more profitably and ultimately achieve better client outcomes. These services include broker member services, claims and loss adjusting businesses, technology support, a centralised data-centre and related infrastructure support, common broking and back-office platforms, finance, tax, M&A, human resources, risk, compliance and other operational support services. 1 Total Income is presented on a statutory basis whilst Underlying Net Profit Before Tax is a non IFRS measure. Refer to Note 3 within the Financial Report for further information. 12 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023OPERATING AND FINANCIAL REVIEW Reconciliation of Reported Net Profit After Tax to Underlying Net Profit After Tax The following reconciliation from Reporting NPAT to UNPAT is presented on the basis attributable to equity holders of the parent: Net Profit after tax attributable to equity holders of the parent Add back/(less) (net of non-controlling interests and income tax): - Amortisation of broking registers 2023 $’000 2022 $’000 65,253 80,836 30,352 11,143 - Adjustments to value of entities (to fair value) on the day they became controlled entities (29,796) (41,046) - Remeasurement of put option liability (net of Interest unwind) - Impairment charge - Movements in contingent consideration - (Profit)/Loss on deconsolidation of controlled entity , sale/dilution of associates and portfolios - Impairment of the Right of Use Asset and Onerous Lease Expense - Acquisition related expenses Underlying Net Profit After Tax 3,620 5,473 39,912 (25,315) 251 39,355 129,105 1,104 7,537 (337) (5,894) 219 20,456 74,018 Operating results for the year In the year ended 30 June 2023 (FY23) Reported Net Profit After Tax attributable to equity holders of the parent (Reported NPAT) was $65.25m (FY22: $80.83m). Reported NPAT was impacted by increased amortisation of broking registers due to acquisition activity, increased contingent consideration related to acquisitions, debt raising and other acquisition related expenses including for the acquisition of Tysers in September 2022. Tysers is a leading London based Llyod’s market broker with access to specialist underwriting expertise and global distribution capabilities. On a Reported NPAT basis, earnings per share was 65.35 cents for the full year (FY22: 105.60). Underlying Net Profit After Tax (Underlying NPAT) is the key measure used by management and the board to assess and review business performance. Underlying NPAT excludes non-controlling interests and the impact of fair value adjustments to the carrying value of associates, profits on sale and deconsolidation of controlled entities, contingent consideration adjustments, amortisation of intangibles, impairment charges and acquisition related costs. Underlying NPAT increased 74.42% to $129.11m in FY23 (FY22: $74.02m) due to strong organic growth across all divisions, complemented by the acquisition of Tysers performing above expectations. 13 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 OPERATING AND FINANCIAL REVIEW (CONTINUED) Operating results for the year (continued) Underlying NPAT 129.11 46.71 53.15 65.30 74.02 140 120 100 80 60 40 20 0 FY19 FY20 FY21 FY22 FY23 Underlying NPAT ($’m) On an Underlying NPAT basis, earnings per share (EPS) increased by 33.73% over the prior year to 129.32 cents. Dividend per share paid for FY23 totaled 64 cents. Underlying EPS and Dividend Growth 129.32 86.12 96.7 65.74 70.61 46.0 50.0 55.0 55.0 64.0 FY19 FY20 FY21 FY22 FY23 Underlying EPS Dividend per share (cents) 140 120 100 80 60 40 20 0 14 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 OPERATING AND FINANCIAL REVIEW (CONTINUED) Results by operating division Tysers - Tysers performed above expectations, with revenue growth for the 9 months to 30 June 2023, up 5.4% vs initial forecast (Organic: 5.8%, FX: -0.4%). Underlying pre-tax profit contributed by Tysers for the 9 months to 30 June 2023 was $76.93m. Australian Broking – underlying pre-tax profit for the period increased by 21.59% to $104.75m (FY22: $86.15m). These increases were driven by organic and bolt-on acquisition growth. Growth drivers included: – Increased Commercial Lines premiums; – Growth in client and policy count; – Continued network optimisation; and – Increased interest income on trust accounts from higher interest rates. Agencies – underlying pre-tax profit for the period increased by 53.86% to $35.05m (FY22: $22.78m). Strong organic growth was partially offset by non-recurrence of some profit comissions. Acquisition-related profit growth included Strata Unit Underwriters (1 September 2022). New Zealand Broking – underlying pre-tax profit for the year increased by 59.35% to $14.27m (FY22: $8.95m) due to: – Revenue and profit growth for all businesses, supported by increased Commercial lines premiums; – BWRS Group merger with ICIB effective 1 December 2022; and – Step-up investment in AUB Group NZ to 100% from 1 July 2022. BizCover – underlying pre-tax profit for the year increased by 18.89% to $12.48m (FY22: $10.50m). This increase was due to organic profit growth assisted by operating leverage and scalability of the platform. FINANCIAL CONDITION Shareholders’ equity increased to $1,513.37m from $997.68m at 30 June 2023, due to the impact of the current year financial performance as well as issue of shares during the period. The Group generated positive cash flow from operating activities before customer trust account movements of $113.38m (2022: $101.96m). Cash outflow of $136.85m from investing activities in FY23 was due mainly to the purchase of Tysers. Cash flows from financing activities were $498.66m primarily from an increase in borrowings, see further detail outlined below. Other finance activity related cash flows were to increase our shareholding in controlled entities and to fund dividends paid to shareholders. Cash held at the end of the period totaled $260.35m (2022: $259.33m), excluding monies held in trust. Interest-bearing loans and borrowings increased by $536.43m to $584.23m. This is driven by the $675m syndicated debt facility entered into to fund the Tysers acquisition. Please see details of this facility outlined in Note 17 of the Financial Statements. Subsidiaries had debt of $63.01m (2022: $47.80m) and the look through share of borrowings by associates (including contingent obligations) of $25.52m (2022: $17.54m)1 are not included in the Group balance sheet as these entities are not consolidated. The borrowings by subsidiaries and associates relate largely to funding of acquisitions, premium funding and other financing activities. 1 Total debt of associates, after considering AUB Group’s percentage shareholding. 15 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023BUSINESS STRATEGY AUB Group’s strategy remains consistent – exploit the latent potential in our existing business supplemented with strategically aligned and disciplined inorganic growth: – Deliver a market leading proposition for our brokers, and in-turn our clients, by investing in processes and technologies that drive efficient and effectives outcomes; – Continued focus on optimising our portfolio through consolidation and targeted involvement to improve underlying business performance; and – Manage our active pipeline of external M&A opportunities through a disciplined and strategic approach to investment. In FY24, the business will continue to evolve its focus from FY23 priorities with specific accountability for the following: – Improve and enhance New Zealand performance – Accelerated revenue and profit growth for AUB NZ’s portfolio of brokers; – Successful development, pilot and implementation of Project Lola and commencement of roll-out to NZbrokers network. – Optimise our network – Continue to optimise our portfolio of businesses to outperform by consolidating into more efficient operating entities or to expand specialistion. – Execute on strategically aligned acquisitions – Disciplined and targeted approach to acquisitions, either bolt-ons that deliver synergy benefits or to expand capabilities and footprint; – Increased investments in current network businesses to aid consolidation/optimisation. – Stabilise and optimise Tysers post acquisition – Enhance the business’ growth potential through strategic intervention in areas of opportunity to expand contribution to AUB UNPAT, including execution of proposed synergy initiatives; – Evolve the operating model to allow successful delivery of the strategic objectives and optimise costs. PROSPECTS FOR FUTURE FINANCIAL YEARS AUB Group has benefited from investment in our core capabilities, cost management and pricing tailwinds. The Group continues to hold a modest outlook on the underwriting cycle with a premise that we are in the midst of a positive phase with potential for extension considering recent ongoing losses in key global underwriting markets. CORPORATE GOVERNANCE The 2023 Corporate Governance Statement can be found at the AUB Group website: aubgroup.com.au/corporate-governance. 16 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023RISK MANAGEMENT Effective risk management is an integral element in AUB Group in achieving its strategic objectives. Overseen by the Board and the Board Audit and Risk Committee, the Risk Management Framework underpins identification and management of enterprise-wide and emerging risks and allows for effective decision-making that is within the Board approved risk appetite and specific limits. The content and status of risk profiles and mitigation plans is considered and updated, in line with changes to the environment and operations, through regular reviews by management. The Board reviews the Group’s key risks and assesses the effectiveness of the risk management framework annually in accordance with the ASX Corporate Governance Principles and Recommendations. AUB Group continues to review and enhance its governance structure and processes in accordance with the ‘three lines model’ recommended by the Institute of Internal Auditors (see below). – Management: responsible for achieving the organisation’s objectives through first-and second-line activities and risk-based decision-making. Businesses, the ‘first line’, are responsible for evaluating their risk environment, putting in place appropriate controls and ensuring that these controls are implemented effectively. The ‘second line’ provides complementary expertise and continuous monitoring systems in areas including legal and compliance, information and technology security, sustainability, and risk management. – Internal audit function: undertake assurance and activities to promote and facilitate continuous improvement. – the Board: responsible for organisational oversight through integrity, leadership, and transparency. GOVERNING BODY Accountability to stakeholders for organizational oversight Governing body roles: integrity, leadership, and transparency MANAGEMENT Actions (including managing risk) to achieve organizational objectives First line roles: Second line roles: Provision of products/ services to clients; managing risk Expertise, support, monitoring and challenge on risk-related maters INTERNAL AUDIT Independent assurance Third line roles: Assurance on key processes and the control environment E X T E R N A L A S S U R A N C E P R O V D E R S I KEY: Accountability, reporting Delegation, direction, resources, oversight Alignment, communication, coordination, collaboration (source: The Institute of Internal Auditors, Australia.) 17 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 KEY BUSINESS RISKS The Group is exposed to various risks during its operations and achievement of its strategic objectives. Broad risk categories, which may impact the Group’s business strategy and prospects for the future financial year, include: Strategic Clearly defining and successfully executing the AUB strategy. Risk Description Strategy is unclear, misaligned or fails to take into account the changing competitive, regulatory and technological landscape. Failure to successfully execute the strategy, including M&A, and deliver strategic objectives and outcomes. 2023 Commentary Management and Mitigation Business model of acquiring and holding equity in operating business An important part of AUB’s business model and its growth strategy is to acquire and hold equity in insurance broking, underwriting agency. Key considerations include the likely future performance of the business being acquired and the extent to which the business will fit strategically within the AUB Group. A priority is the integration of Tysers which represents a significant acquisition for the Group. When due diligence related to acquisitions, mergers or when AUB makes a strategic or financial investment in an entity, fails to detect substantial issues, the transactional documents may not contain corresponding safeguards including representations, warranties or indemnities, to protect AUB against existing and potential liabilities of the target businesses. AUB can be made financially liable and subjected to legal proceedings for past non-compliances of laws and regulations. These may affect AUB’s business operations and hinder its corporate growth. A failed merger and acquisition transaction may also damage AUB’s reputation. While AUB ordinarily has veto rights on most decisions concerning AUB group members, it may not have the capacity to implement its decisions in all cases. There can be no assurance that the anticipated benefits and synergies expected to result from all or some of the integrations of these acquisitions will be realised. As part of the annual assessment of strategic risks, the Board and Management team assess potential risks from both external and internal factors. Actions to mitigate these risks are designed as appropriate. Changes to these key risks and status of actions are reviewed quarterly at the Risk Management Executive Committee and bi-monthly at the Board Audit and Risk Committee meetings. Specific mitigation actions include: – Annual strategy and priorities approved by the Board with bi-annual updates and review; – Assessment criteria (operational, financial, reputation) for all M&A activity which is reviewed by senior management and Board (if required); – Investment and acquisition approach involving skilled resource, due diligence and negotiated representations and warranties; – Post acquisition review, including capital and returns analysis; – Engagement with relevant government stakeholders, regulators, insurers and industry bodies; and – Experienced senior leadership team with global sector knowledge, industry connections and reputation. 18 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) 2023 Commentary Management and Mitigation Increased competition or market change An increase in competition or deterioration in the competitive positioning of AUB may have an adverse impact on AUB network members and could potentially result in a reduction in gross written premium placed through AUB network members due to a loss of market share; a reduction in fees and commissions; and/or a reduction in margins which may adversely impact the revenue and earnings of AUB network members. Increased competition from new entrants and existing market participants, including increased commoditisation of business insurance products, may have an adverse impact on partner network and AUB earnings. If there are changes in the remuneration model for, or the use of, insurance brokers, underwriting agencies, or risk services businesses, this may adversely impact AUB’s earnings and/or financial position and performance. AUB in some cases acts as agent of the insurers. Insurers may choose to reduce their reliance on insurance brokers and underwriting agencies including through an increase in their direct web-based distribution models. Continued consolidation in the general insurance industry may result in a more limited product set and/or greater pricing power for insurers which may result in downwards pressure on commissions and fees. Environmental, social and governance (ESG) risks and expectations Evolving community attitudes towards, and increasing regulation and disclosure in relation to ESG issues may impact the operation of AUB’s business. Increased expectations, and in particular the failure to meet those expectations, with respect to ESG may impact on the profitability or value of AUB’s business, restrict AUB’s ability to attract financing or investment, result in heightened compliance costs associated with meeting prevailing regulatory and disclosure standards, or adversely impact on the reputation of AUB, which may have an adverse effect on AUB’s business, financial position and prospects. The Board and Senior Management are constantly assessing market dynamics and conduct formal strategic planning sessions twice a year. Specific additional mitigants include: – Annual strategy and priorities approved by the Board with bi-annual updates and review; – Specialist advisors (eg Sector, banks, legal) provide market insights, competitor analysis (threats, opportunities) and regulatory updates; – Engagement with relevant government stakeholders, regulators, insurers and industry bodies; and – Experienced senior leadership team with global sector knowledge, industry connections and reputation. The manner in which ESG risks and opportunities are embedded in the day-to-day business activities continues to evolve and improve. The following key mitigants have been implemented over the last 18 months: – Independent specialists conducted an ESG materiality assessment, engagement and reporting programme; – ESG considerations are included as part of stakeholder engagement plans; – ESG risks are included as part of each M&A business assessment; and – ESG reporting is provided to senior management and Board. 19 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) Financial Risks relating to funding and liquidity management, expected return on investments and mitigation of fraud, client disputes and professional indemnity claims. Risk Description Multiple factors could lead to the Group having insufficient capital or cash flow to meet its obligations including unfavourable outcomes from inappropriate management of interest rate, foreign exchange, counterparty credit, liquidity and self-insurance risks, adverse effects from capital structure and funding or losses associated with fraud, claims or disputes. 2023 Commentary Market risk The operating and financial performance of AUB is influenced by a variety of general economic and business conditions, including levels of consumer spending, inflation, interest rates and exchange rates and government fiscal, monetary and regulatory policies. Changes in general economic conditions may result from many factors including government policy, international economic conditions, significant acts of terrorism, hostilities or war or natural disasters, A prolonged deterioration in general economic conditions could be expected to have an adverse impact on AUB’s operating and financial performance and financial prospects. The ability of AUB to secure debt financing, or financing on acceptable terms, may be affected by volatility in the financial markets, globally or within a particular geographic region, industry or economic sector. An inability to obtain, or increase in the costs of obtaining, financing on acceptable terms could adversely impact AUB’s financial position and performance. AUB is exposed to movements in interest rates through its debt facility. Fraudulent or inappropriate conduct AUB has in place policies and procedures implemented in relation to the risk of fraud. However, particularly in relation to businesses where AUB does not control the day-to-day operations, there is a risk that funds of the business or of those held on behalf of clients may be the subject of fraudulent behaviour. Any such fraudulent behaviour would likely have an adverse impact of AUB’s financial position, performance and reputation. Management and Mitigation AUB Group proactively manages these risks and opportunities through its established corporate governance structures, through the Compliance Framework, Risk Management Framework, and Assurance program supported by company policies, standards and procedures. We employ specialised and experienced resources and teams to oversee and educate stakeholders of relevant regulatory requirements and monitor potential changes. Where required, we also engage specialist advisors to support internal resources where required. Other specific mitigation plans include: – Finance specialists undertake forecasting and financial scenario testing activities; – The organisation operates with segregation of duties and a Board approved delegation of authority; – Actions to improve fraud reporting and dashboards to facilitate more effective oversight; and – Implementation of external advisory channels for improved accessibility, accuracy and consistency. The AUB Group Financial Risk Management Committee (FRMC) is accountable for assessing key existing and emerging financial risks, including whether there are appropriate and effective risk management controls in place to manage these risks. The Committee meets at least quarterly and reports significant findings to the BARC. 20 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) Compliance and regulatory risk Risk of non-compliance with obligations (legal, regulatory, contractual) or failure to identify or appropriately respond to changes in the regulatory environment. Risk Description AUB operates in a regulated environment which has been and continues to be subject to regulatory review and change. 2023 Commentary Management and Mitigation Failure to act in accordance with regulation, licenses, industry standards and codes, internal policies and procedures and principles of good governance could result in regulatory or legal action, licences being suspended or withdrawn, significant fines, penalties, other costs, reputation damage and/or reduced investor confidence. This, in turn, may adversely impact AUB’s reputational, financial performance and position. AUB may be exposed to violations of financial crime laws including fraud, anti-bribery and corruption, sanctions and anti- money laundering and terrorism financing. The acquisition of Tysers has further exposed AUB to some jurisdictions which can be higher risk for breach of such financial crime laws. A breach of financial crime laws or other applicable laws or regulatory requirements could lead to enforcement action by regulators, and/or significant fines and/or other penalties, litigation, as well as the risk of reputational damage. Regulatory changes may also impact AUB and/or its operating entities through costly and burdensome regulation and may have consequences which cannot be foreseen. Additionally, compliance with these regulatory obligations may require considerable investment into the establishment of compliance systems and the monitoring and maintenance of such systems to minimise the risk of noncompliance in the future. AUB also faces the risk of failing to identify or appropriately respond to changes in the regulatory environment or of damaging AUB’s standing with its regulators as a result of AUB not meeting regulatory expectations. AUB Group proactively manages these risks and opportunities through its established corporate governance structures, through the Compliance Framework, Risk Management Framework, and Assurance program supported by company policies, standards and procedures. We employ specialised and experienced resources and teams (Legal, Compliance, Finance, etc.) to oversee and educate stakeholders of relevant regulatory requirements and monitor potential changes. Where required, we also engage specialist advisors to support internal resources where required. Other specific mitigation plans include: – Continuous disclosure policy and Management Disclosure Committee; – Improved oversight and reporting at a Group and Board level; – Policies, Frameworks and Procedures; and – Financial Crime Compliance Framework. – Legal advisors identify any potential changes in legislation, including the impact on AUB business; and – Structured approach for Regulatory change implementation, including training and education of relevant AUB and broker stakeholders. 21 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) Operational A disruption that impacts the ability of AUB to operate effectively. Risk Description AUB may be unable to continue to operate effectively due to inadequate or failed internal systems and processes, disruption including inability to access premises, inability to use technology or systems (may be information security or cyber related), an infrastructure failure, impact to people and third-party disruption (including loss of Binder arrangements). 2023 Commentary Management and Mitigation Loss of capacity for underwriting agencies Unexpected loss of underwriter capacity, whereby an underwriter fails to renew a binder or withdraws capacity for strategic reasons (such as exiting lines of business or a specific country exit) is likely to result in significant loss of income. Further risk may be as a result of an underwriter withdrawing capacity due to uneconomic underwriting results. This would severely constrain the ability of underwriting agencies to write new business and may restrict them from renewing existing business. Any such scenario would have an adverse impact on the financial performance of AUB’s underwriting business. There are a number of key mitigation strategies to manage this risk including: – Binder agreements are subject to layered review by key and external legal advisors; – Key binder obligations are identified, communicated to relevant stakeholders and monitored on a regular basis; – Peer to peer review reviews in accordance with underwriting guidelines; – Insurer claims and underwriting audits conducted to identify any control weaknesses or non-performance of binder agreements; and – Internal assurance activities are conducted to identify control weaknesses, the results of which are tabled at key management and Board meetings. Specific mitigation actions to manage binder compliance include: – Binder management approach; – Business Continuity Framework and Plans; – Disaster recovery plans and annual disaster recovery tests; – Information security strategy, framework, roadmap; and – Tactical controls such as malware, multi-factor authentication, network segmentation among others. 22 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) 2023 Commentary Management and Mitigation Technology and cyber security risk AUB’s information technology systems (including those provided by third party technology vendors) are vulnerable to damage or interruption from a number of sources. Information security breaches or Cyber incidents could significantly curtail AUB’s ability to conduct its business and generate revenue and lead to losses associated with investigation, rectification and remediation activities. Loss of sensitive (personal or organisational) information can lead to reputational damage, client distrust and regulatory inquiries or actions. – Group has designed and implemented a suite of core capabilities to manage cyber security and cyber risk. From the establishment of a set of strategic objectives, to an industry aligned cyber security framework, to a roadmap focused on embedding solid foundations, we have developed an ecosystem whereby our cyber posture is continually assessed and enhanced. Taking a risk-based approach to prioritising the cyber roadmap initiatives, we are focused on meeting our strategic information security objectives and managing risk within the enterprises risk appetite and tolerance levels. Mitigation plans include: – a security operations centre with technologies such as managed detection and response (MDR) and security information and event management (SIEM); – cyber awareness training; – phishing simulation exercises; – vulnerability and patch management; – risk and threat assessments; – third party audits; – penetration testing; and – incident and disaster recovery exercises. Personal and Confidential Information Specific mitigation actions include: AUBs operations rely on the secure processing, transmission and storage of confidential, proprietary and other information. In addition to information loss from technology and cyber security breaches, personal and confidential information may be lost due to theft, misplacement of data, human error or other similar events. Any loss, unauthorised disclosure or use of confidential information, including financial data, commercially sensitive information or other proprietary data whether by AUB or a third party could have a material adverse effect on AUB. The loss of confidential information could result in interruptions to operations, reputational damage and regulatory action. – Data protection framework including policies, standards and procedures; – Third party contracts include privacy and data loss provisions; – Use of incident management and responses plans; – Physical and system controls to ensure information is secure and available only to approved personnel; – Staff training on data and privacy requirements; and – Privacy due diligence checklist for M&A transactions. 23 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023KEY BUSINESS RISKS (CONTINUED) Partnering and Outsourcing AUB failing to identify, develop and manage Broker partnerships and third party relationships to best deliver the long term strategy Risk Description Inability to identify, onboard and effectively manage insurers and third parties by AUB may result in missed opportunities, financial losses, inability to deliver the strategy, reputation damage and increased concentration risk. Management and Mitigation Specific mitigation actions include: – Contract development and review approach; – Third party Service Level Agreements (SLAs)/Key Performance Indicators (KPIs) embedded in contracts and monitored; – Partner Development Manager Roles; and – Delegations of authority are in place, outlining who can bind AUB into agreements. 2023 Commentary An important part of AUB’s business model and its growth strategy is to acquire and hold equity in insurance broking, underwriting agency or risk services businesses. These relationships are a significant contributor to AUB Group success. Failure to manage these relationships effectively could lead to reduced revenues, increased costs and an inability for AUB Group to deliver its strategy. Third Party Risk AUB utilises third party suppliers to bring external expertise and support to the business. Insufficient or uncommercial contractual arrangements may impact the Group’s ability to maintain efficiency and ensure third parties meet their obligations. The risks associated with engaging third parties include reputational damage, operational disruption, and risks to AUB’s compliance with laws and regulations. People AUB relies on the recruitment, retention and engagement of skilled personnel. Risk Description Ineffective recruitment, retention and engagement of skilled/key personnel, or failure to appropriately manage work health and safety, may result in AUB being unable to operate efficiently and effectively, leading to potential financial and reputational impacts and inability to successfully execute its strategy. 2023 Commentary A loss of key personnel by AUB may lead to material business interruption and loss of key customer or partner relationships. AUB also relies on the need to be able to attract staff with the right experience and expertise to assist AUB with successful execution of its strategic priorities and growth plans. Particularly given the presently competitive labour market, there can be no certainty that AUB will be able to attract the people it desires. Skilled/key personnel may include key persons noted on Binder Authorities, Responsible Managers as noted on AFSL’s, incumbents in key roles or individuals who hold business critical knowledge. Management and Mitigation Specific mitigation plans include – Succession plans and review approach; – KPI setting and performance reviews; – Regular monitoring of staff hours and skills gaps to identify recruitment needs; – Workforce planning including recruitment and employee development plans to assist achieve the organisation’s future goals and keep talent engaged; and – Use of employee engagement surveys and anonymous feedback to be pro-active in employee satisfaction, work-life balance, and mental health. 24 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the consolidated entity during the financial year, other than acquisitions and disposals disclosed above. SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 22 August 2023, the Directors of AUB Group Limited determined a final fully franked dividend on ordinary shares of 47.0 cents per share in respect of the 2023 financial year. Based on the current number of ordinary shares on issue, the total amount of the dividend is estimated to be $50.95m. ENVIRONMENTAL REGULATION AND PERFORMANCE The Directors are satisfied that adequate systems are in place for management of the Company’s environmental responsibility and compliance with various requirements and regulations. The Directors are not aware of any material breaches to these requirements, and to the best knowledge, all activities have been undertaken in compliance with environmental requirements. Refer to the Environmental, Social and Governance Report for more details. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During or since the end of the financial year, the Company has paid premiums in respect of a contract insuring all the Directors and Officers of AUB Group Limited against liabilities, past, present and future. In accordance with normal commercial practice, the disclosure of the total amount of premiums under and the nature of the liabilities covered by the insurance contract is prohibited by a confidentiality clause in the contract. INDEMNIFICATION OF AUDITOR To the extent permitted by law, the Company has agreed to indemnify its auditor, Ernst & Young Australia, as part of the terms of its audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. 25 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023REMUNERATION & PEOPLE COMMITTEE CHAIR’S LETTER Dear Shareholders On behalf of the Board of AUB Group Limited (AUB Group), I am pleased to present our Remuneration Report for the financial year ended 30 June 2023. The purpose of this report is to describe AUB Group’s remuneration strategy and framework for its Key Management Personnel (KMP), in particular the links between AUB Group’s executive remuneration framework and business strategy, performance and reward. Key financial highlights for FY23 Key FY23 financial highlights include: – Underlying revenue of $1,111.4m, representing growth of 61.2% from FY22; – Underlying NPAT of $129.11m, representing growth of 74.42% from FY22; and – Underlying earnings per share of 129.32 cents, an uplift of 33.73% in comparison to FY22. Changes to remuneration and key governance measures The Board continually monitors AUB Group’s incentive scheme frameworks to ensure they appropriately reflect AUB Group’s profile, are effective in driving business strategy and financial performance to create sustainable shareholder value and continue to reflect our ‘pay for performance’ philosophy. During the course of FY23, the Board undertook a review of our Long Term Incentive (LTI) Plan framework, in conjunction with external stakeholder feedback. Key changes and remuneration governance measures arising from that review included the following in respect of FY23 LTI awards: – The addition of a new Return on Invested Capital (ROIC) performance measure; – An increase in EPS hurdles; – The introduction of a one year holding lock in relation to Performance Share Rights (PSRs) that vest and convert into Shares under the LTI Plan; and – PSRs awarded at share price face value with vested PSRs receiving a cash equivalent of dividends awarded during the performance period. It was pleasing to receive overwhelming shareholder support for these changes to the LTI Plan, with 99.8% of shareholders voting in favour at the Extraordinary General Meeting (EGM) in March 2023. Furthermore, a minimum shareholding policy for both Non-Executive Directors and Group Executives has been introduced to provide strong ongoing alignment between Non-Executive Directors, Group Executives and shareholders. The Board continued to align our risk, remuneration and consequences management framework, with the Remuneration & People Committee and Board Audit & Risk Committee meeting concurrently to consider if there were risk-based or other adjustments that may warrant consideration in the Board’s determination of remuneration outcomes. The Committees observed management’s continued progress in integrating and embedding effective risk management throughout the organisation to support achievement of business priorities and fulfill corporate governance objectives. The Board is pleased to confirm that no risk-based or other adjustments to remuneration were recommended by the Committees as a result of their review of risks and behaviours. The Board believes that these changes further enhance AUB Group’s remuneration framework and people strategy, and that AUB Group continues to provide clear and transparent disclosure. 26 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023REMUNERATION & PEOPLE COMMITTEE CHAIR’S LETTER (CONTINUED) Alignment between performance and remuneration outcomes AUB Group’s remuneration strategy and framework is based on a ‘pay for performance’ philosophy which supports sustainable value for our shareholders. Group Executives received on average 146% of their STI target award (compared to the maximum target STI opportunity of 150%), supported by Underlying NPAT increasing by 74.42% to $129.11m from FY22. This strong Underlying NPAT growth was driven by both underlying organic growth, pleasingly across all operating businesses, and acquisition driven growth. To further align the interests of Group Executives with shareholders, 30% of STI outcomes are deferred in the form of PSRs that vest over 12 and 24 months. This Remuneration Report discloses the outcome of the FY21 LTI grant (performance period ending 30 June 2023). Based on sustained long-term performance over this performance period, 100% (in total) of LTI PSRs will vest following testing against the TSR and EPS performance measures. This was driven by strong EPS growth, combined with high relative TSR performance resulting in AUB Group significantly outperforming its Peer Comparator Group. Group Executive remuneration framework review As part of the annual remuneration review cycle, and following the recent international expansion of AUB’s business, the Board undertook a review of the Group Executive remuneration framework to ensure competitiveness across its global markets, alignment to strategic priorities and effectiveness in retaining and attracting the leadership and talent it needs to drive business strategy and financial performance in the interests of shareholders, The changes to CEO remuneration are set out in this report. We invite you to read the Remuneration Report and welcome your feedback. Paul Lahiff Chair of Remuneration & People Committee 27 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 REMUNERATION REPORT OVERVIEW This Remuneration Report for the financial year ended 30 June 2023 has been prepared in accordance with section 300A of the Corporations Act and has been audited as required by section 308(3C) of the Corporations Act. Terms used in this Remuneration Report are defined in the Glossary within Section 7 of this report. List of KMPs – Reporting Period Table 1 below outlines the KMP during the Reporting Period. Name Position Term as KMP Non-Executive Directors David Clarke Richard Deutsch Peter Harmer Andrew Kendrick Paul Lahiff Robin Low Cath Rogers Executive KMP Michael Emmett Mark Shanahan Chair; Non-Executive Director Full financial year Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director From 3 November 2022 Full financial year From 27 January 2023 Full financial year Full financial year Full financial year Chief Executive Officer and Managing Director Full financial year Chief Financial Officer Full financial year Contents This Remuneration Report is set out in the following sections: Section 1 – Group Executive Remuneration Framework Section 2 – How variable remuneration is structured Section 3 – Remuneration Outcomes and Alignment to Performance Section 4 – Remuneration Governance Section 5 – Non-Executive Director Remuneration Section 6 – Statutory Remuneration Tables and Data Section 7 – Glossary of terms commonly used in this Remuneration Report 28 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK OUR REMUNERATION PRINCIPLES The following principles guide AUB Group’s remuneration strategy and ‘pay for performance’ philosophy, which are designed to attract, retain and motivate highly skilled individuals. Alignment to shareholder interests & sustainable shareholder returns Encourage behaviours consistent with values & deliver good partner outcomes Reflect the markets we recruit from and need to be competitive in Performance based – link rewards to business results and strategy Robust governance with focus on risk management SENIOR EXECUTIVE REMUNERATION STRUCTURE FIXED STI LTI FIXED REMUNERATION Base salary, superannuation & other benefits SHORT-TERM INCENTIVE (STI) Reward for strong individual and group performance during the performance period LONG-TERM INCENTIVE (LTI) Reward for sustainable longer-term AUB Group performance VALUE DETERMINED BY – Experience, position and responsibilities – Competitive fixed remuneration in the market (market median) Achievement of annual financial and non-financial performance hurdles at a: – TSR – 40% weighting – EPS – 40% weighting – ROIC – 20% weighting – Group level – Business unit level – Individual level HOW DOES IT LINK WITH STRATEGY & PERFORMANCE – Provides competitive ongoing remuneration in recognition of day-to-day responsibilities and accountabilities – Supports annual delivery of – Focuses on multi-year metrics key strategic and operational targets and to recognise and reward individual performance – Deferred STI supports retention and more closely aligns the interest of executives and shareholders that support sustained shareholder value creation – Delivered in equity to align the interests of executives and shareholders – Supports retention AT RISK 29 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK (CONTINUED) Group Executive Remuneration Mix Total remuneration includes both a fixed component and an at-risk or performance-related component, comprising both short- term and long-term incentives. The Board views the at-risk component as an essential driver of a high-performance culture and one that contributes to achievement of sustainable shareholder returns. The following illustration shows the remuneration mix for the Group Executives in FY23. It has been modelled on the average of the Group Executive’s target opportunity (but excluding the one-off grant of Share Appreciation Rights (SARs) under the Outperformance Plan). The Board aims to achieve a balance between fixed and performance-related components of remuneration. The actual remuneration mix for the Group Executives will vary depending on the level of performance achieved by the AUB Group as well as the realised value of PSRs that vest and convert into shares. CEO Remuneration Mix Target Remuneration Maximum Remuneration Actual Remuneration 36% 32% 32% 27% 36% 35% 36% 32% 32% 0% 20% 40% 60% 80% 100% Fixed STI* LTI Group Executive (ex-CEO) Remuneration Mix Target Remuneration Maximum Remuneration Actual Remuneration 0% 37% 33% 34% 20% 26% 34% 33% 37% 33% 34% 40% 60% 80% 100% Fixed STI* LTI * 15% of STI is deferred is deferred for 1 year, a further 15% is deferred for 2 years. Minimum Shareholding Policy The Board endorsed during this Reporting Period a minimum shareholding policy for Group Executives to promote the alignment of executive interests with the long-term interests of shareholders and support long-term sustained value creation for AUB Group. The CEO is required to acquire AUB Group shares equivalent to 150% of base salary, and other Group Executives are required to acquire AUB Group shares equivalent to 100% of base salary. Group Executives have a five-year period commencing on the later of 1 July 2023 or the date of their appointment (hire or promotion) to meet the minimum shareholding expectation. Further details of Executive KMP shareholdings are provided in Table 9. 