ANNUAL REPORT 2020 $1.25 1 Jan 2020 $0.52 23 Mar 2020 $1.82 Dec 2020 ASX:BFG CONTENTS Overview 01 Highlights Performance 02 Operating and Financial Review 08 Directors’ Report (Including Remuneration Report) 17 Lead Auditor’s Independence Declaration Financial Statements 18 Statement of Profit or Loss 19 Statement of Comprehensive Income 20 Statement of Financial Position 21 Statement of Changes in Equity 22 Statement of Cash Flows 23 Notes to the Financial Statements 61 Directors’ Declaration 62 Independent Auditor’s Report Other Information 67 Shareholder Information 69 Directory Bell Financial Group Ltd ABN 59 083 194 763 Bell Financial Group Ltd is an Australian-based provider of stockbroking, investment and financial advisory services to private, institutional and corporate clients. Bell Financial Group has over 730 employees, operates across 14 offices in Australia and has offices in New York, London, Hong Kong and Kuala Lumpur. International London New York Hong Kong Kuala Lumpur Australia Adelaide Brisbane Cairns Coolum Geelong Hobart Mackay Melbourne Mornington Orange Perth Sydney Toowoomba Bell Potter Securities Limited COMMODITIES FX Bell Potter Capital Limited BELL POTTER CAPITAL Third Party Platform Pty Ltd POTTER ONLINE HIGHLIGHTS Revenue Profit After Tax Funds Under Advice $299.3m $46.7m $63.9b 18% increase on 2019 44% increase on 2019 9% increase on 2019 Earnings Per Share Dividend Per Share Return on Equity 14.6¢ 44% increase on 2019 10.5¢ 4 cent interim, 6.5 cent final, a 31% increase on 2019 29% 32% increase on 2019 Retail and Institutional Equities Futures and Foreign Exchange International Equities Portfolio Administration Superannuation Fixed Income Cash Margin Lending Structured Products Retail Online Broking Wholesale Online Broking Institutional Online Broking Annual Report 2020 01 Bell Financial Group OPERATING AND FINANCIAL REVIEW 1. Group 2020 was an extraordinary year. Having achieved all-time highs in February the Australian market fell 39% to an eight year low on 23 March in response to the global COVID-19 pandemic and world economies, including Australia, moving into recession. This triggered unprecedented Central Bank fiscal stimulus, rate cuts and quantitative easing precipitating a global stock market recovery with the Australian market finishing 2020 just 1.5% lower than 2019. Working conditions throughout the year were at times difficult. However we did not apply for, nor did we receive any Government assistance. We have had at times throughout the year, particularly in Melbourne, a large percentage of our 730 staff working from home. Importantly our systems, technology, communications and remote access capability has allowed us to operate seamlessly on a business as usual footing. Our ongoing strategy of investment in technology and development of proprietary platforms, systems, and products & services I think sets us apart. And as a result we continue to see meaningful revenue and earnings growth through scale, efficiency, better client service and access, and cost synergies. Preparation for the Group to provide third party clearing for Australian equities and derivatives continues and we initiated a pilot scheme in 2020 for Third Party Platform (TPP) to clear selected clients of Bell Potter Securities. Against this backdrop BFG achieved a record result in 2020. Revenue and earnings grew across each of our operating divisions. Once again our Equity Capital Markets (ECM) team was a stand-out following on from 2019 with another record year. TPP’s revenue and earnings grew by 35% and 64.7% respectively and at year end Group Funds Under Advice (FUA) stood at approximately $64 billion, providing an extraordinary platform for the future growth of the Group. Revenue ($M) NPAT ($M) Earnings Per Share (Cents) 350 300 250 200 150 100 50 0 CAGR +12.9% 299.3 254.5 205.8 220.0 184.3 2016 2017 2018 2019 2020 50 45 40 35 30 25 20 15 10 5 0 CAGR +29.9% 46.7 32.4 24.4 20.6 16.4 2016 2017 2018 2019 2020 16 14 12 10 8 6 4 2 0 CAGR +23.9% 14.6 10.2 7.8 8.4 6.2 2016 2017 2018 2019 2020 2020 Revenue of $299.3 million was up 17.6% on 2019 resulting in a five year Compound Annual Growth Rate (CAGR) of 12.9%. Net Profit after Tax (NPAT) has grown consistently over the past five year period. 2020 NPAT of $46.7 million was 43.9% up on 2019 resulting in a five year CAGR of 29.9%. 2020 Earnings Per Share (EPS) of 14.6 cents was up 43.1% on 2019 resulting in a five year CAGR of 23.9%. Return On Equity Dividend Paid ($M) 35% 30% 25% 20% 15% 10% 5% 0% CAGR +23.5% 29.0% 22.0% 17.3% 14.9% 12.5% 2016 2017 2018 2019 2020 40 35 30 25 20 15 10 5 0 CAGR +23.4% $33.6 $25.6 $19.9 14.3% $22.3 11.8% $14.5 10.8% 9.6% 8.2% 2016 2017 2018 2019 2020 15% 10% 5% 0% Dividends Paid ($M) Gross Dividend Yeild 2020 Return on Equity (ROE) of 29% was up 31.8% on 2019 resulting in a five year CAGR of 23.5%. In dollar terms 2020 fully franked dividends of $33.6 million was up 31.25% on 2019 resulting in a five year CAGR of 23.4%. 02 Bell Financial GroupAnnual Report 2020 Funds Under Advice ($B) 70 60 50 40 30 20 10 0 CAGR +13.3% 63.9 58.4 47.2 46.8 38.8 2016 2017 2018 2019 2020 Funds under Advice (FUA) at year end of $63.9 billion was up 9.4% on 2019 resulting in a five year CAGR of 13.3%. The benchmark S&P/ASX200 index was down 1.5% in 2020. Technology & Platforms and Products & Services Revenue Breakdown ($M) 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 CAGR +13.8% 47.8 3.5 3.4 12.6 12.1 16.2 52.1 3.7 3.3 13.8 13 18.3 70.0 3.7 3.1 15.6 22.6 61.8 3.7 3.2 15.2 15.4 24.3 25.0 41.8 3.2 3.1 10.4 10.7 14.4 2016 2017 2018 2019 2020 Other Super PAS Online share trading platform Margin Lending, cash & structured products Our strategy is one of continuous investment in proprietary platforms and technology and in-house products and services. The benefits are real and measurable, with revenue of $70 million up 13.3% on 2019 resulting in a five year CAGR of 13.8%. This now represents 23.4% of Group revenue. BFG Share Price Movement: January 2020 – December 2020 60% 40% 20% 10% 0% -10% -20% -40% -60% Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 BFG Share Price ($A) XJO BFG Share Price Movement: January 2016 – December 2020 250% 200% 150% 100% 50% 0% -50% $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 1 Jan 16 1 Jan 17 1 Jan 18 1 Jan 19 1 Jan 20 BFG Share Price ($A) XJO BFG share price closed at $1.82 on 31 December 2020, a 53% increase over the year. The S&P/ASX 200 (XJO) was down 1.5% over the comparative period. 03 Bell Financial GroupAnnual Report 2020 OPERATING AND FINANCIAL REVIEW continued 2. Broking – Retail & Institutional Bell Potter Securities (BPS) Brokerage Revenue (Retail & Institutional)($M) 110 92.6 91.6 94.6 72.9 73.2 76.6 85.8 64.4 105.7 85.2 21.4 19.7 18.4 18 20.5 2016 2017 2018 2019 2020 100 90 80 70 60 50 40 30 20 10 0 ECM and Syndication Revenue ($M) 120 110 100 90 80 70 60 50 40 30 20 10 0 54.6 52.4 2.2 2017 41.8 38.9 2.9 2016 109.0 106.4 83.0 77.7 66.4 62.0 4.4 5.3 2018 2019 2.6 2020 Institutional Retail Syndication ECM Brokerage from our Institutional and Retail desks, and our Futures, Foreign Exchange and Fixed Income business was $105.7 million for the year, a 11.7% increase on 2019. A very pleasing result given the challenges of the year. Our Equity Capital Market (ECM) team had another record year. In 2020 the team generated $109 million gross corporate revenue, a 31.4% increase on 2019. We completed 109 transactions raising $3.4 billion in new equity capital for ASX listed companies over the year. We continue to believe our ECM team, supported by our substantial retail and institutional (domestic and international) distribution network, is the market leader in the Small and Mid-Cap segment of the Australian market. Another outstanding effort. 04 Bell Financial GroupAnnual Report 2020 3. Technology & Platforms Third Party Platform Pty Ltd (TPP) Revenue ($M) 25 20 15 10 5 0 12.5 2.8 6.7 3.0 2016 CAGR +18% 14.2 2.8 7.5 3.9 15.2 2.9 7.6 4.7 18.0 3.4 8.6 6.0 24.3 6.1 10.5 7.7 2017 2018 2019 2020 Desktop Broker Bell Direct White Label $24.3 million revenue, a 35% increase on 2019, and an 18% 5-year CAGR. All three online businesses, Bell Direct, Desktop Broker, and White Label grew strongly again in 2020. TPP operates five distinct businesses: • Bell Direct – our proprietary online retail broking business • Desktop Broker – provides execution and clearing services to the Financial Planning industry. • White Label Online Broking – TPP’s turn key online broking solution. Current clients include Macquarie, HSBC, and Bell Potter online. • Third Party Clearing – TPP is an ASX General Participant and is preparing to provide Third Party Clearing services to the Australian stockbroking industry. TPP is currently clearing for a pilot program of Bell Potter Securities clients, and we expect to start clearing for external clients in 2021. • Technology – Continuous development of proprietary software applications for TPP and the wider BFG Group. We anticipate this will lead to third party distribution opportunities in the future NPAT ($M) Sponsored Holdings ($B) Client Accounts (’000) 5.0 4.0 3.0 2.0 1.0 1.2 CAGR +36.8% 4.2 2.5 1.9 1.6 0.0 2016 2017 2018 2019 2020 30.0 25.0 20.0 15.0 10.0 5.0 0.0 CAGR +25.3% 26.5 22.0 15.7 16.7 10.8 2016 2017 2018 2019 2020 250 200 150 100 50 0 CAGR +12.3% 207 176 160 144 130 2016 2017 2018 2019 2020 $4.2 million net profit after tax, a 64.7% increase on 2019 demonstrating the leverage to growth in revenue. TPP sponsored holdings increased 20.1% on 2019, and have increased on average 25.3% per annum over the past five years. TPP client numbers increased 17.6% in 2020, and now stand at more than 207,000. 05 Bell Financial GroupAnnual Report 2020 OPERATING AND FINANCIAL REVIEW continued 4. Products & Services Bell Potter Capital (BPC) Revenue ($M) Margin Lending & Cash 16.0 12.0 8.0 4.0 0.0 CAGR +17.4% 14.8 12.9 10.5 9.6 7.8 2016 2017 2018 2019 2020 Bell Potter Capital (BPC) revenue increased 14.7% year on year to $14.8 million, and has increased on average more than 17.4% per annum over the past five years. Cash Book ($M) 500 400 300 200 100 0 437 382 317 289 276 2016 2017 2018 2019 2020 Loan Book ($M) 600 500 400 300 545 470 286 296 200 227 100 0 2016 2017 2018 2019 2020 Client deleveraging resulted in a decrease in the size of the loan book and a corresponsding increase in the cash book. Revenue PAS & Super Solutions ($M) 25.0 20.0 15.0 10.0 5.0 0.0 CAGR +9.3% 18.9 19.3 17.5 16.1 13.6 2016 2017 2018 2019 2020 Portfolio Administration Services (PAS) and Superannuation products is an area in which we continue to invest. Funds under Advice on PAS and Superannuation now exceed $4.0 billion and generate more than $19 million in revenue. 