30 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK (CONTINUED) Group Executive remuneration time horizon The following diagram provides an illustrative indication of how remuneration is delivered to Group Executives. Fixed Remuneration STI cash component (70%) STI deferred component (15%) STI deferred component (15%) LTI Year 1 Year 2 Year 3 Year 4 Date granted End of deferral/performance period Date paid/eligible for vesting End of holding lock Adjustments to ongoing CEO remuneration Executive Remuneration was reviewed and there were no adjustments during the reporting period, including no adjustments to CEO & Managing Director remuneration. A summary of CEO & Managing Director remuneration arrangements for the reporting period is as follows: Item Fixed remuneration STI (at target) LTI opportunity Total target remuneration $ 1,000,000 750,000 1,000,000 2,750,000 Following the reporting period, the Board has adjusted the CEO & Managing Director remuneration for FY24 as follows: Item Fixed remuneration STI (at target)* FY24 LTI opportunity** Total target remuneration * Maximum Short-Term Incentive opportunity is capped at 150% of target STI award. ** Face value of LTI award. The FY24 LTI grant is subject to being approved by shareholders at the Annual General Meeting in November 2023.. $ 1,250,000 1,000,000 1,875,000 4,125,000 31 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED SHORT TERM INCENTIVE (STI) – HOW DOES IT WORK? Description Group Executives have the opportunity to earn an annual incentive award which is delivered in cash. The STI Plan recognises and rewards short-term performance. STI opportunity The STI Plan is considered to be at-risk remuneration and is not a guaranteed part of Group Executive remuneration. A target opportunity is set for each Group Executive, which is earned if individual performance is on target and the participant performs against a balanced scorecard set of KPIs, which includes both financial and non-financial measures that have weighted allocations and are aligned to AUB Group’s strategic priorities (the Balanced Scorecard). The Board determines the total STI accrual to be distributed. Group Executives (including the CEO) have (on average) a target STI opportunity of 70% of fixed remuneration. The maximum STI payout is capped at a maximum of 150% of a participant’s target STI opportunity. Performance conditions Group Executive performance is assessed against a Balanced Scorecard (for further details of the CEO’s Balanced Scorecard, refer to Table 4). Individual targets as set out in the Balanced Scorecard include consideration as to role-related accountabilities and responsibilities in the context of business strategy and objectives. A behavioural gateway is incorporated into the performance review process and operates to reduce an incentive payment should there be conduct that is inconsistent with AUB Group’s values, irrespective of performance. The Group CEO’s behaviour is assessed by the Board. Group Executives’ behaviours are assessed by the CEO, who recommends eligibility for Group Executive STI to the Board. Underlying NPAT is the key financial performance measure in the Balanced Scorecard, is used by management and the Board to assess operational performance and is a strong indication of the underlying health of the business. Why were these performance conditions chosen? The Board considers that a Balanced Scorecard which contains weighted allocations to both financial and non-financial performance conditions is appropriate as they are aligned with AUB Group’s objectives of delivering sustainable growth and returns to shareholders. Group Executives have a clear line of sight to KPIs and are able to directly affect outcomes through their own actions. Group Executives are also assessed on behavior metrics (the ‘how’) which contribute to that individual’s overall performance rating. This operates to reduce an incentive payment should there be conduct that is inconsistent with AUB Group’s values, irrespective of performance. For all individuals, the Board may apply discretion in determining the STI outcomes to ensure they appropriately reflect performance. How STI outcome is then determined On an annual basis, a rating is determined for each Group Executive based on an evaluation of their performance against the balanced scorecard. This individual performance rating metric is then applied to the individual’s STI target award. Individual STI Payment = STI Target Incentive Award x Scorecard Performance Rating STI outcomes are therefore scaled up or down to reflect performance against the agreed KPIs in their Balanced Scorecard. The KPIs are set and reviewed annually. Prior to an award, the scorecard outcome is assessed holistically against individual and Group performance to determine if any discretion to vary from scorecard results should apply. The level of incentive outcome reflects the performance of AUB Group and the individual, thereby ensuring it is aligned with shareholders’ interests. 32 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) SHORT TERM INCENTIVE (STI) – HOW DOES IT WORK? (CONTINUED) Deferral terms The following STI deferral arrangements have been introduced for Group Executives: 70% of STI outcome will be paid in cash and the remaining 30% is deferred in the form of an equity award of PSRs, with these PSRs vesting as follows: – half of the deferred component (15% of the STI outcome) after 12 months; and – half of the deferred component (15% of the STI outcome) after 24 months. No additional performance conditions apply to the vesting of PSRs, with the exception of the continued employment by the relevant Group Executive as described below. The number of PSRs is calculated using the VWAP over the 60 trading days immediately prior to and including the last day of the performance period. An amount (based upon dividends paid by AUB during the deferral period) accrues on the PSRs and is paid in cash at the end of the deferral period if the PSRs vest. The Board has broad ‘clawback’ powers to lapse unvested PSRs in a number of circumstances, including in the event of fraud, dishonesty, gross misconduct, breach of duties or obligations, a material misstatement, error or omission in the financial report, to prevent a participant being entitled to an inappropriate benefit, or if there is a change of control event. The clawback policy also permits clawback of any shares allocated on exercise of the PSRs, as well as cash payments received on vesting and exercise of PSRs. Eligibility for dividends Forfeiture and clawback Who assesses performance? The Board assesses performance of the CEO and Managing Director against the Balanced Scorecard (as described in Table 4) with the benefit of recommendations from the Remuneration and People Committee. The CEO and Managing Director assesses the other Group Executives’ performance based on the Group Balanced Scorecard outcomes and achievement against individual goals. The CEO and Managing Director then recommends an STI award for consideration by the Remuneration and People Committee, which then recommends an STI award for approval by the Board. The Board believes the abovementioned methods in assessing performance are an appropriate way to assess the performance of AUB Group and the Group Executives’ individual contribution, and to determine their remuneration outcomes. In addition, the aggregate of annual STI payments available for all employees is subject to review by the Remuneration and People Committee and approval of the Board. Cessation of employment A Group Executive will only remain eligible to receive an STI outcome if that person ceases employment prior to the STI entitlement date and is a ‘good leaver’ (for example, ceases employment by reason of retirement or bona fide redundancy), unless the Board determines otherwise. If a Group Executive has ceased employment and is a ‘good leaver’, then unvested PSRs (deferred STI) will remain on foot and vest in the ordinary course, unless the Board determines otherwise. If a Group Executive has ceased employment and is not a ‘good leaver’, then unvested PSRs will automatically lapse on or around the date of cessation of employment, unless the Board determines otherwise. Restrictions on transfer or hedging PSRs granted under the plan are not transferable and participants are prohibited from entering into hedging arrangements in respect of unvested PSRs. 33 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) FY23 LONG TERM INCENTIVE – HOW DOES IT WORK? Description Under the FY23 LTI Plan, annual grants of PSRs are made to eligible participants to align remuneration outcomes with the creation of sustainable shareholder value over the long term. Group Executives are eligible to participate, as these employees on an individual basis have the ability to impact AUB Group’s longer term financial performance. Non-Executive Directors are not eligible to participate in the LTI Plan. LTI opportunity The number of PSRs granted to a Group Executive is calculated by dividing the dollar value of the Group Executive’s LTI Opportunity by the VWAP over the 60 trading days prior to the start of the relevant performance period. In determining the ‘LTI Opportunity’, the Board will take into account the nature of the position, the context of the current market, the function and purpose of the long-term component and other relevant information. Vesting conditions PSRs will only vest to the extent that the vesting conditions and ongoing employment conditions (set out below later in this table) are satisfied over the relevant three year performance period. PSRs are tested against three vesting conditions over a three year performance period: – 40% of PSRs are tested against an EPS hurdle; – 40% of PSRs are tested against a Relative TSR hurdle; and – 20% of PSRs are tested against a Return on Invested Capital (ROIC) hurdle. Vesting outcomes for FY20 and FY19 LTI PSRs exercised during FY23 are detailed in Note 21 of the Financial Report. The EPS vesting condition is measured by comparing the Compound Annual Growth Rate (CAGR) of the Underlying EPS from the financial year immediately preceding the start of the performance period to the Underlying EPS for the final year of the performance period. CAGR is therefore measured using the most recent financial year-end prior to the grant as the base year and the final financial year in the three-year performance period as the end year. The percentage of EPS PSRs granted in FY23 that may vest is determined based on the following vesting schedule (see hurdles and outcomes of FY21 grants in section 3 of this report): CAGR of Underlying EPS PSRs subject to EPS vesting condition that vests (%) Base and required EPS Outcomes for FY23 Grant (cents per share – cps) Base for EPS growth 30 June 2022 Underlying EPS 96.70 cps Base Less than 7% 7% 0% 50% Less than 118.46 cps in FY25 At 118.46 cps in FY25 Greater than 7% to less than 12% Straight line vesting between 50% and 100% Between 118.46 cps and 135.85 cps in FY25 12% or more 100% 135.85 cps in FY25 or greater EPS – 40% weighting 34 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) FY23 LONG TERM INCENTIVE – HOW DOES IT WORK? (CONTINUED) Relative TSR – 40% weighting The Board approves a Peer Comparator Group and has the discretion to periodically review and adjust the composition of the Peer Comparator Group, including to take into account acquisitions, mergers, or other relevant corporate actions. For purposes of calculating the growth in AUB Group’s share price over the performance period, the following opening and closing share prices will be used: – for the opening share price, the VWAP during the 60 trading days ending on the first day of the performance period, and – for the closing share price, the VWAP during the 60 trading days ending on the last day of the performance period. Relative TSR performance is assessed over a three-year period which commences at the start of the financial year during which the PSRs are granted. For any PSRs to vest pursuant to the Relative TSR vesting condition, AUB Group’s compound TSR must be equal to or greater than the median ranking of constituents of the Peer Comparator Group. The percentage of TSR PSRs that may vest is determined based on the following vesting schedule: AUB Group’s TSR ranking relative to Peer Comparator Group PSRs subject to Relative TSR vesting condition that vests (%) Below the 50th percentile 50th percentile 0% 50% Between the 50th and 75th percentile Straight line vesting between 50% and 100% At or above the 75th percentile 100% ROIC – 20% weighting The ROIC vesting condition is measured based on the average annual return on invested capital (ROIC) achieved, which is assessed over a 3 year performance period. The percentage of PSRs that may vest is determined based on the following vesting schedule: 3 year average ROIC Less than 11% 11% PSRs subject to ROIC vesting condition that vests (%) 0% 50% Greater than 11% to less than 12% Straight line vesting between 50% and 100% 12% or more 100% ROIC in each year is calculated as EBITA Less Tax divided by Average Invested Capital, defined as follows: EBITA Less Tax Invested Capital Underlying NPAT, add back interest expense related to external borrowings (net of interest received from operating bank accounts) as per consolidated financial statements after tax. The sum of equity attributable to equity holders of the parent plus interest-bearing loans and borrowings (excluding lease liabilities), less cash and cash equivalents not held in trust. Average Invested Capital (Invested Capital at financial year end + Invested Capital at previous financial year end)/2 3 year average ROIC Simple average of ROIC in each of the 3 years of the performance period 35 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) FY23 LONG TERM INCENTIVE – HOW DOES IT WORK? (CONTINUED) ROIC – 20% weighting Calculation of invested capital and average invested capital at the end of the reporting period ($,000) Equity attributable to Shareholders of AUB Group as at 30 June External interest-bearing Loans and Borrowings (excluding lease liabilities) Less cash and cash equivalents (excluding cash held in trust) Invested Capital Average Invested Capital 3 year average ROIC FY21 FY22 FY23 478,754 854,494 1,279,853 212,283 47,802 584,230 (76,588) (259,329) (260,352) 614,449 595,561 11.8% 642,967 1,603,731 628,708 1,123,349 11.7% 12.6% Why were these performance conditions chosen? The Board is confident that it has the right arrangements in place to drive performance and retention in line with shareholders’ interests. EPS – Is a relevant indicator of increases in shareholder value; and – Is a target that provides a suitable line of sight to encourage executive performance. Relative TSR – Ensures alignment between comparative shareholder return and reward for the executive; – Provides a relative test that reflects AUB Group’s performance against the market and an objective test reflective of management’s performance in growing earnings per share; and – Is widely understood and accepted by key stakeholders. ROIC – Ensures alignment between an increase in underlying profit and appropriate returns on new acquisitions; – Indicates the company’s ability to generate a return on all its capital; – Outcomes can be measured against peers to determine relative performance; and – Performance can be measured against acquisition strategy and compared against actual outcomes. Who assesses performance and when? EPS and ROIC results are calculated by AUB Group and an external remuneration advisor tests the TSR results as soon as practicable after the end of the relevant three year performance period. The calculations are considered by the Board to determine vesting outcomes. The vesting conditions are therefore tested at the end of the performance period and the Board determines the relevant number (if any) of PSRs that will vest and convert into shares. Calculation of the vesting conditions and achievement against the vesting conditions is determined by the Board in its absolute discretion, having regard to any matters that it considers relevant (including any adjustments for unusual or non-recurring items that the Board considers appropriate). Any PSRs that do not vest following testing at the completion of the performance period, lapse. 36 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) FY23 LONG TERM INCENTIVE – HOW DOES IT WORK? (CONTINUED) Vesting PSRs vest following testing by the Board at the end of the relevant three year performance period. Prior to vesting, the outcome is assessed holistically against individual and Group performance to determine if any discretion to vary from formulaic results should apply. The Board will have the discretion to exclude the impact of significant acquisitions or capital raisings that are considered in the best long-term interest of AUB if these occur within the final 12 months of the performance period. Any discretion applied will be disclosed. If PSRs vest, the Board has discretion to issue new shares, acquire shares on-market or to cash settle to satisfy the PSRs that will vest. Participants receive one share for each PSR that vests or, if the Board determines, an equivalent cash payment. Shares allocated on vesting of the PSRs are subject to the terms of AUB Group’s Securities Trading Policy and carry full dividend and voting rights upon allocation. Holding Lock There will be a holding lock for a period of one year from the date that the PSRs vest and convert into shares. During this period executives will be restricted from dealing with any of the shares allocated on vesting. Are PSRs eligible for dividends? For PSR grants issued after 1 July 2022, holders of PSRs are entitled to a cash equivalent of dividends paid during the performance period if the PSRs vest. There are no voting rights until the PSRs have vested and converted into shares. Cessation of employment – CEO and Managing Director Cessation of employment – Group Executives other than the CEO If the CEO and Managing Director ceases employment before his PSRs vest, then the following treatment applies: – if employment is terminated in accordance with Mr Emmett’s employment agreement, without notice, for serious misconduct or by reason of illness, injury or incapacity of Mr Emmett, all unvested PSRs will automatically lapse; or – if employment is terminated with notice given by the Company or Mr Emmett, all unvested PSRs remain on foot and will be tested in the ordinary course. If a participant ceases employment before his/her PSRs vest, then the following treatment applies, unless the Board determines otherwise: – if employment is terminated for cause, as a result of the participant being unable to perform duties due to ill health, injury or incapacity or if the participant resigns, then all unvested PSRs automatically lapse; or – if employment ceases in any other circumstances, then a pro rata portion of the participant’s PSRs (based on the portion of the performance period that has elapsed up to the date of cessation) remain on foot and are tested in the ordinary course in accordance with the vesting conditions. If a participant ceases employment and holds vested PSRs which have not been exercised, then the following treatment applies, unless the Board determines otherwise: – if employment is terminated for cause, then all vested PSRs automatically lapse; or – if employment ceases in any other circumstances, then all vested PSRs must be exercised within three months of cessation of employment. After this time, all vested PSRs are automatically exercised at a time determined by the Board. 37 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED) FY23 LONG TERM INCENTIVE – HOW DOES IT WORK? (CONTINUED) Forfeiture and clawback The Board has broad ‘clawback’ powers to lapse unvested PSRs in a number of circumstances, including in the event of fraud, dishonesty, gross misconduct, breach of duties or obligations, a material misstatement, error or omission in the financial report, to prevent a participant being entitled to an inappropriate benefit, or if there is a change of control event. What happens in the event of a change of control? The clawback policy also permits clawback of any shares allocated on exercise of the PSRs, as well as cash payments received on vesting and exercise of PSRs. There is no automatic vesting of PSRs on a change of control. The Board has discretion to determine the appropriate treatment regarding PSRs in the event of a change of control. Where the Board does not exercise this discretion, there will be a pro-rata vesting of PSRs based on the proportion of the performance period that has passed at the time of the change of control event. Restrictions on transfer or hedging PSRs granted under the LTI Plan are not transferable and participants are prohibited from entering into hedging arrangements in respect of PSRs. 38 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE Alignment between remuneration and group performance Numerous elements of AUB Group’s remuneration strategy and framework are directly linked to group performance. The table below sets out information about movements in shareholder wealth for the financial years ended 30 June 2019 to 30 June 2023 highlighting alignment between AUB Group’s remuneration strategy and framework and group performance over the past 5 years. Table 2: Summary of movement in shareholder wealth Underlying NPAT ($m) Underlying EPS (cents) TSR (%) Share price ($) Change in share price ($) Dividends paid and proposed (cents) 2023 129.11 129.32 69.40 29.40 11.72 64.0 2022 74.02 96.70 (18.58) 17.68 (4.71) 55.0 2021 65.30 86.12 60.99 22.39 7.69 55.0 2020 53.15 70.61 5.20 14.70 4.26 50.0 2019 46.71 65.74 (10.50) 10.44 (3.14) 46.0 Executive remuneration is directly aligned with group performance through STI measures of profitability, and LTI measures of EPS growth, capital efficiency, and TSR performance relative to constituents of the S&P/ASX Small Ordinaries Industrials Index. AUB Group Limited (AUB) v S&P/ASX Small Ordinaries Industrials Index (AXSID) AUB Group Limited TSR compared to S&P/ASX Small Ordinaries Industrials Index 250 200 150 100 50 ) 0 0 1 o t d e x e d n I ( n r u t e R r e d o h e r a h S l l a t o T 0 Jun-20 260.28 174.59 107.09 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 AUB Group Ltd Peer Comparator Group 50th Percentile Peer Comparator Group 75th Percentile Further details about AUB Group’s performance over this period can be found in the Operating and Financial Review section contained in this Directors’ Report. 39 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED) Remuneration outcomes The remainder of this section of the Remuneration Report discloses the outcome of awards made under: – the FY23 STI award (performance period 1 July 2022 – 30 June 2023); and – the FY21 LTI grant (performance period 1 July 2020 – 30 June 2023). FY23 STI Outcomes FY23 continued a run of strong performance for the Group and therefore the Board considered STI for FY23 and has provided for an accrual of $5.96m for all Group STI participants (including deferred components of STI granted in prior periods). Table 3: Group STI accrual outcome ($’m) Cash bonuses 2023 5.96 2022 4.74 2021 4.01 2020 3.57 2019 0.88 Table 4: FY23 CEO Balanced Scorecard Performance Category and Weighting Measures FY23 Balanced Scorecard Financial (70%) Business profitability and financial performance: – % Growth in Group UNPAT; – % Growth in Tysers UNPAT; – Network growth, including value of M&A transactions (excl. Tysers); – % NZ Profit Growth; and – % Profit Growth in Agencies. Achieved (% of max) 100% Network Partners and Customers (16.67%) – Board Assessment of Network, Customer and Team progress; – Number of business optimisations (consolidations, simplifications and equity 90% restructuring); and – Continued uplift in effectiveness of risk management and compliance processes and reporting. Other (13.33%) – Number of alternative Premium Funding Arrangements; – Successful completion of Tysers integration activities, including incentive schemes to retain key brokers; and – Scaling of IT platforms, including Lola development. STI Scorecard outcome 93.33% 97.44% This resulted in an STI award of $1,096,250 of which 70% will be paid in cash with the balance allocated to PSRs and will vest over 12 and 24 months. See section 2 of this report for further details. 40 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED) LTI Outcomes 2021 LTI grant outcomes 100% of the total 2021 LTI grant will vest: – 100% of the Relative TSR component will vest given that AUB Group’s TSR was 141.09%, which resulted in AUB’s percentile rank at 95.09% over the performance period; – 100% of the EPS component will vest given that AUB Group’s actual EPS AAGR across the performance period was 22.74%; and – 164,436 PSRs will vest on 31 August 2023. Table 5 below discloses the outcomes of the 2021 LTI grant. All unvested PSRs after testing will lapse. 1 July 2020 to 30 June 2023 Total shareholder return (TSR) outcomes – 40% of total PSR grant* (65,775 PSRs) TSR of AUB Group Limited Percentile Rank Number of TSR PSRs vesting percentage under the 2021 LTI plan 100% vesting of TSR PSRs where AUB Group’s TSR ranking relative to Peer Comparator Group exceeds 75% percentile. Actual outcome 141.09% 95.09% 100% Earnings Per Share (EPS) outcomes – 60% of total PSR grant* (98,661 PSRs) 1 July 2020 to 30 June 2023 Minimum entry target for vesting Straight line for vesting Maximum threshold target for vesting Actual 3-year AAGR achieved (%) Actual vesting outcome 5% AAGR 5%-10% AAGR 10% AAGR 22.74% N/A EPS vesting percentage (of the 60%) 50% 50%-100% 100% N/A Total percentage of EPS PSRs vesting under the 2021 LTI Plan * The vesting conditions in Table 5 apply to the 2021 LTI Plan. 100.00% 100% Results of the 3 year testing of the CEO’s 200,000 PSRs sign on grant. A sign-on bonus of 200,000 PSRs was granted to the CEO and Managing Director that vest over five years. In the previous year, one third of the PSRs were tested over the three year performance period from 1 July 2019 to 30 June 2022. The TSR and EPS hurdles for the sign-on PSR grant were the same as the hurdles for the FY20 grants. Based on the TSR and EPS outcomes (refer to the remuneration report included in the 2022 Annual Report), all 66,667 PSRs (both TSR PSRs and EPS PSRs) satisfied the performance hurdles and will therefore remain on foot and vest at the end of the 5 year period ended 30 June 2024, subject to the CEO’s employment conditions. The remaining balance of 133,333 PSRs (TSR and EPS) will be tested after the completion of the 5 year period ended 30 June 2024. Any unvested PSRs at that time will lapse. 41 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 4 REMUNERATION GOVERNANCE Overview The following diagram illustrates AUB Group’s remuneration governance framework. BOARD The Board reviews, amends and approves the recommendations from the Board’s Committees around governance, strategy, performance, and the remuneration arrangements for all Group Executives and Non-Executive Directors. REMUNERATION & PEOPLE COMMITTEE Oversees our remuneration philosophy and framework. The Committee is responsible for reviewing compensation arrangements for the Directors, CEO and Group Executives, including the Company’s KMP and making recommendations in that regard for determination by the Board. The Committee comprises all Non-Executive Directors of the Board. EXTERNAL ADVISORS The Board and the Committee seek advice from independent experts and advisors from time to time on various matters, including remuneration. The Committee appoints remuneration consultants and external advisors and ensures independence. CEO & MANAGING DIRECTOR (CEO) AND MANAGEMENT The CEO makes recommendations to the Committee regarding Executives’ remuneration. These recommendations take into account performance, culture and values. Together with management, the CEO also provides information and recommendations for deliberation and implements arrangements once they have been approved. Use of remuneration advisors In making recommendations to the Board, the Remuneration & People Committee seeks advice from external advisors from time to time to assist in its deliberations. Remuneration advisors are engaged by the Chair of the Remuneration & People Committee with an agreed set of protocols that determine the way in which remuneration recommendations would be developed and provided to the Board. This process is intended to ensure there can be no undue influence by Executive KMP to whom any recommendations may relate. No remuneration recommendations, as defined by the Corporations Act, were made by the remuneration advisors during the Reporting Period. 42 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 4 REMUNERATION GOVERNANCE (CONTINUED) Executive Service Agreements The remuneration and other terms of employment for the Executive KMP are formalised in employment agreements, which have no specified term. Each of these agreements provide for performance-related bonuses under the STI Plan, and participation, where eligible, in the LTI Plan. Other major provisions of the service agreements of the Executive KMP are as follows: Table 6: Executive Service Agreement terms Name CEO and Managing Director Michael Emmett Other Executive KMP Notice to be given by executive Notice to be given by AUB Group* Termination payment Post-employment restraint 12 months 12 months 12 months fixed remuneration 12 months Mark Shanahan 6 months 6 months 6 months fixed remuneration 12 months * Payments may be made in lieu of notice period. Disclosures under Listing Rule 4.10.22 A total of 39,169 shares were acquired on-market by the Austbrokers Employee Share Acquisition Schemes Trust (at an average price of $27.07 per share) during the Reporting Period to satisfy AUB Group’s obligations under various equity and related plans. Securities Trading Policy AUB Group’s securities trading policy prohibits Group Executives from entering into margin lending or similar arrangements in relation to AUB Group’s securities, including transferring securities into an existing margin loan account and/or selling securities to satisfy a call pursuant to a margin loan. Breaches of AUB Group’s securities trading policy are regarded very seriously and may lead to disciplinary action being taken (including termination of employment). 43 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 5 NON-EXECUTIVE DIRECTOR REMUNERATION Details of the Non-Executive Directors of AUB Group during the Reporting Period are provided in the Directors’ Report. Components and details of Non-Executive Director remuneration Non-Executive Directors receive a fixed fee (inclusive of superannuation) for services to the Board and each Board Committee on which the Director serves. A further fee is payable to Non-Executive Directors who are directors of Tysers Insurance Brokers Limited, which is a wholly owned subsidiary of AUB Group. Non-Executive Director fees for the reporting period are shown in Table 7. Non-Executive Directors do not receive retirement benefits other than amounts paid by way of the superannuation guarantee, nor do they participate in any incentive programs, but they may be reimbursed for expenses reasonably incurred in the course of carrying out their duties. AUB Group does not make sign-on payments to new Non-Executive Directors and does not provide for retirement allowances for Non-Executive Directors. Aggregate fee cap approved by shareholders Non-Executive Directors’ fees are set by the Board within the maximum aggregate amount of $1,500,000 per annum approved by shareholders at the Annual General Meeting in November 2022. Table 7: Non-Executive Director fees payable during the Reporting Period 1 July 2022 to 30 June 2023 Board fees per annum Chair Non-Executive Director Committee Chair (Board Audit & Risk) Committee Chair (Remuneration & People) Committee Chair (Nomination) Subsidiary Boards (excluding Tysers) Committee member Tysers Insurance Brokers Limited: Chair Tysers Insurance Brokers Limited: Non-Executive Director $ Amount (incl. of statutory superannuation) 240,000 120,000 Additional 25,000 Additional 15,000 N/A Additional 10,000 N/A GBP 100,000 GBP 50,000 Non-Executive Directors Minimum Shareholding Policy Non-Executive Directors are encouraged to hold AUB shares and the Board has endorsed a minimum shareholding policy for Non-Executive Directors to hold 100% of the annual director (or Board Chair) base fee within five years, commencing on the later of 1 July 2023 or the date of their appointment. The value of shares for determining compliance is the higher of cost or market value. Our Non-Executive Director minimum shareholding policy is intended to align the interests of Non-Executive Directors with our shareholders. The Non-Executive Directors do not participate in any of our performance-based incentive schemes and have to acquire shares out of their own funds. 44 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 6 STATUTORY REMUNERATION TABLES AND DATA Table 8: PSR/SARs movements for the period The LTI grants for FY23 and movements in all unvested PSRs previously granted to Senior Employees are summarised in the LTIP tables below: GROUP EXECUTIVES (including KMPs) LTIP Financial Year (tranche) Opening Granted Lapsed Exercised Remaining Earliest vesting date Lapse date Fair value per PSR at grant date ($) Fair value to be expensed in the future ($) 2019 (14th) 4,873 – (3,674) (1,199) – 31-Oct-21 31-Oct-25 10.72 – 2020 (15th -5 year PSRs) 200,000 2020 (15th -3 year PSRs) 2021 (16th) 2022 (17th) 2022 (DSTI) 2023 (18th) 101,219 164,436 144,879 – 39,169 – 150,146 – – – – – – – – – – – 200,000 31-Aug-24 31-Aug-28 8.91 335,104 (101,219) – 31-Aug-22 31-Aug-26 9.37 – – – – 164,436 31-Aug-23 31-Aug-27 11.27 144,879 31-Aug-24 31-Aug-28 18.02 788,720 39,169 31-Aug-23 31-Aug-24 19.02 – 150,146 31-Aug-25 31-Aug-29 20.04 1,790,041 – – Total 615,407 189,315 (3,674) (102,418) 698,630 2,913,865 Total Share Appreciation Rights 1,016,776 – – – 1,016,776 31-Aug-26 31-Aug-26 3.79 1,965,326 Shares issued as a result of the exercise of PSRs During FY23, 101,219 PSRs were exercised and converted to shares in AUB Group Limited under the 2020 LTIP and 1,199 PSRs were exercised under the 2019 LTIP. The remaining 3,674 unvested 2019 LTIP PSRs, lapsed. The hurdles and vesting conditions for 2019 and 2020 LTIP were detailed in the FY22 financial statements. All PSRs are granted over shares in the ultimate controlling entity AUB Group Limited. Unissued shares As at the date of this report, there were 698,630 unissued ordinary shares under PSRs as part of the LTIP that have not vested. Refer to Note 21 of the Financial Report for further details of the PSRs outstanding. Holders of PSRs do not have any right, by virtue of the option to participate in any share issue of the Company or any related body corporate. 45 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED) Table 9: Shares held in AUB Group Limited at 30 June 2023 Directors D. C. Clarke (Chair) M. P. C. Emmett (CEO) R. D. Deutsch1 P. G. Harmer A .J. Kendrick2 P. A. Lahiff R. J. Low C. L. Rogers Executives M. J. Shanahan Total Balance at 30-Jun-22 Shares acquired during the year Shares disposed during the year Balance at 30-Jun-23 29,587 5,405 – 2,497 – 12,322 23,196 7,154 14,301 94,462 1,250 77,279 1,000 918 – 416 1,250 1,250 14,319 97,682 – – – – – – – – – – 30,837 82,684 1,000 3,415 – 12,738 24,446 8,404 28,620 192,144 1. R. D. Deutsch was appointed as a Director on 3 November 2022. 2. A .J. Kendrick was appointed as a Director on 27 January 2023. Table 10: PSRs/SARs holdings of KMP at 30 June 2023 Balance at 30-Jun-22 Granted as remuneration PSRs exercised PSRs lapsed/ forfeited Balance at 30-Jun-23 Vested/ exercisable Not vested/ not exercisable Total PSRs/SARs at year end Directors M. P. C. Emmett (CEO) PSRs PSRs (DSTI) * SARs Executives M. J. Shanahan (CFO) 408,101 52,576 (76,029) – 16,009 508,388 – – – – – – 384,648 16,009 508,388 PSRs 59,306 28,917 (14,319) (1,341) 72,563 PSRs (DSTI) * – 8,218 SARs 254,194 – – – – – 8,218 254,194 * PSRs granted as part of the FY22 deferred short term incentive scheme (DSTI). The outstanding PSRs have an exercise price of $NIL. During the current year a total of 189,315 PSRs were granted (105,720 to KMP). – – – – – – 384,648 16,009 508,388 72,563 8,218 254,194 Loans or other transactions with KMP No KMP or their related parties held any loans from the AUB Group during or at the end of the year ended 30 June 2023 or prior year. Apart from the details disclosed in this Report, there were no transactions between KMP (or their related parties) and AUB Group or any of its subsidiaries during the Reporting Period. 46 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED) Compensation of Directors and other Key Management Personnel Table 11: Statutory Reporting Basis – period ending 30 June 2023 The table below outlines senior management team remuneration as calculated in accordance with accounting standards and the Corporations Act requirements. The amounts shown are equal to the amount expensed in the Company’s Financial Report for the particular year. 30 June 2023 Year Salary & fees $ Non Executive Directors D. C. Clarke (Chair) 2023 217,195 R. J. Carless 2022 218,182 2023 2022 – 18,182 P. G. Harmer*** 2023 167,653 2022 102,937 P. A. Lahiff 2023 122,172 2022 122,727 R. J. Low 2023 145,000 2022 145,000 C. L. Rogers 2023 108,598 R.D. Deutsch 2022 109,091 2023 2022 79,091 – A.J. Kendrick**** 2023 153,916 2022 – Equity Settled Short term incentive Cash short term incentive* Non monetary benefits Post employ- ment Super -annuation contributions Share- based payment Equity PSRs/ SARS** $ – – – – – – – – – – – – – – – – $ – – – – – – – – – – – – – – – – $ – – – – – – – – – – – – – – – – $ 22,805 21,818 – 1,818 17,604 10,294 12,828 12,273 – – 11,402 10,909 – – – – $ – – – – – – – – – – – – – – – – Total remunera- tion $ 240,000 240,000 – 20,000 185,257 113,231 135,000 135,000 145,000 145,000 120,000 120,000 79,091 – 153,916 – Total per- formance related % 0% 0% – 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% – 0% – Executive Directors M. P. C. Emmett (CEO) Executives M. J. Shanahan (CFO) Total Remuneration Total Remuneration 2023 971,762 767,376 328,874 2022 973,410 710,500 304,500 2,922 2,922 27,500 1,530,697 3,629,131 27,500 1,352,767 3,371,599 72.39% 70.23% 2023 478,098 378,000 162,000 46,585 27,500 527,840 1,620,023 2022 454,425 364,723 156,310 71,060 27,500 365,598 1,439,616 65.92% 61.59% 2023 2,443,485 1,145,376 490,874 49,507 119,639 2,058,537 6,307,418 2022 2,143,954 1,536,033 460,810 73,982 112,112 1,718,365 5,584,446 * STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be paid/settled during the following financial year. The 2023 amounts have been approved by the Remuneration Committee. ** Share based payments are calculated on the accrued cost to the Company recognising that PSRs issued to KMP will vest over 3 years (5 years for CEO sign-on PSRs and 5 years for SARs) after taking into account a 75% -100% probability that the Group will achieve the performance hurdles required for those PSRs/SARs to vest. *** P.G. Harmer was appointed to the Tysers Insurance Brokers Limited Board on 1 October 2022. Remuneration is based on GBP 50,000 per annum. **** A.J. Kendrick, joined the AUB Group Board on 27 January 2023. During the period he received an amount of AUD 51,613 based on an annual Directors fee of AUD 120,000. In addition to the AUB Group Board, A.J. Kendrick also received remuneration as chair of the Tysers Insurance Brokers Board, based on a fee of GBP 100,000 per annum. The remuneration received from 1 December 22 to 30 June 23 was AUD 102,303. Fees were converted based on an AUD/GBP exchange rate of 0.5702. 47 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED) Statutory remuneration represents the accounting expense of remuneration in the financial year. It includes salary remuneration, annual and long service leave payments, the amortisation expense of deferred performance share rights previously granted and an accrual for STIs. 30% of the FY23 STI will be settled by the grant of further performance share rights of which 50% will vest on 31 August 2024 and the balance will vest on 31 August 2025. There are no performance hurdles required for vesting of the deferred short term incentives settled as performance share rights other than continuing employment. Table 12: Cash and vesting basis - period ending 30 June 2023 The table below outlines remuneration received individually during the year including the prior year STI paid in cash, including the deferred component, in the reporting year plus the benefit received from vesting of shares granted under the Employee Long Term Incentive Scheme. 30 June 2023 Year Salary & fees $ Non Executive Directors D. C. Clarke (Chair) 2023 217,195 R. J. Carless 2022 218,182 2023 2022 – 18,182 P. G. Harmer 2023 167,653 2022 102,937 P. A. Lahiff 2023 122,172 2022 122,727 R. J. Low 2023 145,000 2022 145,000 C. L. Rogers 2023 108,598 R.D. Deutsch 2022 109,091 2023 2022 79,091 – A.J. Kendrick 2023 153,916 2022 – Cash short term incentive* Equity settled Short term incentive Non monetary benefits $ – – – – – – – – – – – – – – – – $ – – – – – – – – – – – – – – – – $ – – – – – – – – – – – – – – – – Post em- ployment Superannu- ation $ 22,805 21,818 – 1,818 17,604 10,294 12,828 12,273 – – 11,402 10,909 – – – – Share- based payment PSRs/ SARS** $ – – – – – – – – – – – – – – – – Total remu- neration $ 240,000 240,000 – 20,000 185,257 113,231 135,000 135,000 145,000 145,000 120,000 120,000 79,091 – 153,916 – Total performance related % 0% 0% – 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% – 0% – Executive Directors M. P. C. Emmett Executives M. J. Shanahan 2023 2022 2023 2022 971,762 710,500 304,500 2,922 27,500 1,696,055 3,713,239 73.01% 973,410 884,375 – 2,922 27,500 – 1,888,207 46.84% 478,098 364,723 156,310 46,585 27,500 319,428 1,392,644 454,425 457,517 – 71,060 27,500 235,052 1,245,554 60.35% 36.73% Total Remuneration 2023 2,443,485 1,075,223 460,810 49,507 119,639 2,015,483 6,164,147 Total Remuneration 2022 2,143,954 1,341,892 – 73,982 112,112 235,052 3,906,992 * STI amounts paid during each financial year for performance during the prior financial year based on agreed KPIs. 30% of FY22 STI amounts were settled by grant of performance share rights of which 50% vest on 31 August 2023 and the balance on 31 August 2024. There are no performance hurdles required for vesting of the deferred short term incentives settled as performance share rights other than continuing employment. ** The actual remuneration relating to share based payments is based on the market value on the date the PSRs were exercised multiplied by the actual number of PSRs vested during the year. 48 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED) Table 13: Number of PSRs granted as part of remuneration 30 June 2023 (Grant year FY23) Directors M. P. C. Emmett PSRs PSRs (DSTI) Executives M. J. Shanahan PSRs PSRs (DSTI) Total Granted no. Grant date Fair value per PSR at grant date (see Note 21) Exercise price per PSR (see Note 21) $ Expiry date First exercise date Last exercise date 52,576 29-Mar-23 16,009 2-Sep-22 20.04 19.02 0.00 31-Aug-29 31-Aug-25 31-Aug-29 0.00 31-Aug-24 31-Aug-23 31-Aug-24 28,917 29-Mar-23 8,218 2-Sep-22 20.04 19.02 0.00 31-Aug-29 31-Aug-25 31-Aug-29 0.00 31-Aug-24 31-Aug-23 31-Aug-24 105,720 The fair value above is the weighted average price of the EPS and TSR PSRs at the date the PSRs were granted. All PSRs were issued with an exercise price of $NIL and the expiry date of the PSRs is four years after the vesting date. Mr Emmett’s grant of 52,576 PSRs under the Long Term Incentive Plan was approved by shareholders at the EGM on 28 March 2023, and this approval was for all purposes, including Listing Rule 10.14. Deferred Short term Incentive (DSTI) 30% of the FY22 STI was deferred in the form of an equity award based on the 60 day VWAP for 30 June 2022. Half of the PSRs will vest on 31 August 2023 with the remaining PSRs vesting on 31 August 2024. No additional performance conditions apply to the vesting of these PSRs other than continued employment to the date the PSRs vest. 49 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED) Table 14: Value of PSRs/SARs granted as part of remuneration (including PSRs/SARs vested or lapsed during the year) Shares issued on exercise of PSRs Value of PSRs/ SARs granted during the year* Value of PSRs/SARs exercised during the year** Percentage of remuneration consisting of value share based payments incurred during the year*** Number of shares issued on exercise of PSRs Paid per share on shares issued on exercise of PSRs Number of PSRs vested during the year Number of PSRs lapsed during the year $ $ % No. $ No. No. 1,053,623 1,696,055 304,491 – – – 76,029 – 1,358,114 1,696,055 40.24% 76,029 – – – 76,029 – 76,029 – – – 579,496 319,428 156,306 – – – – 735,802 319,428 40.67% 14,319 2,093,916 2,015,483 90,348 – 0.00 0.00 – 14,319 90,348 – 1,341 1,341 14,319 0.00 14,319 1,341 30 June 2023 Directors M. P. C. Emmett PSRs DSTI*** Total Executives M. J. Shanahan* PSRs DSTI*** Total Total Total gross value of PSRs granted during the year which will vest over three years if all performance hurdles required for PSRs and SARs to vest, are met. * ** Total value of PSRs exercised during the year is calculated based on the fair value of the PSRs at exercise date multiplied by the number of PSRs exercised. *** Share based payments as a percentage of remuneration is calculated on the accrued cost to the Company recognising that PSRs issued to KMP will vest over 3 years after taking into account a 75 - 100% probability that the Group will achieve the performance hurdles required for those PSRs to vest. 50 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SECTION 7 GLOSSARY AAGR Average annual growth rate (expressed as a %) Balanced Scorecard A balanced scorecard set of KPIs, which includes both financial and non-financial measures that have weighted allocations and are aligned to AUB Group’s strategic priorities CAGR Compound annual growth rate (expressed as a %) Corporations Act Corporations Act 2001 (Cth) EPS Underlying earnings per share Executive KMP Michael Emmett (CEO and Managing Director) and Mark Shanahan (Chief Financial Officer) Group Executives The CEO, CFO, Chief Broking Officer, Chief Underwriting Officer and Chief Legal & Risk Officer KMP Persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of AUB Group during the Reporting Period LTI Plan AUB Group’s Long-Term Incentive Plan Peer Comparator Group Constituents of the S&P/ASX Small Ordinaries Industrials Index (AXSID), defined at the commencement of the performance period PSR Performance Share Right, with each right entitling the holder to receive one fully-paid ordinary share in AUB Group on vesting (or, if the Board determines, an equivalent cash payment). Vesting of PSRs may be subject to vesting conditions and performance hurdles Relative TSR AUB Group’s compounded TSR measured against the ranking of constituents of the Peer Comparator Group Reporting Period 12 months period ended 30 June 2023 ROIC SAR STI Plan TSR Underlying EPS Underlying NPAT Return on Invested Capital – is a profitability or performance ratio that aims to measure the percentage return that AUB Group earns on invested capital. The ratio shows how efficiently the Group is using the investors’ funds to generate income. Invested capital also includes interest bearing debt (net of cash and cash equivalents) but excludes lease liabilities. Share Appreciation Right, with each right entitling the holder to receive fully-paid ordinary shares in AUB Group on vesting (or, if the Board determines, an equivalent cash payment). See remuneration report included in the 2022 Annual Report for further details. AUB Group’s Short-Term Incentive Plan Total shareholder return measures the percentage growth in the share price together with the value of dividends paid during the relevant three year performance period, assuming all dividends are reinvested into new securities Underlying earnings per share, being, in respect of any financial year, the Underlying NPAT divided by the weighted average number of shares on issue during the financial year. Underlying net profit after tax, being, in respect of any financial year, the consolidated net profit after tax of AUB Group for that year excluding fair value adjustments to the carrying values of associates, profit on sale of entities and assets or deconsolidation of controlled entities, contingent consideration adjustments, impairment charges and amortisation of intangibles. Other adjustments to the Underlying NPAT calculation may be made in limited circumstances where the Board considers it to be appropriate. VWAP Volume weighted average price of shares in AUB Group traded on the ASX 51 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023ROUNDING The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC instrument “Rounding in Financial/Directors’ Reports” 2016/191. The Company is an entity to which this legislative instrument applies. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES The Directors received an independence declaration from the auditors of AUB Group Limited. Refer to page 74 of the Directors’ Report. Non-audit services provided to the AUB Group by the entity’s auditor, Ernst & Young, in the financial year ended 30 June 2023 were predominantly in relation to tax matters. Other services included independent investigation and reviews. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act (2001) Cth. The nature and scope of each of the non-audit services provided means that auditor independence was not compromised. The amounts received or due to be received are detailed in Note 24 of the Financial Report. Signed in accordance with a resolution of the Directors. D.C. Clarke Chair Sydney: 22 August 2023 M. P. C. Emmett Chief Executive Officer and Managing Director 52 DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 DIRECTORS’ REPORT YEAR ENDED 30 JUNE 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 53 AUB GROUP ANNUAL REPORT 2023CONTENTS 1. Scope and Methodology 1.1 Introduction 1.2 Global policies and principles 1.3 Themes that matter - Stakeholder Engagement and Materiality 1.4 Our SDG Contribution 2. ESG Balance Scorecard 3. ESG Governance 4. Environment 4.1 Risks and Opportunities 5. Social 5.1 Our Community Investment 5.2 Supporting Our Customers 5.3 Our People 6. Governance 55 55 55 55 57 58 60 61 61 64 64 65 67 70 54 AUB GROUP ANNUAL REPORT 2023ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT YEAR ENDED 30 JUNE 2023 1. SCOPE AND METHODOLOGY INTRODUCTION 1.1 Doing the right thing by our people, our partners, our customers, our environment, and the communities in which we operate is part of our ethos. At AUB Group we recognise our responsibility in society towards creating a more sustainable future. We continue to embed ESG into our business strategy and operations. This is increasingly important as our business continues to grow year on year. With changing customer expectations and increasing demand for ESG engagement, sustainability is increasingly becoming a driver for success. The visible impacts of climate change increase the urgency for action and the need to continue to develop our ESG strategy, as well as support our customers also facing these risks. We are a services organisation operating in more than ~570 locations globally. AUB Group’s network of insurance intermediaries conduct business with clients and other stakeholders both face-to-face and remotely. We maintain office space in the locations in which we operate and our team travels to these office locations and client venues. We do not consume raw materials or manufacture any physical products so our environmental footprint and exposure to supply chain risks is limited to our direct operations. During FY23, we continued to build on our ESG strategy and working towards achieving our ESG commitments. The Tysers acquisition is a direct response to serving our customers and providing them access to cover for harder to place climate risks. We have formalised our ESG targets into a balance scorecard approach, ensuring that we set ambitious ESG goals which will help us create long term sustainable value for our stakeholders. Our ESG priorities across each pillar are the result of extensive stakeholder engagement, including materiality assessments. This report covers AUB Group’s ESG management approach and associated activities for the year ending 30 June 2023. Unless otherwise indicated, ESG data is presented for the period from 1 May 2022 to 30 April 2023 (the ‘reporting period’). This report includes the activities of our subsidiaries and their controlled entities at the end of the reporting period. The data for these subsidiaries has been presented for the full year, irrespective of when control was obtained, and comparative information has been represented where necessary. Governance is a key aspect on delivering on our ESG strategy and in ensuring we have the right policies and processes in place to support our ESG commitments. As further detailed within this report, the Board, in consultation with the Board Audit and Risk Committee, oversees and approves AUB Group’s ESG activities, including our strategy, policies and procedures. 1.2 GLOBAL POLICIES AND PRINCIPLES We recognise the need to provide our stakeholders with clear and transparent ESG reporting. This report has been prepared considering the guidance provided by the Global Reporting Initiative (GRI) Standards 2016. We have also considered the United Nations Sustainable Development Goals and disclosed in this report the areas where we believe we can have the greatest impact. We will comply with a globally accepted ESG reporting standard by FY25. 1.3 THEMES THAT MATTER - STAKEHOLDER ENGAGEMENT AND MATERIALITY Social responsibility and caring for our environment are aligned with our stakeholders’ interests. Listening to our stakeholders diverse needs, helps us adapt and shape our approach to ESG, and identify the key themes that matter to them. In 2021 we conducted a materiality assessment to develop our fundamental ESG principles and identify our most important focus areas. The materiality assessment involved: – Engaging expert advisors; – A desktop review and of industry trends and leading practice in ESG; – Interviews with internal and external stakeholders to determine material topics and their relative importance; and – An assessment of our impact areas against the UN Sustainable Development Goals (SDGs). The three areas of employees, customers and social and environment are the themes under which our material impacts are organised. Our strong relationship with our partner businesses is an essential component of our framework, and our ethics and integrity underpin everything that we do; they guide us in our approach to all of our stakeholders and business activities. 55 AUB GROUP ANNUAL REPORT 2023Material Topics identified Ethics and Integrity: – Responsible business and governance; – Integrity and ethical behaviour; – Responsible investment; – Financial resilience and profitability; – Trust, transparency and disclosure; – Fair insurance broker commissions; – Compliance; and – Data security and privacy. Employee: – Partner relationship advocacy; – Employee training, development, and retention; and – Health, Safety and wellbeing. Customers: – Technological transformation; and – Product innovation. Social and Environment: – Climate change, environmental sustainability, and stewardship; – Social responsible engagement and reconciliation; and – Responsible supply chain. During 2023 we reviewed the outcomes of the materiality assessment and confirmed that the topics identified remained our most important focus areas. Additionally, we considered stakeholder feedback obtained throughout the year from our stakeholders and whether this has any impact on our ESG strategy, ensuring we are agile and continuing to focus on the themes that matter most. We plan to undertake a materiality assessment every 3 years, with our next assessment to be completed in FY24. We engage with all our stakeholder groups on a regular basis to ensure we are responsive to their needs and concerns. ESG matters are becoming a growing area of concern for many of our stakeholders. Our key stakeholders and methods of engagement are: STAKEHOLDER DESCRIPTION INTEREST CUSTOMERS Our network partners are in regular direct contact with their customers. They collect and analyse customer feedback through a range of interactions such as one on one meetings, online surveys, social media and focus groups. This helps to ensure that we are aware of, and able to respond to, the evolving needs of customers. A hardening commercial insurance market over the past 5 years has impacted the price and availability of insurance cover for our customers. Acting fairly and in their best interest. Providing access to insurance. Reducing cost pressures. Deliver a reliable and secure service. SHAREHOLDERS We have regular discussions, briefings and meetings with investors, analysts and proxy advisors to keep them informed of our performance and any emerging risks and opportunities. Responsible investing. Good governance practices. Oversight of decentralised group. EMPLOYEES We conduct regular employee engagement surveys, industry benchmark research and regular team meetings to keep our employees up-to-date on the latest company and industry developments. Using feedback and research we set targets to appropriately respond to employee issues. Development opportunities. Market tested salaries. Technology to eliminate repetition. GOVERNMENT AND REGULATORS We engage with Federal and state-level governments, regulators and industry bodies through meetings and formal policy consultation submissions to advocate for issues important to our stakeholders. We ensure we comply with regulation and proactively adopt key principles of upcoming changes and best practice. Flexible arrangements. Diversity targets and plans. Good governance practices and risk mitigation. Strong asset management and protection. SUPPLIERS We hold formal and informal meetings with our top suppliers including IT, product suppliers, insurance underwriters and finance providers. Prompt payments to small businesses. Supply chain integrity. COMMUNITY We engage with the communities in which we operate through volunteering, fundraising initiatives and events, workshops and funded programs. Being a good corporate citizen Giving back through volunteering and charity 56 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 20231.4 OUR SDG CONTRIBUTION Our approach to ESG supports the United Nations Sustainable Development Goals (SDGs). As our business continues to grow internationally, supporting these global goals is increasingly important for the Group. AUB Group have identified priority SDGs where we believe we can have the greatest impact and have incorporated the goals into our broader ESG framework. SDG WHAT AUB GROUP IS DOING AND WHERE IS OUR FOCUS We ensure our employees have a safe working environment and offer them health and wellbeing programs and initiatives. With greater numbers of employees working remotely, we are mindful of the need to monitor and address the impact on their mental wellbeing as well as look to broader health and wellbeing challenges in our customers and communities. We use Officevibe, a platform which prompts employees to complete fortnightly surveys anonymously and provides resulting insights to management. The tool enables us to collect continuous feedback from employees on range of topics including well-being. As with others in our industry, reaching gender balance throughout AUB Group remains a challenge. We have assessed our recruitment, selection and retention processes and explored opportunities to improve gender equality at all levels across the organisation. Our longer term gender balance goal is to achieve 40:40:20 (40% men, 40% women and 20% open) – at all levels of our organisation. During FY23 we completed a review of Group wide pay to identify whether there was any gender pay gaps within the Group that need to be addressed. As a result of this review, we have identified measures to improve our gender pay equity that we will focus on during FY24. We stay at the forefront of market developments so that we can offer our customers the best technology and product solutions for their needs. Developments and better use of customer data have led to greater choice, and a more efficient & customised experience. We negotiate terms with underwriters to enable our customers to obtain the most affordable and appropriate protection for themselves, their workers and their families. We provide our employees opportunities to develop their careers with us through internal and external training and study assistance. We have strengthened our training platform and program, with the objective organisation-wide engagement and alignment with key policies and commitments. We introduced an updated Modern Slavery Policy to address modern slavery risks within our operations, supply chains and investment activities. We are committed to continuous assessment of potential modern slavery issues in our supply chain and focusing on developing our approach to quantifying and managing impacts. We contribute to our communities through volunteering and fundraising. Our decentralised business model means that our partner businesses are free to contribute to causes and local communities at their own discretion. We plan to support this activity by developing partnerships with our community stakeholders and our partner business to address inequalities. The roll-out of our ‘Do Good, Be Better’ program during the year saw increased volunteering hours across the group. Our AUB Community Day grants employees a day of paid volunteer leave to participate in community activities such as volunteering, mentoring, and working with charities and other not-for-profit organisations. The AUB Community Day includes partnerships with community groups who benefit from our involvement and support to deliver their mission. During 2023, the Group has contributed over $1.2m (FY22: $1.2m) of donations to a range of organisations. This is comprised of: Direct contributions to charities from the Group of $374k (FY22: $507k); Indirect contributions to charities through foundations run by the Group of $435k (FY22: $315k); and Direct and indirect contributions of the Group’s associate businesses of more than $350k (FY22: $325k). 57 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 SDG WHAT AUB GROUP IS DOING AND WHERE IS OUR FOCUS We make efforts to manage our environmental footprint. This includes measure such as carbon offsetting, switching to renewable energies and measuring our scope 1, 2 and 3 emissions. We carbon offset our business travel emissions. We are committed to net zero emissions by 2050 for wholly owned group entities. We are working to improve how we measure and report on our environmental impacts and our long-term approach to mitigate climate change, including by developing our ESG reporting to comply with a globally accepted ESG reporting standard by FY24. 2. ESG BALANCE SCORECARD AUB Group have committed to a range of short to longer term ESG targets, as reviewed and approved by our Board of Directors. These targets support our wider ESG strategy, as well as our contribution to the UN SDGs. AUB Group is comprised of a number of controlled entities, who are either fully owned or majority owned entities. Some of our targets range from group wide or with initial focus on wholly owned entities and commitment to expand the target to all controlled entities in the subsequent year. Our balanced scorecard represents our commitments for FY23 and our progress against these. FOCUS AREA MEASURE PROGRESS Environmental Governance (Environment) Extend renewable energy and carbon offset model to others in the Group During the year, additional group entities switched to 100% renewable energy usage in their offices. In FY23, 38% of the Group’s energy usage was from renewable resources. We are committed to continuing to rollout the renewable energy model to additional entities in the Group and increasing our renewable energy usage. AUB head office entities and Tysers currently are part of carbon offsetting programs, offsetting 100% of scope 3 emissions from business flights. Tysers began carbon offsestting in July 2022 and AUB head office entities from October 2022. We will extend carbon offsetting to other entities in the Group during FY24. Employee Development (Social) Minimum of 20 hours training in addition to ethics training for all AUB Group head office staff During FY23, all head office employees completed on average 20.7 hours of training (FY22: 19.5). This training was completed on LITMOS, our centralised learning and development (L&D) platform. 58 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 FOCUS AREA MEASURE PROGRESS Community Investment (Social) Rollout of a donation and volunteering model Social Governance (Social) Corporate governance over M&A (Governance) Assess strategic measures to be implemented to achieve long term gender balance objective of 40/40/20 Benchmark and assess strategic measures to assess and eliminate any gender wage gap. ESG metrics formally codified within M&A checklist We launched the following as part of our ‘Do Good, Be Better’ initiative; AUB Community Day grants a day of paid volunteer leave to all AUB had office employees to participate in community activities such as volunteering, mentoring, and working with charities and other not-for-profit organisations. The AUB Community Day includes partnerships with community groups who benefit from our involvement and support to deliver their mission. AUB Giving programme allows our team members the freedom to support causes they are passionate about via pre-tax donations, deducted directly from their pay, with AUB Group matching each donation up to a maximum of $1,000 per head office employee per annum. The program will also become part of AUB Group’s performance recognition process with the option to receive ‘charity gift cards’ instead of other financial awards. At launch, all employees received a one-off $50 in their AUB Giving account to facilitate donations to the charities of their choice. The Group has a target to achieve 40:40:20 (40% men, 40% women and 20% open) – at all levels of our organisation. During the year, a gender wage assessment was completed across the Group. As a result of this assessment, we have identified focus areas for FY24 and are assessing measures to eliminate any gender wage gaps identified. We have taken initial steps to formally build ESG metrics into our M&A checklist. This goal will be finalised during FY24. 59 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 ESG RATING HISTORY We are proud of our MSCI rating. Our rating from MSCI has consistently improved since their initial assessment in 2019 and we are please to have maintained our rating during FY23. For our stakeholders on average the most material areas of focus relate to the Governance Pillar. In this regard we proactively work to uplift the Group’s governance through hiring skilled employees in the right positions, and a drive to achieve best practice outcomes. The improvement in our score is a reflection of this journey. 3. ESG GOVERNANCE AUB Group is committed to high standards of corporate governance. Embedding ESG into our existing business is key to optimising our impact and therefore it is treated as a key part of our system of governance. AUB Group’s Board comprises three Board Committees that guide our governance activities in respective areas according to their Committee Charters and Group policies. Board structure and responsibilities AUB GROUP LTD BOARD BOARD AUDIT & RISK COMMITTEE REMUNERATION & PEOPLE COMMITTEE NOMINATION COMMITTEE The Board of Directors is responsible for the corporate governance of AUB Group and ensuring high standards of governance are maintained across all the aspects of Group’s business and operations. The Board guides and monitors the business and affairs of AUB Group on behalf of stakeholders. Our corporate structure ensures that the Board maintains an appropriate level of oversight over our operations. The Board, in consultation with the Board Audit and Risk Committee (BARC), oversees and approves AUB Group’s ESG activities, including our strategy and policies and procedures. The Board delegates responsibility for ESG to management, with our Chief Executive Officer having ultimate responsibility of our ESG activities. During the year, to further embed and support our ESG governance, AUB Group established a new ESG related committee run by management. The BARC endorses all ESG targets, progress is formally reported in BARC meetings held every 2 months, and reviews all ESG materials, and outcomes of ESG rating agencies assessments. The BARC also approve our ESG report prior to publication, ensuring that all material topics are appropriately reported on. Our ESG Policy sets out how we work towards being a socially and environmentally responsible corporate citizen. It outlines policies and procedures we adopt across all our businesses to support socially and commercially ethical practices, reduce our environmental footprint and manage our environmental risks. We have a number of more specific policies that cover other ESG areas, such as diversity and inclusion, workplace health and safety, and modern slavery. Our Corporate Governance Statement is founded on the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition). We review and revise our Corporate Governance Statement to reflect the changing standards and expectations of our industry annually. It is available on our website: www.aubgroup.com.au/corporate-governance. 60 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 20234. ENVIRONMENT Environmental sustainability is integral to a strong, secure future. AUB Group is committed to being a responsible and sustainable organisation. 4.1 RISKS AND OPPORTUNITIES Climate change presents a number of risks and opportunities for all sectors, including the insurance industry. These include direct damage to assets or property from climate related events, pricing and demand changes flowing from the transition to a low-carbon economy, and business disruption from a changing regulatory environment. Increasing frequency and severity of climate-related events pose increased risk to some customers and as these events become more regular, the cost of insurance may become prohibitive and certain risks may become uninsurable. This has direct impact on AUB Group Limited as a broking and underwriting group. AUB Group believes that we must take climate risks seriously to ensure the viability of our business as well as identify opportunities to change and grow in a changing world. We acknowledge the science and are supportive of global efforts to decarbonize the economy. We are committed to net zero emissions by 2050 for wholly owned Group entities. We are working to align practices with the goals set in the Paris Agreement, including to limit global warming to well below 1.5 degrees. We are also committed to further developing our climate risk reporting, with a view to aligning our reporting practices to the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). We have made an initial assessment of our risks and opportunities against the TCFD, and will comply with a globally accepted ESG reporting standard by FY25. We are committed to reducing the environmental impact of our direct operations, including reduced emissions and carbon offsetting, reducing energy and water/waste consumption. Our specific climate goals are set out in our ESG scorecard. AUB Group’s environmental objectives and how we are achieving them are summarised below. OUR OBJECTIVE HOW WE ACHIEVE IT Reduce water and energy consumption – Reducing and consolidating office space. – 4/1 work from home program for Sydney-based agency and head office staff, where employees work from home 4 days a week. – Measuring Scope 1, 2 and 3 emissions across the AUB Group. – Monitoring and reducing water consumption year-on-year. – Monitoring and encouraging carbon offsets purchase and use of renewable energy. Head office and a number of other businesses’ energy supply switched to fully renewable sources. – Choosing green buildings for our office, including our North Sydney head office, which boasts a 5.5 Star NABERS energy rating and a 4.0 Star NABERS water rating. – Use of energy efficient lighting in our office buildings. – 5 buildings in the target emissions group have an average energy rating of 4.5. – 4 buildings in the target emissions group have an average water rating or 4.5 Minimise waste, and encourage the reuse and recycling of waste items – Actively encouraging recycling of paper, glass and aluminium. We also provide printer toner cartridge recycling stations in each office. – Encouraging our employees to use reusable water bottles, cups, and mugs while in the office to reduce waste. – 2 buildings in the target emissions group have an average waste rating of 2.8. Promote sustainable transport to employees, clients, and suppliers – Providing office space in central locations near public transport hubs. Most employees travel to and from work via public transport (train, bus, ferry) or active transport (walking and cycling). – Encouraging video and audio communication to reduce air and road travel. – Carbon offset purchase for corporate travel. Support sustainable procurement and other sustainable work practices – Procuring environmentally friendly office supplies. – Adopting digital solutions to reduce our use of paper and our need for business travel. – Reducing our paper usage by setting printers to print double-sided output. – Equipping our employees with knowledge and training to minimise their own environmental footprint. – Actively engaging with our network partners on good ESG practices. 61 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023Carbon emissions reduction AUB Group’s emissions reporting covers ours and our partners’ tenanted offices and car fleets. Our primary measures of these activities are scope 1, 2 and 3 emissions. – Scope 1 emissions relate to emissions from our car fleets. – Scope 2 emissions relate to energy we purchase from the electricity grid. – Scope 3 emissions are the result of activities from activities not directly controlled by the Group and consists of activities in our supply chain. This includes business travel. Scope 1 and 2 Emissions ) e - 2 O C s e n n o T ( 1500 1000 500 0 Scope 1 - Diesel & Petrol Combustion and Natural Gas via Pipeline Scope 2 - Electricity from National Grid PE23 PE22 Total The Graphs include impacts of newly acquired entities if they had been in the Group for the full period. The increase has been due to the growth of the business, primarily through acquisitions. Pleasingly carbon emissions per employee continues to fall compared to FY22. Scope 1 and 2 Emissions, tCO2-e/employee 2023 0.44 2022 0.50 Movement, % (12.00%) AUB operates a 4/1 work from home program for our North Sydney head office, where employees of AUB Group, our agencies and two brokerages work from home four days a week. This has allowed our staff greater flexibility and control over their working hours and reduced our office space needs. We have sub-let or surrendered a number of offices. We continue to monitor our emissions across the AUB Group and explore initiatives to reduce them. Scope 3 emissions and carbon offsets AUB head office entities and Tysers use carbon offsetting programs, offsetting 100% of scope 3 emissions from business flights. Tysers began carbon offsestting in July 2022 and AUB head office entities from October 2022. As this is the first year of our carbon offsetting programs, no prior period comparatives are applicable. tCO2 from business flights- Tysers and AUB Head Office entities 4,820 (3,217) 1,603 2023 Scope 3 Emissions 2023 Total Emissions Offset 2023 Scope 3 Net Emissions 62 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 Energy consumption As a services organisation, our energy consumption relates to energy used to power our offices. In April 2022, AUB head office entities switched to renewable energy. During FY23, 15% of our total electricity usage was derived from renewable sources. This is expected to increase in FY24 as the renewable energy model is extended to others in the Group. Total energy consumption (kWh) 000’s Renewable (%) 2023 2,012 15% 2022 1,352 1% Energy consumption by segment from non-renewable sources Energy consumption by segment from renewable sources KWH CONSUMED KWH CONSUMED 2% 39% 34% 14% 25% 9% 28% 63% Agencies Australian Broking NZ Tysers Agencies Australian Broking Support Services Water consumption We strive to monitor and reduce our water consumption across our businesses. Consolidating our office space, as well as promoting flexible working arrangements have been the key factors in reduction of water consumption in the reporting period, compared to the prior year. 63 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023Our network partnerships and initiatives AUB Group and our partners support community organisations, such as charities and sporting clubs, through fundraising, sponsorship, and volunteering. Because our partners are located in a wide range of locations, we adopt a decentralised approach to community support, allowing our partners to determine how they can have the greatest impact in their local communities. During FY23, our employees volunteered over 1,079 hours to charitable causes. Our agency and Austbrokers divisions contributed monetary donations to, and participated in, a range of fundraising and community initiatives during the year, including as: – Sponsor of the annual Insurances Ashes, which is a cricket event run by charity the Primary Club of Australia (PCA). The event raises funds for the PCA, which gives people with disabilities the opportunity to experience the joy and exhilaration that comes from playing cricket. We also actively support other PCA events that take place throughout the year. – Major sponsor of the Lloyd’s Australia Golf Day. In 2022, the event supported SpinalCure Australia in their work to find a cure for spinal cord injury. – Charity partner with AllKids, which is a not-for-profit organisation providing education to disadvantaged children in the coastal commune of Ream in Sihanouk Province, Cambodia. Our sponsorship enables the AllKids staff to work with local public schools, teachers and principals, local government, commune officials and families to give all children in their community access to quality education. Throughout the year we sponsored the education of 10 children in Cambodia through the AllKids Kids to School program. – Sponsorship for 4 students studying English in Cambodia to attend the Central Coast Grammar School and develop educational skills to assist the teachers at Sunrise Cambodia, an organisation that provides care for at risk children. This includes the provision of a home, food, clothing and education including English and computer lessons. – The Insurance Advisernet Foundation supports local Australian and New Zealand organisations that work to help change the lives of individuals, families and communities for the better. Over the past 10 years, IA and its Foundation has contributed over $3m to more than 50 different charities. Each year over $400k is donated to a variety of community fundraising initiatives, including charities such as Men’s Shed Association, Tour De Cure, Act for Kids, South Australian Health and Medical Research Institute, Starlight Foundation and Pancare. 5. SOCIAL The pillars of our social approach are community, our customers and our people. 5.1 OUR COMMUNITY INVESTMENT AUB Group is committed to supporting the communities in which operate, and to manage our wider social responsibilities. We recognise the importance of focusing on economic and social wellbeing by supporting our local communities. Do Good, Be Better During FY23, we successfully launched our AUB Group ‘Do Good, Be Better’ initiative’ which is designed to support the aspirations of our teams and employees to make a difference to the causes they care about most. Initially offering paid volunteer leave and donation matching, in partnership with The Good Company. AUB Community Day During the year we granted a day of paid volunteer leave to all AUB Head Office employees to participate in community activities such as volunteering, mentoring, and working with charities and other not-for-profit organisations. This includes partnerships with community groups who benefit from our involvement and support to deliver their mission – whether by assisting the homeless, supporting children in need, working at schools or volunteering at animal shelters. AUB Giving The AUB Giving program allows our team members the freedom to support causes they are passionate about via pre-tax donations, deducted directly from their pay. During FY23 AUB Group matched each donation up to a maximum of $1,000 per head office employee per annum. Since the launch of the program, there has been $18.4k of donations. This is a positive uptake and we expect to further the uptake in FY24 as the program becomes more established. The program will also become part of AUB Group’s performance recognition process with the option to receive ‘charity gift cards’ instead of other financial awards. At launch, all head office employees received a one-off $50 in their AUB Giving account to facilitate donations to the charities of their choice. Tysers Tysers donates fortnightly to charities chosen by employees. Since launching in 2019, over 60 charities have benefited from this scheme. During 2023, Tysers also selected a charity via employee vote to support via donations and an employee volunteer program. The chosen charity operates in the UK to help those impacted by homelessness. 64 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023 – Adroit Insurance and Risk, based in regional Victoria and Albury holds strong community values at the heart of their organisation. The team has raised over $2m for local community organisations and foundations since it was established in 1978. In the reporting period, Adroit made donations to a variety of local community groups, organised and hosted many fundraising events and volunteered over 400 hours of staff time. Adroit has proudly supported foundations and their projects including, The Power In You Project who help those affected by substance, mental health or justice related challenges, Ballarat Health Services by raising funds to purchase two new infant resuscitation cots – for the Emergency Department and the Operating Theatre, and The Border Trust Foundation – various projects within the Albury Wodonga region including, financially assisting families to get their children back to school. We also provided donations to, and sponsorship of, community and sporting clubs around Australia, including AllKids, the St George Australia Football Club, Primary Club of Australia and Drummoyne Water Polo Club. Commitment to fair tax contributions AUB recognises that without taxes, communal investment including development of future talent through formal education opportunities would suffer. We benefit from this communal investment and as such believe we have an obligation to pay a fair share of taxes. AUB’s Board has a strict policy to operate within the law and not to take aggressive tax positions, or operate within tax havens. Our aim is to avoid any tax controversies and to pay a fair share of our profits as taxes in each country we operate in. In FY23 the Group paid $32.34m (FY22: $26.9m) in income tax, and $21.9m (FY22: $6.7m) in payroll tax. In addition, our associates (companies we don’t control) pay taxes at similar rates. The Effective Tax Rate for the Year Ended 30 June 2023 was 28% (2022: 18%). The Group’s tax rate is below the main effective tax rate in Australia of 30% largely as a result of the $9m tax impact of entities that are accounted for on an equity basis. Entities accounted for on an equity basis are fully tax paying in Australia, however for accounting purposes the related tax expense is reflected in the net return on the investment rather than the tax expense of the Group. This is offset by a $4m increase in the tax charge resulting from expenses that are not deductible for tax purposes which principally relate to fees incurred when acquiring new businesses in the year. The increase in the effective tax rate of 10% is largely the result of a net loss on the adjustment to carrying value of investments in 2022 (see Note 4f of the Notes to the Financial Statements), that did not have an associated tax credit, which did not recur in 2023. The main impact on the tax rate in future years is expected to be the continued profitability of the business accounted for under the equity accounting rules as discussed above, the change in geographic profile of the earnings of the Group and any changes in tax legislation. 