06 Bell Financial GroupAnnual Report 2020 5. Growth Through Investment In Proprietary Technology, Platforms, Products & Services We have a simple strategy. Growth through our traditional full service broking businesses augmented by investment in leading edge technology through our ongoing commitment to the continuous development of our proprietary systems and platforms and suite of products and services. Our investment in technology, platforms, products and services benefits not only our internal broking businesses, it has broader application for third parties in the Australian financial services and broking market. OUTLOOK 2020 was an outstanding year for BFG. It was in many ways surprising given the market volatility at the start of the year and the disruption caused by the COVID-19 pandemic. But I do feel our result reflects the strength and simplicity of our business model which has stood the test of time through many different market cycles since 1970. Predicting how 2021 will pan out is hard if not impossible. What we can say is that Government support and Central Bank stimulus appear to be ongoing. And the current ultra-low interest rate and benign inflation environment is set to be with us for the foreseeable future. So despite some sectors having run hard in terms of valuation equity markets should remain buoyant. Systems and Platforms FUSION – In-house desktop application covering all aspects of adviser day-to-day functions IQ – Price discovery and trade execution platform. TPP – Market leading fully integrated online trading platform THIRD PARTY PLATFORM Products & Services • Bell Potter Portfolio Administration Service (PAS) • Bell Potter Personal Superannuation Solutions • Bell Financial Trust • Bell Potter Portfolio Lending • Bell Potter Capital Structured Loan Products – Bell Geared Equities Investment – Bell Equity Lever As far as BFG is concerned 2020 has rolled seamlessly into 2021. Obviously it is very early days but we have had an excellent start to the year. Our ECM pipeline is full, our secondary market activity in both our full service and online broking business has been strong, and our Funds Under Administration continue to grow. Once again I would like to finish by thanking all our staff and clients for their ongoing effort and support in what can only be described as an extraordinarily challenging year. Alastair Provan Executive Chairman 07 Bell Financial GroupAnnual Report 2020 DIRECTORS’ REPORT For the year ended 31 December 2020 The Directors of Bell Financial Group Limited (Bell Financial or the Company) present their report, together with the financial report, on the consolidated entity (Group) consisting of Bell Financial and its controlled entities for the financial year ended 31 December 2020. Board of Directors The names and details of the Directors of the Company holding office during the financial year and as at the date of this report are listed below. Directors were in office for the entire period, unless otherwise stated. Alastair Provan Graham Cubbin BEcon (Hons), FAICD Brian Wilson AO MComm (Hons), Hon DUniv Mr Provan is the Executive Chairman of Bell Financial and he is responsible for the day-to-day management of all businesses within the Group. Mr Provan was appointed as Executive Chairman of Bell Financial in August 2019. Prior to that he was the Managing Director. Mr Provan joined Bell Commodities in 1983 and held a number of dealing and management roles prior to becoming Managing Director in 1989. Mr Wilson is an Independent Director. He is also a member of the Group Risk and Audit Committee. Mr Wilson was appointed to the Board in October 2009. He is a Senior Advisor to The Carlyle Group and Chairman of the UTS Foundation. Mr Wilson is the former Chairman of Australia’s Foreign Investment Review Board, a former Chancellor of University of Technology Sydney and a former member of the Payments System Board of the Reserve Bank of Australia. He was a member of the Commonwealth Government Review of Australia’s Superannuation System and a member of the ATO Superannuation Reform Steering Committee. Mr Wilson retired in 2009 as a Managing Director of the global investment bank Lazard, after co- founding the firm in Australia in 2004 and prior to that was a Vice-Chairman of Citigroup Australia and its predecessor companies. Mr Cubbin is an Independent Director. He is also Chairman of the Group Risk and Audit Committee. Mr Cubbin was appointed to the Board in September 2007. Mr Cubbin was a senior executive with Consolidated Press Holdings Limited (CPH) from 1990 until September 2005, including Chief Financial Officer for 13 years. Prior to joining CPH, he held senior finance positions with a number of major companies including Capita Financial Group and Ford Motor Company. Mr Cubbin has over 20 years’ experience as a Director and Audit Committee member of public companies in Australia and the US. He is a Non-Executive Director of Teys Australia Pty Ltd. Other listed companies – past three years Chairman, McPherson’s Limited (September 2010-present) Non-Executive Director, WPP AUNZ Limited (May 2008-present) Non-Executive Director, White Energy Company Limited (February 2010-present) Non-Executive Director, Challenger Limited (January 2004-October 2018) 08 Bell Financial GroupAnnual Report 2020 Christine Feldmanis BComm, MAppFin, SFFin, TFASFA, FAICD, CPA, CSA, AGIA, JP Craig Coleman BComm Ms Feldmanis is a Non-Executive Director and was appointed to the Board on 21 February 2020. She has more than 30 years of experience in the financial arena, with both government and private sectors. Ms Feldmanis has extensive experience in investment management, finance, accounting and risk management, legal and regulatory compliance, governance and business building in both the listed and unlisted financial products markets. She is currently a Non-Executive Director and Chair of the Audit and Risk Committees of Omni Bridgeway Ltd (formerly IMF Bentham Ltd), Rabobank Australia Ltd, FIIG Securities Ltd, Utilities of Australia Pty Ltd and Hunter Water Corporation, and is Chair of Bell Asset Management Ltd. Ms Feldmanis formerly held senior executive and C suite positions with firms including Deloitte, Elders Finance, Bankers Trust, NSW TCorp and Treasury Group Limited. Other listed companies – past three years Non-Executive Director, Omni Bridgeway Ltd (May 2008-present) Non-Executive Director, Perpetual Equity Investment Company Ltd (September 2014-October 2020) Mr Coleman was appointed to the Board in July 2007 and retired on 17 February 2021. He was an Independent Director and a member of the Group Risk and Audit Committee throughout the year ended 31 December 2020 and up to 17 February 2021. Mr Coleman is Executive Chairman of private and public equities fund manager, Viburnum Funds Pty Ltd. Previously, he was Managing Director and a Non-Executive Director of Home Building Society Limited. Prior to joining Home Building Society, Mr Coleman held a number of senior executive positions and directorships with ANZ, including Managing Director – Banking Products, Managing Director – Wealth Management and Non-Executive Director of Etrade Australia Limited. Other listed companies – past three years Chairman, Sports Entertainment Group Ltd (November 2017-present) Chairman, Universal Biosensors Inc (June 2016-present) Chairman, Rubik Financial Limited (December 2006-May 2017) Non-Executive Director, Pulse Health Limited (January 2010-May 2017) 09 Bell Financial GroupAnnual Report 2020 DIRECTORS’ REPORT continued For the year ended 31 December 2020 Principal activities Bell Financial is an Australian-based provider of stockbroking, investment and financial advisory services to private, institutional and corporate clients. The Group is also a developer of proprietary technology, platforms, products and services for the Australian stockbroking market. With over 730 employees, Bell Financial operates across 14 offices in Australia and has offices in New York, London, Hong Kong and Kuala Lumpur. Review and results of operations Information on the operations and financial position of the Group is set out in our Operating and Financial Review on pages 2 to 7. At the date of issue of this financial report, the impact of COVID-19 on Bell Financial Group has not been material. The future impact on global and domestic economies and investment market indices is uncertain and Bell Financial Group continues to monitor this situation. Dividends On 17 February 2021, the Directors resolved to pay a fully franked final dividend of 6.5 cents per share. Dividends paid to shareholders during the year ended 31 December 2020 were as follows: Dividend Final 2019 ordinary Interim 2020 ordinary Per share 4.5 cents 4.0 cents Total $’000 14,433 12,830 Fully Franked Yes Yes Date of payment 18 March 2020 27 August 2020 Significant changes in the state of affairs There were no significant changes in Bell Financial’s state of affairs or the nature of its principal activities during the financial year ended 31 December 2020. Business strategies, prospects and likely developments The Operating and Financial Review sets out key information on Bell Financial’s operations and financial position, and provides an overview of its business strategies and prospects for future financial years. Details likely to result in unreasonable prejudice to the Group (e.g. information that is commercially sensitive, confidential or which could give a third party a commercial advantage) have not been included. Events after the end of the financial year There has not arisen in the interval between the end of the financial year and the date of this report, any matter or circumstance that has significantly affected, or may significantly affect, in the opinion of the Directors of Bell Financial: (a) the Group’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the Group’s state of affairs in future financial years. Directors’ meetings The number of Board and Committee meetings held during the year that each Director was eligible to attend, and the number of meetings attended by each Director were: Director Alastair Provan Graham Cubbin Brian Wilson AO Christine Feldmanis1 Craig Coleman2 Board Group Risk and Audit Committee Held 5 5 5 5 5 Attended 5 5 5 4 5 Held 4 4 4 4 4 Attended - 4 4 - 4 Observed 4 - - 3 - 1. Christine Feldmanis was appointed to the Board on 21 February 2020. 