5.2 SUPPORTING OUR CUSTOMERS Our customers are at the heart of everything we do. Our approach is based on our commitment to high-quality service and seeks to support our customers in safeguarding their future. Every day we provide valuable support through market- leading technology and products backed by strong customer service. Customer Engagement Our partners and their employees actively engage with our customers and earn their long-term trust by providing high standards of customer service. We strive to provide all our customers with products that are appropriate to their financial objectives and circumstances. We do this as part of our customer service standards and to ensure we are compliant with the relevant financial services laws. As part of our commitment to high quality customer service, our partner businesses must also ensure robust dispute resolution processes are in place to handle complaints in a timely and fair manner. AUB Group provides all partner firms with access to up-to-date resources on these requirements and provides support, as and when required, to meet regulatory notification and ongoing reporting obligations. Customer complaints are monitored by Group Risk and Compliance, and are reported to the Group Board Audit and Risk Committee on a regular basis. Technological Transformation To deliver a stable, reliable and secure service to our partner businesses, we provide an opt in centrally managed network and infrastructure services. This centralised technology service leverages our scale and helps partners better serve their clients confidently. All data is backed up and secured in our dedicated Sydney data centre with a second back up datacenter site in Melbourne. AUB Group has made several strategic acquisitions which uniquely position us to transform our broker platform experience. We now have the building blocks to create a cohesive modern suite of digital broker solutions. In addition, our Underwriting Agencies have transitioned to a new digital platform which will better enable them to serve brokers and clients. Product Access and Innovation We keep abreast of product innovation to ensure our partners are constantly meeting our customers’ needs. We provide our partners with insurance services that enhance their ability to support their customers including claims services, specialist estimating, forensic and investigation support. Further to enable our partners to concentrate more on their customers we provide a range of opt-in administrative support services in accounting, payroll, tax and analytics. We also assist our partners to optimise their businesses by facilitating financial advice, legal advice, management support, succession advice and support, funding, mergers and acquisitions support, and strategy formulation and execution. 65 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023The acquisition of Tysers represents significant acquisition during the period to increase capacity and support hard to place insurance risks. Tysers is a leading Lloyds and London based broker with access to specialist underwriting expertise and global distribution capabilities. Tysers operates primarily out of the UK but has operations in more than a dozen countries including the United States. The acquisition represents vertical integration of wholesale insurance in the Group. The acquisition will enable the Group to enhance client service, by increasing capacity for harder to place risks for our clients direction of wholesale placement from our Agencies to Tysers. The acquisition will also provide Brokers and Agencies across the Group to access capabilities and facilities in the Lloyd’s and International markets. Digital Confidence Ensuring that we have robust data privacy and security measures helps us to improve customer experience and develop trust with our customers. Data Privacy- AUB Group is committed to protecting the privacy of personal and sensitive information collected as part of its business operations in line with the Australian Privacy Act (1988). Our Privacy Policy sets out our privacy principles and provides guidance to member firms on the collecting, using, holding, disclosing, and otherwise managing personal information. Cyber Security- AUB Group has designed and implemented a suite of core capabilities to manage cyber security and cyber risk, including the establishment of a set of strategic objectives to an industry aligned cyber security framework and a roadmap focused on embedding solid foundations. We have developed a capability whereby our cyber posture is continually assessed and enhanced. Taking a risk-based approach to prioritising the cyber roadmap initiatives, we are focused on meeting our strategic information security objectives and managing risk consistent with enterprise risk appetite and tolerance levels. The minority of partner firms within the group who manage their own IT services and security, are subject to AUB’s Security Policy and IT Service Standards. 66 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 20235.3 OUR PEOPLE Our employees are a critically important asset and a key pillar of our ESG framework. We aim to equip our employees with the skills they need to deliver for our customers and to provide them with opportunities so that they can reach their full potential. We know that a diverse and inclusive workforce is the foundation for innovative thinking and new ideas. For the second year in row, an independent review conducted by Great Place to Work benchmarked the staff of AUB’s Sydney office against peers globally and certified AUB as a Great Place to Work. Of approximately 300 employees surveyed: – 98% believe it is a safe place to work – 95% believed they are treated fairly regardless of their race or sexual orientation – 89% believed they are treated fairly irrespective of their gender or age – 88% believed they can take off time when they believe it’s necessary – 89% average score for justice. Employee Development We are committed to ensuring that our employees get a sense of fulfilment from their work. We do this by providing them with ongoing development opportunities through AUB Group learning and development programs as well as further study assistance. Our Broking Division has an Education Committee comprising senior broking management from across the country. The Committee ensures that insurance broker employees receive the necessary training and education through the National Insurance Brokers Association, Australia (NIBA), the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), LMI College and other specialist providers. Our Agency Division and Head Office employees complete their ongoing training requirements online through the LITMOS learning management system. Our agencies’ training managers are responsible for running LITMOS, ensuring that the available learning material meets the relevant training requirements and ensures that agency staff complete their training in a timely manner. During the year, training hours for our employees across the group remained consistent with the previous year. In FY23, employees undertook an average of 21.1 hours of training each, including our broker and agency employees. 2023 2022 Movement, % Employee training hours (includes compliance related) 46,757 46,975 (0.5) 67 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023PROMOTIONS 2023 PROMOTIONS 2022 42 Female Male 35 Female Male 58 65 Employee Engagement We use our Employee Net Promoter Score (eNPS) to assess employee engagement based on their willingness to recommend the organisation to others. AUB Group’s head office employee satisfaction is measured regularly and reflects a strong level of overall satisfaction, especially with respect to how our employees feel about their relationships with peers and their managers. We utilise Officevibe, a dynamic online employee engagement platform. The platform prompts employees to complete fortnightly surveys anonymously and provides resulting insights to management. The tool enables us to collect continuous feedback on employee sentiment and dive deeper into emerging trends and developments amongst our workforce. Officevibe has been rolled out to our head office teams as well as to all Sydney, Melbourne and Brisbane teams in our agencies, and a number of brokers in the Group. Diversity and Inclusion Gender parity is integral to a dynamic balanced workforce. We are working to improve gender balance across the AUB Group. We have made a number of improvements to our recruitment, selection and succession processes, incorporating psychometric testing as part of the recruitment process and ensuring succession planning is evaluated on an ongoing basis and continuously updated and monitored. Our longer term gender balance goal is to achieve 40:40:20 (40% men, 40% women and 20% open) – at all levels of our organisation. We recognise this is a long-term commitment and that the insurance industry as a whole will require substantial work in this space. The Group is committed to the development, promotion and retention of women in leadership. Some of these initiatives include: – Seeking to achieve gender diversity in the composition of our board and with a target of 30% female directors; – Mentoring and career resiliency programs that are focused on giving female staff equal opportunity to rise to senior positions; – Regular remuneration reviews to ensure remuneration is relevant to the market and commensurate to the role regardless of gender; – In January 2023 Tysers joined Insurance Cultural Awareness Network (iCAN) as a bronze sponsor. iCAN is an industry-wide independent network that supports multicultural inclusion across the UK insurance sector. It aims to bring the industry together to share best practices and to promote multicultural inclusion in the workplace; and – Tysers’ Charity Initiative donations for March were directed to Smart Works which provides interview training and clothing to help low-income women in the UK improve their confidence, secure employment and gain financial independence. We report annually to the Workplace Gender Equality Agency, in line with the Workplace Gender Equality Act. These reports provide valuable insights into our workforce composition and flag areas where we can improve our employee value proposition and retention and recruitment practices. The latest filing is available on our website. As at 30 June 2023 AUB Group and its controlled entities had a total of 2,433 (FY22: 1,208) employees with women representing 58% (FY22: 61%) across the Group. We’re pleased to report that throughout the year approximately 58% (FY22: 65%) of our internal promotions were female, demonstrating that the efforts we are making to support the careers of our female employees are delivering results. During the year, 65% of our new hires were female. 68 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023EMPLOYEE GENDER COMPOSITION (%) 100 80 60 40 20 0 80 20 38 62 55 45 79 21 Executives Non Executive Management Professionals Other Female Male We also recognise our workforce and that of Australia as a whole is built on migration. 30% of Australians were born overseas, and our workforce reflects this at all levels. BIRTHPLACE OF WORKFORCE (%) 100 80 60 40 20 0 37 63 50 50 65 66 35 34 Executives Non-Executive Management Professionals Other Employees Overseas Australia We will build processes in the next period to assess and report on cultural diversity within our workforce. We also plan to focus on broader diversity in the future to improve representation across other groups, including the indigenous and LGBTQIA+ communities, as well as people living with a disability and people of different ages, to align our workforce makeup with the communities that we serve. Talent Attraction and Retention We see increasing demand for talent across several skill sets. We monitor employee turnover to understand trends in demand for skills and to assist us adjusting our retention strategies to ensure our high performers are fulfilled and engaged with their roles. We conduct exit interviews to help management ensure that organizational issues are identified and dealt with. Employee turnover across the Group was 17% in 2023 compared to 20% in 2022. The volatility was experienced particularly around new starters and casual employees as the industry and Australia as a whole struggles with a shortage in the employment market. Absenteeism can be a lead indicator for poor wellbeing. We recognise equally a very low absentee rate indicates employees being over worked. We aim to keep absentee rates below 5% (excluding paid annual leave). We encourage all our employees to utilise their full entitlement to paid leave each year. Fair Remuneration Many of our employees are highly skilled and their remuneration reflects their value to AUB and the market. We recognise our responsibility to ensure all our staff are able to achieve a livable wage (60% of the median wage). We have benchmarked the lowest paid employees to an FTE equivalent to ensure their pay meets the higher of this benchmark and the related industry award. Based on the benchmark there were 4 employees marginally below the threshold, 3 of whom were school leaver/ interns and 1 part-time employee working 1 day per week. Such opportunities represent an alternative pathway to higher education with an expectation to complete industry qualifications after gaining sufficient relevant practical experience. A number of non-cash benefits such as work from home allowances, complimentary or discounted insurance coverage available to staff, are not considered in the analysis above. The average salary across the Group was $132k, and median salary was $104k. We have also engaged an external party to review all casual rates to benchmark against industry standards. In addition to benchmarking current pay and conditions we engaged the same external party to review all termination entitlement payments to ensure employees are paid what they are owed at all times. 69 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023Workplace health and safety We aim to provide a physically and psychologically safe workplace for our people. All health and safety incidents are reported to AUB Group Board’s Remuneration and People Committee and Board Audit & Risk Committee. We have a dedicated free and confidential Employment Assistance Program (EAP) to support our employees and their families 24/7. During the current year, we have not witnessed any increase in reported incidents related to mental health, however, we acknowledge that with most of our workforce carrying out desk work remotely, workplace health and safety incidents may not be as visible to us. We encourage our employees to provide feedback to us about their physical and psychological health through our regular online employee surveys, their direct managers and HR. Advocacy We engage in industry research, public relations initiatives and policy advocacy on behalf of our partners. Our activities include engaging with governments, regulators and industry bodies through official consultations and meetings in order to provide information and perspectives on our industry and our members. The main industry associations and advocacy organisations which are Group employees are members of include The Insurance Association of Australia, The Australian and New Zealand Institute of Insurance and Finance and The Insurance Brokers Association of New Zealand. 70 6. GOVERNANCE Our Policies and Processes AUB Group have implemented policies and processes across the Group to support our high standards of governance, ensuring that those in the business are guided by our core principles and appropriate support is in place for communicating any grievances to appropriate levels of governance. Commitment to Responsible Investing As outlined in the Directors report, a key element of the Group’s strategy is to execute on strategically aligned acquisitions. As part of further embedding ESG into our daily governance, we have implemented a formal ESG Mergers and Acquisitions checklist. Working to formalise our ESG considerations in M&A activity will support creating long term stakeholder value by acquiring businesses with ESG strategies and commitments aligned to our strategy. Our commitment to responsible investing includes; 1. Acquisitions of ethical businesses with ethical leadership; 2. A long term view of ownership and sustainable operating models; and, 3. Consideration of all stakeholders. Code of Conduct AUB Group’s Code of Conduct (Code) sets out the ethical standards expected of all directors, officers, and employees of AUB Group and its controlled entities. AUB Group encourages any businesses in which AUB Group has a direct or indirect equity investment to adopt the code. The Code is designed to ensure AUB Group delivers on its commitment to corporate responsibility and sustainable business practice. It establishes a foundation to our business decisions and provides clear, consistent guidelines on ethical behaviour. The Code requires our people to: – Act with honesty and integrity in dealing with all stakeholders, including shareholders and the community; – Manage conflicts of interest; – Comply with the law; – Adhere to company policies and procedures; and – Respect confidentiality and privacy. All employees are required to complete ethics training annually. Breaches of our code of conduct will impact an employee’s annual performance rating and in turn the at-risk portion of their remuneration. Except for fixed term contractors and other labour hire staff, all employees have a portion of their remuneration at risk based on performance measures. In additional to standard HR policies, and our code of conduct, our businesses have policies governing (1) Complaints, (2) Financial Hardship, (3) Domestic Violence and (4) Flexible working. ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023Employee and Customer Grievance There are risks which may arise from our decentralised operation such as pockets of poor culture or leadership. In addition to grievance and escalation policies that exist within each of our businesses we provide an anonymous access point for any employee of any company in the Group or any customer to contact the head office. Submissions are jointly reviewed by the Group legal counsel & Head of People and Culture on any grievance they may have. This process is designed to pro-actively manage a range of issues including mismanagement across the decentralised Group. Although these issues may not constitute whistleblower events, we believe it is best practice to enable them to surface and be dealt with. Whistleblower events are dealt with through our Whistleblower portal - Whisplii. We do not report the number of whistleblower or grievance instances to protect the anonymity of any submitted. Supply Chain Management AUB Group acknowledges that modern slavery can occur in every industry, sector, and country, including those where we operate. AUB Group has a zero tolerance policy for modern slavery in our supply chain and is committed to continual improvement in combating all forms of modern slavery such as forced labour, debt bondage, deceptive recruiting, human trafficking and child labour. AUB Group’s ESG policy promotes ethical and sustainable practices, in particular respecting human rights through developing high quality and ethical partnerships with suppliers and service providers. AUB Group encourages all employees and business partners to escalate any concerns internally or through our anonymous reporting service. We comply with all relevant laws and expect the same from all our stakeholders. We recognise that as an organisation our suppliers are key to positively contributing to the social, economic, and environmental wellbeing of the communities that we are part of. Therefore, an assessment of modern slavery risks forms part of our review of all potential supplier engagements. We include standard ethical sourcing contractual clauses in all contracts where new vendors are directly engaged to provide services to AUB Group. We expect our first-tier suppliers to comply with these standards and encourage that they expect the same level of compliance from their suppliers. We believe mutual commitments between AUB Group and our suppliers, to operate in accordance with community expectations of businesses, creates sustainable value for all our stakeholders. We work collaboratively with our suppliers to foster relationships that align with the standards in our governance framework and the interests of our stakeholders. AUB Group takes a systematic approach to assessing modern slavery risks to ensure we remain compliant with modern slavery requirements and educate, encourage and provide resources (including self-certification) to support compliance by controlled entities with modern slavery requirements. AUB Group conducted a preliminary review of and its controlled entities’ supply chain partners and assessed it against government and international organisations’ data and resources as part of our enterprisewide Risk & Compliance Management Framework. As our approach to addressing modern slavery risk matures, we will continue to develop systems, controls and processes to assess and further develop the effectiveness of our risk management framework, including in respect of controlled entities. AUB Group has implemented compliance measures to assess and review potential risks. To further complement our framework and demonstrate compliance with modern slavery requirements and obligations, the Group has developed a range of controls to reduce modern slavery risks. These include policies, training and awareness, reporting tools, due diligence and monitoring. These policies and procedures promote and instill good practices and behaviours and protect the human rights of our employees and suppliers. During the reporting period, AUB Group took action to uplift its processes across three broad categories: (1) Governance, (2) Supplier Assessment and (3) Internal Awareness, Education & Training. The key uplifts across these categories included: – Incorporating a review of embedment of modern slavery practices across our broker network; – Enhancing our reporting line and internal accountability through the introduction of a grievance form available on our public website; – Engaging an external party to review AUB’s key supplier agreements to align contractual standards with AUB’s minimum compliance requirements; – Focusing on training related to mental health and modern slavery, and continuing training and awareness through delivery of training programs for directors and employees; and – Reporting on training completion rates to our Board Audit and Risk Committee. In subsequent reporting periods, we will continue to review and develop our processes to ensure effectiveness of our actions. The AUB Group Board Audit and Risk Committee has responsibility for overseeing the Group’s response to modern slavery risks. Modern slavery risk management is discussed by the Group Board and the Group Board Audit and Risk Committee. Our Modern Slavery Statement is available on our website. 71 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023AUB Group takes a systematic approach to assessing modern slavery risks to ensure we remain compliant with modern slavery requirements and educate, encourage and provide resources (including self-certification) to support compliance by controlled entities with modern slavery requirements. AUB Group conducted a preliminary review of and its controlled entities’ supply chain partners and assessed it against government and international organisations’ data and resources as part of our enterprise- wide Risk & Compliance Management Framework. As our approach to addressing modern slavery risk matures, we will continue to develop systems, controls and processes to assess and further develop the effectiveness of our risk management framework, including in respect of controlled entities. AUB Group has implemented compliance measures to assess and review potential risks. To further complement our framework and demonstrate compliance with modern slavery requirements and obligations, the Group has developed a range of controls to reduce modern slavery risks. These include policies, training and awareness, reporting tools, due diligence and monitoring. These policies and procedures promote and instill good practices and behaviours and protect the human rights of our employees and suppliers. During the reporting period, AUB Group took action to uplift its processes across three (3) broad categories: “Governance”, “Supplier Assessment” and “Internal Awareness, Education & Training”. The key uplifts across these categories included: – Incorporating a review of embedment of modern slavery practices across our broker network; – Enhancing our reporting line and internal accountability through the introduction of a grievance form available on our public website; – Engaging an external party to review AUB’s key supplier agreements to align contractual standards with AUB’s minimum compliance requirements; – Focusing on training related to mental health and modern slavery, and continuing training and awareness through delivery of training programs for directors and employees; and – Reporting on training completion rates to our Board Audit and Risk Committee. Over subsequent reporting periods, we will continue to review and develop our processes to ensure effectiveness of our actions. The AUB Group Board Audit and Risk Committee has responsibility for overseeing the Group’s response to modern slavery risks. Modern slavery risk management is discussed by the Group Board and the Group Board Audit and Risk Committee. Our Modern Slavery Statement is available on our website. 72 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2023AUB GROUP ANNUAL REPORT 2023FINANCIAL REPORT 73 AUB GROUP ANNUAL REPORT 2023AUDITORS INDEPENDENCE DECLARATION Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s Independence Declaration to the Directors of AUB Group (cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) 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(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:56)(cid:37)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3) Ernst & Young Michael Wright Partner 22 August 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 74 AUB GROUP ANNUAL REPORT 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 30 JUNE 2023 Notes 2023 $’000 2022 $’000 4 (a) 4 (b) 4 (c) 4 (d) 4 (e) 4 (f) 4 (g) 5 (a) Revenue from contracts with customers Other Income Share of profit of associates Cost to provide services and administrative expenses Finance costs Adjustments to carrying value Profit from sale or dilution of interests in associates, controlled entities and broking portfolios Profit before income tax Income tax expense Profit for the year Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods: Exchange Differences on Translation of Foreign Operations Gains/(Losses) on Cash Flow Hedges Tax on Other Comprehensive Income to be reclassified to profit or loss in subsequent periods Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Remeasurements of Post-Employment Benefit Obligations and Other Tax on Other Comprehensive Income not to be reclassified to profit or loss in subsequent periods Other comprehensive income after income tax for the period Total comprehensive income after tax for the year Profit for the year attributable to: Equity holders of the parent Non-controlling interests Total comprehensive income after tax for the year attributable to: Equity holders of the parent Non-controlling interests Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 6 (a) 6 (a) 763,659 332,502 28,084 35,690 1,035 39,053 (660,625) (282,701) (72,102) 94,706 (6,750) 83,139 (6,649) 31,817 39,046 127,103 7,250 122,206 (35,480) (22,322) 91,623 99,884 62,688 17,601 (4,264) (1,122) (3,911) (32) (7,124) 17 69,271 160,894 65,253 26,370 91,623 134,462 26,432 160,894 65.35 65.08 180 – (5,238) 94,646 80,836 19,048 99,884 76,322 18,323 94,646 105.60 105.23 The above Consolidated Statement of Comprehensive Income (SOCI) should be read in conjunction with the notes to the Financial Report. 75 AUB GROUP ANNUAL REPORT 2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 ASSETS Current Assets Cash and Cash Equivalents Cash and Cash Equivalents - Trust Trade and Other Receivables Lease Net Investment Financial and Other Assets Deferred Acquisition Costs Total Current Assets Non-current Assets Trade and Other Receivables Right of Use Asset and Lease Net Investment Financial and Other Assets Property, Plant and Equipment Investment in Associates Intangible Assets and Goodwill Deferred Tax Asset Total Non-current Assets Total Assets LIABILITIES Current Liabilities Trade and Other Payables Deferred Revenue from Contracts with Customers Income Tax Payable Provisions Lease Liabilities Interest-bearing Loans and Borrowings Financial Liabilities Total Current Liabilities Non-current Liabilities Provisions Lease Liabilities Interest-bearing Loans and Borrowings Financial Liabilities Deferred Tax Liabilities Total Non-current Liabilities Total Liabilities Net Assets EQUITY Issued Capital Retained Earnings Foreign Currency Translation Reserve Hedge Reserve Defined Benefits Plan and Other Reserves Put Option Reserve Share-based Payments Reserve Equity attributable to equity holders of the parent Non-controlling Interests Total Equity Notes 2023 $’000 2022 $’000 10 10 11 12 11 12 8 13 5 (b) 260,352 936,369 313,079 1,804 11,718 13,822 259,329 333,131 117,679 1,020 1,868 – 1,537,144 713,027 17,286 70,360 29,891 12,885 238,526 1,956,841 21,385 2,347,174 739 23,851 9,214 6,347 250,100 622,510 14,694 927,455 3,884,318 1,640,482 15 1,050,117 407,651 16 17 18 16 17 18 5 (b) 20 18 30,827 26,482 204,547 14,743 19,769 36,138 10,382 7,967 29,104 8,187 8,941 17,976 1,382,623 490,208 5,475 62,134 564,461 237,940 118,317 988,327 2,370,950 1,513,368 945,687 258,399 57,340 12,562 (6,617) (11,781) 24,263 1,279,853 233,515 1,513,368 4,505 18,752 38,861 72,876 17,603 152,597 642,805 997,677 608,520 247,278 (5,057) (1,128) 261 (8,161) 12,781 854,494 143,183 997,677 The above Consolidated Statement of Financial Position (SOFP) should be read in conjunction with the notes to the Financial Report. 76 AUB GROUP ANNUAL REPORT 2023 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 JUNE 2023 Attributable to equity holders of the parent Issued capital $’000 Retained earnings $’000 Foreign currency translation reserves $’000 Put option reserves $’000 Hedge reserves $’000 Defined benefit plan and other reserves $’000 Share- based payments reserves $’000 Non- controlling interests $’000 Total $’000 Total equity $’000 At 1 July 2022 608,520 247,278 (5,057) (8,161) (1,128) 261 12,781 854,494 143,183 997,677 Net profit after tax for the year Other comprehensive income Tax on other comprehensive income Net comprehensive income for the period Transactions with owners in their capacity as owners: Ownership changes without gaining/losing control (Note 9) Non-controlling interests relating to new acquisitions (Note 7(a)) Non-controlling interests relating to disposals (Note 7(b)) Transfer to put option reserve & impact of put option release Net cost of share-based payment Issue of shares, net of issue costs Equity dividends (Note 6(d)) – – – – 65,253 – – – 62,397 – 65,253 62,397 – (5,337) – – – 337,167 – – 3,620 – – – (52,415) – – – – – – – – – – – – – – (3,620) – – – – – 17,601 (6,895) (3,911) 17 – – – 65,253 26,370 91,623 73,103 62 73,165 (3,894) – (3,894) 13,690 (6,878) – 134,462 26,432 160,894 – – – – – – – – – – – – – – – (5,337) 4,012 1,325 – 84,046 84,046 – (2,020) (2,020) – – – – – – – 11,482 11,482 11,482 – 337,167 – 337,167 – (52,415) (22,138) (74,553) At 30 June 2023 945,687 258,399 57,340 (11,781) 12,562 (6,617) 24,263 1,279,853 233,515 1,513,368 The above Consolidated Statement of Changes in Equity (SOCIE) should be read in conjunction with the notes to the Financial Report. 77 AUB GROUP ANNUAL REPORT 2023CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 JUNE 2022 Attributable to equity holders of the parent Issued capital $’000 Retained earnings $’000 Foreign currency translation reserves $’000 Put option reserves $’000 Hedge reserves $’000 Defined benefit plan and other reserves $’000 Share- based payments reserves $’000 Non- controlling interests $’000 Total $’000 Total equity $’000 At 1 July 2021 266,659 210,424 (1,519) (7,057) 108 10,139 478,754 119,533 598,287 Net profit after tax for the year Other comprehensive income Tax on other comprehensive income Net comprehensive income for the period Transactions with owners in their capacity as owners: Ownership changes without gaining/losing control (Note 9) Non-controlling interests relating to new acquisitions (Note 7(a)) Non-controlling interests relating to disposals (Note 7(b)) Transfer to put option reserve & impact of put option release Net cost of share-based payment – – – – 80,836 – – – (3,538) – 80,836 (3,538) – (3,408) – – – – – 1,104 – – – – – (1,128) 185 – (32) (1,128) 153 – – – – – – – – – – – – – – – – – – – – – (1,104) – – – – – – – – – – – – – – 80,836 19,048 99,884 (4,481) (725) (5,206) (32) – (32) 76,323 18,323 94,646 – (3,408) 6,619 3,211 – – – – 14,131 14,131 – – (436) (436) – – – 2,642 2,642 2,642 – – 341,861 – 341,861 (41,678) (14,987) (56,665) Issue of shares, net of issue costs 341,861 Equity dividends (Note 6(d)) – (41,678) At 30 June 2022 608,520 247,278 (5,057) (8,161) (1,128) 261 12,781 854,494 143,183 997,677 78 AUB GROUP ANNUAL REPORT 2023CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2023 Notes 2023 $’000 2022 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Dividends/trust distributions received from associates Management fees received from associates/related entities, and interest received Payments to suppliers and employees Income tax paid Interest paid Interest paid - lease liabilities Net cash from operating activities before customer trust account movements Net increase/(decrease) in cash held in customer trust accounts NET CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Payments for acquisition of consolidated entities, net of cash acquired Cash inflow from sale/deconsolidation of controlled entities Payment for new associates and increases in holdings in associates Proceeds from reduction in interests in associates Payment for contingent and deferred consideration on prior year acquisitions Net payment for new broking portfolios purchased/broking portfolios sold Net payments from purchases/sales of plant and equipment, capitalised projects, and other assets Net repayments/(advances) of loans to associates/related entities 4 7 (a) 7 (b) 8 18 816,668 345,154 38,203 34,665 43,149 15,988 (677,007) (268,931) (32,339) (26,904) (62,813) (4,001) 113,376 88,862 (5,489) (1,006) 101,961 (6,426) 202,238 95,535 (160,199) 109,303 9,710 (7,207) 42,135 (16,078) (4,307) (749) (159) 5,330 (5,408) 8,124 (5,179) 10 (2,193) 2,500 NET CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES (136,854) 112,487 CASH FLOWS FROM FINANCING ACTIVITIES Capital raising Dividends paid to shareholders of the Group Dividends paid to shareholders of non-controlling interests Distributions paid outside the group to unitholders of controlled trusts Increase in borrowings Repayment of borrowings Proceeds from issue of capital to non-controlling interest Payments of principal for lease liabilities Payment of financial liabilities resulting from acquisition of controlled entity Payment for increase in interests in controlled entities Proceeds from reduction in interests in controlled entities NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the period Impact as a result of foreign exchange 20 161,297 341,861 10 (b) 10 (b) 10 (b) (52,415) (22,137) (11,804) (41,678) (14,987) – 709,315 32,103 (178,825) (208,352) – (10,255) (92,978) (21,934) 18,394 5,967 (7,392) – (3,136) 380 498,658 104,766 564,042 312,788 592,460 281,820 40,219 (2,148) Cash and cash equivalents at the end of the period 10 1,196,721 592,460 The above Consolidated Statement of Cash Flows (SOCF) should be read in conjunction with the notes to the Financial Report. 79 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 CORPORATE INFORMATION 1 The consolidated financial statements are those of AUB Group Limited (the parent ‘Company’) and all entities that AUB Group Limited controlled (together the ‘Group’) during the year and at the reporting date. The financial report of AUB Group Limited for the year ended 30 June 2023 was authorised for issue in accordance with a resolution of the directors on 22 August 2023. The Directors have the power to amend and reissue the financial report. AUB Group Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The principal activities of entities within the consolidated Group for the year were the provision of services globally across insurance broking, agencies, and distribution of ancillary products within the support services businesses. The registered office and principal place of business of the Company is Level 14, 141 Walker Street, North Sydney NSW 2060, Australia. 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation of the financial report The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared under the historical cost convention, as modified by applying fair value accounting to certain financial assets and financial liabilities (including derivative instruments) measured at Fair Value through Profit or Loss (FVTPL) or in other comprehensive income (OCI). The financial report is presented in Australian dollars ($) and all values are rounded to the nearest $1,000 (where rounding is applicable), unless otherwise stated, under the option available to the Company under ASIC instrument “Rounding in Financial/Directors’ Reports” 2016/191. The Company is an entity to which this legislative instrument applies. The functional currency of the Group and all segments other than New Zealand and Tysers is Australian Dollars. The New Zealand Broking segment’s functional currency is New Zealand dollars. The Tysers segment’s functional currency is British Pounds. The presentational currency of the Group is Australian Dollars. The financial statements have been prepared on a going concern basis. Certain comparative information has been revised in this financial report to conform with the current period’s presentation. b. Statement of compliance The financial statements comply with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’). 80 c. Basis of consolidation Information from the financial statements of controlled entities is included from the date the parent entity obtains control until such time as control ceases. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption, the Group also considers all relevant facts and circumstances in assessing whether it has control over an entity, including rights arising from contractual arrangements with the entity and/or other vote holders of the entity. Where there is a loss of control of a controlled entity, the consolidated financial statements include the results for the part of the reporting period during which the parent entity had control. The financial information in respect of controlled entities is prepared for the same reporting period as the parent Company using consistent accounting policies. Adjustments are made to ensure conformity with the Group’s accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in the consolidated accounts. Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries which are not 100% owned by the Group. These are presented separately in the Consolidated Statement of Comprehensive Income and within equity in the Consolidated Statement of Financial Position. Transactions with owners in their capacity as owners A change in ownership interest without loss of control is accounted for as an equity transaction. The difference between the consideration transferred and the book value of the share of the non-controlling interest acquired or disposed is recognised directly in equity attributable to the parent entity. Where the parent entity loses control over a controlled entity, it derecognises the assets including goodwill, liabilities and non-controlling interests in the controlled entity together with any accumulated translation differences previously recognised in equity. The Group recognises the fair value of the consideration received and the fair value of the investment retained together with any gain or loss in the Consolidated Statement of Comprehensive Income. d. Significant accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d. Significant accounting judgements, estimates and assumptions (continued) Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions are found in the relevant notes to the financial statements. The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment of goodwill/intangibles and investments in associates The Group determines whether goodwill is impaired at least on an annual basis and for any identifiable intangibles and investments in associates that have an indicator of impairment. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill is allocated. The resulting recoverable amounts derived from the appropriate measures described in Note 13 are compared to the carrying value for each CGU and in the event that the carrying value exceeds the recoverable amount, an impairment loss is recognised. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill are discussed in Note 14. Measurement of contingent consideration The Group recognises contingent consideration at fair value through profit or loss. Contingent considerations terms vary between transactions but generally involves either (1) an EBIT or Revenue (fixed) performance hurdle (generally 2-3 years) post the acquisition date (i.e. high water mark) or (2) future dated (generally 2-3 years) EBIT or Revenue times a fixed multiple less historic payments made. See Note 7(a) and Note 8 for further details on current year transactions and Note 18 for movements in all contingent and deferred considerations. Re-estimation of financial liability at amortised cost A financial liability at amortised cost has been recognised representing an estimate of the value the Group could be required to pay on the future exercise by holders of put options over non-controlling interests and the value of units held by others for consolidated trusts. The Group re- estimates the financial liability at the reporting date, taking into account the estimated future outcomes for income or profit. For put options, generally this involves projecting the EBIT of the entity to the first exercise date multiplied by the expected EBIT multiple and projected net debt (based on known information and the company’s gearing targets). Historical trends and any relevant external factors are taken into account in determining the likely outcome. See Note 18 for further details. Deferred Tax Assets Deferred tax assets (DTA) are recognised for deductible temporary differences when management considers that it is probable that future tax profits will be available to utilise those temporary differences. Judgement is required in relation to DTAs recognised in relation to carry forward losses. The future profitability of each entity or tax consolidation group (if a part of a tax consolidation group) needs to be assessed including where a capital loss is made, the probability of a future capital gain to offset the carry forward capital loss. See Note 5 for further details. Pensions Tysers operates two defined benefit pension schemes, which require contributions to be made to separately administered funds. The cost of the defined benefit pension schemes and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in a valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Remeasurements, comprising actuarial gains and losses, the effect of any asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. Capital Risk Management AUB Group’s risk management policy is to identify, assess, and manage risks, which are likely to adversely impact its financial performance, continued growth and its survival. In terms of financial risk management, the Group takes a risk- averse approach, and seeks to minimise risk whilst bearing in mind cost effectiveness. AUB will not engage in speculative activity, nor will it explicitly seek opportunities to profit from expected movements in the financial markets. The Group hedges cashflows where there is a mis-match in cash receipts compared to the functional expense base of an entity. As at 30 June 2023, AUB Group’s hedge program includes foreign currency hedges, to mitigate the risk of variability of operating cash flows caused by foreign currency fluctuations. The current hedges are designed to ensure that USD revenue exposures are hedged to GBP, the Tysers operating currency. Where possible the Group takes advantage of natural hedges offsetting foreign currency assets and liabilities. Hedge Accounting The Group uses derivative financial instruments, such as forward currency contracts to hedge its exposure to foreign currency risk in forecast transactions and firm commitments. 81 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d. Significant accounting judgements, estimates and assumptions (continued) At the inception of a hedge relationship, AUB Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve. If there is any ineffective hedge, that portion is recognised immediately in profit or loss. Climate Change Climate change is a material risk to the global economy including the insurance sector. As a result of an increased frequency and severity of climate related events, the availability and cost of insurance coverage for some of our customers may be materially impacted. Our decentralised operating approach and diversified investment strategy helps manage concentration risk to locations, industries, and products. As a result, we are not materially exposed to industries expected to be significantly impacted by climate change. There are opportunities for the Group to facilitate alternative insurance cover for customers impacted by climate change. There are also opportunities for the Group within new and emerging markets such as renewable energy. OPERATING SEGMENTS 3 An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by members of the senior executive management team who are the entity’s Chief Operating Decision Makers (CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the aggregation criteria is still reported separately where information about the segment would be useful for the users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category. The Group’s corporate structure is organised into five business units which have been identified as separate reportable segments as follows: Australian Broking: assesses the insurable risks and risk appetite of customers and sources relevant insurance products from insurers and underwriters which meets the needs of the customer. Post policy binding services 1. 82 2. 3. 4. primarily include claims handling services on behalf of the customer (claims preparation). Customers generally comprise of Small and Medium Enterprise (SME) businesses, however services are also provided to large institutions and individuals. Agencies: assesses, on behalf of the insurer, the risk profile of the end customer and pricing of policies requested by brokers. Post policy-binding services primarily include claims handling on behalf of the insurer (claims processing). Business is largely generated by brokers operating within the SME insurance sector. Agencies do not assume any underwriting risk and accordingly do not incur or hold policy liabilities. New Zealand Broking: provides broking services within the New Zealand market. Operations are centrally monitored and managed by AUB Group NZ head office. As a distinct overseas operation and investment, performance of the segment is separately monitored. Tysers: includes Wholesale and Retail broking and Managing General Agents (MGA) and is headquartered in London. This is a separately reportable segment given Tysers is largely UK based and operating mainly in markets outside Australia. Tysers operates across: – Wholesale broking: wholesale broker to the Lloyd’s marketplace with global distribution largely through retail brokers; – Retail broking: provides retail broking services within the UK market; and – Managing General Agents: operates insurer delegated authorities, both in-house and through third parties. 5. Support Services: provides a diversified range of services to support the Australian Broking, Agencies, and New Zealand Broking and Tysers segments, and external clients. Services includes post claim rehabilitation, investigation, loss adjusting, legal, white labelling, Group captive insurance and AUB Group head office support. These sub segments are not individually reportable. Discrete financial information about each of these segments is reported to management on a regular basis and the operating results are monitored separately for the purposes of resource allocation and performance assessment. Each segment, except Support Services, contains entities which operate within a uniform regulatory environment, and contains similar characteristics in relation to customer profile and operational risks. Underlying Net Profit Before Tax Performance of segments is reviewed by CODM on an Underlying Net Profit Before Tax (UNPBT) basis. UNPBT excludes the effects of non-recurring events or other items not representative of the underlying operating items of income and expenditure which do not represent the underlying performance of the Group and segments of the Group, such as restructuring costs, acquisition costs, fair value gain/losses, profits on sale, amortisation of broking registers and impairments. Such items are considered to be a result of non-recurring events or non-representative of the underlying operations of the Group and segments of the Group. UNPBT also excludes non-controlling interests to reflect the performance attributable to the shareholders of the Group. AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 OPERATING SEGMENTS (CONTINUED) 3 UNPAT reconciles to the Profit after income tax attributable to equity holders of the parent (Reported NPAT) within the Statement of Comprehensive Income (SOCI) as follows: Net Profit after tax attributable to equity holders of the parent Add back/(less) (net of NCI and income tax): – Amortisation of broking registers – Adjustments to value of entities (to fair value) on the day they became controlled entities – Remeasurement of put option liability (net of Interest unwind) – Impairment charge – Movements in contingent consideration, net of impairment charge – (Profit)/Loss on deconsolidation of controlled entity, sale/dilution of associates and portfolios – Impairment of the Right of Use Asset and Onerous Lease Expense Notes SOCI 2023 $’000 2022 $’000 65,253 80,836 30,352 11,143 (29,796) (41,046) 3,620 5,473 39,912 1,104 7,537 (337) (25,315) (5,894) 251 39,355 129,105 219 20,456 74,018 180,643 106,086 (51,538) (32,068) 129,105 74,018 – Acquisition related expenses Underlying Net Profit After Tax Represented by: Underlying profit pre tax Tax Expense Underlying Net Profit After Tax Segment Financial Performance Inter-segment revenue** Revenue from external customers Total revenue and other income Share of Net Underlying Profits of Associates accounted for using the equity method before amortisation on broking registers and income tax expense Total income Less: Expenses Total underlying cost to provide services and administrative expenses* Australian Broking $’000 5,618 279,517 285,135 30 June 2023 New Zealand Broking $’000 – 60,690 60,690 Agencies $’000 – 137,584 137,584 Tysers $’000 – 311,069 311,069 Support Services $’000 41,924 2,883 Total $’000 47,542 791,743 44,807 839,285 41,069 2,855 1,287 (325) 326,204 140,439 61,977 310,744 12,480 57,287 57,366 896,651 (175,097) (88,696) (37,824) (211,203) (65,955) (578,775) Inter-segment expenses** (21,450) – (6,050) (20,042) – (47,542) Interest paid and other borrowing costs Non-controlling interest Underlying Net Profit Before Tax (741) (24,165) 104,751 (58) (16,635) 35,050 (1,196) (2,640) 14,267 (992) (1,578) (41,686) – (44,673) (45,018) 76,929 (50,354) 180,643 Excludes non-operating expenses, refer to preceding table for reconciliation between statutory profit and underlying profit after tax. * ** Management fees and interest on loans are recognised as revenue within the Support services segment, and as an expense within other segments. 83 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 3 OPERATING SEGMENTS (CONTINUED) Segment Financial Performance Inter-segment revenue** Revenue from external customers Total revenue and other income Share of Net Underlying Profits of Associates accounted for using the equity method before amortisation on broking registers and income tax expense Total income Less: Expenses 23% Total underlying cost to provide services and administrative expenses* 59% Inter-segment expenses** Interest paid and other borrowing costs Non-controlling interest Underlying Net Profit Before Tax Australian Broking $’000 2,846 192,659 195,505 30 June 2022 New Zealand Broking $’000 – 48,524 48,524 Agencies $’000 – 92,120 92,120 42,689 2,724 238,194 94,844 1,669 50,193 (132,366) (60,717) (2,862) (640) (16,177) 86,149 – (31) (11,314) 22,782 (36,911) (1,825) (530) (1,974) 8,953 Tysers $’000 – – – – – – – – – – Support Services $’000 1,841 234 2,075 Total $’000 4,687 333,537 338,224 10,497 12,572 57,579 395,803 (20,061) (250,055) – (4,687) (4,309) (5,510) – (29,465) (11,798) 106,086 Excludes non-operating expenses, refer to preceding table for reconciliation between statutory profit and underlying profit after tax. * ** Management fees and interest on loans are recognised as revenue within the Support services segment, and as an expense within other segments. Tysers was acquired during the year therefore no comparatives shown. Segment Non-Current Assets The total of non-current assets other than financial instruments and deferred tax assets are provided in the following graphs. The measurement of segment non-current assets follows the accounting policies of the Group. 6% 2023 28% 10% 7% 49% 16% 13% 2022 51% 20% Australian Broking Agencies New Zealand Tysers Support service Intangible assets such as Goodwill, and investment in associates have been presented within the segment the respective underlying operations is contained. Disaggregated information by segment of the carrying value of associates is disclosed in Note 8. 84 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 3 OPERATING SEGMENTS (CONTINUED) Other Segment Information Revenue from external customers is attributed to geographic location based on the country where services were provided. Revenue based on geographic location Australia New Zealand UK USA Rest of Europe Other Total revenue 4 REVENUE AND EXPENSES Revenue recognition 2023 $’000 2022 $’000 418,448 285,103 80,759 196,269 69,476 24,987 1,804 48,524 – – – – 791,743 333,537 Revenue from contracts with customers The Group will recognise as revenue the amount of the transaction price that is allocated to the performance obligation, excluding any amounts that are highly probable of significant reversal, when the performance obligation has been satisfied. Australian Broking, Agencies, and New Zealand segments Commission, brokerage and fees In most instances the Group receives short-term advances from its customers, being the receipt of the premium and fees on bound policies prior to due date to the insurer. Using the practical expedient in AASB 15, the Group does not adjust the consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised service to the customer and when the customer pays for that service will be one year or less. Non-Variable component Policy Issuance Commission, brokerage and fee income is generated by brokers primarily through assessment of insurable risks and risk appetite of customers and sourcing relevant insurance products from insurers and underwriters which meets the needs of the customer. For agencies, services are provided to brokers (the customer), through assessment of risk profile and pricing of policies requested by brokers. The Group recognised commissions, brokerage and fee revenue at invoice date on the basis that: (a) the Group acts primarily as an agent of the customer when acting in the capacity as a broker, and as an agent of the insurer while acting in the capacity as an agent; (b) the Group’s performance obligations are distinct from those of the insurer; and (c) the Group’s performance obligations are predominantly completed prior to the inception of the insurance policy, the invoice date is the relevant date to recognise the fixed components of revenue. Claims handling Claims handling for agencies refers to claims processing on behalf of insurers. In certain arrangements (separate contract or distinct clause within binding agreements with insurers) the cost per claim processed is separately identifiable. For such claims the revenue is recognised over time based on the number of claims processed and the percentage of completion of claims assessment in progress at the balance sheet date. Variable components The Group recognises the variable amount of revenue only to the extent that it is highly probable that a significant reversal of revenue will not occur when the uncertainty associated with the variability is resolved. 85 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 4 REVENUE AND EXPENSES (CONTINUED) Claims handling and premium settlement activities In most arrangements for agencies, claims handling services forms part of the binding arrangement with insurers. Claims handling for brokers refers to claims preparation services on behalf of the insured. Premium settlement refers to post policy issuance activities such as payment processing and bordereaux/settlement reporting. Revenue associated with claims handling services and premium settlement activities is recognised over time as the services are provided to the customer and variable consideration is constrained to reflect potential cancellations. Premium Funding Commissions Premium funding companies provide services to a similar customer base as the brokers within the Group. The services provided by these companies involve short term lending of the upfront Gross Written Premium (‘GWP’) in return for the principal loan repaid over the term of the insurance cover plus interest and fees. The Group receives commission from Premium Funding companies on successful referral of customers contingent on the customer’s ongoing repayments. Additionally, the Group receives commissions payments on volume based incentives provided typically as a percentage of GWP based on hurdle targets, with a minimum floor to generate the volume based incentive payments. Such arrangements exist at both the Group and individual broker level, subsequently the outcome of broker/agencies may be contingent on both future sale volume and performance of related entities contributing to the scheme. The Premium Funding Commission is recognised monthly by the Group on receipt of cash or notification by the Premium Funding Company on the commission due to the Group. No component of the commission is deferred as no ongoing obligation exists for the Group. Profit Commissions Profit Commissions refer to the share of profits provided to the broker or agencies by the insurer in relation to the book of policies (the ‘book’) bound by the broker or agency in any given underwriting year. Insurers calculate the profit based on the GWP less any cost incurred to maintain the book, and satisfy its obligations under the policies within the book such as claim acquisition, and maintenance costs. The variable consideration is contingent on the performance of the book and in particular the quantum of claims. The Group recognises profit commission at the earlier of: – receipt of payment; – receipt of the insurers’ advice of the amount earned; or – where the recipient is an agency who administers the related claims handling services, the point at which the profit commission no longer contains a highly probable risk of significant reversal of revenue. Support Services segment Fees Fee revenue earned is recognised upon issue of an invoice for services rendered, plus an accrual for a percentage of completion of any work in progress (including a profit margin), which has yet to be invoiced, but for which the Group has an enforceable right of payment. No ongoing performance obligation exists after the issuance of the invoice. Other Revenue Other income is recognised when the service has been performed and the right to receive the payment is established. Management fees from related entities Management fees and other revenue are recognised over time as the performance obligation is satisfied. Interest income Interest income is recognised as interest accrues using the effective interest method. Dividends and Distributions from trusts Dividends and distributions from trusts are recognised when the shareholder’s right to receive the payment is established. Share of profits of associates The Group recognises its share of profits of associates using the equity accounted method, being the recognition of a post- tax share of profits at the Group’s economic interest of each associate. The share of profits excludes any fair value changes or impairments incurred within the associate as a result of a downstream transaction such as bolt on acquisitions or changes in control. Additionally, differences between the Group and entity accounting policies are adjusted at the Group level, primarily in relation to intangibles recognised by the acquirer (i.e. the Group) which were not recognised at the associate level. The amortisation of such intangibles over its useful life (generally 10 years) is separately disclosed. 86 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 4 REVENUE AND EXPENSES (CONTINUED) (a) Revenue from contracts with customers Commission, brokerage and fee income Management fees from related entities Other revenue Total revenue from contracts with customers Recognised at a point in time Recognised over time (b) Other income Interest income from related parties Interest from other persons/corporations Total other income (c) Share of Profit of Associates Share of Profit of Associates After Tax but Before Amortisation Amortisation of intangibles – Associates Total share of profit of associates Expenses 2023 $’000 2022 $’000 734,033 312,765 5,982 23,644 13,774 5,963 763,659 332,502 727,847 35,812 312,496 20,006 248 27,836 28,084 41,920 (6,230) 35,690 169 866 1,035 45,853 (6,800) 39,053 Expenses Expenses including salaries and wages, business technology and software costs, insurance, advertising and marketing, and interest are recognised as incurred or as services are provided to the Group. Salary related statutory obligations such as long service leave are accrued on a probability weighted basis to the vesting date. Assumptions are applied in relation to annual and long service leave with respect to expected wage growth and risk free discount rates over the next 10 years. Amortisation of brokering registers is conducted on a straight line basis over the useful life of the asset, generally 10-12 years. The right of use asset incorporates fixed rental increases, with changes based on indexes and rental market reviews incorporated when such changes are known. The Group applies practical expedients in relation to short term (less than 12 months) and low value (less than $7,000 AUD) leases. Such leases are recognised on a straight line basis of the expected gross expense over the term of the lease. Depreciation/Amortisation of all other assets is recognised on a straight line basis over the useful life of the asset, refer to Note 27 for more details. Commission expenses are sub agent and referral fees paid to another party in return for introductory services on insurances brokered by the Group. The expense is recognised in full when the related insurance policy is invoiced. For broking entities, typically they are the principal in the arrangement and as such the commission income and expense are not offset. For agencies, and in some arrangements for broking entities, the commission is recognised on a net basis as the entity was determined to be an agent in the arrangement. Legal fees/acquisition costs are recognised as they are incurred except in relation to acquisition of a non-financial asset, borrowing facility, or associates. The costs that are directly attributable to bringing the asset to its intended use are capitalised and depreciated over the useful life of the asset. The costs directly attributable to obtaining funding are capitalised and amortised over the term of the facility to a maximum of 5 years. The cost directly attributable to acquisition of an associate is capitalised as part of the carrying value of the associate. Further disclosures in relation to non-operating gains and losses such as fair value adjustments to carrying value or gains/ losses from sale are made in Notes 7-9. 87 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 4 REVENUE AND EXPENSES (CONTINUED) (d) Costs to provide services and administration expenses Salaries and wages Business technology and software costs Commission expense Amortisation/impairment of right of use asset and rent expense Amortisation of broking registers Amortisation of other financial assets Amortisation of capitalised project costs Depreciation Insurance Advertising, marketing and travel costs Consulting, accounting, and audit fees Legal fees/acquisition costs Share-based payments Other expenses 2023 $’000 2022 $’000 403,164 162,400 43,571 26,045 17,097 35,920 1,104 2,365 3,876 22,776 29,826 21,150 19,349 10,591 23,791 20,190 17,990 10,369 9,341 839 675 2,333 12,778 7,924 6,470 20,862 2,365 8,165 Total cost to provide services and administrative expenses 660,625 282,701 (e) Finance costs Interest paid and other borrowing costs Interest unwind on lease liability Interest unwind on put option liability Interest unwind on contingent consideration Finance charge on profits of trust minority interests Total finance costs (f) Adjustments to carrying value Fair value adjustment relating to the carrying value of associates and goodwill Adjustment to contingent consideration on acquisitions Remeasurement of put option liability Impairment charge relating to the carrying value of goodwill and intangible assets (see Note 13) Total adjustments to carrying value 44,673 4,001 303 12,126 10,999 72,102 29,930 (26,920) (3,317) (6,342) (6,649) 5,510 1,006 234 – – 6,750 40,715 411 (870) (8,439) 31,817 (g) Profit from sale or dilution of interests in associates, controlled entities and broking portfolios Profit on sale of controlled entities leading to deconsolidation (Note 7 (b)) Profit from sale or dilution of interests in associates and broking register Total profit from sale or dilution of interests in associates, controlled entities and broking portfolios 4,447 34,599 3,928 3,322 39,046 7,250 88 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 INCOME TAX 5 Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the year end date as presented in the Consolidated Statement of Financial Position. Deferred income tax is provided on all temporary differences at the date of the Consolidated Statement of Financial Position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: – when the deferred income tax liability arises from the initial recognition of goodwill, or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or – when the taxable temporary differences associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. No deferred tax liability has been recognised in respect of any potential profit on the disposal of an associate or controlled entity by the Group as there is no intention of disposing of these assets in the foreseeable future. Any tax liability will be recognised before the date of asset’s disposal, when it is considered probable that the temporary difference will reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: – when the deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or – when the deductible temporary differences associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each year end date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised Unrecognised deferred income tax assets are reassessed at each year end date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the year- end date as presented in the Consolidated Statement of Financial Position. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation For the purposes of income taxation, AUB Group Limited (AUB) entered into a Consolidated Tax Group with its 100% owned Australian subsidiaries. Tax consolidation results in the controlled entity members being treated as part of the Head Company for tax purposes rather than as a separate taxpayers. The Income Tax Assessment Act (1997) provides that the Consolidated Tax Group is to be treated as a single entity for Australian tax purposes with the Head Company responsible for the tax payable. AUB formally notified the Australian Taxation Office of its adoption of the tax consolidation regime. The Consolidated Tax Group was formalised by entering into tax sharing and tax funding agreements in order to allocate income tax payable to group members. Each member of the group calculates tax expense on an entity basis. The agreement also provides that AUB carries forward tax funding assets or tax funding liabilities for which an intercompany loan is recognised between the parties. Tax effect accounting by members of the tax consolidated group Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes. Allocations under the tax funding agreement are made at the end of each quarter. 89 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 5 INCOME TAX (CONTINUED) Effective Tax Rate The Effective Tax Rate for the Year Ended 30 June 2023 was 28% (2022: 18%). The Group’s tax rate is below the main effective tax rate in Australia of 30% largely as a result of the $9m tax impact of entities that are accounted for on an equity basis. Entities accounted for on an equity basis are fully tax paying in Australia, however for accounting purposes the related tax expense is reflected in the net return on the investment rather than the tax expense of the Group. This is offset by a $4m increase in the tax charge resulting from expenses that are not deductible for tax purposes which principally relate to fees incurred when acquiring new businesses in the year. The increase in the effective tax rate of 10% is largely the result of a net loss on the adjustment to carrying value of investments in 2022 (see Note 4 (f)), that did not have an associated tax credit, which did not recur in 2023. The main impact on the tax rate in future years is expected to be the continued profitability of the business accounted for under the equity accounting rules as discussed above, the change in geographic profile of the earnings of the Group and any changes in tax legislation. The AUB Group consists of AUB Group Limited, the parent entity and ASX listed entity, and over 300 entities in which the parent has a direct or indirect economic interest. The information reported by the Australian Taxation Office (ATO) (as prescribed by statute) in respect of corporate tax entities will not necessarily provide the complete picture, particularly for organisations such as the AUB Group that receive a significant amount of its income is received from franked dividends. The AUB Tax Consolidation Group (AUB TCG), comprises only AUB Group Limited (the parent entity) and its 100% wholly owned entities. The primary income of the AUB TCG is the receipt of franked dividend income received from the partly owned entities. Given tax has already been paid in respect of the franked dividends, the AUB TCG is entitled to a credit equal to that tax. That is, the franking credits attaching to the dividends reflect tax that has already been paid by the individual entity paying the dividends. While the franking credits represent tax paid, they are reflected in the income tax return of the AUB TCG as an offset against AUB’s gross tax, thereby reducing the amount disclosed as ‘tax payable’. The amount disclosed by the ATO in their report is after the franking credits have been taken into account, which does not reflect the tax paid by the Group. a) Income tax expense i) Major components of income tax expense are as follows: Current income tax Current income tax charge Adjustment for prior years Deferred tax credit Origination and reversal of temporary differences Total income tax expense in Consolidated Statement of Comprehensive Income 2023 $’000 2022 $’000 49,638 (1,077) 21,810 (15) (13,081) 35,480 527 22,322 ii) A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the company’s applicable income tax rate is as follows: Profit before income tax At the company's statutory income tax rate of 30% (2022: 30%) Impact of: Equity accounted income/distributions from entities operating as trusts (Loss)/Gain on sale Adjustments to carrying value (see Note 4(f)) Tax losses not recognised Benefit of tax losses not previously recognised Income taxed at different tax rates on overseas operations (Over)/under provision prior year Acquisition costs and other non-deductible expenses Income tax expense reported in the Consolidated Statement of Comprehensive Income 90 2023 $’000 2022 $’000 127,103 122,206 38,131 36,662 (8,975) 775 1,995 1,095 (1,099) 981 (1,077) 3,654 35,480 (8,998) (1,375) (9,545) - - (115) (16) 5,709 22,322 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 5 INCOME TAX (CONTINUED) b) Deferred income tax Deferred Tax Assets and Liabilities are netted where arising within the same tax payer and to the same tax authority and expected to unwind in the same period. i) Movement in deferred income tax during the year relates to the following: Assets 2023 $’000 2022 $’000 Liabilities 2023 $’000 Unamortised broking registers (and other intangibles) Non assessable income Foreign currency hedge Defined benefit pensions Accrued expenses and provisions PPE & ROU tax timing differences Borrowing costs Carry forward capital losses Carry forward operating losses Other Netting of deferred taxes (arising within same tax consolidated group or entity) Deferred tax assets/(liabilities) – – – – 30,092 5,578 4,068 – 9,737 – (28,090) 21,385 – – – – (132,791) (5,912) (4,332) (1,611) – – – – – 15,357 3,947 340 123 1,505 592 (7,170) 14,694 (1,761) (385) 28,090 7,170 (118,317) (17,603) 2022 $’000 (16,793) (7,595) – – – – – ii) Unrecognised deferred tax assets Deferred tax assets for tax losses incurred are recognised to the extent that the Group expects the carry forward losses to be utilised in the future. Deferred tax assets arising from unused tax losses not recognised at 30 June 2023 was $2.0m (2022: $1.24m). Deferred tax assets arising from unused capital losses not recognised at 30 June 2023 was $1.1m (2022: $nil). 6 EARNINGS PER SHARE (EPS)/DIVIDENDS PAID AND PROPOSED Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: – the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; – other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; and – divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. a) Earnings Per Share (EPS) The following reflects the income and share data used in the basic and diluted earnings per share computations: Net profit attributable to ordinary equity holders of the parent 2023 $’000 2022 $’000 65,253 80,836 2023 Thousands Shares 2022 Thousands Shares Weighted average number of ordinary shares for basic earnings per share 99,837 76,546 Effect of dilution: Share Options Weighted average number of ordinary shares adjusted for the effect of dilution Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 430 100,267 65.35 65.08 269 76,815 105.60 105.23 91 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 6 EARNINGS PER SHARE (EPS)/DIVIDENDS PAID AND PROPOSED (CONTINUED) b) Changes in weighted average number of shares There have been no significant transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements. Information on the classification of securities c) Options granted to employees as described in Note 21 are considered to be potential ordinary shares and have been included in the determination of the diluted earnings per share to the extent they are dilutive. These options have not been included in the determination of the basic earnings per share. The amount of the dilution of these options is the average market price of ordinary shares during the year minus the exercise price. d) Equity dividends on ordinary shares Dividends paid or recognised as a liability during the year Final franked dividend for financial year ended 30 June 2021: 39.0 cents Interim franked dividend for financial year ended 30 June 2022: 17.0 cents Final franked dividend for financial year ended 30 June 2022: 38.0 cents Interim franked dividend for financial year ended 30 June 2023: 17.0 cents Total dividends paid/provided in current year In addition to the above, dividends paid to non-controlling interests totalled $22.14m (FY22:$14.99m). Dividends proposed and not recognised as a liability Final franked dividend for financial year ended 30 June 2022: 38.0 cents Final franked dividend for financial year ended 30 June 2023: 47.0 cents Dividends paid and accrued per share (cents per share) Dividends proposed per share (cents per share) not recognised at balance date Franking credit balance e) The amount of franking credits available for the subsequent financial year are: 2023 $’000 2022 $’000 29,017 12,661 41,678 35,155 35,155 56.00 39.00 35,155 17,260 52,415 50,951 50,951 55.00 47.00 franking account balance as at the end of the financial year at 30% (2022: 30%) 61,938 52,547 15,359 77,297 (21,836) 55,461 – 52,547 (15,049) 37,498 – – franking credits that will arise from the payment of income tax payable as at the end of the financial year The amount of franking credits available for future reporting periods – impact on the franking account of dividends proposed or declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the year The amount of franking credits available for future reporting periods after payment of dividend The tax rate at which paid dividends have been franked is 30% (2022: 30%). Dividends proposed and accrued will be franked at the rate of 30% (2022: 30%). 92 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 7 BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING GAIN OR LOSS OF CONTROL a) Business combinations A major strategy of the Group is to acquire part ownership in insurance broking, agency and other complementary services businesses or portfolios. The terms of these acquisitions vary in line with negotiations with individual vendors but are structured to achieve the Group’s benchmarks for return on investment. The business combinations in the current period primarily relate to insurance broking and agency businesses in Australia, New Zealand, and the purchase of Tysers which is incorporated in the UK and the US. The acquisition method of accounting is used to account for all business combinations. Consideration transferred is measured as the fair value of the assets given, shares issued or liabilities assumed at the date of exchange. All acquisition costs including legal fees are charged against profits to acquisition and legal fees (see Note 4(d)) as incurred, except stamp duty which is recognised in acquisition costs as incurred. An estimate is made of the fair value of the future contingent consideration. Any variation to this amount in future periods (either up or down) is recognised through the Consolidated Statement of Comprehensive Income. Over accruals are recognised as income in the year the amount is reversed and any under accruals are charged as an expense against profits. Contingent considerations are recognised in the Consolidated Statement of Financial Position at fair value. Refer to Refer to Note 2.1 (d) and Note 18 for further information on measurement and critical assumptions. When a business combination occurs, the acquiree’s identifiable assets and liabilities are measured at their fair value at the date of acquisition to determine the amount of any goodwill associated with the transaction. Any previously held interests of the acquiree are remeasured to fair value, with the movement reflected in the Consolidated Statement of Comprehensive Income as either a profit or loss. If new information becomes available within one year of acquisition about the facts and circumstances that existed at the date of acquisition, then any revisions to the fair value previously recognised, will be retrospectively adjusted. Non-Controlling Interest is initially measured at fair value. When the Group increases their interest in a company leading to the Group obtaining control in the company, the Group derecognises the investment in associate and recognises the acquiree’s identifiable assets and liabilities measured at their fair value in line with other business combinations. The shares held immediately preceding the Group obtaining control is remeasured based on the fair value of the shares acquired, resulting in a fair value gain or loss. The cumulative amount recognised through Other Comprehensive Income is reclassified to profit or loss when the control is obtained or lost. Where there is a change in ownership and the Group loses control, the gain or loss will be recognised in the Consolidated Statement of Comprehensive Income and the net assets of the entity including the carrying value of non-controlling interests is derecognised. Change in the ownership interest in a controlled entity (without loss of control) is accounted for as a transaction with owners in their capacity as owners and these transactions will not give rise to a gain or loss in the Consolidated Statement of Comprehensive Income. Refer to Note 9 for all transactions between owners. i) During the current period, the following transactions occurred: – Effective 1 July 2022, Austbrokers Corporate Pty Ltd (AUC), a controlled entity of the Group, acquired 100% of SRS Broking Pty Ltd. AUC partially funded the acquisition by issuing shares, resulting in AUB diluting its ownership in AUC by 20% to 80%. – Effective 30 September 2022, AUB Group acquired 100% of Integro Insurance Brokers Holdings Limited and its controlled entities, Galileo Insurance Services LLC, and Integro Insurance Brokerage Services LLC (collectively Tysers) for GBP 520m, comprising GBP 320m in cash, GBP 100m in AUB shares, and GBP 100m in contingent consideration. The contingent consideration is subject to Tysers meeting revenue growth hurdles within 24 months of completion. The fair value of the contingent consideration at acquisition date is based on the probability weighted outcome discounted over 24 months at 9.88%. Tysers is a leading Lloyd’s and London based broker with access to specialist underwriting expertise and global distribution capabilities. Tysers operates primarily out of the UK but has operations in more than a dozen countries, and services clients in more than 100 countries. Tysers is a material acquisition for the Group. The acquisition will enable the Group to enhance client service by increasing capacity for harder to place risks for our clients and generate synergies through economies of scale, cost rationalisation and direction of wholesale placement from our Agencies to Tysers. The acquisition provides Brokers and Agencies across the Group with access to the capabilities and facilities of the Lloyd’s and international markets. Total transaction costs for the Tysers acquisition were $35.5m of which $19.0m was expensed in the prior year. 93 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 7 a) i) BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING GAIN OR LOSS OF CONTROL (CONTINUED) Business combinations (continued) During the current period, the following transactions occurred (continued): Regulatory investigation The acquisition of Tysers has exposed the Group to risk in relation to the alleged conduct of business in Ecuador between 2013 and 2017 by Integro Insurance Brokers Limited (a company within the Tysers group) and/or its employees, agents and associated persons. While the UK Serious Fraud Office has communicated that it has decided not to take any action against Integro Insurance Brokers Limited/Tysers in respect of the alleged conduct, the U.S. Department of Justice (DOJ) investigation into Integro Insurance Brokers Limited, its employees, agents and associated persons remains ongoing. The DOJ investigation relates to suspicions of bribery and corruption, and possible associated money laundering. If this investigation reveals any unlawful conduct by companies within the Tysers group, Tysers (and/or the relevant group companies) may be subject to fines and/or other penalties and may incur reputational damage. As previously disclosed, AUB obtained a number of contractual protections in the Tysers transaction documents, including indemnification that AUB considered appropriate for the recovery of potential losses/fines and penalties which may become payable by Tysers in connection with the aforementioned investigations. On acquisition of Tysers, AUB Group has recognised a provision and related recoveries in respect of this matter in accordance with the Australian Accounting Standards. – Effective 1 January 2023, AUB Group acquired a further 25% of AEI Insurance Group Pty Ltd (AEI). On this date AEI became a controlled entity of the Group, and the transaction resulted in a fair value gain on step up of $27.4m. The above acquisitions have been provisionally accounted for as the initial accounting for the business combinations are incomplete at the reporting date, The accounting will be completed within 12 months of the acquisition date. The total Revenue and Net Profit After Tax recognised during the year in relation to the current period acquisitions were $373.9m, and $37.8m respectively. Group revenue in relation to current period acquisitions would have been $481.7m had all of the above transactions closed on 1 July 2022. The profit contribution to the Group had all the above transactions closed on 1 July is impractical to measure given significant change in operational and financing aspects of the acquirees prior to acquisition. Business Acquired SRS Broking Pty Ltd Integro Insurance Brokers Holdings Limited AEI Insurance Group Pty Ltd All other transactions Transaction date(s) 1/07/2022 30/09/2022 1/01/2023 Various Total consideration paid for all additional interest acquired Less contingent/deferred consideration Less shares issued by AUB Group Limited Less cash acquired Less trust cash acquired Payments for acquisition of consolidated entities, net of cash acquired Goodwill arising on acquisition related to the Group Goodwill arising on acquisition relating to non-controlling interests Total Goodwill arising on acquisition Other intangibles net of deferred taxes Net increase in non-controlling interest FY22 % 0.00 0.00 45.00 Various FY23 %/$ ‘000 100.00 100.00 65.00 Various 1,101,779 154,912 215,016 95,131 476,521 (160,199) 801,739 48,967 850,706 340,484 84,046 94 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING GAIN OR LOSS OF CONTROL (CONTINUED) 7 The fair value of the identifiable assets and liabilities recognised as a result of the acquisition of Tysers are as follows: ASSETS Cash and Cash Equivalents Cash and Cash Equivalents - Trust Trade and Other Receivables Right of Use Asset Intangible Assets Property, Plant and Equipment Deferred Acquisition Costs Total Assets LIABILITIES Trade and Other Payables Deferred Revenue from Contracts with Customers Provisions Lease Liabilities Deferred Tax Liability Total Liabilities Net Assets Total consideration paid for interest acquired Less contingent/deferred consideration Less shares issued by AUB Group Limited Less cash acquired Less trust cash acquired Payments for acquisition of Tysers, net of cash acquired Goodwill arising on acquisition related to the Group Goodwill arising on acquisition relating to non-controlling interests Tysers $’000 85,878 421,442 148,623 36,205 388,289 10,671 10,320 1,101,428 514,290 9,750 173,559 37,223 76,539 811,361 290,067 939,225 154,737 175,870 85,878 421,442 (101,298) 649,158 2,318 ii) During the prior period, the following transactions occurred: – Effective 1 July 2021, the Group acquired a further 8.8% of HQ Insurance Brokers Pty Ltd (HQ) for $2.74m cash. On this date the entity became a controlled entity of the Group, and the transaction resulted in a fair value gain on step up of $7.73m. – Effective 1 October 2021, the Group acquired 100% of iaAnyware Unit Trust (iaAnyware) for $18.15m cash plus estimated contingent consideration of $11.85m. iaAnyware is a leading software platform business providing licensing of their proprietary software to brokers across Australia and New Zealand. The deferred consideration is based on estimated normalised EBIT in 2 years from the acquisition date and is uncapped. – Effective 1 October 2021, a controlled entity of the Group, acquired 90% of Rosser Underwriting Limited (Rosser), including 50% from another controlled entity of the Group. On this date Rosser became a controlled entity of the Group. The Group’s effective ownership has increased by 2.3%, however control was established as the Group controls an entity which in turn controls Rosser. – Effective 30 June 2022, the Group acquired a further 5.5% of Insurance Advisernet Unit Trust (IAA) & Insurance Advisernet New Zealand Unit Trust (IAH). On this date IAA & IAH become controlled entities of the Group, and the transaction resulted in a fair value gain on step up of $29.06m. 95 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 7 BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING GAIN OR LOSS OF CONTROL (CONTINUED) Loss of Control b) When a 100% disposal occurs the Group derecognises all assets and liabilities previously recognised in relation to the disposed entity including associated goodwill. A gain or loss is recognised in relation to the disposal based on the difference between the carrying value of net assets (including goodwill) associated with the entity and the sale price. When a partial disposal occurs leading to the Group losing control of the entity, the Group derecognises all assets, liabilities and NCI previously recognised in relation to the disposed entity including associated goodwill with an investment in associate recognised in relation to the remaining interest continued to be held by the Group. A gain or loss is recognised in relation to the disposal based on the difference between the share (portion of interest being disposed) of net assets (including goodwill) associated with the entity and the sale price. During the current period, the following transactions occurred: i) Effective 31 January 2023, the Group disposed all of its interest in Austbrokers Coast to Coast Pty Ltd (“Coast to Coast”). On that date Coast to Coast ceased to be a controlled entity. Business Disposed Austbrokers Coast to Coast Pty Ltd Various Total consideration received for all additional interests disposed Less cash disposed Receipts for disposal of consolidated entities, net of cash disposed Total goodwill derecognised on disposal Total intangibles derecognised on disposal Total non-controlling interest derecognised Transaction date(s) 1/01/2023 Various 2022 %/$’000 51.00 Various 2023 %/$’000 – Various 13,633 (3,923) 9,710 (9,014) (1,604) (2,020) ii) During the previous period, there were no individually significant transactions which resulted in the Group losing control of any of its subsidiaries. 8 INVESTMENT IN ASSOCIATES The Group’s investments in its associates are accounted for under the equity method of accounting in the Consolidated Financial Statements. These are entities in which the Group has significant influence and which are not controlled entities. The Group deems they have significant influence if they have more than 20% of the voting rights. The financial statements of the associates are used by the Group to apply the equity method. The reporting dates of the associates and the AUB Group are identical and adjustments are made to bring into line dissimilar accounting policies used by associates. The investment in associates is carried in the Consolidated Statement of Financial Position at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less dividends and any impairment in value. The Consolidated Statement of Comprehensive Income reflects the Group’s share of the results of operations of the associates. Refer to Note 14 Impairment Testing of Identifiable Intangible Assets and Goodwill. On partial acquisition whilst maintaining significant influence the purchase price is added to the investment in associate carrying value, and on partial disposal whilst maintaining significant influence the portion of interest in the entity being sold is proportionately derecognised from the investment in associate carrying value. As part of impairment testing we consider the recent purchase/disposal prices when determining if there are indicators of impairment. 96 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 INVESTMENT IN ASSOCIATES (CONTINUED) During the current period, the following transactions occurred: 8 i) Entity Increase in voting shares Various Transaction date(s) 30 Jun 2023 %/$‘000 30 Jun 2022 %/$‘000 Various Various Various Total cash consideration paid for all interest acquired 7,207 Decrease in voting shares SRG Group Pty Ltd Western United Financial Services Pty Ltd Various Total consideration received for all interest disposed Less carrying value of shares being sold Less Capital Gains Tax on shares being sold Net gain on disposal of interest 01-Aug-22 01-May-23 – – 50.0% 50.0% Various Various Various 43,435 (6,104) (10,948) 26,383 ii) During the previous period, the following transactions occurred: There were no individually significant transactions with associates in the prior year. 97 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 8 INVESTMENT IN ASSOCIATES (CONTINUED) iii) The Group’s investment in associates ownership at balance date is as follows: Australian Broking Adroit Specialty Risks Pty Limited Austbrokers ABS Aviation Pty Ltd AEI Insurance Group Pty Ltd* Austbrokers Dalby Insurance Brokers Pty Ltd Austbrokers Kelly Partners Pty Ltd Austbrokers RIS Pty Ltd* Austbrokers SPT Pty Ltd Austral Insurance Brokers Pty Ltd Bluestone Insurance Pty Ltd Brett Grant and Associates Pty Ltd Broker Claims Pty Ltd Countrywide Insurance Holdings Pty Ltd** Cruden & Read Pty Ltd Finzane Group Pty Ltd Global Assured Finance Pty Ltd JMD Ross Insurance Brokers Pty Ltd KJ Risk Group Pty Ltd Lea Insurance Brokers Pty Ltd/Lea Group Trust** Markey Group Pty Ltd MGA Management Services Pty Ltd National Rural Insurance Group Pty Ltd Nexus Advisernet (Aust) Pty Ltd Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust Pace Insurance Pty Ltd/Pace Insurance Group Unit Trust*** Peter L Brown & Associates Pty Ltd Rework Pty Ltd Rivers Insurance Brokers Pty Ltd SRG Group Pty Ltd Supabrook Pty Ltd The Procare Group Pty Ltd Western United Financial Services Pty Ltd YDR Pty Ltd Agencies Anchorage Marine Underwriting Agency Pty Ltd Longitude Insurance Pty Ltd* Millennium Underwriting Agencies Pty Ltd Sura Hiller Marine Pty Ltd Sura Professional Risks Pty Ltd Sura Technology Risks Pty Ltd Tasman Underwriting Pty Ltd 2023 % 34.0 50.0 65.0 50.0 50.0 95.0 50.0 – 50.0 50.0 47.5 52.5 50.0 50.0 50.0 50.0 49.0 57.0 50.0 49.9 25.0 50.0 42.7 10.4 50.0 50.0 50.0 – 50.0 48.8 – 50.0 26.2 100.0 – 50.0 50.0 50.0 50.0 2022 % 34.0 50.0 40.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 47.5 52.5 50.0 – 50.0 40.0 49.0 53.4 50.0 49.9 25.0 50.0 42.7 – 50.0 – 50.0 50.0 50.0 49.0 50.0 50.0 26.2 75.0 49.9 50.0 50.0 – 50.0 The Group obtained control of the entity during the period as a result of further shares obtained. * ** Whilst the Group holds more than 50% interest in the entity, the Group’s voting rights are capped at 50%, hence it was determined that the Group maintains significant influence and does not have control of the entity. *** Whilst the Group’s look through interest in the entity is less than 20%, the Group controls an entity which has significant influence over the entity. 98 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 8 INVESTMENT IN ASSOCIATES (CONTINUED) iii) The Group’s investment in associates ownership at balance date is as follows (continued): New Zealand Broking BWRS (North Shore) Limited Commercial and Rural Insurance Limited McDonald Everest Insurance Brokers Limited Support Services BizCover Pty Ltd Tysers Factory and Industrial Risk Managers (Pty) Ltd 2023 % 36.1 36.1 50.0 2022 % 44.7 44.7 44.7 40.7 40.6 40.0 – Other information in respect of associated entities which carry on business directly or through controlled entities: a) The principal activity of each associate is insurance broking or agency business except The Procare Group Pty Ltd which offers investigation, and loss adjusting services. b) There have been nil impairments relating to the investment in associates during the current year or previous year. c) All associates, including unit trusts, were incorporated, or established in Australia, except for associates owned by AUB Group NZ Limited, which is a controlled entity incorporated in New Zealand, and associates owned by Tysers Insurance Brokers Limited which is a controlled entity incorporated in the UK d) The following associates are considered material to the Group as at 30 June 2023: – BizCover is a commercial online insurance platform that allows SME clients to compare quotes from insurance providers and purchase a variety of insurance products, including public liability, professional indemnity and business insurance. The carrying value at 30 June 2023 is $129.49m (2022: $131.68m); and – MGA Management Services Pty Limited provides insurance agent and broker services for a range of insurance types including commercial insurance, personal insurance and specialised insurance. The carrying value at 30 June 2023 is $26.80m (2022: $25.00m). Revenue Operating profits before income tax Amortisation of intangibles Net profit before income tax Income tax expense Share of associates' net profits 2023 $’000 2022 $’000 176,639 198,886 56,588 (6,230) 50,358 (14,668) 35,690 58,853 (6,800) 52,053 (13,000) 39,053 99 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 8 INVESTMENT IN ASSOCIATES (CONTINUED) The Group’s reconciliation of its carrying value in its investment in associates are iv) presented below: Balance at the beginning of the period Acquisition of or increase of investment in associates Disposal or dilution of interest in associates Reclassification of investment in associates becoming controlled entities Reclassification of controlled entity to investment in associate on losing control Reclassification of investment in associate to other investments where significant influence was lost Share of associates’ profit after income tax Dividends/trust distributions received Net foreign exchange and other movements Balance at the end of the period v) The Group’s share of the assets and liabilities of associates: Current assets Non-current assets Current liabilities Non-current liabilities Net assets 2023 $’000 2022 $’000 250,100 280,643 10,522 (6,104) (13,057) 569 (1,786) 35,690 (37,889) 481 9,552 (6,048) (29,957) 34 – 39,053 (43,149) (28) 238,526 250,100 2023 $’000 2022 $’000 205,892 165,777 66,485 94,250 (176,769) (145,137) (24,927) (28,335) 70,681 86,555 100 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 9 SHARES IN CONTROLLED ENTITIES New acquisitions of controlled entities or transactions which lead to the Group obtaining or losing control in an entity during the current and previous period are disclosed in Note 7. The following transactions involve transactions between owners where there is no change in the control assessment. i) During the current period, the following transactions occurred: Entity Increase in voting shares AUB Group NZ Ltd All other transactions Decrease in voting shares AUB Three Sixty Pty Ltd All other transactions Transaction date(s) June 2023 % June 2022 % 01-Jul-22 Various 100.00 Various 89.30 Various 01-Jan-23 Various 49.65 Various 52.27 Various ii) During the previous period, the following transactions occurred: – On 1 October 2021 AUB Three Sixty Pty Ltd undertook a capital raise of $6m to fund the increased interest in Rosser Underwriting Limited and Anchorage Marine Underwriting Agency Pty Ltd. There were no other significant transactions between owners during the period. Other information a) All controlled entities are incorporated in Australia except for the following: – AUB Group NZ Limited (AUB NZ), AUB Three Sixty NZ Limited and Insurance Advisernet New Zealand Unit Trust and their controlled entities which are incorporated in New Zealand; – Ludgate Limited which is incorporated in the UK; – Ludgate US Corp which is incorporated in the US; and – Colonnade Pte Ltd (Colonnade) which is incorporated in Singapore. b) Colonnade is the Group’s insurance captive. Given the size and scale of the Group including associates, certain insurable risks are internally manageable. Furthermore, the entity provides the Group opportunities to insure certain non-insurable or hard to place risks at more equitable terms for all participants in the scheme. During the current period, insurance placed through the Colonnade covers AUB Group, some of its controlled entities and some of its associates. No external parties to the Group are part of the schemes provided by Colonnade. c) Material non-controlling interests (NCI) of the Group’s controlled entities include the following: As at 30 June 2023 Principal place of business Non Controlling Interest % Profit or loss attributed to minority $’000 Total NCI balance at balance date $’000 AUB Three Sixty Pty Ltd AEI Insurance Group Pty Ltd Australia and New Zealand Australia 50.3 35.0 9,086 1,380 92,494 37,221 As at 30 June 2022 Name of controlled entity AUB Group NZ Limited AUB Three Sixty Pty Ltd Principal place of business Non Controlling Interest % Profit or loss attributed to minority $’000 Total NCI balance at balance date $’000 New Zealand Australia and New Zealand 10.7 47.7 668 6,542 17,153 81,912 No other NCI or minority interest is material to the Group. 101 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 9 SHARES IN CONTROLLED ENTITIES (CONTINUED) iii) The Group’s shares in controlled entities ownership at balance date is as follows: Name and Interests in controlled entities: Australian Broking AB Phillips Group Pty Ltd and its controlled entities Austbrokers Life Pty Ltd and its controlled entities Adroit Holdings Pty Ltd and its controlled entities AEI Insurance Group Pty Ltd and its controlled entities* Astute Insurance Services Pty Ltd AUB Hospitality Pty Ltd Austbrokers Canberra Pty Ltd Austbrokers Coast to Coast Pty Ltd and its controlled entity Austbrokers City State Pty Ltd Austbrokers InterRisk Pty Ltd Austbrokers Member Services Pty Ltd Austbrokers RIS Pty Ltd and its controlled entities* Austbrokers RWA Pty Ltd Austbrokers Southern Pty Ltd Austbrokers Sydney Pty Ltd and its controlled entities Austbrokers Trade Credit Pty Ltd CityCover (Aust) Pty Ltd and its controlled entities (Austbrokers Comsure) Experien Insurance Services Pty Ltd and its controlled entities Finsura Holdings Pty Ltd and its controlled entities Insurance Advisernet Unit Trust and its controlled entities Insurance Advisernet New Zealand Unit Trust and its controlled entities Austbrokers Corporate Pty Ltd and its controlled entities McNaughton Gardiner Insurance Brokers Pty Ltd North Coast Insurance Brokers Pty Ltd** Northlake Holdings Pty Ltd (Country Wide Insurance Brokers WA) and its controlled entities Terrace Insurance Brokers Pty Ltd and its controlled entity The Insurance Alliance Pty Ltd and its controlled entity Agencies Austagencies Pty Ltd and its controlled entities AUB Three Sixty Pty Ltd and its controlled entities New Zealand Broking AUB Group NZ Limited and its controlled entities Brokerweb Risk Services Limited and its controlled entities Runacres Limited and its controlled entities Support Services — Australia AUB Group Services Pty Ltd Austbrokers Investments Pty Ltd Colonnade Pte Ltd Tysers Ludgate Limited and its controlled entities Ludgate US Corp and its controlled entity 2023 % 2022 % 58.2 95.1 100.0 65.0 53.2 100.0 100.0 – 60.0 51.0 100.0 95.0 51.0 51.0 100.0 75.0 83.5 73.2 70.0 52.0 52.0 80.0 75.0 39.0 89.1 50.5 60.8 95.1 100.0 40.0 – 100.0 85.0 51.0 60.0 80.0 100.0 50.0 60.0 80.0 100.0 75.0 83.5 73.2 70.0 52.0 52.0 100.0 75.0 75.0 90.5 53.7 100.0 100.0 100.0 49.7 100.0 72.1 67.0 100.0 100.0 100.0 100.0 100.0 100.0 52.3 89.3 89.3 67.0 100.0 100.0 100.0 – – The Group obtained control of the entity during the period as a result of further shares obtained. The entity was previously an associate of the Group. * ** While the look through economic interest in the entity is below 50%, the entity is controlled by intermediary holding group, which is in turn controlled by the Group. 102102 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 10 CASH AND CASH EQUIVALENTS Cash and cash equivalents, and cash and cash equivalents - trusts (trust cash), in the Consolidated Statement of Financial Position comprise cash at bank, in hand and short-term deposits with an original maturity of three months or less. Although there is a concentration of cash and cash equivalents held with major banks, the lifetime expected credit losses on cash and cash equivalents are insignificant. Trust cash relates to cash held for insurance premiums received from policyholders which will ultimately be paid to insurers, claims floats and amounts to be held in escrow for specified purposes. Trust cash cannot be used to meet business obligations/ operating expenses other than payments to underwriters and/or refunds to policyholders. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents as defined above are shown net of outstanding bank overdrafts. Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of the entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currencies at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates on the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve, in equity. If the foreign operation is not a wholly owned controlled entity then the relevant proportion of the translation difference is allocated to non-controlling interests. Cash and cash equivalents Cash and cash equivalents - Trust Total Cash and cash equivalents 2023 $’000 260,352 936,369 2022 $’000 259,329 333,131 1,196,721 592,460 103103 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 10 CASH AND CASH EQUIVALENTS (CONTINUED) a) Cashflow from operating activities Profit after tax for the period Equity accounted (profits) after income tax Dividends/trust distributions received from associates Amortisation of intangibles Amortisation of capitalised project costs Amortisation and impairment of Right of Use Asset Depreciation of fixed assets Share options expensed Adjustments to contingent consideration on acquisitions Remeasurement of put option and interest unwind Finance charge on movement in trust minority interests 2023 $’000 2022 $’000 91,623 99,884 (35,690) (39,053) 38,203 35,920 3,469 12,024 3,876 10,590 26,920 3,620 10,999 43,149 10,180 675 7,171 2,333 2,366 (411) 636 – Profit/Loss from sale of associates, controlled entities and broking portfolios (34,599) (6,782) Profit on deconsolidation of controlled entity Interest unwind on contingent consideration Adjustments to fair value of associates and goodwill Impairment of intangibles Changes in assets and liabilities (Increase) in trade and other receivables (Decrease)/increase in trade and other payables Increase in deferred revenue from customers Increase/(decrease) in trust payables (Decrease)/increase in provisions Change in deferred tax Increase/(decrease) in provision for tax Net cash flows from operating activities (4,447) 12,126 – – (29,930) (40,715) 6,342 8,439 (46,724) (19,239) 10,149 109,919 (6,054) (13,081) 16,222 (7,387) 12,949 2,108 (7,486) 12,061 (3,333) (1,249) 202,238 95,535 104 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 10 CASH AND CASH EQUIVALENTS (CONTINUED) b) Changes in liabilities arising from financing activities Listed below are the disclosure requirements in respect of the changes in the liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). 1 July 2022 $’000 Cash flows $’000 Foreign exchange movement $’000 New Acquisitions $’000 New consolidated entity/ deconsolidation $’000 Other $’000 30 June 2023 $’000 Year ended 30 June 2023 Current interest bearing loans and borrowings (excluding items listed below) Current lease liability Current unsecured loan other 8,388 8,187 553 10,624 1,721 14 Non-current interest bearing loans and borrowings Non current lease liability 38,630 519,934 18,752 8,534 Non Current Unsecured Loan Other 231 (82) Total liabilities from financing activities 74,741 540,745 – 72 – 416 510 – 998 195 4,821 – 5,355 34,371 – 44,742 – – – – – – (5) 19,202 (58) 14,743 – 567 (23) 564,312 (33) 62,134 – 149 (119) 661,107 1 July 2021 $’000 Cash flows $’000 Foreign exchange movement $’000 New Acquisitions $’000 New consolidated entity/ deconsolidation $’000 Other $’000 30 June 2022 $’000 Year ended 30 June 2022 Current interest bearing loans and borrowings (excluding items listed below) Current lease liability Current unsecured loan other Non-current interest bearing loans and borrowings Non current lease liability Non Current Unsecured Loan Other 10,508 (4,558) 7,786 750 43 (182) (80) (42) (15) 200,345 (166,764) (513) 18,080 680 (296) (448) (43) (1) 2,518 400 – 9,250 1,011 – Total liabilities from financing activities 238,149 (172,205) (694) 13,179 – – – – – – – – – 8,388 8,187 553 (3,688) 38,630 – – 18,752 231 (3,688) 74,741 105 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 11 TRADE AND OTHER RECEIVABLES Trade and other receivables which generally have 30-day credit terms, are initially recognised at fair value and subsequently measured at amortised cost. The Group acts as an agent in the collection of amounts due from customers for premiums and amounts payable to insurers on broking/agency operations, as the Group is not liable for the underlying insurance contract. As such these balances do not meet the definition of a financial liability or financial asset respectively. The Group recognises amounts due from customers in relation to uncollected fees and commissions due to the Group for services rendered, adjusted for the expected credit loss. The Group only recognises amounts due to insurers for premiums when collected but yet to be transferred to the insurer. Amounts due from premium funding operations include amounts due from policyholders in respect of insurances arranged by a controlled entity. These arrangements with policyholders have repayment terms up to 12 months from policy inception. The individual funding arrangements are used to pay insurers. Should policyholders default under the premium funding arrangement, the insurance policy is cancelled by the insurer and a refund issued which is credited against the amount due. The Group’s credit risk exposure in relation to these receivables is limited to commissions and fees charged plus any additional interest charged under the premium funding arrangement. Other receivables are loan receivables and short-term intercompany funding to related entities. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: a) the rights to receive cash flows from the asset have expired; b) c) the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset and has neither transferred or retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay. As at 30 June 2023 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 Total $’000 59,898 186,265 2,038 16,925 65,238 – – – 6,661 – 6.661 330,365 Trade receivables 59,422 – 476 Amount due from customers on broking/agency operations Amount due from clients in respect of premium funding Related party receivables Prepayments and other receivables Total trade and other receivables 111,236 75,029 2,038 7,069 53,506 233,271 – – 4,779 79,808 – – 3,195 6,953 10,625 106 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 11 TRADE AND OTHER RECEIVABLES (CONTINUED) As at 30 June 2022 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 24,414 74,967 1,018 14,279 2,128 116,806 – – 873 – – 873 45 – – 694 – 739 – – – – – – Total $’000 24,459 74,967 1,891 14,973 2,128 118,418 Trade receivables Amount due from customers on broking/agency operations Amount due from clients in respect of premium funding Related party receivables Prepayments and other receivables Total trade and other receivables Expected Credit Losses (ECL) For trade receivables and other receivables, an allowance is made for anticipated losses based upon historical information, adjusted for forward-looking information, and specific credit information of counterparties where available. Amounts over due by more than (a) Brokers - 30 days, (b) Support services entities and Underwriters - 90 days and (c) Wholesale brokers - 180 days are considered to have a significance increase in credit risk. Expected credit losses are recorded on receivables, including trade and other receivables, interest-bearing loan assets, investments and other financial assets. The Group applies the simplified approach to its trade receivables, and measures the loss allowance at an amount equal to lifetime expected credit losses. For amounts due from customers of broking/agency operations and amounts due from clients in respect of premium funding operations, an allowance is made for anticipated lapses and cancellations based upon historical information, adjusted for forward-looking information. ECL allowance included in trade and other receivables (current) above using the simplified approach as follows: The provision for lapses 5.0% (2022: 5.0%) provides an amount for expected cancellations and loss of commissions and fees (amounts due from broking/agency operations, debtors) based on Group wide historic data. Australian Agencies provision at 50% for debtors over 90 days, and 100% for debtors over 120 days in line with their binding arrangements to generally cancel policies past due by 90 days. Commercial loans to controlled entities and associates are secured over the shares of the non AUB Group shareholders of the borrower. Other related party loans are generally provided to a related party for purchase of shares in a controlled entity or associate, where the shares acquired form collateral in the loan deed. All other loans and receivables, including intercompany and short-term loans to controlled entities and associates are unsecured. The valuation of shares held as security exceed the total loans receivable for the years ended 30 June 2023 and 30 June 2022. The Group recognises under AASB 15 a deferred component of Revenue representing the significant risk of reversal on issued policies. This is within the Group’s Deferred Revenue balance within the Consolidated Statement of Financial Position. In addition to requirements under AASB 15, forward looking elements under ECL provisioning is required. This is presented in the table above, along with ECL provisioning on assets not impacted by AASB 15. As such changes in forward looking elements of ECL provisioning have an impact on the table below. Opening balance 1 July ECL from acquisition of a controlled entity Movements during the year Total Expected Credit Loss 2023 $’000 316 3,780 1,100 5,196 2022 $’000 2,792 103 (2,579) 316 107 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 12. FINANCIAL AND OTHER ASSETS Foreign Exchange Forward Contract Asset The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. Such derivative financial instruments are initially recognised at fair value at the date at which a derivative contract is entered into and are subsequently remeasured at fair value. If there is any ineffective portion, it is recognised immediately in profit or loss. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. For the purposes of hedge accounting, hedges are classified as: – Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment. – Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset of liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements. A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements: – There is ‘an economic relationship’ between the hedged item and the hedging instrument; – The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship; and – The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. The Group designates only the spot element of forward contracts as a hedging instrument. The forward element is recognised in OCI and accumulated in a separate component of equity under cost of hedging reserve. The amounts accumulated in OCI are accounted for, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the hedged asset or liability. This is not a reclassification adjustment and will not be recognised in OCI for the period. This also applies where the hedged forecast transaction of a non-financial asset or non-financial liability subsequently becomes a firm commitment for which fair value hedge accounting is applied. Other Assets Other assets are contract assets, secured loans, minor investment in listed equities and defined benefit scheme asset. For AUB’s policy on defined benefit schemes refer to Note 16. Contract assets represent assets recognised at fair value acquired on acquisition of a subsidiary in relation to expected revenues generated by existing contracts over the next 10 years. The asset has finite life and is amortised over the term of the contract (10 years). 108 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 12 FINANCIAL AND OTHER ASSETS (CONTINUED) As at 30 June 2023 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 Foreign Exchange Forward Contract Asset Other Assets Total Financial and Other Assets 5,628 744 6,372 4,603 743 5,346 13,303 16,588 29,891 – – – As at 30 June 2022 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 Foreign Exchange Forward Contract Asset Other Assets Total Financial and Other Assets – 1,868 1,868 – – – – 9,214 9,214 – – – Total $’000 23,534 18,075 41,609 Total $’000 – 11,082 11,082 109 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 13 INTANGIBLE ASSETS AND GOODWILL Capitalised project costs Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met: it is technically feasible to complete the software so that it will be available for use; i. ii. management intends to complete the software and use or sell it; iii. there is an ability to use or sell the software; iv. v. adequate technical, financial and other resources to complete the development and to use or sell the software are available, it can be demonstrated how the software will generate probable future economic benefits; and and the expenditure attributable to the software during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software including eligible employee costs and an appropriate portion of relevant overheads. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. Research expenditure and development expenditure that do not meet the criteria above are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Assessments are made on a project by project basis on the expected life of the intangible with a maximum useful life of 5 years adopted by the Group. Costs associated with maintaining software programs and Software-as-a-Service (SaaS) are recognised as an expense as incurred. Software-as-a-Service (SaaS) arrangements SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date. A right to receive future access to the supplier’s software does not, at the contract commencement date, give the customer the power to obtain the future economic benefits flowing from the software itself and to restrict others’ access to those benefits. The following outlines the accounting treatment of costs incurred in relation to SaaS arrangements: – Recognise as an operating expense over the term of the service contract: – Fee for use of application software; – Support and maintenance services; – Program/Project management; – Integration; and – Customisation costs. – Recognise as an operating expense as the service is received (as considered distinct services): – Configuration costs; – Data conversion and migration costs; – Testing costs; and – Training costs. Costs incurred for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible software assets. Goodwill Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the fair value of the identifiable net assets acquired at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses and is not amortised. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. 110 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 13 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) Goodwill (continued) Where goodwill forms part of a cash-generating unit and part of the operation of that unit is disposed, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Impairment losses recognised for goodwill are not subsequently reversed. Intangible assets - Insurance Broking Register and Brand Name Identifiable intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment. Internally generated intangible assets are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of these intangible assets are assessed to be finite for insurance broking registers and indefinite for brand name. Intangible assets with finite lives are amortised over the useful life, currently estimated to be 10 and 12 years (2022: 10 years) for broking portfolios/client relationships and financial services businesses (life risk), and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an identifiable intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on identifiable intangible assets with finite lives is recognised in the expense category of the Consolidated Statement of Comprehensive Income consistent with the function of the intangible asset. Gains or losses arising from derecognition of an identifiable intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Consolidated Statement of Comprehensive Income when the asset is derecognised. Year ended 30 June 2023 Capitalised project costs $’000 Goodwill $’000 Insurance broking registers $’000 Brand name $’000 Total $’000 Cost Balance at the beginning of the year 5,538 559,847 123,081 Net addition/(disposals) not related to consolidation/ (deconsolidation) Acquisition of controlled entities Deconsolidation of controlled entities Impairments/write-off during the year Translation of foreign exchange rate movements 4,714 1,026 (11) (201) 653 – – 688,466 9,021 – 4,307 850,707 402,010 54,886 1,308,629 (9,014) (1,219) 43,113 (1,604) (4,922) 24,156 – – 3,977 (10,629) (6,342) 71,899 Total Intangibles at cost Amortisation Balance at the beginning of the year Deconsolidation of controlled entities Amortisation during the year Translation of foreign exchange rate movements Total Accumulated amortisation Summary Net carrying amount at beginning of year Net carrying amount at end of year 11,719 1,443,434 547,028 58,863 2,061,044 2,299 – 2,365 299 4,963 – – – – – 63,657 (1,604) 35,920 1,267 99,240 3,239 6,756 559,847 1,443,434 59,424 447,788 – – – – – – 65,956 (1,604) 38,285 1,566 104,203 622,510 58,863 1,956,841 111 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 13 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) Year ended 30 June 2022 Capitalised project costs $’000 Goodwill $’000 Insurance broking registers $’000 Brand name $’000 Total $’000 Cost Balance at the beginning of the year 2,240 416,241 107,709 Net addition/(disposals) not related to consolidation/ (deconsolidation) Acquisition of controlled entities Deconsolidation of controlled entities Translation of foreign exchange rate movements & Other Total Intangibles at cost Amortisation Balance at the beginning of the year (Disposals) not related to deconsolidation Amortisation during the year Impairments/write-off during the year Translation of foreign exchange rate movements Total Accumulated amortisation Summary Net carrying amount at beginning of year Net carrying amount at end of year 702 2,686 – (1,723) 161,627 (5,320) 1,977 15,801 (1,139) (90) (2,539) (1,267) 5,538 568,286 123,081 1,696 (137) 675 – 65 2,299 544 3,239 – – – 8,439 – 8,439 416,241 559,847 54,817 – 9,341 – (501) 63,657 52,892 59,424 – – – – – – – – – – – – – – – – 526,190 956 180,114 (6,459) (3,896) 696,905 56,513 (137) 10,016 8,439 (436) 74,395 469,677 622,510 112 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 13 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) Intangible assets are attributable to the following controlled entities: i) Goodwill Ludgate Limited and its controlled entities AUB Group NZ Limited and its controlled entities Insurance Advisernet Unit Trust & Insurance Advisernet New Zealand Unit Trust AUB Three Sixty Pty Ltd and its controlled entities Austagencies Pty Ltd and its controlled entities AEI Insurance Group Pty Ltd and its controlled entities Austbrokers Corporate Pty Ltd and its controlled entities Adroit Holdings Pty Ltd and its controlled entities Ludgate US Corp and its controlled entities Experien Insurance Brokers Pty Ltd Other controlled entities Total Goodwill ii) Insurance Broking Registers Ludgate Limited and its controlled entities AUB Group NZ Limited and its controlled entities AEI Insurance Group Pty Ltd and its controlled entities Austbrokers Corporate Pty Ltd and its controlled entities Other controlled entities Total Insurance Broking Register Remaining amortisation period (years) 2023 11.3 5.5 9.5 5.5 2022 – 6.5 – 3.5 2023 $’000 2022 $’000 670,177 109,325 117,109 115,319 79,232 75,143 58,867 41,954 19,531 18,538 138,239 1,443,434 – 82,692 103,812 115,012 47,021 – 17,545 38,272 – 18,596 136,897 559,847 2023 $’000 2022 $’000 329,021 36,270 29,952 14,382 38,163 447,788 – 26,832 – 1,312 31,280 59,424 113 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 14 IMPAIRMENT Impairment of non-financial assets other than Investment in Associates, Intangibles and Goodwill The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset. If indication of impairment exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at its revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. No such indicators were noted in the current or prior year and subsequently no impairments recorded. Investments in Associates, Intangibles and Goodwill The Group assesses the impairment of investments in Associates, Intangibles, and Goodwill as a significant judgement and material to the financial statements. The recoverable amount of the intangible assets and goodwill is determined based on the higher of the estimate of fair value of the cash generating unit (CGU) to which they relate less costs to sell or its value in use. In determining fair value, each controlled entity or associate is considered a separate CGU or grouped into a single CGU for impairment testing where cash inflows are interdependent and have similar characteristics. The CGU represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. Australian Broking entities, New Zealand entities and Support Services entities are viewed as separate CGUs at the entity level for impairment purposes, whilst Agency businesses have been disaggregated into two CGU and Tysers businesses have been aggregated into one CGU. To conduct impairment testing, the Group compares the carrying value with the recoverable amount of each CGU. The recoverable amount is based on the higher of: – Fair value - based on maintainable earnings; or – Value in use - based on a discounted cash flow model. The Group conducts testing over multiple phases, throughout the year and with several layers of review: 1. Half year impairment review: Review of all cash generating unit (CGU) at 31 December for indicators of impairment including qualitative questionnaires to each Group representative which has oversight of the respective CGU. 2. Annual Impairment testing: – Phase I - Targeting: Fair value measurement of all CGUs and compared to carrying value as at 31 March to determine if any entities show a potential impairment or low headroom. Testing is conducted irrespective of any indicators of impairment (or lack thereof). EBITs are averaged over 3 years to consider the impact of timing differences, however stress testing is conducted using (1) a 5% decline in EBIT, (2) stressed multiples, and (3) a single year EBIT. – Phase II – Screening: Update of prior year Discounted Cash Flow (DCF) models where an entity continues to rely on a value in use model to support its carrying value and current year results meet or exceed prior year projections. – Phase III – Detailed Review: Review of entities identified in Phase I and II as having potential impairment issues including creation of new DCFs, supporting normalisations or plans to rectify profitability concerns. – Phase IV – Year End Refresh: Review of following year budgets, and current year actuals to ensure no significant changes to the reporting date at 30 June compared to the interim testing date 31 March. Low head room entities are revisited to mitigate the risk of an undetected impairments. 