2. Craig Coleman retired from the Board on 17 February 2021. 10 Bell Financial GroupAnnual Report 2020 Directors’ shareholdings in Bell Financial Group As at the date of this report, the relevant interests of each Director in BFG ordinary shares, as notified to the ASX in accordance with the Corporations Act, are set out below. No Directors held options over BFG shares during the year ended 31 December 2020. Director Alastair Provan1 Graham Cubbin Brian Wilson AO Christine Feldmanis Craig Coleman Fully paid ordinary shares 4,999,070 216,000 1,200,000 50,000 2,176,740 Deemed relevant interest 146,230,350 - - - - Total 151,229,420 216,000 1,200,000 50,000 2,176,740 1. Bell Group Holdings Pty Limited (BGH) holds 143,998,350 BFG ordinary shares. BGH’s wholly-owned subsidiary, Bell Securities Pty Limited (BSPL) holds 2,232,000 BFG ordinary shares. Alastair Provan holds more than 20% of BGH and therefore under the Corporations Act is deemed to have a relevant interest in the 146,230,350 BFG ordinary shares held by BGH and BSPL. Company Secretary Cindy-Jane Lee, BEc, LLB, GAICD was appointed as Company Secretary on 10 January 2014 and is also the Group’s General Counsel. Before joining Bell Financial, Ms Lee held the position of Regional Legal Counsel, South Asia with Mercer. Ms Lee has over 20 years’ experience in corporate and financial services law working in law firms and multinational companies in Australia, London and Singapore. Ms Lee holds a Bachelor of Economics and a Bachelor of Laws from Monash University. Corporate Governance Bell Financial recognises the importance of good corporate governance. As required under the ASX listing rules, Bell Financial has a Corporate Governance Statement which has been lodged with the ASX, disclosing the extent to which it has followed the recommendations set by the ASX Corporate Governance Council during the reporting period. A copy of our Corporate Governance Statement is located at the Corporate Governance section of our website: www.bellfg.com.au/#corporate-governance. Copies of the Board Charter, Code of Conduct, Group Risk and Audit Committee Charter, Diversity Policy, Disclosure and Communication Policy, Description of Risk Management Policy and Framework, Trading Policy and Whistleblower Policy are also located here. Directors’ and officers’ indemnity and insurance Bell Financial has agreed to indemnify the Directors against all liabilities to another person (other than Bell Financial or a related entity) that may arise from their position as officers of Bell Financial or its controlled entities, except where the liability arises out of conduct including a lack of good faith. Except for the above, neither Bell Financial nor any of its controlled entities has indemnified any person who is or has been an officer or auditor of Bell Financial or its controlled entities. Since the end of the previous financial year Bell Financial has paid a premium for an insurance policy for the benefit of the Directors, officers, company secretaries and senior executives. The insurance policy prohibits disclosure of the premium payable under the policy and the nature of the liability covered. Environmental regulation The operations of the Group are not subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory. Non-audit services During the year, Bell Financial’s auditor, KPMG, performed certain other services in addition to its statutory auditor duties. Details of the amounts paid to KPMG for audit and non-audit services during the year are set out in Note 38 of the Financial Statements. The Directors are satisfied, based on advice provided by the Group Risk and Audit Committee, that the provision of these non-audit services during the year by the auditor is compatible with, and does not compromise, the general standard of independence for auditors imposed by the Corporations Act 2001, for the following reasons: • services provided during the year are not considered to be materially in conflict with the role of the auditor; and • the Directors are unaware of any matter relating to the provision of non-audit services which would impair the impartial and objective judgement of the auditor. A copy of the Lead Auditor’s Independence Declaration is set out on page 17. 11 Bell Financial GroupAnnual Report 2020 DIRECTORS’ REPORT continued For the year ended 31 December 2020 Remuneration Report (audited) This Remuneration Report describes Bell Financial’s ‘Key Management Personnel’ (KMP) remuneration arrangements as required by the Corporations Act. 1. KMP Bell Financial’s KMP during the reporting period were: Directors Alastair Provan Graham Cubbin Brian Wilson AO Christine Feldmanis1 Craig Coleman2 Senior Executives Lewis Bell Andrew Bell Dean Davenport Rowan Fell Executive Chairman Independent Director Independent Director Non-Executive Director Independent Director Head of Compliance Executive Director – Bell Potter Securities Ltd Chief Financial Officer Chief Executive Officer – Bell Potter Capital Ltd 1. Christine Feldmanis was appointed to the Board on 21 February 2020. 2. Craig Coleman retired from the Board on 17 February 2021. In this report, ‘Executive KMP’ refers to the above persons excluding Non-Executive Directors. 2. Overview of remuneration policy and framework Bell Financial remunerates Executive KMP and other executives, management and advisers by one or more of fixed salary, commission entitlements and other short-term and long-term incentives. Non-Executive Directors receive a fixed fee and the superannuation guarantee rate only for their role on the Board. Where remuneration is linked to performance, net profit/(loss) after tax and Earnings per Share are key performance measures, in addition to individual objectives. In considering the Group’s performance and benefits for shareholder wealth, the Board has regard to the following financial indicators in respect of the current financial year and previous financial years. Net profit/(loss) after tax $’000 Share price at year end $ Earnings per Share (cents) Dividends paid $’000 2016 $16,905 $0.725 6.2 $12,502 2017 $21,443 $0.75 7.8 $15,196 2018 $24,737 $0.85 8.4 $23,312 2019 $32,443 $1.19 10.2 $24,660 2020 $46,695 $1.82 14.6 $27,263 The Company has established two equity-based plans to assist in the attraction, retention and motivation of Executive KMP, management and employees of the Company, the Long-Term Incentive Plan (LTIP) and the Employee Share Acquisition (Tax Exempt) Plan. Each plan contains customary and standard terms for dealing with the administration of an employee share plan, and the termination and suspension of the plan. Participants in the plans must not enter into a transaction or arrangement or otherwise deal in financial products which operate to limit the economic risk of the unvested Bell Financial securities issued under the plans. 3. Fixed compensation Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Compensation levels are reviewed annually through a process that considers individual performance and that of the overall Group. 4. Commission Commission entitlements are determined by the Board from time to time and aim to align the remuneration of Executive KMP and advisers with the Company’s performance. Certain executives and advisers are paid a commission based on revenue generated by the individual during the year. This creates a strong incentive for key executives and advisers to maximise the Company’s revenue and performance. 12 Bell Financial GroupAnnual Report 2020 5. Performance linked compensation Performance linked compensation includes both short-term and long-term incentives and is designed to reward Executive KMP for meeting or exceeding their financial and individual objectives. The short-term incentive is an ‘at risk’ bonus provided in the form of cash and or shares, while the long-term incentive is provided as options or performance rights over ordinary shares of the Company. 6. Short-term incentive bonus The Company may pay Executive KMP and other executives a short-term incentive (STI) annually. The Board is responsible for determining who is eligible to participate in STI arrangements, as well as the structure of those arrangements. There are two types of STI arrangements, being: • the STI payable to executives who are not remunerated by reference to commission, which is a discretionary annual cash bonus and or shares determined based on the Company’s financial performance during the year, key performance indicators, industry competitive measures and individual performance over the period; and • the STI payable to the Executive Chairman, which is a discretionary annual cash bonus, up to three times annual salary, determined based on the Company’s financial performance during the year, key performance indicators and individual performance over the period. These STI arrangements aim to ensure that executive remuneration is aligned with the Company’s financial performance and growth. 7. Long-term incentive plan (LTIP) The LTIP is part of the Company’s remuneration strategy and is designed to align the interests of the Company’s Executive KMP, other executives and advisers with the interests of shareholders to assist the Company in the attraction, motivation and retention of Executive KMP, other executives and advisers. In particular, the LTIP is designed to provide relevant Executive KMP, other executives and advisers with an incentive for future performance, with conditions for the vesting and exercise of the options or performance rights under the LTIP, therefore encouraging them to remain with the Company and contribute to its future performance. Eligible persons participating may be granted options or performance rights on the terms and conditions in the LTIP rules and as determined by the Board from time to time. An option or performance right is a right, subject to the satisfaction of the applicable vesting conditions and exercise conditions, to subscribe for a share in the Company. If persons become entitled to participate in the LTIP and their participation requires approval under Chapter 10 of the ASX listing rules, they will not participate in the LTIP until that shareholder approval is received. No options or performance rights were granted under the LTIP in 2020 and 2019. 