114 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 14 IMPAIRMENT CONTINUED) Investments in Associates, Intangibles and Goodwill (continued) 3. Watchlist Monitoring: Entities with low headroom are monitored at Board Audit & Risk Committee (BARC) level and specifically considered during half year and year end testing given sensitivity to impairment. 4. Governance: Impairment testing is conducted by the Group financial control team in conjunction with the mergers & acquisitions team, and reviewed at 3 levels (1) Head of Financial Control, (2) Chief Financial Officer, and (3) BARC. The Group maintains a policy to seek independent advice on multiples every 3 years from an appropriate valuations firm. The Group sought independent advice in 2022 to determine the appropriate earnings before interest and tax (EBIT) multiple used to determine fair value. The extensive impairment testing and monitoring exceeds requirements under accounting standards and reflects the materiality of the balances to the Group and the low risk appetite of management and the BARC. Key assumptions for the fair value methodology are as follows: Fair value is based on estimates of maintainable earnings. The appropriate pre-tax maintainable earnings for each CGU is multiplied by a multiple from within the range, depending on the type of business carried out by the CGU. The risk free rate (before risk margin). 2023 2022 8-15 times 8-15 times 3.65% 2.8-3.1% Multiples have been determined after factoring in the following assumed sustainable long-term profit growth. up to 2% up to 2% Value in use Where the Value In Use methodology produces a higher valuation than Fair Value Less Costs of Disposal (FVLCD), this valuation is used for the Recoverable Amount. This measurement takes into account the expected Discounted Cash Flows (DCF) for the next 5 -15 years based on the forecast profitability. The valuation takes into account the weighted average cost of capital (WACC) for those CGUs and also looks at the expected long term growth rate with a terminal value calculation at the end of the intermediary cash flows. This methodology will result in a better estimate valuation for entities where historic performance may not factor in the medium and long term expected growth from this business. During the current year, no CGU’s (2022: three CGU’s) were valued using the value in use methodology. All CGUs were supportable using the fair value methodology. For two of the CGUs it was determined that an EBIT multiple was not appropriate in measuring the recoverable amount for the Group in relation to the entities. The fair value measurements were categorised as level 3 fair value based on the lack of observable inputs in the valuation technique used (see Note 19). Key assumptions for the value in use methodology are as follows: Post-tax discount rates (WACC). Short-term revenue growth rate - used in discount cash flow assumptions (1-5 years). Long-term revenue growth rate. 2023 N/A N/A N/A 2022 6.5%-10.9% 2.5%-5.7% 1.5%-2.0% Low headroom Entities are considered to have low headroom if headroom is less than $500k or 5% of total carrying value (whichever is lower) or show impairment using any of the following: (1) Stressed multiple (2) 5% reduction in EBIT or (3) single current year profit (to ensure 3-year average does not hide a decline in profitability). No reasonably possible change in key assumptions would result in the recoverable amount of a CGU that is material to the Group’s total intangible assets, goodwill and investment in associates, being significantly less than the carrying value included in the accounts. When making an acquisition, the Group may pay a deposit and defer a component of the purchase price to be determined based on future financial results. Estimates of the final acquisition cost are made and recognised in the financial statements. An estimate of the contingent consideration is made at the time of acquisition and is reviewed and varied at balance date if estimates change or actual payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where an estimate is reduced an offsetting adjustment (impairment) is generally made to the carrying value. During the current year, due to current market conditions further adjustments to contingent considerations in respect of current and prior year acquisitions resulted in a net reduction (previous year increase) to the estimates previously recognised by the Consolidated Group of $0.28m (2022: $0.41m). Where the revised contingent consideration estimates were below the original estimated contingent consideration payments, a corresponding and offsetting impairment charge may be recognised. The reduction in contingent consideration lead to an impairment of $nil (2022: $nil). 115 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 14 IMPAIRMENT (CONTINUED) Impairment - current year Phase I -Targeting Phase 2 - Screening Phase 3 - Detailed review Phase 4 -Low Head Room No impairment Impairment All other entities 1 Entity 2 Entities Two cash generating unit were assessed to be impaired during the current year by $6.34m. One CGU remains on the watchlist due to low headroom. One CGU was removed from the watchlist. No CGUs were added to the watchlist. Impairment - previous year Phase I -Targeting Phase 2 - Screening Phase 3 - Detailed review Phase 4 -Low Head Room No impairment Impairment All other entities 2 Entities 2 Entities 1 Entity One cash generating unit was assessed to be impaired during the previous year by $8.44m. Two CGUs remain on the watchlist due to low headroom. No CGUs were added to the watchlist 15 TRADE AND OTHER PAYABLES Liabilities for trade creditors and other amounts are carried at amortised cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the entity. Payables to related parties are carried at the principal amount. Interest, when charged, is recognised as an expense on an accrual basis. Payables are normally settled on 90 day terms. The Group recognises amounts due to insurers for premiums collected but yet to be transferred to the insurer. As at 30 June 2023 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/No maturity $’000 Trade payables and accruals Amount payable on broking/agency operations Related party payables Other payables Total trade and other payables 53,782 932,983 3,387 59,965 1,050,117 – – – – – – – – – – – – – – – As at 30 June 2022 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/No maturity $’000 42,100 354,176 1,130 10,245 407,651 – – – – – – – – – – – – – – – Trade payables and accruals Amount payable on broking/agency operations Related party payables Other payables Total trade and other payables 116 Total $’000 53,782 932,983 3,837 59,965 1,050,117 Total $’000 42,100 354,176 1,130 10,245 407,651 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 16 PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Make good provision on leased premises In accordance with the various lease agreements, the Group must restore the leased premises to a similar condition that existed prior to leasing the premises by removing all fixed and removable partitions. A provision has been included for expected amounts payable. Because of the long-term nature of the liability, the greatest uncertainty in estimating the provision is the cost that will ultimately be incurred. During the year further amounts were provided for premises leased during the year. Current lease durations range from less than 1 year to 10 years. Make good payments will only be made at the end of the lease. Employee entitlements Liabilities for employee entitlements to annual leave and other current entitlements are accrued at amounts calculated on the basis of current wage and salary rates, including package costs and on-costs. Liabilities for non accumulating sick leave are recognised when the leave is taken and are measured at the rate paid or payable. Liabilities for employee entitlements to long service leave, which are not expected to be settled within twelve months after balance date, are accrued at the present value of the future amounts to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary level, experience of employee departures and periods of service. The discount factor applied to all such future payments is determined using high quality corporate bond rates attaching as at the reporting date, with terms to maturity that match, as closely as possible, estimated future cash outflows. Any contributions made to the accumulated superannuation funds by entities within the Group are charged against profits when due. Defined benefit plan liability The Group operates two defined benefit pension plans in the UK. All of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their salary in the final years leading up to retirement. Defined benefit schemes are funded, with assets of the scheme held separately from those of the Group, in separate trustee administered funds. Defined benefit scheme assets are measured at fair value and liabilities are measured by independent actuaries using the projected unit credit method. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. If the present value of defined benefit obligations at the reporting date is less/more than the fair value of plan assets at that date, the plan has a surplus/deficit respectively which is presented in the Consolidated Statement of Financial position. The Group recognises a plan surplus as a defined benefit plan asset only to the extent that it is able to recover the surplus either through reduced contributions in the future or through refunds from the plan. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. 117 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 16 PROVISIONS (CONTINUED) Balance at the beginning of the year Payments made during the year Change in estimates Additions during the year Acquisition of controlled entity Deconsolidation of controlled entities Foreign exchange rate movements Balance at the end of the year Current 2023 Non-current 2023 Balance at the end of the year Employee entitlements $’000 31,414 (18,690) (273) 13,729 95,890 (580) 5,465 126,955 123,476 3,479 126,955 Year ended 30 June 2023 Make good provision $’000 2,195 – (88) 669 Other general provisions $’000 – (729) (823) 151 Total $’000 33,609 (19,419) (1,184) 14,549 1,088 77,824 174,802 (5) 92 3,951 1,955 1,996 3,951 – 2,693 79,116 79,116 – 79,116 (585) 8,250 210,022 204,547 5,475 210,022 A regulatory investigation of Tysers for an event which occurred prior to AUB’s ownership is currently in progress. Please refer to Note 7 for further details. Balance at the beginning of the year Additions/Disposals/Other during the year Balance at the end of the year Current 2022 Non-current 2022 Balance at the end of the year Year ended 30 June 2022 Employee entitlements $’000 22,819 Make good provision $’000 1,628 Other general provisions $’000 – 8,595 31,414 28,479 2,935 31,414 567 2,195 625 1,570 2,195 – – – – – Total $’000 24,447 9,162 33,609 29,104 4,505 33,609 17 INTEREST-BEARING LOANS AND BORROWINGS Interest-bearing liabilities are initially recognised at fair value of the consideration received, net of any directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised. Borrowing costs are amortised over the term of the loans. Group Borrowing facilities as at 30 June 2023 AUB Group entered into a Syndicated Debt Facility totalling $675m to fund the completion of the Tysers acquisition. The facility has a maturity date of 30th September 2027. The total facility consists of: – Tranche A: AUD term facility of $525m (amortising $1.5m per quarter); and – Tranche B: multi-currency facility of $150m. At 30 June 2023 the total outstanding facility balance is $520.5m. AUB Group Limited’s borrowing facilities are subject to financial undertakings and warranties typical of facilities of this nature and have sub-limits for various purposes including acquisitions. A small number of controlled entities within the Group in Australia and New Zealand have negotiated facilities with other banks. During the current and prior period, there were no defaults or breaches of terms and conditions of any of these facilities. 118 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 17 INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED) Current Secured bank loan Other Total interest-bearing loans and borrowings (current) Non-current Secured bank loan Other Total interest-bearing loans and borrowings (non-current) AUB Group Limited syndicated finance facility (see below) Commonwealth Bank Hunter Premium Funding St George Bank Australia and New Zealand Banking Group Macquarie Bank Other Total secured bank loans Group Borrowing facilities as at 30 June 2023 2023 $’000 2022 $’000 19,202 567 19,769 564,312 149 564,461 520,500 19,251 17,191 7,278 8,316 5,471 5,507 583,514 8,388 553 8,941 38,630 231 38,861 – 2,518 14,790 16,170 9,250 3,690 600 47,018 Facility provider Type of Borrowing Total Facility $’000 Undrawn Amount $’000 Amount Utilised $’000 Borrowing Amount $’000 Current $’000 Non Current $’000 Expiry Date(s) Interest Rate % Variable/ Fixed (Var/Fix) AUB Group Limited Syndicated Finance Facility Australia and New Zealand Banking Group Loan Facility 670,500 150,000 520,500 520,500 6,000 514,500 30/09/2027 8 Var Bank Guarantees 13,458 – 13,458 – – – N/A N/A N/A Facilities arranged by other controlled entities Commonwealth Bank Hunter Premium Funding Australia and New Zealand Banking Group Loan facility 20,257 1,006 19,251 19,251 1,994 17,257 Loan Facility 20,268 3,077 17,191 17,191 2,833 14,358 Loan facility St George Bank Loan Facility 8,316 8,000 – 722 8,316 7,278 8,316 7,278 1,552 1,100 6,764 6,178 31/07/2023 & 01/07/2026 Between 30/11/2024 & 31/05/2028 30/06/2032 5/12/2024 Between 01/05/2024 & 6-10 Var 1 - 2.75 Fixed 7 7 Var Var Var and Fixed Macquarie Bank Loan facility 8,471 3,000 5,471 5,471 377 5,094 30/04/2027 3.75 - 5.2 Other Loan facility 7,201 1,694 5,507 5,507 5,346 161 Total Borrowing Facilities 756,471 159,499 596,972 583,514 19,202 564,312 Between 30/11/2023 & 30/06/2032 & 31/10/2025 8 - 9.1 Var 119 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 17 INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED) Group Borrowing facilities as at 30 June 2022 Facility provider Type of Borrowing AUB Group Limited Australia and New Zealand Banking Group Bank Guarantees Total Facility $’000 Undrawn Amount $’000 Amount Utilised $’000 Borrowing Amount $’000 Current $’000 Non Current $’000 Expiry Date(s) Interest Rate % Variable/ Fixed (Var/Fix) 23,179 – 23,179 – – – N/A N/A N/A Facilities arranged by other controlled entities Hunter Premium Funding Loan facility 18,694 3,904 14,790 14,790 2,669 12,121 St George Bank Loan Facility 16,888 719 16,170 16,170 2,468 13,702 Between 01/11/2025 & 27/01/2035 Between 18/10/2022 & 19/03/2023 Between 01/05/2024 & Macquarie Bank Loan facility 4,140 449 3,691 3,691 133 3,558 30/04/2027 3.75 - 5.2 1 - 2 Fixed 4 - 4.2 Var Var and Fixed Australia and New Zealand Banking Group Loan Facility 14,896 5,646 9,250 9,250 – 9,250 20/04/2027 Other Loan facility 4,706 1,588 3,118 3,118 3,118 – 30/11/2022 Total Borrowing Facilities 82,502 12,305 70,197 47,018 8,388 38,630 2 6 Fixed Fixed 18 FINANCIAL LIABILITIES Contingent and deferred consideration payable The Group initially recognises estimated contingent and deferred consideration at present value as part of purchase consideration and is remeasured at amortised cost at each reporting date. Contingent considerations terms vary between transactions but generally involves either (1) an EBIT or Revenue (fixed) performance hurdle (generally 2-3 years) post the acquisition date (i.e. high water mark) or (2) future dated (generally 2-3 years) EBIT or Revenue times a fixed multiples less historic payments made. Financial liability at amortised cost AUB recognises a financial liability in relation to units held by non-AUB parties for unit trusts controlled by the Group, as the Group does not control the distribution of profits by these entities to their beneficiaries. These liabilities are initially measured at fair value and subsequently measured at each reporting date at amortised cost as an expense through finance costs. Put options AUB Group Limited entered into agreements with various shareholders of controlled entities and associates, granting options to put shares held by those shareholders to AUB Group Limited at fair value at the date of exercise of that option. The earliest the put option can be exercised is 5 years from the date of AUB acquiring its initial shareholding in those entities. The Group recognises put options financial liability initially at estimated present value of the value the Group could be required to pay on the future exercise by holders of the put options. Refer to Note 2.1 (d) for further information on measurement and critical assumptions and for Put Option liability movement during the current period, refer to the SOCIE. 120120 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 18 FINANCIAL LIABILITIES (CONTINUED) Put options (continued) After initial recognition, put options financial liability is subsequently measured at amortised cost using the effective interest method. The Group re-estimates put options financial liability at the reporting date using the same model applied during the initial measurement, however the discount rate is not reset as the liability is held at amortised cost. The adjustment is recognised through the Consolidated Statement of Comprehensive Income as income or expense. Movements in the put option liability are ultimately transferred from retained earnings to the Put Option Reserve. Whilst this obligation will only be payable in the event that other shareholders of controlled and associated entities put their remaining shares to the Group, a liability has been recognised in relation to the put option. The financial liability will be derecognised when the put option expires unexercised or an entity is disposed with the corresponding movement being reflected in the Put Option Reserve. At balance date there has been no indication from the non-controlling shareholders that they wish to exit their respective businesses and put their shares to the Group. Included in financial liabilities are the following: Balance at the beginning of the period Additions during the year Interest unwind/Finance charge on profits of trust minority Remeasurement of past obligations (including foreign currency movements) Payments made in respect of previously recognised balances Balance at the end of the period As at 30 June 2023 Contingent and Deferred Considerations $’000 17,576 152,516 Financial Liability at amortised Cost $’000 51,861 – Actuarial Liability $’000 5,252 6,235 Put Options $’000 8,161 – Total $’000 82,850 158,751 12,126 10,999 – 397 23,522 26,920 7,642 (757) 3,223 37,028 (16,078) 193,060 (11,805) 58,697 (190) – (28,073) 10,540 11,781 274,078 Contingent consideration sensitivity: A 10% increase or decrease in profit or revenue of acquired entities which are subject to an earn out would have a $2.68m charge or $19.36m release to the profit or loss respectively. Contingent and Deferred Considerations $’000 Balance at the beginning of the period Additions during the year Interest unwind/Finance charge on profits of trust minority Remeasurement of past obligations (including foreign currency movements) Payments made in respect of previously recognised balances Balance at the end of the period 8,606 14,529 – (380) (5,179) 17,576 As at 30 June 2022 Financial Liability at amortised Cost $’000 – 51,861 – – – Actuarial Liability $’000 817 4,435 – – – 51,861 5,252 Put Options $’000 7,057 – 234 870 – 8,161 Total $’000 16,480 70,825 234 490 (5,179) 82,850 121 121 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 18 FINANCIAL LIABILITIES (CONTINUED) Ageing is presented below: As at 30 June 2023 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 Total $’000 Contingent or deferred consideration payables Financial Liability at amortised cost Actuarial Liability Put Options Total Financial Liabilities 26,790 – 743 3,223 30,756 – 166,270 – 193,060 4,639 743 – – 9,054 8,558 54,058 – – 58,697 10,540 11,781 5,382 183,882 54,058 274,078 As at 30 June 2022 Due not later than 6 months $’000 6 months to no later than 1 year $’000 Later than 1 year and not later than 5 years $’000 Later than 5 years/ No maturity $’000 Contingent or deferred consideration payables Financial Liability at amortised cost Actuarial Liability Put Options Total Financial Liabilities 8,352 9,624 – – 17,976 – – – – – 9,224 – 5,252 8,161 – 50,239 – – 22,637 50,239 90,852 Total $’000 17,576 59,863 5,252 8,161 19 FINANCIAL INSTRUMENTS Financial risk management objectives and policies The Group’s principal financial instruments comprise receivables, loans, cash and short-term deposits, payables, lease liabilities, overdrafts, interest bearing loans and borrowings, bank overdrafts and derivatives. The Group manages its exposure to key financial risks, including interest rate and foreign currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. AUB has entered into forward contracts to manage the foreign currency risk associated with multi-currency cash flows generated by Tysers. AUB has designated these instruments in hedge relationships. The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board Audit and Risk Management Committee, supported by a Management Committee, under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below. Risk exposures and Responses Credit Risk a) Refer to Note 10 Cash and Cash Equivalents and Note 11 Trade and Other Receivables. Liquidity Risk b) The Company’s objective is to maintain adequate cash to ensure continuity of funding and flexibility in its day-to-day operations. The Company reviews its cash flows weekly and models expected cash flows for the following 12 to 24 months (updated monthly) to ensure that any stress on liquidity is detected, monitored and managed, before risks arise. To monitor existing financial assets and liabilities as well as enable an effective control of future risks, the Group has established comprehensive risk reporting that reflects expectations of management of expected settlement of financial assets and liabilities. The Group’s main borrowing facilities are provided by a syndicated facility as outlined in Note 17, although some controlled entities have arranged borrowing facilities with other banks. The Company considers the maturity of its financial assets and projected cash flows from operations to monitor liquidity risk. Liquidity risk arises in the event that the financial assets/liabilities are not able to be realised/settled for the amounts disclosed in the accounts on a timely basis. 122 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) Liquidity Risk (continued) b) The table below reflects all contractually fixed pay-outs and receivables for settlement, repayments and interest resulting from recognised financial assets and liabilities. Cash flows for financial assets and liabilities without a fixed amount or timing are based on the conditions existing at 30 June 2023 with comparatives based on conditions existing at 30 June 2022. Financial Assets Due not later than 6 months 6 months to not later than one year Later than one year and not later than five years Later than five years Total financial assets Financial Liabilities Due not later than 6 months 6 months to not later than one year Later than one year and not later than five years Later than five years Total financial liabilities 2023 $’000 2022 $’000 1,433,664 710,710 93,480 40,516 6,661 2,317 5,346 4,607 1,584,321 722,980 (1,126,784) (439,381) (51,293) (810,477) (54,058) (13,756) (75,001) (50,239) (2,042,611) (578,377) Whilst the Group’s financial liabilities exceed its financial assets for periods past 12 months, AUB generates significant cash flows from its long term equity interest in its subsidiaries and associates which are excluded from the table above. This cash flow is expected to enable AUB to meet its debts when they become due and payable. Furthermore AUB has the ability to raise substantial debt and capital from the market should it need. The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Lease liabilities, trade payables and other financial liabilities mainly originate from the financing of assets used in the Group’s ongoing operations such as plant and equipment and investments in working capital, e.g. trade receivables and deferred payments on broker acquisitions. The table summarises the maturity profile of the Group’s financial assets and financial liabilities based on contractual undiscounted payments. 123 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) Fair Values of recognised assets and liabilities c) Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes places either – in the principal market for the asset or liability; or – in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or lability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that the market participants act in their economic best interests. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure the fair value, maximising the use of relevant observable inputs and minimising the unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities, including cash. Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The Company’s deferred acquisition costs, contingent considerations, put option liabilities, actuarial liability and contingent considerations made in relation to acquisitions of controlled entities and associated are categorised as level 3. These are valued based on the inputs in the valuation used on new acquisitions during the reporting period, refer to Note 2.1(d), Note 7(a) and Note 18 for measurement techniques & critical assumptions, new transactions, and movements during the year respectively. All other assets and liabilities measured at fair value are categorised as level 2 under the three level hierarchy reflecting the availability of observable market inputs when estimating the fair value. Management has assessed that the fair value of cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: – The fair value of loans and other financial assets has been calculated using market interest rates; – Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as interest rates and individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. Market values have been used to determine the fair value of securities; – Fair values of the Group’s interest-bearing borrowings and loans are determined by using the DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period; – The fair value of unquoted instruments, loans from banks and other financial liabilities (including put option liability), obligations under leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities; – The fair value of the non-current deferred and contingent consideration payments may change as a result of changes in the projected future financial performance of the acquired assets and liabilities. Refer to Note 18 for further information; and – The fair value of forward contracts is determined based on standard market valuation methodologies which use reliable observable inputs including yield curves and market rates. 124 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) Fair Values of recognised assets and liabilities (continued) c) The carrying value of most of the Group’s financial assets and financial liabilities approximate their fair value due to their short term nature. Presented below are the between the book value and fair value of the Group’s financial assets and liabilities: Financial Assets measured at fair value Financial Assets; Foreign Exchange Forward Contract Asset Total Financial Assets measured at fair value Financial Assets not measured at fair value Cash and cash equivalents Cash and cash equivalents - Trust Deferred Acquisition Costs Financial Assets; Other Financial Assets Total Financial Assets not measured at fair value Financial Liabilities not measured at fair value Contingent or deferred consideration payables Actuarial Liability Put Options Financial Liability at amortised cost Interest-bearing loans and borrowings Total Financial Liabilities not measured at fair value Financial Assets measured at fair value Other Financial Assets; Foreign Exchange Forward Contract Asset Total Financial Assets measured at fair value Financial Assets not measured at fair value Cash and cash equivalents Cash and cash equivalents - Trust Deferred Acquisition Costs Financial Assets; Other Financial Assets Total Financial Assets not measured at fair value Financial Liabilities not measured at fair value Contingent of deferred consideration payables Actuarial Liability Put Options Financial Liability at amortised cost Interest-bearing loans and borrowings Total Financial Liabilities not measured at fair value 2023 Level 1 $’000 Level 2 $’000 Level 3 $’000 Carrying value $’000 Fair Value $’000 – – 23,534 23,534 – – 23,534 23,534 23,534 23,534 260,352 936,369 – – – – – – 13,822 260,352 936,369 13,822 260,352 936,369 13,822 – 1,196,721 18,075 18,075 – 13,822 18,075 1,228,618 18,075 1,228,618 – – – – – – – – – – 584,230 193,060 10,540 11,781 58,697 – 193,060 10,540 11,781 58,697 584,230 193,617 10,540 10,228 71,139 584,230 584,230 274,078 858,308 869,754 2022 Level 1 $’000 Level 2 $’000 Level 3 $’000 Carrying Value $’000 Fair Value $’000 – – – 259,329 333,131 – – 592,460 – – – – – – – – – – – – 11,082 11,082 – – – – 47,802 – – – – – – – – – – – – – 259,329 333,131 – 259,329 333,131 – 11,082 603,542 11,082 603,542 17,576 5,252 8,161 51,861 – 17,576 5,252 8,161 51,861 47,802 17,576 5,252 7,954 62,608 47,802 47,802 82,850 130,652 141,192 There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the current or prior period. No level 3 financial instrument is measured at fair value on a recurring basis. 125 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) c) Fair Values of recognised assets and liabilities (continued) Put Options AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and associates, granting options to put shares held in related companies or associates to AUB Group Limited, refer Note 23. Other than shown on Note 18, at balance date no liability has arisen in relation to these arrangements. d) Market Risk Interest rate risk The Group’s exposure to interest rate movements relates to cash and cash equivalents held by the Group and the Group’s long-term debt obligations. To manage interest rate risk, interest rates on borrowings are fixed for a period depending on market conditions. This risk is minimal as the Group holds cash (including trust cash) in excess of the amount of borrowings and therefore the Group has a hedge against interest rate rises. Loans generally have interest rate resets every three months. In the event of interest rate rises, a net increase in interest revenue will occur due to cash and cash equivalents exceeding borrowings. The main risk to the Group is in relation to interest rate reductions which will decrease the net income earned on cash and cash equivalents held. The cash held to pay insurers must be held in prescribed investments (investment grade bank accounts or deposits) and as such will be subject to market interest rate fluctuations. The Group has at balance date, the following mix of financial assets and liabilities exposed to variable interest rate risk. Financial Assets Cash and cash equivalents (including trust account balance) Loans and advances - related entities Other financial assets Total financial assets Financial Liabilities Loans and other borrowings Net exposure to interest rate movements 2023 $’000 2022 $’000 1,196,721 592,460 16,925 41,609 1,255,255 14,973 11,082 618,515 (567,691) 687,564 (56,934) 561,581 The Group’s long-term policy is to maintain a component of long-term borrowings at fixed interest rates, which are carried at amortised cost and it is acknowledged that exposure to fluctuations in fair value is a by-product of the Group’s policy. Due to AUB’s current positive net exposure to interest rates, fixing interest rates on borrowings has been assessesd by the Group to be unnecessary. Materially all borrowings are based on variable interest rates. See Note 17 for full details of terms and conditions. The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing and the term for fixing interest rates. 126 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) d) Market Risk (continued) The following sensitivity analysis is based on the interest rate exposures in existence at year end. The sensitivity for the prior year has been prepared on an equivalent basis. At year end, had interest rates moved as illustrated in the table below, with all other variables held constant, post-tax profits and equity would have been affected as follows: Judgements of reasonably possible movements +1.00% (100 basis points) (2022 +0.50% (50 basis points)) -1.00% (100 basis points) (2022 -0.50% (50 basis points)) Post tax profits Higher/(lower) Impacts directly to equity Higher/(lower) 2023 $’000 6,876 (6,876) 2022 $’000 2,808 (2,808) 2023 $’000 – – 2022 $’000 – – Equity securities price risk Equity securities price risk arises from investments in equity securities. The Group does not invest in listed equity securities or derivatives. At year end, the Group had no material exposure to equities other than to shares in associates and controlled entities and therefore has no exposure to price risk that has not already been reflected in the financial statements. The Group tests for impairment annually and reviews all investments at least half yearly. The methodology for testing for impairment and results is shown in Note 14. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign currency rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expenses is denominated in a foreign currency) and the Group’s investment in overseas controlled entities. The Group maintains a hedge program to manage its foreign currency risks in relation to cash flows. Refer to Note 12 for further information on the Group’s hedge instruments. The majority of the foreign exchange rate exposure relates to the investment in New Zealand and Tysers operations, although some controlled entities raise client invoices in foreign currency denominations. The Group does not hedge its net investment in foreign operations through derivatives. The Group’s syndicate facility arrangement includes a component of borrowing in New Zealand Dollars utilised by the Group’s New Zealand arm which reduces the net assets the Group exposed to foreign currency. At year end, had foreign exchange rates moved as illustrated in the table below, with all other variables held constant, post-tax profits and equity would have been affected as follows: Judgements of reasonably possible movements -10% NZD:AUD +10% NZD:AUD -10% GBP:AUD +10% GBP:AUD -10% USD:AUD +10% USD:AUD Post tax profits Higher/(lower) Impacts directly to equity Higher/(lower) 2023 $’000 (250) 250 9,165 (9,165) (2,680) 2,680 2022 $’000 (118) 118 – – – – 2023 $’000 (15,533) 15,533 (40,599) 40,599 (18,266) 18,266 2022 $’000 (11,792) 11,742 – – – – 127 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 19 FINANCIAL INSTRUMENTS (CONTINUED) e) Capital Management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure. In order to maintain or adjust the capital structure or in response to changes in economic conditions and the requirements of the financial covenants, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt if required. The Group monitors capital using the leverage ratio. Leverage is calculated as Net Debt divided by Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), as defined below. – Net Debt contains the Group’s interest-bearing loans and borrowings, other debt (including guarantees), the Group’s contingent consideration*, the Group’s share of borrowings and contingent consideration in relation to associates less uncommitted cash and cash equivalents**. – EBITDA includes the Group’s share of associate EBITDA plus an annualised EBITDA of entities acquired during the period plus any pro forma cost synergies achieved during the period in relation to entities acquired less contribution of EBITDA for any entities disposed during the period. The leverage ratios at 30 June were as follows: Leverage ratio Interest-bearing loans and borrowings Debt like items Contingent consideration Interest bearing loans, borrowings & contingent consideration payable - associates (AUB Group share) Contingent consideration payable for obligors* Uncommitted cash and cash equivalents** Total Net Debt EBITDA- controlled entities Normalisation due to M&A EBITDA- associates (AUB Group share) Total Normalised EBITDA Leverage Ratio - Net Debt/EBITDA 2023 $’000 2022 $’000 584,230 16,552 193,060 25,522 (192,859) (152,870) 473,636 164,500 50,469 61,571 276,540 1.71 47,802 19,231 17,576 31,063 – (196,550) (80,879) 84,195 – 62,450 146,645 (0.55) Contingent consideration excludes contingent consideration recognised by wholly owned Group entities. * ** Uncommitted cash and cash equivalents excludes trust cash accounts, and restricted cash such as to meet regulatory obligations. 128 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 20 ISSUED CAPITAL Issued Capital opening balance Issue of shares, net of issue costs Issued Capital closing balance Number of Shares on Issue (ordinary shares fully paid) Movements in number of shares on issue Beginning of the financial year Issue of shares* Issue of shares- acquisition** Number of shares issued during period - options exercised Number of shares issued during period - options exercised on 11 November 2021 Total Shares on Issue Weighted average number of shares on issue at end of the year 2023 $’000 608,520 337,167 945,687 2022 $’000 266,659 341,861 608,520 Shares No. Shares No. 108,405,620 92,409,126 92,409,126 74,403,507 6,875,102 17,950,069 9,018,974 102,418 – – – 55,550 108,405,620 92,409,126 99,836,672 76,545,637 On 24 May 2023, AUB issued 6,875,102 shares at $24.00. Total amount raised less issue costs was $161.7m. * ** On 30 September 2022, AUB issued 9,018,974 shares at $19.50 to the vendors of Tysers as part of the acquisition (refer to Note 7 for further information). The shares whilst issued are held in escrow for 2 years. Total amount raised less issue costs was $175.9m. Ordinary shares have the right to receive dividends and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary share capital is recognised at the fair value of the consideration received by the company, net of issue costs. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. 21. SHARE-BASED PAYMENT PLANS The Group provides benefits to employees (including executive directors) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’). An Employee Performance Share Rights Plan is in place which provides benefits to executive directors and senior executives through the issue of both Performance Share Rights (PSRs) and Share Appreciation Rights (SARs). The performance hurdles relating to PSRs issued in previous periods remain unchanged. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. Details of the methodology to value of PSRs is included below. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of AUB Group Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The Consolidated Statement of Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. It is included in Note 4(d) Expenses. The Share Based Payment reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration. 129 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 21 SHARE-BASED PAYMENT PLANS (CONTINUED) For PSRs vesting based on earnings per share hurdles, no expense is recognised for awards that do not ultimately vest, except for awards that are cancelled or where vesting is only conditional upon a market condition. For PSRs issued based on Total Shareholder Return (TSR) hurdles, an expense is recognised irrespective of the Group meeting market expectations. In the event PSRs are cancelled, or cancelled and reissued, the remaining cost for these is brought forward and recognised immediately in addition to the expense for any reissued/new PSRs. If the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured, at the date of modification. The dilutive effect, if any, of outstanding PSRs is reflected as additional share dilution in the computation of earnings per share (see Note 6). The number of PSRs outstanding is represented by: Financial year Grants issued As at 30 June 2021 lapsed during FY22 exercised during FY22 Granted during FY22 As at 30 June 2022 lapsed during FY23 exercised during FY23 Granted during FY23 As at 30 June 2023 Grant date Earliest exercise date Valuation $ 2018 2019 2020 2020 2021 2022 2023* 2023 33,586 (6,077) (27,509) 32,914 101,219 200,000 125,688 – – – – – – – – – – (28,041) – – – – – – – – – – 101,219 200,000 38,748 164,436 144,879 144,879 – – – – – – – 4,873 (3,674) (1,199) – – – – – – – – – 07-Apr-16 23-Nov-20 08-Dec-16 31-Oct-21 24-Jan-17 31-Aug-22 200,000 23-Nov-17 31-Aug-24 164,436 31-Oct-18 31-Aug-23 144,879 13-Nov-21 31-Aug-24 39,169 39,169 02-Sep-22 31-Aug-23 150,146 150,146 29-Mar-23 31-Aug-25 11.83 10.72 9.37 8.91 11.27 18.02 19.02 20.92 – – – – – – (101,219) – – – – – 493,407 (6,077) (55,550) 183,627 615,407 (3,674) (102,418) 189,315 698,630 Share Appreciation Rights (SARS’s) 2022 * – – – 1,016,776 1,016,776 – – – 1,016,776 11-Nov-21 31-Aug-26 3.79 39,169 Equity award resulting from deferring 30% of the FY22 Short Term Incentive(DSTI). No additional performance conditions apply to the vesting of the PSRs with the exception of the continued employment by the relevant Group Executive. Half of the DSTI will vest after 12 months and the remaining balance will vest after 24 months. The weighted average exercise price for all PSRs exercised in FY23 and FY22 was $NIL. All PSRs lapsed during FY22 and FY23 were due to vesting conditions not being met. Vesting conditions for PSRs The following option exercise conditions apply to all PSRs issued. For PSRs issued in FY21 and FY22, 60% are subject to an average annual growth rate (AAGR) hurdle set out in part (a) below (EPS PSRs) and 40% of PSRs issued will be subject to the total shareholder return hurdle set out in part (b) below (TSR PSRs). For PSRs issued in FY23 40% are subject to a compound annual growth rate (CAGR) hurdle set out in part (a) below (EPS PSRs), 40% of PSRs issued will be subject to the total shareholder return hurdle set out in part (b) below (TSR PSRs) and 20% subject to an average of 3 years return on invested capital hurdle (ROIC PSRs) set out in part (c) below. For the purposes of calculating the compound annual growth rate (CAGR) or Annual average growth rate (AAGR), an underlying form of earnings per share will be utilised (Underlying EPS) being, in respect of any financial year, the consolidated net profit after tax of the Company for that year excluding the effects of non-recurring events or other items not representative of the underlying operating items of income and expenditure of the Group and segments of the Group, such as restructuring costs, acquisition costs, fair value gain/losses, profits on sale, amortisation of broking registers and impairments (Underlying NPAT) divided by the weighted average number of shares on issue during the financial year. Other adjustments to the Underlying NPAT calculation may be made in limited circumstances where the Board considers it to be appropriate. Subject to satisfaction of the performance based conditions referred to in paragraphs (a), (b) and (c) below, the PSRs will vest 3 years (5 years for sign-on grant – see part (d)) after the start of the performance period; 130 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 21 SHARE-BASED PAYMENT PLANS (CONTINUED) (a) Earnings Per Share Growth hurdles are as follows: Issued in FY20 Issued in FY21 and FY22 Issued in FY23 AAGR EPS EPS vesting AAGR EPS EPS vesting CAGR EPS EPS vesting less than 5% 5% 5-7% NIL 50% 50% - 100% less than 7% 7% 7-10% 7% or more 100% 10% or more NIL 50% 50%- 100% 100% less than 7% 7% 7-12% 12% or more NIL 50% 50%- 100% 100% (b) TSR hurdles for all grant years are as follows: Relative TSR performance is assessed over a three-year period which commences at the start of the financial year during which the PSRs are granted. For any PSRs to vest pursuant to the Relative TSR vesting condition, AUB Group’s compound TSR must be equal to or greater than the median ranking of constituents of the Peer Comparator Group. TSR PSRs will be measured by comparing the TSR of the Company with the TSRs of the constituents of the S&P/ASX Small Ordinaries Industrials Index (AXSID) (Comparator Group). Hurdles for TSRs issued after 1 July 2021 Less than 50th percentile of the Comparator Group, 0% of the PSRs will vest. 50th percentile of the Comparator Group, 50% of the PSRs will vest. Between 50th percentile and 75th percentile of the comparator Group, between 50% and 100% of the PSRs will vest. 75th percentile of the Comparator Group or higher, 100% of the PSRs will become vest. (c) Return on Invested Capital (ROIC) The ROIC vesting condition for PSRs granted during FY23 is measured based on the average annual ROIC achieved from 1 July 2022 (the start of the performance period) to 30 June 2025 (being the final year of the performance period). ROIC in each year is calculated as EBITA Less Tax, divided by Average Invested Capital, defined as follows: EBITA Less Tax Invested Capital Underlying NPAT plus interest expense (net of interest received from operating bank account) as per consolidated accounts after tax The sum of equity attributable to equity holders of the parent and interest-bearing borrowings and loans, less cash and cash equivalents (excluding cash held in trust). Average Invested Capital (Invested Capital at financial year end + Invested Capital at previous financial year end)/2 3 year average ROIC Simple average of ROIC in each of the 3 years of the performance period The percentage of ROIC PSRs that may vest is determined based on the following vesting schedule. 3 year average ROIC Less than 11% 11% Greater than 11% to less than 12% 12% or more PSRs subject to ROIC vesting condition that vests (%) 0% 50% Straight line between 50% and 100% 100% 131 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 21 SHARE-BASED PAYMENT PLANS (CONTINUED) (d) Performance Period - 200,000 CEO 5 year PSRs In FY20, a sign-on bonus of 200,000 PSRs was granted to the CEO that vest over 5 years. In the previous year, one third of the PSRs were tested over the three year performance period from 1 July 2019 to 30 June 2022. The TSR and EPS hurdles for the sign-on PSR grant are as shown in part (a) and (b). Based on the TSR and EPS outcomes (see previous year remuneration report), all 66,667 PSRs (both TSR PSRs and EPS PSRs) satisfied the performance hurdles and will therefore remain on foot and vest at the end of the 5 year period ended 30 June 2024, subject to the CEO’s employment conditions. The remaining balance of 133,333 PSRs (TSR and EPS) will be tested after the completion of the 5 year period ended 30 June 2024. Any unvested PSRs at that time will lapse. Share Appreciation Rights (SARs) Key terms of the SARs are as follows: The SARs granted in FY22, have five-year performance period which is intentionally longer than the 3 year performance period for other performance options granted under the LTI Plan. Additionally there is a further post exercise holding lock of two years which is designed to act as an additional mechanism with executives having additional AUB Group equity ownership. SARs will be tested against a CAGR of the EPS of the Company during the five-year performance period covering 1 July 21 to 30 June 2026. Vested SARs Vesting will require stretch performance exceeding regular LTI plan maximum, as well as peer LTI maximum, together with 5 years of ongoing employment from 1 July 2021. Shares allocated on vesting and conversion of SARs are subject to the terms of AUB Group’s Share Trading Policy and carry full dividend and voting rights upon allocation. SARs will automatically vest and convert into Shares if the vesting conditions have been satisfied, expected to be on or around 31 August 2026. Vested SARs will be converted to shares in AUB Group Limited based on the formula below. There is no conversion price or exercise price payable for the conversion of any vested SARs. Vesting is conditional on meeting performance targets in line with table below Achieving a CAGR of Underlying EPS of Vesting outcomes of SARS Less than 12% 12% 0% 25% Greater than 12% but less than 14% Pro rata straight line vesting between 25% and 100% 14% or more 100% If the vesting conditions are satisfied, the SARs will convert into that number of Shares based on the following formula: Number of vested SARs x Conversion Price-Initial VWAP Conversion Price Where: – Number of vested SARs means the number of SARs that vested after the EPS calculation has been undertaken at the end of the 5 year performance period. – Conversion Price means the VWAP of the Shares traded on the ASX over the 60 trading days prior to 30 June 2026. – Initial VWAP means $20.33, being the VWAP of the Shares traded on the ASX over the 60 trading days prior to 1 July 2021 (the first day of the Performance Period). – The base underlying EPS at 30 June 2021 was 87.93 cents per share (86.12 cents per share TERP adjusted). During the year the Group has commenced recognition of share based payment expenses in relation to the retention programme for Tysers key producers. The share appreciation rights will be granted around 31 August 2023, with a performance measurement period from 1 July 2023 to 30 June 2026. 132 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 22 PARENT ENTITY INFORMATION The parent company’s summary financials are presented below: ASSETS Cash and cash equivalents Current Assets Non-current Assets Total Assets LIABILITIES Current Liabilities Non-current Liabilities - Interest bearing loans and borrowings Total Liabilities NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL SHAREHOLDERS EQUITY Profit for the year before income tax Income tax (expense)/credit Net profit after tax for the year Other comprehensive income/(expense) after income tax for the year Total comprehensive income after tax for the year Other information 2023 $’000 2022 $’000 111,311 176,673 414,986 131,632 1,202,789 436,961 1,729,086 745,266 92,728 514,500 607,228 9,054 – 9,054 1,121,858 736,212 945,687 608,520 17,684 12,641 158,487 115,051 1,121,858 736,212 91,659 4,192 95,851 9 62,010 2,985 64,995 (140) 95,860 64,855 Guarantees entered into by the parent entity in relation to the debts of its controlled entities or associates: AUB Group Limited has guaranteed loan facilities provided to controlled entities and associates in proportion to its shareholding 13,701 – AUB Group Ltd has guaranteed lease facilities provided to controlled entities and associates in proportion to its shareholding Total Guarantees 4,841 18,542 16,745 16,745 Contingent liabilities AUB Group Limited has provided indemnities to other shareholders of related entities and associates in relation to guarantees given by those shareholders, to financiers of or lessors to entities in which AUB Group Limited has an equity interest. AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and associates, granting options to put shares held in related companies or associates to AUB Group Limited. 133 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 23 COMMITMENTS AND CONTINGENCIES The Group’s commitments and contingencies are presented below: Commitments - Group excluding AASB 16 Lease Liabilities - Not later than one year - Later than one year and not later than five years - Later than five years Commitments - Associate excluding AASB 16 Lease Liabilities - Not later than one year - Later than one year and not later than five years - Later than five years Contingent liabilities Estimates of the maximum amounts of contingent liabilities that may become payable: AUB Group Limited has guaranteed loan facilities provided to associates in proportion to its shareholding. AUB Group Limited has guaranteed lease facilities provided to associates in proportion to its shareholding. Contingent liabilities on committed transactions 2023 $’000 2022 $’000 88 – – 88 – – – – 706,608 204 – 706,812 68 116 – 184 1,946 3,598 172 – 234 196,553 2,118 200,385 134 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 24 AUDITORS’ REMUNERATION The Group’s payments to audit firms are presented below: Amounts received or due to Ernst & Young (globally and NZ) for: Audit of the financial statements of Group and its Controlled entities in Australia Audit of the financial statements of Controlled entities overseas Other statutory assurance services Other assurance related services Total audit services Non-audit services Taxation advice Taxation compliance services Consulting services Total non-audit services Total services provided by Ernst & Young Amounts received or due to non Ernst & Young audit firms for: Audit and review of financial statements Other statutory assurance services Other assurance related services Total audit services Non-audit services Taxation advice Taxation compliance services Other consulting services Total non-audit services Total services provided by other auditors Total Auditors' remuneration Consolidated 2023 $ 2022 $ 1,646,000 1,200,804 3,017,000 195,000 214,000 156,072 – 58,000 4,877,000 1,609,876 – – 57,000 158,271 – 38,000 57,000 196,271 4,934,000 1,806,147 661,721 280,645 164,707 85,000 20,716 – 911,428 301,361 – 26,640 59,329 85,969 – 26,669 3,030 29,699 997,397 331,060 5,931,397 2,137,207 135 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 25 RELATED PARTY DISCLOSURES a) Details of Key Management Personnel (KMP) The directors of the company in office throughout the year and until the date of signing this report are: D. C. Clarke Chairman (non-executive) R. D. Deutsch Director (non-executive) (appointed 3 November 2022) P. G. Harmer Director (non-executive) A. J. Kendrick Director (non-executive) (appointed 27 January 2023) P. A. Lahiff Director (non-executive) R. J. Low Director (non-executive) C. L. Rogers Director (non-executive) The following persons were the executives with the greatest authority for the planning, directing and controlling the activities of the consolidated entity during the financial year: M.P.C. Emmett Director and Chief Executive Officer M. J. Shanahan Chief Financial Officer b) There are no loans outstanding owing by KMP at 30 June 2023 (2022: NIL). c) Compensation of KMP’s by Category Salary, fees and short-term incentives Post employment benefits Other long-term benefits Termination benefits Share-based Payments Total 2023 $ 2022 $ 4,158,471 3,753,969 119,639 112,112 – – – – 2,058,537 1,718,365 6,336,647 5,584,446 d) STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be paid during the following financial year. The 2023 amounts have been approved by the Remuneration Committee. e) The following related party transactions occurred during the year: i) Transactions with related parties in parent, controlled entities and associates 1. Entities within the Consolidated Group charge associates management fees for expenses incurred and services rendered. Refer to Note 4. 2. Entities within the Consolidated Group provide funds to other related entities within the Group. These funds are interest bearing, excluding small working capital advances, and are repayable on demand. See Note 11 for amounts receivable from related parties and Note 15 for payables to related parties. These transactions are at normal commercial terms and conditions. Entities within the Consolidated Group have advanced funds to other related parties Associates Related persons/Companies – Shareholder Loan Loans to association members 2023 $ 2022 $ 5,912,764 11,682,895 9,147,665 1,817,877 1,864,908 1,472,274 136 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 25 RELATED PARTY DISCLOSURES (CONTINUED) ii) Transactions with other related parties Other payables - related parties Associates Related persons/Companies – Trust distribution Related persons/Companies – Shareholder Loan 2023 $ 2022 $ 2,527,183 1,129,651 1,461,629 8,115,125 859,652 – Entities within the Consolidated Group provide Shareholder loans to enable key employees to buy into the business (as part of the Group’s strategy to retain key employees). These loans (except one loan payable in 10 years), are payable within 5 years, are fully securitised on the shares of the company, and mechanisms for repayments include garnishing rights over associated dividends. These transactions are at normal commercial terms and conditions. Transactions with directors and director-related entities. iii) Entities within the Consolidated Group receive fees for arranging insurance cover for directors and/or director related entities. These transactions are at normal commercial terms and conditions. Other than disclosed above and in Notes 25(b) and 25(c), there were no other transactions with director or director related entities. 26 SUBSEQUENT EVENTS On 22 August 2023, the Directors of AUB Group Limited declared a final dividend on ordinary shares in respect of the 2023 financial year. The total amount of the dividend is $50.95m which represents a fully franked dividend of 47.0 cents per share. The dividend has not been provided for in the 30 June 2023 financial statements. 27 OTHER POLICIES Other Policies For the basis of preparation, significant accounting policies, and changes to accounting refer to Note 2. For accounting policies on material balances refer to notes above. Current versus non-current classification The Group presents assets and liabilities in the Consolidated Statement of Financial Position based on current and non-current classification. An asset is current when it is: – expected to be realised, or intended to be sold, or consumed in the normal operating cycle; – expected to be realised within twelve months after the reporting period; – held primarily for the purpose of trading; or – cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. An liability is current when: – it is expected to be settled in the normal operating cycle; – it is held primarily for the purpose of trading; – it is due to be settled within twelve months after the reporting period; or – there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other assets and liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. 137 AUB GROUP ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 27 OTHER POLICIES (CONTINUED) Deferred acquisition costs Deferred customer acquisition costs represent costs associated with acquiring a new customer contract where a relationship is bound by contractual agreement. The costs are capitalised only when they are determined to be recoverable per the customer contract. Deferred acquisition costs are amortised over the term of the customer contract. Deferred revenue from contracts with customers Revenue from broking and agency activities are partially (1%, 2022: 1%) deferred for premium settlement and claims handling services (1.5%, 2022: 1.5%) and cancellations (5%, 2022: 5%). The amount of deferral is based on historic data (on time and cost such activities) adjusted for any forward looking anticipated changes, and margin on service of a standalone service (based on available external data). The revenue is recognised over time, generally 90 days for premium settlement, and within 12 months for claims handling. Dividends Received The Group recognises dividends received within the Consolidated Statement of Cash Flows as cash from operating activities. The Group’s strategy involves investing into other businesses (see Note 7). Cash flows from the Group’s investment in associates is derived in the form of dividends received. As the Group intends to hold such businesses for the long term, dividends from associates represents operating cash flows from the Group’s equity investments. The parent actively monitors dividend payout ratios compared to net profits generated by each business in which the parent has a direct investment. Leases The Group has entered into leases for premises, car parking and fixed assets for varying periods of up to seven years. The lease contracts are recognised on the balance sheet at commencement of the lease, with the exception of short-term leases not exceeding 12 months and leases of low-value assets. The Group applied practical expedients and the exemptions to short-term leases and low-value underlying assets available in the accounting standard. Pursuant to some of its lease agreements, the Group has the option to renew the lease for a period of up to ten years. The Group has no restrictions placed upon the lessee by entering into these leases. The Group applies judgement and considers all relevant factors in assessing whether it is reasonably certain to exercise an option. This assessment is performed periodically, and when the Group is reasonably certain to exercise an option to extend the duration of a lease, that option is then taken into account in calculating or recalculating the right-of-use asset and lease liability. Where the Group sub leases a premises, it derecognises the right of use asset and immediately recognising a lease net investment asset representing the net present value of all future net cash flows expected from the sub lease. Any gain or loss is charged against profit and loss. Non-controlling Interests This is measured at their proportionate share of the identifiable net assets and proportion of goodwill. Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST)/Value Added Tax (VAT) except: – when the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and – receivables and payables, which are stated with the amount of GST included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated Statement of Financial Position. Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the taxation authority. 138 AUB GROUP ANNUAL REPORT 2023NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023 27 OTHER POLICIES (CONTINUED) Property, plant and equipment Property, plant and equipment, is stated at cost less depreciation and any impairment in value. Depreciation is calculated on a straight-line over the estimated useful life of the asset as follows: Motor vehicles: 5 to 8 years; Plant and equipment: 5 to 10 years. Impairment The carrying value of property, plant and equipment is reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate the carrying value may be impaired. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset or cash generating unit is written down to their recoverable amount. Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. 28.1 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES The accounting policies and methods of computation are the same as those adopted in prior years except for new and amended accounting standards which came into effect on 1 July 2022. The 30 June 2023 financial statements, and respective notes to the financial statements have been prepared in accordance with the new and amended accounting standards. The accounting policies in the notes below have also been updated to reflect the new and amended accounting standards in effect during the year. The Group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 July 2022: – AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments; and – AASB 2021-7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections. The amendments listed above did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. 28.2 STANDARDS ISSUED BUT NOT YET EFFECTIVE There are a number of new accounting standards and amendments issued, but not yet effective, none of which have been early adopted by the Group in this Financial Report. The new standards and amendments (noted below), when applied in future periods, are not expected to have a material impact on the financial position of the Group. – AASB 2014-10 Amendments to AASs – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture. – AASB 2020-1 and 2020-6 Amendments to AASs – Classification of Liabilities as Current or Non-current. – AASB 2021-2 Amendments to AASB 108 – Disclosure of Accounting Policies and Definition of Accounting Estimates. – AASB 2022-1 Amendments to AASs – Initial Application of AASB 17 and AASB 9 – Comparative Information. – AASB 2021-5 Amendments to AASs – Deferred Tax related to Assets and Liabilities arising from a Single Transaction. – AASB 2022-6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants. – AASB 2022-8 Amendments to Australian Accounting Standards – Insurance Contracts: Consequential Amendments. – AASB 2022-9 Amendments to Australian Accounting Standards – Insurance Contracts in the Public Sector. 139 AUB GROUP ANNUAL REPORT 2023DIRECTORS’ DECLARATION YEAR ENDED 30 JUNE 2023 In accordance with a resolution of the directors of AUB Group Limited, we state that: In the opinion of the directors: a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001 (Cth), including: i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2023 and of its performance for the year ended on that date; ii. complying with Australian Accounting Standard (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2.1; and c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 (Cth) for the financial year 30 June 2023. On behalf of the Board D.C. Clarke Chair M. P. C. Emmett Chief Executive Officer and Managing Director Sydney, 22 August 2023 Sydney, 22 August 2023 140 AUB GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au (cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:10)(cid:86)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:56)(cid:37)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) 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(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 141 AUB GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:29)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:26)(cid:3) WWhhyy ssiiggnniiffiiccaanntt (cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3) (cid:50)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3) Group (‘Tysers) at 30 September 2022 for GBP 520m (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:29)(cid:3)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:42)(cid:37)(cid:51)(cid:3)(cid:22)(cid:21)(cid:19)(cid:80)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:15)(cid:3)(cid:42)(cid:37)(cid:51)(cid:3)(cid:20)(cid:19)(cid:19)(cid:80)(cid:3)(cid:76)(cid:81)(cid:3)(cid:36)(cid:56)(cid:37)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:42)(cid:37)(cid:51)(cid:3)(cid:20)(cid:19)(cid:19)(cid:80)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:3)  (cid:44)(cid:81)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71) the Sale and Purchase Agreement (‘SPA’) 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(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:46)(cid:72)(cid:92)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Group’s accounting for the (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)  (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:76)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:68)(cid:81)(cid:78)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:51)(cid:36)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)management’s (cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:68)(cid:81)(cid:87)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:88)(cid:79)(cid:79)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73) (cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:17)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)the Group’s determination of the fair value (cid:82)(cid:73)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72) Group’s basis for determination of identified (cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)  (cid:58)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:76)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:40)(cid:60)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:86)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72) reviewed management’s assessment of the fair value (cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85) expert’s valuation report.  (cid:41)(cid:82)(cid:85)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:72)(cid:79)(cid:71) (cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:79)(cid:72)(cid:74)(cid:68)(cid:79) (cid:70)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)(cid:15)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:72)(cid:71)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:80)(cid:76)(cid:81)(cid:88)(cid:87)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:76)(cid:85)(cid:71) (cid:83)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:3)(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3)(cid:70)(cid:82)(cid:85)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:17)  (cid:53)(cid:72)(cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72) (cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:17)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72) (cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:72)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 142 AUB GROUP ANNUAL REPORT 2023INDEPENDENT AUDITOR’S REPORT (cid:44)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:29)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)(cid:21)(cid:15)(cid:3)(cid:20)(cid:23)(cid:3) WWhhyy ssiiggnniiffiiccaanntt HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr (cid:36)(cid:86)(cid:3)(cid:68)t 30 June 2023, the Group’s statement of financial (cid:50)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:29)(cid:3) (cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:15)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)(cid:7)(cid:20)(cid:17)(cid:28)(cid:3)(cid:69)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:24)(cid:19)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3) (cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:7)(cid:27)(cid:22)(cid:24)(cid:3) (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:7)(cid:23)(cid:24)(cid:26)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3) (cid:3) (cid:36)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:25)(cid:17)(cid:22)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:22)(cid:19)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:19)(cid:21)(cid:22)(cid:17)(cid:3)(cid:3) (cid:3) (cid:44)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:15)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3) (cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:73)(cid:85)(cid:72)(cid:84)(cid:88)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:15)(cid:3)(cid:76)(cid:73)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:3) (cid:3) The Group’s impairment(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:86)(cid:3) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:29)(cid:3)  (cid:39)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3) (‘CGUs’)(cid:3)  (cid:36)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:37)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:55)(cid:68)(cid:91)(cid:3)(cid:11)(cid:40)(cid:37)(cid:44)(cid:55)(cid:12)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)  (cid:39)(cid:76)(cid:86)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:79)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:3) (cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3) (cid:39)(cid:76)(cid:86)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:73)(cid:79)(cid:82)(cid:90)(cid:3)(cid:11)(cid:39)(cid:38)(cid:41)(cid:12)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:17)(cid:3)  (cid:54)(cid:87)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:3) (cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:88)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:92)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:79)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:79)(cid:92)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:68)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:17)(cid:3)(cid:3) (cid:3) (cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:21)(cid:17)(cid:20)(cid:11)(cid:71)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:20)(cid:23)(cid:3) (cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:87)(cid:75)(cid:82)(cid:71)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:42)(cid:56)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:73)(cid:76)(cid:85)(cid:80)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) nature of the Group’s business and management’s (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)  (cid:44)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:81)(cid:3)(cid:55)(cid:92)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:88)(cid:87)(cid:79)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3)(cid:46)(cid:36)(cid:48)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) (cid:68)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:3)  (cid:40)valuated the Group’s process regarding impairment (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:88)(cid:87)(cid:70)(cid:82)(cid:80)(cid:72)(cid:86)(cid:17)(cid:3)(cid:3)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:72)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3) of management’s expert who advised management on EBIT multiples across the Group’s operating (cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:74)(cid:72)(cid:82)(cid:74)(cid:85)(cid:68)(cid:83)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:42)(cid:56)(cid:86)(cid:17)(cid:3)(cid:3)  (cid:44)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:71)(cid:3)(cid:40)(cid:60)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:86)(cid:76)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:87)(cid:75)(cid:82)(cid:71)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3) (cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:3) (cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:3)  (cid:55)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:75)(cid:72)(cid:80)(cid:68)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:89)(cid:68)(cid:81)(cid:87)(cid:3)(cid:71)(cid:68)(cid:87)(cid:68)(cid:3)(cid:69)(cid:68)(cid:70)(cid:78)(cid:3)(cid:87)(cid:82)(cid:3) management’s forecasts, audited year end results (cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:82)(cid:70)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3) (cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)(cid:3)  (cid:36)ssessed the Group’s sensitivity analysis and (cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:86)(cid:72)(cid:72)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) (cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:79)(cid:72)(cid:68)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:3)  (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3) (cid:21)(cid:17)(cid:20)(cid:11)(cid:71)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:23)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3)(cid:3) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 143 AUB GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT Information other than the Financial Report and Auditor’s Report(cid:3) (cid:55)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:76)(cid:86)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3) the Group’s 2023 Annual Report but does not include the financial report and 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(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:85)(cid:72)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:85)(cid:68)(cid:88)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:85)(cid:85)(cid:82)(cid:85)(cid:17)(cid:3) In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going 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(cid:50)(cid:88)(cid:85)(cid:3)(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:85)(cid:72)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable (cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:79)(cid:90)(cid:68)(cid:92)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:70)(cid:87)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:75)(cid:72)(cid:81)(cid:3)(cid:76)(cid:87)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:86)(cid:17)(cid:3)(cid:48)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:68)(cid:81)(cid:3)(cid:68)(cid:85)(cid:76)(cid:86)(cid:72)(cid:3) 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(cid:36)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:86)(cid:70)(cid:72)(cid:83)(cid:87)(cid:76)(cid:70)(cid:76)(cid:86)(cid:80)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:29)(cid:3)  (cid:44)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:85)(cid:68)(cid:88)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:85)(cid:85)(cid:82)(cid:85)(cid:15)(cid:3) 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(cid:80)(cid:76)(cid:86)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:85)(cid:76)(cid:71)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:17)(cid:3)  (cid:50)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:89)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3) (cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:76)(cid:85)(cid:70)(cid:88)(cid:80)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:83)(cid:82)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) Group’s internal control.(cid:3) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 144 AUB GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT  (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:3)  Conclude on the appropriateness of the directors’ use of the going concern basi(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:88)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:92)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3) significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertain(cid:87)(cid:92)(cid:3) exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report (cid:82)(cid:85)(cid:15)(cid:3)(cid:76)(cid:73)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:82)(cid:71)(cid:76)(cid:73)(cid:92)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:50)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)f our auditor’s report. However, future events or conditions may cause the Group to (cid:70)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:17)(cid:3)  (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) 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(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3) our auditor’s report unless law or regulation preclud(cid:72)(cid:86)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:85)(cid:3)(cid:90)(cid:75)(cid:72)(cid:81)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:91)(cid:87)(cid:85)(cid:72)(cid:80)(cid:72)(cid:79)(cid:92)(cid:3)(cid:85)(cid:68)(cid:85)(cid:72)(cid:3) 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scheme approved under Professional Standards Legislation 145 AUB GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)(cid:72)(cid:86)(cid:3)(cid:21)(cid:25)(cid:3)(cid:87)(cid:82)(cid:3)(cid:24)(cid:20)(cid:3)of the Directors’ Report for the year ended 30 (cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:19)(cid:21)(cid:22)(cid:17)(cid:3) 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(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3) Ernst & Young Ernst & Young Michael Wright Partner Sydney 22 August 2023 Stacey Hooper Partner Sydney 22 August 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 146 AUB GROUP ANNUAL REPORT 2023ASX ADDITIONAL INFORMATION YEAR ENDED 30 JUNE 2023 Additional information required by the ASX and not shown elsewhere in this report is as follows. The information is current as at 28 July 2023. A) DISTRIBUTION OF EQUITY SECURITIES Ordinary share capital – 108,405,620 fully paid ordinary shares are held by 4,314 individual shareholders. All issued shares carry one vote per share and carry the rights to dividends. – 9,018,974 fully paid ordinary shares are subject to voluntary escrow until 30 September 2024. – 229,666 fully paid ordinary shares are subject to voluntary escrow until 20 July 2024. Performance Share Rights (PSRs) – 698,630 PSRs are held by 6 individual holders. PSRs do not carry a right to vote. Share Appreciation Rights (SARs) – 1,016,776 SARs are held by 3 individual holders. SARs do not carry a right to vote. There is no current on-market buy-back. The number of security holders, by size of holding, in each class are: Range of shareholding 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1,000 Number of shareholders Fully paid ordinary shares Fully paid ordinary shares (%) 28 100,294,003 93% 138 201 3,448,087 1,451,712 1,020 2,329,137 2,927 882,681 3% 1% 2% 1% 4,314 108,405,620 100% Holding less than a marketable parcel 146 The number of PSRs and SARs holders, by size of holding, in each class are: Range of holding 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1,000 Holders of PSRs Number of PSRs % of PSRs Holders of SARs Number of SARs % of SARs 2 3 1 – – 6 537,808 153,651 7,171 – – 77% 22% 1% – – 698,630 100% 3 – – – – 3 1,016,776 100% – – – – – – – – 1,016,776 100% 147 AUB GROUP ANNUAL REPORT 2023 ASX ADDITIONAL INFORMATION YEAR ENDED 30 JUNE 2023 B) SUBSTANTIAL SHAREHOLDERS The following organisations have disclosed a substantial shareholding notice to ASX. Integro Parent Inc. Challenger Limited The Capital Group Companies, Inc Date of Notice Number Fully Paid Percentage 30 September 2022 9,018,974 5 October 2022 6,609,247 27 April 2022 3,726,876 8.88% 6.51% 5.01% C) TWENTY LARGEST HOLDERS OF ORDINARY SHARES Ordinary shareholders HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED INTEGRO PARENT INC NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD WASHINGTON H SOUL PATTINSON & COMPANY LIMITED AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED BOND STREET CUSTODIANS LIMITED MASFEN SECURITIES LIMITED MIRRABOOKA INVESTMENTS LIMITED NETWEALTH INVESTMENTS LIMITED MRS GAELEEN ENID ROUVRAY JACOBS FLORENTINE TRUSTEES LIMITED DCRM PTY LTD GOTTLIEB PTY LTD PACIFIC CUSTODIANS PTY LIMITED INVIA CUSTODIAN PTY LIMITED MARKEY INVESTMENTS PTY LTD MR STEPHEN SPENCE ROUVRAY Number Fully paid Percentage 34,573,139 31.89% 23,681,637 21.85% 16,027,643 14.78% 9,018,974 6,139,245 4,498,490 1,839,810 1,662,309 732,730 602,088 439,500 356,343 236,723 229,666 210,669 210,669 209,562 206,251 148,709 147,805 8.32% 5.66% 4.15% 1.70% 1.53% 0.68% 0.56% 0.41% 0.33% 0.22% 0.21% 0.19% 0.19% 0.19% 0.19% 0.14% 0.14% 101,171,962 93.33% 148 AUB GROUP ANNUAL REPORT 2023 DIVIDEND DETAILS YEAR ENDED 30 JUNE 2023 DIVIDEND DETAILS Dividend Interim Final Amount Franking Ex Date Record Date Payment Date 17.0c Fully Franked 1/03/2023 2/03/2023 4/04/2023 47.0c Fully Franked 7/09/2023 8/09/2023 9/10/2023 149 AUB GROUP ANNUAL REPORT 2023CORPORATE INFORMATION This annual report covers the consolidated entity comprising AUB Group Limited and its subsidiaries. The Group’s functional and presentation currency is AUD($). A description of the Group’s operations and of its principal activities is included in the operating and financial review in the Directors’ report on pages 13-15. DIRECTORS D. C. Clarke (Chair) M. P. C. Emmett (Chief Executive Officer and Managing Director) R. D. Deutsch P. G. Harmer A. J. Kendrick P. A. Lahiff R. J. Low C. L. Rogers COMPANY SECRETARIES R. H. Bell E. M. McGregor ANNUAL GENERAL MEETING The Annual General Meeting of AUB Group Limited will be held on Thursday 2 November 2023 at 10.00am. REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS AUB Group Limited Level 14, 141 Walker Street North Sydney NSW 2060 P: + 61 2 9935 2222 W: www.aubgroup.com.au ACN: 000 000 715 SHARE REGISTRY Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 P: 1800 194 270 W: www.linkmarketservices.com.au AUB Group Limited shares are listed on the Australian Securities Exchange (ASX: AUB) AUDITOR Ernst & Young 200 George Street Sydney NSW 2000 150 AUB GROUP ANNUAL REPORT 2023www.aubgroup.com.au

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