8. Service agreements 8.1 Executive Chairman Bell Financial entered into a service agreements with its Executive Chairman, Alastair Provan effective from listing in December 2007. This agreement sets out the terms of his appointment, including responsibilities, duties, rights and remuneration. A summary of Mr Provan’s remuneration including benefits under the short-term and long-term incentive plans is set out in the KMP remuneration table in Section 8.4. Bell Financial may terminate Mr Provan’s service agreement on 12 months’ notice, or immediately for cause. If his agreement is terminated on 12 months’ notice, Bell Financial has agreed to vest early any unvested options under the LTIP and to allow their early exercise. Mr Provan may terminate his service agreement on six months’ notice. He has entered into non-competition covenants with Bell Financial which operate for six months from termination of his service agreement. 8.2 Senior Executives All key executives are permanent employees of Bell Financial. Each executive has an employment contract with no fixed end date. Any executive may resign from their position by giving four weeks’ written notice. The Company may terminate an employment contract by providing written notice and making payment in lieu of notice in accordance with the Company’s termination policies. The Company may terminate an employment contract at any time for serious misconduct. 13 Bell Financial GroupAnnual Report 2020 DIRECTORS’ REPORT continued For the year ended 31 December 2020 Remuneration Report (audited) continued 8. Service agreements continued 8.3 Non-Executive Directors On appointment to the Board, each Non-Executive Director was provided with a letter of appointment setting out the terms of their appointment, including responsibilities, duties, rights and remuneration, relevant to the office of director. Non-Executive Directors do not receive bonuses, incentive payments or equity-based pay. They receive a fixed annual fee inclusive of compulsory superannuation contributions. Their remuneration for the reporting period was: Name Brian Wilson AO Graham Cubbin Christine Feldmanis1 Craig Coleman2 1. Christine Feldmanis was appointed to the Board on 21 February 2020. 2. Craig Coleman retired from the Board on 17 February 2021. 8.4 KMP remuneration Details of the remuneration of each KMP are tabled below. Directors Executive Directors Alastair Provan, Executive Chairman Non-Executive Directors Graham Cubbin Brian Wilson AO Christine Feldmanis Craig Coleman Total compensation: Directors (consolidated) 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Senior Executives Lewis Bell, Head of Compliance Dean Davenport, Chief Financial Officer 2020 2019 Andrew Bell, Executive Director of Bell Potter Securities 2020 2019 2020 2019 Rowan Fell, Chief Executive Officer of Bell Potter Capital 2020 2019 2020 2019 Total compensation: Executives (consolidated) Directors’ fees $ 91,324 91,324 85,641 91,324 Superannuation $ 8,676 8,676 - 8,676 Total $ 100,000 100,000 85,641 100,000 Short-term Post-employment Salary & fees $ STI cash bonus $ Non-monetary benefits $ 522,927 523,508 500,000 350,000 91,324 91,324 91,324 91,324 85,641 - 91,324 91,324 882,540 797,480 368,154 368,735 420,907 505,563 311,539 277,439 288,500 270,731 1,389,100 1,422,468 - - - - - - - - 500,000 350,000 - - - - 200,000 200,000 550,000 550,000 750,000 750,000 - - - - - - - - - - - - - - - - - - - - - - Total 1,022,927 873,508 91,324 91,324 91,324 91,324 85,641 - 91,324 91,324 1,382,540 1,147,480 368,154 368,735 420,907 505,563 511,539 477,439 838,500 820,731 2,139,100 2,172,468 Superannuation Other Termination Share-based benefits long term benefits payments $ $ $ $ Proportion of remuneration performance related % Value of options as proportion of remuneration 21,348 20,767 8,676 8,676 8,676 8,676 - - 8,676 8,676 47,376 46,795 21,348 20,767 12,655 33,555 25,000 25,447 25,000 25,000 84,003 104,769 - - - - - - - - - - - - - - - - 13,461 47,114 16,500 34,269 29,961 81,383 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 59,500 48,000 59,500 48,000 Total $ 1,044,275 894,275 100,000 100,000 100,000 100,000 85,641 - 100,000 100,000 1,429,916 1,194,275 389,502 389,502 433,562 539,118 609,500 598,000 880,000 880,000 2,312,564 2,406,620 48% 39% 0% 0% 0% 0% 0% 0% 0% 0% 35% 19% 0% 0% 100% 100% 43% 41% 63% 63% 54% 56% % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% See footnotes on page 12. 14 Bell Financial GroupAnnual Report 2020 Remuneration Report (audited) continued 8. Service agreements continued 8.3 Non-Executive Directors On appointment to the Board, each Non-Executive Director was provided with a letter of appointment setting out the terms of their appointment, including responsibilities, duties, rights and remuneration, relevant to the office of director. Non-Executive Directors do not receive bonuses, incentive payments or equity-based pay. They receive a fixed annual fee inclusive of compulsory superannuation contributions. Their remuneration for the reporting period was: Name Brian Wilson AO Graham Cubbin Christine Feldmanis1 Craig Coleman2 1. Christine Feldmanis was appointed to the Board on 21 February 2020. 2. Craig Coleman retired from the Board on 17 February 2021. 8.4 KMP remuneration Details of the remuneration of each KMP are tabled below. Directors’ fees Superannuation $ 91,324 91,324 85,641 91,324 8,676 8,676 $ - 8,676 Total $ 100,000 100,000 85,641 100,000 Salary & fees $ STI cash Non-monetary bonus $ benefits $ 522,927 523,508 500,000 350,000 Directors Executive Directors Alastair Provan, Executive Chairman Non-Executive Directors Graham Cubbin Brian Wilson AO Christine Feldmanis Craig Coleman Total compensation: Directors (consolidated) Senior Executives Lewis Bell, Head of Compliance Andrew Bell, Executive Director of Bell Potter Securities 2020 Dean Davenport, Chief Financial Officer Rowan Fell, Chief Executive Officer of Bell Potter Capital 2020 Total compensation: Executives (consolidated) See footnotes on page 12. 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2019 2020 2019 2019 2020 2019 91,324 91,324 91,324 91,324 85,641 - 91,324 91,324 882,540 797,480 368,154 368,735 420,907 505,563 311,539 277,439 288,500 270,731 1,389,100 1,422,468 - - - - - - - - - - - - 500,000 350,000 200,000 200,000 550,000 550,000 750,000 750,000 Total 1,022,927 873,508 91,324 91,324 91,324 91,324 85,641 - 91,324 91,324 1,382,540 1,147,480 368,154 368,735 420,907 505,563 511,539 477,439 838,500 820,731 2,139,100 2,172,468 - - - - - - - - - - - - - - - - - - - - - - Short-term Post-employment Superannuation benefits $ Other long term $ Termination benefits $ Share-based payments $ 21,348 20,767 8,676 8,676 8,676 8,676 - - 8,676 8,676 47,376 46,795 21,348 20,767 12,655 33,555 25,000 25,447 25,000 25,000 84,003 104,769 - - - - - - - - - - - - - - - - 13,461 47,114 16,500 34,269 29,961 81,383 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 59,500 48,000 - - 59,500 48,000 Total $ 1,044,275 894,275 100,000 100,000 100,000 100,000 85,641 - 100,000 100,000 1,429,916 1,194,275 389,502 389,502 433,562 539,118 609,500 598,000 880,000 880,000 2,312,564 2,406,620 Proportion of remuneration performance related % Value of options as proportion of remuneration % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 48% 39% 0% 0% 0% 0% 0% 0% 0% 0% 35% 19% 0% 0% 100% 100% 43% 41% 63% 63% 54% 56% 15 Bell Financial GroupAnnual Report 2020 DIRECTORS’ REPORT continued For the year ended 31 December 2020 Remuneration Report (audited) continued 8. Service agreements continued 8.5 Options and equity instruments No options over the Company’s shares or other equity instruments are held by KMP. 9. Loans to KMP and their related parties All loans to KMP and their related parties are margin loans provided in the ordinary course of business on standard terms and conditions that are no more favourable than those provided to other employees or clients, including the interest rate and security required. Details on the aggregate loans provided to KMP and their related parties are as follows. Opening balance Closing balance1 Interest charged 31 Dec 2020 $ 2,273,518 1,896,810 67,056 1. The aggregate loan amount at the end of the reporting period includes loans to 5 KMP and their related parties. Details of KMP (including their related parties) with an aggregate of loans above $100,000 during the reporting period are as follows: Lewis Bell Andrew Bell Rowan Fell Dean Davenport Craig Coleman Balance 1 Jan 20 $ - 300,000 1,055,965 126,449 791,104 Balance 31 Dec 20 $ 100,965 404,494 861,383 176,093 353,875 Interest paid and payable in period $ 7,372 11,136 27,644 4,752 16,152 Highest balance in period1 $ 1,385,589 696,558 1,627,186 176,668 796,054 1. Represents the highest loan balance during the reporting period for the individual KMP. All other items in the table relate to KMP and their related parties. Lead auditor’s independence declaration The lead auditor’s independence declaration is set out on page 17 and forms part of the Directors’ Report for the financial year ended 31 December 2020. Rounding of amounts Bell Financial is an entity to which ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 applies. Amounts in this report have been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. This report is made on 17 February 2021 in accordance with a resolution of the directors. Alastair Provan Executive Chairman 17 February 2021 16 Bell Financial GroupAnnual Report 2020 LEAD AUDITOR’S INDEPENDENCE DECLARATION For the year ended 31 December 2020 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Bell Financial Group Ltd I declare that, to the best of my knowledge and belief, in relation to the audit of Bell Financial Group Limited for the financial year ended 31 December 2020 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Chris Wooden Partner Melbourne 17 February 2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. Liability limited by a scheme approved under Professional Standards Legislation. 17 Bell Financial GroupAnnual Report 2020 STATEMENT OF PROFIT OR LOSS For the year ended 31 December 2020 Rendering of services Finance income Investment gains/(losses) Other income Total revenue Employee expenses Depreciation and amortisation expenses Occupancy expenses System and communication expenses Market information expenses ASX & Other clearing expenses Professional expenses Finance expenses Other expenses Total expenses Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Attributable to: Equity holders of the Company Non-controlling interests Profit/(loss) for the year Earnings per share: Basic earnings per share Diluted earnings per share Note 6, 7 10 8 9 11 16,17, 31 10 Consolidated $’000 2020 271,465 24,967 2,541 353 299,326 (175,148) (11,177) (3,075) (10,003) (7,012) (5,924) (3,351) (5,850) (10,786) (232,326) 2019 227,462 24,318 2,030 660 254,470 (152,153) (10,370) (2,770) (9,840) (7,051) (4,863) (2,137) (7,740) (11,046) (207,970) 67,000 46,500 12 (20,305) (14,057) 46,695 32,443 46,695 - 46,695 Cents 14.6 14.6 32,443 - 32,443 Cents 10.2 10.2 28 28 The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements. 18 Bell Financial GroupAnnual Report 2020 STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2020 Profit for the year Other comprehensive income/(loss) Items that may be classified to profit or loss Change in fair value of cash flow hedge Foreign operations – foreign currency translation differences Other comprehensive income/(loss) for the year, net of tax Consolidated $’000 2020 46,695 2019 32,443 142 (356) (214) (305) 103 (202) Total comprehensive income for the year 46,481 32,241 Attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income for the year Other movements in equity arising from transactions with owners are set out in note 26. The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements. 46,481 - 32,241 - 46,481 32,241 19 Bell Financial GroupAnnual Report 2020 STATEMENT OF FINANCIAL POSITION As at 31 December 2020 Assets Cash and cash equivalents Trade and other receivables Prepayments Financial assets Derivative assets Loans and advances Right of use assets Deferred tax assets Property, plant and equipment Goodwill Intangible assets Total assets Liabilities Trade and other payables Deposits and borrowings Current tax liabilities Lease liabilities Derivative liabilities Employee benefits Provisions Total liabilities Net assets Equity Contributed equity Other equity Reserves Retained earnings Total equity attributable to equity holders of the Company Consolidated $’000 Note 2020 2019 13 14 15 30 19 31 18 16 17 17 20 21 22 31 30 24 23 26 26 26 26 284,043 129,998 1,028 15,645 105 469,076 16,122 4,140 1,957 130,413 13,761 1,066,288 267,785 477,476 4,056 22,357 238 62,935 500 835,347 195,137 167,958 930 13,559 103 543,489 22,801 4,420 1,104 130,413 12,497 1,092,411 245,611 559,430 2,152 30,568 380 42,966 - 881,107 230,941 211,304 204,237 (28,858) 177 55,385 230,941 204,237 (28,858) 691 35,234 211,304 The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements. 20 Bell Financial GroupAnnual Report 2020 STATEMENT OF CHANGES IN EQUITY Balance at 1 January 2019 Total comprehensive income Profit/(loss) for the year Other comprehensive income Change in fair value of cash flow hedges Translation of foreign currency reserve Total other comprehensive income Total comprehensive income for the year Transactions with owners, directly in equity Transfer of retained earnings Purchase of treasury shares Share based payments Employee share awards exercised Decrease in other equity Dividends Balance at 31 December 2019 Balance at 1 January 2020 Total comprehensive income Profit/(loss) for the year Other comprehensive income Change in fair value of cash flow hedges Translation of foreign currency reserve Total other comprehensive income Total comprehensive income for the year Transactions with owners, directly in equity Transfer of retained earnings Purchase of treasury shares Share based payments Employee share awards exercised Decrease in other equity Issuance of share based payment Dividends Balance at 31 December 2020 Share Capital $ ‘000 204,237 Other Equity $ ‘000 (28,858) Treasury Shares Reserve $ ‘000 (1,312) Share Based Payments Reserve $ ‘000 1,218 Cash Flow Hedge Reserve $ ‘000 (75) Foreign Currency Reserve $ ‘000 668 Retained Earnings $ ‘000 27,451 Total Equity $ ‘000 203,329 - - - - - - - - - - - - - - - - - - - - - - 204,237 (28,858) 204,237 (28,858) - - - - - - - - - - - - - - - - - - - - - - - - 204,237 (28,858) - - - - - - - - 1,603 - - 291 291 - - - - - - (7) - 426 - (710) - - - - - - - - - 46 (1,255) - - 9 9 - - - - - - - - - - (9) - - - - 32,443 32,443 (305) - (305) (305) - - - - - - (380) (380) - 142 - 142 142 - - - - - - - (238) - 103 103 103 - - - - - - 771 771 - - - 32,443 (305) 103 (202) 32,241 - - - - 46 - 348 - - - (24,660) (24,660) 35,234 211,304 35,234 211,304 - 46,695 46,695 - (356) (356) (356) - - - 46,695 142 (356) (214) 46,481 - - - - - - - 415 - - (7) - - - 426 - - - - 719 (27,263) (27,263) 55,385 230,941 The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements. 21 Bell Financial GroupAnnual Report 2020 STATEMENT OF CASH FLOWS For the year ended 31 December 2020 Cash flows from/(used in) operating activities Cash receipts from customers and clients Cash paid to suppliers and employees Net cash from client related receivables and payables Cash generated from operations1 Dividends received Interest received Interest paid Income taxes paid Net cash from operating activities Cash flows from/(used in) investing activities Net proceeds from sale of investments Acquisition of property, plant and equipment Acquisition of other investments Net cash used in investing activities Cash flows from/(used in) financing activities Dividends paid On market share purchases Payment of lease liabilities Bell Potter Capital (Margin Lending) Deposits from client cash balances Drawdown of margin loans Acquisition of margin loans (Repayment)/Drawdown of borrowings Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Consolidated $’000 Note 2020 2019 287,527 (195,018) 41,578 134,087 22 25,064 (5,850) (18,122) 135,201 6,444 (1,589) (6,634) (1,779) (27,263) (7) (9,902) 55,046 74,610 - (137,000) (44,516) 88,906 195,137 284,043 241,953 (211,249) 8,583 39,287 5 24,361 (7,740) (8,895) 47,018 238 (778) (9,213) (9,753) (24,660) - (9,313) 105,989 19,401 (268,167) 141,000 (35,750) 1,515 193,622 195,137 25 13, 25 1. ‘Cash generated from operations’ includes Group cash reserves and client balances. Refer to note 13 for further information on cash and cash equivalents. The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements. 22 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 Bell Financial Group Ltd (“Bell Financial” or the “Company”) is domiciled in Australia. The address of the Company’s registered office is Level 29, 101 Collins Street, Melbourne, VIC. The Consolidated Financial Statements of the Company comprise the Company, and its controlled entities (the “Group” or “Consolidated Entity”). The Group is a for-profit entity. Bell Financial Group Ltd is an Australian-based provider of broking, investment and financial advisory services. 1. Significant accounting policies Set out below is a summary of significant accounting policies adopted by the Company and its subsidiaries in the preparation of the Consolidated Financial Statements. a) Basis of preparation Statement of compliance The financial report is a general purpose financial report prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group and the financial report of the Company comply with International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board (IASB). The Financial Statements were approved by the Board of Directors on 17 February 2021. The accounting policies set out below, except as noted, have been applied consistently to all periods presented in these Consolidated Financial Statements, and have been consistently applied by all entities within the consolidated entity. Basis of measurement These Consolidated Financial Statements have been prepared under the historical cost convention, except for financial assets and liabilities (including derivative instruments and loans) at fair value through the profit or loss. Functional and presentation currency These Consolidated Financial Statements are presented in Australian dollars, which is the Company’s functional currency and the functional currency of the majority of the Group. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instruments 2016/191 and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand dollars unless otherwise stated. Removal of parent entity financial statements The Group has applied amendments to Section 295(2)(b) of the Corporations Act 2001 that remove the requirement for the Group to lodge parent entity financial statements. Parent entity financial statements have been replaced by the specific parent entity disclosures in note 32. b) Principles of consolidation Operating Segment comparative amounts 2019 operating segment comparative information in note 5 have been restated to reflect the allocation of revenue and the related financial performance to align with current year’s presentation. 31 December 2019 Revenue from operations Profit/(loss) after tax Segment assets Total assets Segment liabilities Total liabilities Other segment details Interest revenue Interest expense Depreciation/amortisation Retail $’000 148,936 13,293 999,533 999,533 860,125 860,125 24,318 (7,740) (8,583) Wholesale $’000 78,526 19,150 92,878 92,878 Consolidated $’000 227,462 32,443 1,092,411 1,092,411 20,982 20,982 881,107 881,107 - - (1,787) 24,318 (7,740) (10,370) 23 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 1. Significant accounting policies continued b) Principles of consolidation continued Business combinations The Group applies AASB 3 Business Combinations (2008) and amended AASB 127 Consolidated and Separate Financial Statements (2008) for business combinations. Subsidiaries Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commenced until the date that control ceases. All controlled entities have a 31 December balance date. Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. c) Revenue recognition AASB 15 Revenue from Contracts with Customers AASB 15 requires identification of discrete performance obligations within a transaction and an associated transaction price allocation to these obligations. Revenue is recognised upon satisfaction of these performance obligations, which occur when control of the goods or services are transferred to the customer. Under AASB 15, revenue is recognised when a customer obtains control of the goods or services have been rendered. Determining the timing of the transfer of control – at a point in time or over time – requires judgement. AASB 15 specifically excludes financial instruments recognised under AASB 9 Financial Instruments. Revenue streams for Bell Financial are limited to fee- based revenue items such as brokerage, fee income, commissions and portfolio administration fees. 24 Revenue under AASB 15 is recognised when the Group satisfies the performance obligations relating to its service to a customer. The Group measures revenue based on the consideration specified in a contract with a customer. The following specific criteria must also be met before revenue can be recognised. AASB 16 Leases applies a single, on- balance sheet accounting model for lessees. A lessee recognises a right of use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Rendering of services Revenue arising from brokerage, fee income and corporate finance transactions are recognised by the Group when performance obligations under the contract with a customer are satisfied. Brokerage is recognised at a point in time when a trade is executed and payment is received upon settlement, which is normally 2 days after the trade. Portfolio administration fees are recognised over time as the service is provided and are collected on a quarterly basis. Corporate fees are recognised at a point in time when the Group satisfies its performance obligation, which is usually upon the successful completion of the transaction. Payment is normally received within 7 days of the completion of the transaction. Other revenue streams Other revenue is recognised to the extent that it is probable that performance obligations are satisfied and the revenue can be reliably measured. Interest income Interest income is recognised as it accrues using the effective interest rate method, in accordance with AASB 9. Dividend income Dividend income is recognised when the right to receive the payment is established, in accordance with AASB 9. d) Leases AASB 16 Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. As a Lessee The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of- use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses. The lease liability is initially measured at the present value of the lease payments that are not paid at initial application date, discounted using the incremental borrowing rate determined by the Group. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2020. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources. The weighted average rate applied is 4.1%. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short- term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. e) Statement of Cash Flows The Statement of Cash Flows is prepared on the basis of net cash flows in relation to settlement of trades. This is consistent with the Group’s revenue recognition policy whereby the entity acts as an agent and receives and pays funds on behalf of its clients, however only recognises as revenue, the Group’s entitlement to brokerage commission. For the purpose of the Bell Financial GroupAnnual Report 2020 Statement of Cash Flows, cash and cash equivalents comprise cash at bank and on hand, investments in money market instruments maturing within less than 14 days (net of bank overdrafts) and short- term deposits with an original maturity of 3 months or less. It is important to note that the Statement of Financial Position discloses trade debtors and payables that represent net client accounts being the accumulation of gross trading. f) Income tax Income tax expense or benefit for the period comprises current and deferred tax. Income tax is recognised in the Statement of Profit or Loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Tax consolidation Effective 1st January 2003, the Company elected to apply the tax consolidation legislation. All current tax amounts relating to the Group have been assumed by the head entity of the tax-consolidated group, Bell Financial Group. Deferred tax amounts in relation to temporary differences are allocated as if each entity continued to be a taxable entity in its own right. g) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated with the amount of GST excluded. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as operating cash flows. h) Cash and cash equivalents Cash and cash equivalents comprise cash balances, investments in money market instruments maturing within less than 14 days and short-term deposits with original maturity of less than three months. Bank overdrafts that are repayable on demand are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. Cash held in trust for clients (refer to note 13) is included as cash and cash equivalents and is included within trade and other payables. i) Derivatives Derivative financial instruments are contracts whose value is derived from one or more underlying price indices or other variables. They include swaps, forward rate agreements, options or a combination of all three. Certain derivative instruments are held for trading for the purpose of making short-term gains such as FX swaps. These derivatives do not qualify for hedge accounting. The right to receive options arising from the provision of services to corporate fee clients are valued using the Black Scholes model. On disposal of options, any realised gains/losses are taken to the Statement of Profit or Loss. Derivatives are recognised at fair value and attributable transaction costs are recognised in profit or loss when incurred. Derivative financial instruments are also used for hedging purposes to mitigate the Group’s exposure to interest rate risk. The Group applied the new general hedge accounting model in AASB 9 Financial Instruments from 1 January 2018 (refer to note 1q (iii) for further information). Derivative financial instruments are recognised initially at fair value. Where the derivative is designated effective as a hedging instrument, the timing of the recognition of any resultant gain or loss is dependent on the hedging designation. The Group designated interest rate swaps as cash flow hedges during the period. Details of the hedging instruments are outlined below: 25 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 1. Significant accounting policies continued i) Derivatives continued Cash flow hedges Changes in the fair value of cash flow hedges are recognised directly in equity to the extent that the hedges are effective. To the extent hedges are ineffective, changes in the fair value are recognised in the profit or loss. Hedge effectiveness is tested at each reporting date and is assessed against the hedge effectiveness criteria in AASB 9. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, the hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. j) Impairment of assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Profit or Loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An impairment loss, with the exception of goodwill, is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities the reversal is recognised in profit or loss. 26 k) Trade and other receivables Trade debtors to be settled within 2 trading days are carried at amortised cost. Term debtors are also carried at amortised cost. Recoverability of Trade and other receivables is assessed using the lifetime expected credit loss approach. l) Trade and other payables Liabilities for trade creditors and other amounts are carried at 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 parent entity or Group. Trade accounts payable are normally settled within 60 days. m) Borrowing costs Borrowing costs are recognised using effective yield. n) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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 the risks specific to the liability. o) Deposits and borrowings All deposits and borrowings are recognised at the fair value of the consideration received net of issue costs associated with the borrowings at origination and subsequently measured using effective interest method. p) Goodwill and intangible assets Goodwill Goodwill on acquisition is initially measured at cost being the excess of the costs of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying amount is impaired. An impairment loss in respect to goodwill is not reversed. The Group has changed the composition of its CGUs. It has changed/reallocated goodwill using a relative value approach similar to that used when an entity disposes of an operation within CGU. The CGUs have been reallocated from Retail and Wholesale to Retail Broking, Institutional Broking, Technology & Platforms and Product & Services. Bell Financial Group (BFG) provides traditional stockbroking, investment and financial advisory services to private, Institutional and corporate clients. BFG also develops proprietary technology, platforms, products and services for the Australian stockbroking market. Historically the business has been viewed and managed as two operating divisions, Wholesale and Retail. With the significant investment over a number of years in technology, platforms, products and services, revenues and profits emanating from these areas is now significant, and subject of Management focus in terms of future business decisions. Other intangible assets Research and development Expenditure on research activities is recognised in profit or loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. Customer lists Customer lists that are acquired by the Group, which have finite lives, are measured at cost less accumulated amortisation and accumulated impairment losses. Bell Financial GroupAnnual Report 2020 Amortisation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful lives are as follows: Software Customer list 2020 10 years 10 years 2019 10 years 10 years q) Financial instruments All investments are initially recognised at fair value of the consideration given, plus directly attributable transaction costs. Subsequent to initial recognition, investments, which are classified as financial assets and liabilities are measured as described below. Fair value measurement AASB 13 Fair Value Measurement that establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other AASBs. It unifies the definition of fair value as 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. AASB 9 Financial Instruments AASB 9 sets out requirements for recognising and measuring financial assets and financial liabilities. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement. i. Classification and measurement of financial assets and financial liabilities Under AASB 9, on initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVTOCI) – debt investment; FVTOCI – equity investment; or fair value through profit or loss (FVTPL). The classification of financial assets under AASB 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • It is held within a business model • How managers of the business are whose objective is to hold assets to collect contractual cash flows; and • Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All financial assets not classified as measured at amortised cost or FVTOCI are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The following accounting policies apply to the subsequent measurement of financial assets held by the Group. Financial assets at amortised cost These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses (see (ii) below). Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. Business model assessment The Group will determine the business model at the level that reflects how groups of financial assets are managed using all relevant evidence that is available at the date of the assessment, including: • The stated policies and objectives for the portfolio and the operation of those policies in practice; • How the performance of the portfolio is evaluated and reported to the Group’s management; • The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and compensated. Assessment whether contractual cash flows are solely payments of principal and interest (SPPI) For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. Measurement categories of financial assets Cash and cash equivalents, Trade and other receivables, and Loans and advances that meets SPPI are classified and measured at amortised cost. Certain Loans and advances and other financial assets that do not meet SPPI are classified and measured at FVTPL. There were no changes in classification and measurements of the Group’s financial assets for the years ended 31 December 2019 and 2020. Modifications of financial assets and financial liabilities Financial assets If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, the contractual rights to cash flows from the original financial asset are deemed to have expired. The original financial asset is derecognised and a new financial asset is recognised at fair value. The difference between the carrying amount of financial asset derecognised and the fair value of the new financial asset is recognised in profit or loss. 27 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 1. Significant accounting policies continued q) Financial instruments continued Financial assets continued If the cash flows of the modified asset are not substantially different, the Group recalculates the gross carrying amount of the financial asset and recognises the derecognition as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, the gain or loss is presented together with impairment losses. Financial liabilities The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. A new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss. ii. Impairment of financial assets Under AASB 9, loss allowances are measured on either of the following bases: • 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and • Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. For all financial assets at amortised cost, the Group measures loss allowances at an amount equal to lifetime ECLs, except for loans and advances, which are measured at 12-month ECLs where credit risk has not increased significantly since initial recognition and lifetime ECLs where credit risk has increased significantly since initial recognition. When determining whether credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes quantitative and qualitative 28 information and analysis based on the Group’s historical experience and forward-looking information. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due or the expected probability of default has increased significantly. The Group considers a financial asset to be in default when: • The borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or • The financial asset is more than 90 days past due. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit- impaired. A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Presentation of impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Impairment losses are presented separately in the Consolidated Statement of Profit or Loss and OCI. There were no impairment losses for the year ended 31 December 2020 (2019: Nil). Trade and other receivables ECLs are calculated based on actual historical credit loss experience. Exposures are segmented based on past events, current conditions and reasonable and supportable information about future events and economic conditions. There were no significant changes during the period to Group’s exposure to credit risk and there was no significant impact to credit provisioning over trade and other receivables as at 31 December 2020. Loans and advances ECLs are calculated based on actual historical credit loss experience. Exposures are segmented based on past events, current conditions and reasonable and supportable information about future events and economic conditions. There were no significant changes during the period to Group’s exposure to credit risk and there was no significant impact to credit provisioning over loans and advances as at 31 December 2020. iii. Hedge accounting The Group ensure that hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness, in accordance with the requirements of AASB 9. The Group only uses interest rate swaps to hedge exposure to fluctuations in interest rates. Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends Dividends are recognised as a liability in the period in which they are declared, being appropriately authorised and no longer at the discretion of the Company. Treasury shares When share capital recognised as equity is repurchased, the amount of the consideration paid is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve until sold or reissued. Bell Financial GroupAnnual Report 2020 Diluted earnings per share Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares and share options granted to employees and Directors. u) Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on FVOCI instruments that are recognised directly in OCI. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Australian dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Australian dollars at the exchange rates at the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI. r) Property, plant and equipment Property, plant and equipment is included at cost less accumulated depreciation and any impairment in value. All property, plant and equipment is depreciated over its estimated useful life, commencing from the time assets are held ready for use. Items of property, plant and equipment are depreciated/amortised using the straight-line method over their estimated useful lives. The depreciation rates for each class of asset are as follows: Leasehold improvements Office equipment Furniture and fittings 2020 2019 20 – 25% 20 – 25% 20 – 50% 20 – 50% 20 – 50% 20 – 50% s) Employee entitlements Wages, salaries and annual leave The provisions for entitlements to wages, salaries and annual leave expected to be settled within 12 months of reporting date represent the amounts which the Group has a present obligation to pay resulting from employees’ services provided up to reporting date. Long-service leave The provision for salaried employee entitlements to long-service leave represents the present value of the estimated future cash outflows to be made resulting from employees’ service provided up to reporting date. Liabilities for employee entitlements, which are not expected to be settled within twelve months, are discounted using the rates attaching to national government securities at balance date, which most closely match the terms of maturity of the related liabilities. In determining the liability for employee entitlements, consideration has been given to future increases in wage and salary rates, and experience with staff departures. Related on-costs have also been included in the liability. Bonuses The Group recognises a liability and an expense for bonuses. The Group recognises a provision where contractually obliged or where there is a past performance that has created a constructive obligation. Defined contribution plans A defined contribution plan is a post- employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee expense in profit or loss when they are due. Share-based payments The Company has adopted a number of share-based equity incentive plans in which employees and Directors participate. The grant date fair value of shares expected to be issued under the various equity incentive plans, including options, granted to employees and Directors is recognised as an employee expense, with a corresponding increase in equity over the period in which the employees become unconditionally entitled to the shares. The fair value of options at grant date is independently determined using the Black Scholes option pricing model that takes into account the exercise price, the vesting period, the vesting and performance criteria, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share and the risk free interest rate for the vesting period. t) Earnings per share The Group presents basic and diluted Earnings Per Share (EPS) data for its ordinary shares. Basic earnings per share Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. 29 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 1. Significant accounting policies continued v) Segment reporting The Group determines and presents operating segments based on the information that is internally provided to the Chief Decision Makers in accordance with AASB 8 Operating Segments. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s results are reviewed regularly by management to make decisions about resources to be allocated to the segment and assess its performance. Segment results that are reported to management include items directly attributable to a segment as well as to those that can be allocated on a reasonable basis. w) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2021, and have not been applied in preparing these Consolidated Financial Statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated financial statements. • Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) • Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, ISA 39, IFRS 7, IFRS 4 and IFRS 16) • COVID-19 Related Rent Concessions (Amendment to IFRS 16) • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) • Reference to Conceptual Framework (Amendments to IFRS 3) • Classification of Liabilities as Current or Non-current (Amendments to IAS 1) 30 2. Significant accounting judgements, estimates and assumptions In applying the Group’s accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management and are reviewed on an ongoing basis. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below: Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. (Refer to note 18). Impairment of loans and advances The Company assesses impairment of all loans at each reporting date by evaluating the expected credit loss on those loans. In the Directors’ opinion, no such impairment exists beyond that provided at 31 December 2020 (2019: Nil). (Refer to note 19 and note 1q(ii)). Long service leave provisions The liability for long service leave is recognised and measured as the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of a liability, attrition rates and pay increases through promotion and inflation have been taken into account. A discount rate equal to the government bond rate has been used in determining the present value of the obligation. (Refer to note 24). Legal provision From time to time claims are made against the Group. The recognition of any provision requires judgement to determine managements best estimate of the provision. As at 31 December 2020, a $500,000 provision has been accrued to reflect potential claims. (Refer to note 23). Financial assets The fair value of options is determined using the Black Sholes option-pricing model. Determination of fair value for loans is based on the option value used to mitigate the risk on the limited recourse margin loans and the interest rate implicit in the loan. Intangible assets The customer lists acquired have been valued using the net present value of the unlevered free cash flow from each business’ client list and software development costs incurred are initially measured at cost and are amortised over the useful life. These valuations are outlined below: Bell Foreign Exchange and Futures business The amortisation period for the acquired intangible assets of the Foreign Exchange and Futures business is deemed to be 10 years. This was determined by analysing the average length of the relationship clients have with the business. Development costs Amortisation period for the incurred intangible asset development costs is deemed to be 10 years. This was determined by assessing the average length of the useful life of the assets. Impairment of goodwill Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. For the purpose of impairment testing, goodwill is allocated to Retail, Institutional, Technology and Platforms, and Products and Services which represents the level at which it is monitored for internal management purposes. The recoverable amount of the business to which each goodwill component is allocated to a cash-generating unit is estimated based on its value in use and is determined by discounting the future cash flows generated from continuing use. At 31 December 2020, goodwill has been allocated to the Group’s CGUs (Operating divisions) as follows: Bell Financial GroupAnnual Report 2020 Retail Institutional Technology & Platforms Product & Services 2020 $’m 22.6 31.4 39.2 37.2 130.4 2019 $’m 57.5 72.9 - - 130.4 Key assumptions used in discounted cash flow projections The assumptions used for determining the recoverable amount are based on past experience and expectations for the future. Projected cash flows for each group of cash-generating units are discounted using an appropriate discount rate and a terminal value multiple is applied. The following assumptions have been used in determining the recoverable amount of each cash-generating unit: Discount rates: Terminal value multiple: Retail Institutional A post-tax discount rate of 9% (2019: 9%) was used for each cash-generating unit, based on the risk free rate, adjusted for a risk premium to reflect both the increased risk of investing in equities and specific risks associated with the business. A terminal value multiple of 7 times (2019: 7 times) was used for each cash-generating unit. The multiple was applied to extrapolate the discounted future maintainable after tax cash flows beyond the five year forecast period. An increase in brokerage revenue of 5.0% p.a (2019: 2.7% p.a) average growth over the five year forecast period. Corporate fee income maintained at current levels for the five year forecast period. An increase in brokerage revenue of 5.0% p.a (2019: 5.9% p.a) average growth over the five year forecast period. Corporate fee income maintained at current levels for the five year forecast period. Technology & Platforms An increase in revenue of 15.4% p.a (2019:14.9% p.a) average growth over the five year forecast period for Technology & Platforms. Product & Services An increase in Net Interest income of 8.1% p.a (2019: 8.1% p.a) average growth over the five year forecast period, and an increase in Portfolio Administration fees of 7% p.a (2019: 0.8% p.a) average growth over the five year forecast period. Sensitivity analysis As at 31 December 2020, the recoverable amounts for the retail segments exceeds the carrying values. The recoverable amounts are sensitive to several key assumptions and a change in these assumptions could cause the carrying amounts to exceed the recoverable amounts. Using the discount rate above, if brokerage and corporate fee revenue decreases by approximately 2.4% for retail from the estimated amounts in each of the five years of the forecast period, the estimated recoverable amounts would be equal to the carrying amounts. If the discount rate increased to 12.85% for retail, the estimated recoverable amounts would be equal to the carrying amounts. Further, if the terminal value multiple decreased to approximately 5.41 times for retail, the estimated recoverable amounts would be equal to the carrying amounts at that date. 3. Financial risk management Overview The Group’s principal financial instruments comprise loans and advances, listed securities, derivatives, term deposits, and cash. The Group has exposure to the following risks from its use of financial instruments: • Market risk • Credit risk • Liquidity risk Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Group Risk and Audit Committee (GRAC), which is responsible for developing and monitoring risk management policies. The Committee reports regularly to the Board of Directors on its activities. 31 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 3. Financial risk management continued Risk Management Framework continued Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group Risk and Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Internal Audit assists the Group Risk and Audit Committee in its oversight role. Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group Risk and Audit Committee. The risk management framework incorporates active management and monitoring of a range of risks. These include operational, information technology, cyber, market, credit, liquidity, legal, regulatory, reputation, fraud and systemic risks. The Board of Directors recognises that cyber risk is an increasing area of concern across the financial services industry, and is committed to the ongoing development of cyber security measures through awareness training, implementation of network security measures, and preventive controls to protect our assets and networks. Cyber resilience is an integral component of effective risk management. Market risk Market risk is the risk that changes in market prices, such as interest rates, equity prices, and foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control exposures within acceptable parameters, while optimising returns. Equity price risk All instruments are subject to the risk that future changes in market conditions may make an instrument less valuable. As trading instruments are valued with reference to the market or Black Scholes model, changes in equity prices directly affect reported income in each period. The Group continually monitors equity price movements to ensure the impact on the Group’s activities is managed. Interest rate risk Interest rate risk arises from the potential for change in interest rates to have an adverse effect on the Group’s net earnings. The Group continually monitors movements in interest rates and manages exposure accordingly. The Board has also approved the use of derivatives, in the form of interest rate swaps, to mitigate its exposure to interest rate risk. Changes in the fair value and effectiveness of interest rate swaps (which are designated cash flow hedging instruments) are monitored on a six-monthly basis. Currency risk The Group is exposed to currency risk on monetary assets and liabilities held in a currency other than the respective functional currency of the Group. The Group ensures the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing this risk is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding requirements. The Group manages liquidity by maintaining reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows and matching up maturity profiles of financial assets and liabilities. With respect to the maturity of financial liabilities, the Group also: • holds financial assets for which there is a liquid market and that they are readily saleable to meet liquidity needs; and • has committed borrowing facilities or other lines of credit that it can access to meet liquidity needs. Credit risk Credit risk is the financial loss to the Group if a debtor or counterparty to a financial instrument fails to meet its contractual obligations. Trade and other receivables The credit risk for these accounts is that financial assets recognised on the balance sheet exceed their carrying amount, net of any provisions for doubtful debts. In relation to client debtors, the Group’s credit risk concentration is minimised as transactions are settled on a delivery versus payment basis with a settlement regime of trade day plus two days. 32 Bell Financial GroupAnnual Report 2020 Share based payments The fair value of employee stock options is determined using a Black Scholes model. Measurement inputs include share price, exercise price, volatility, weighted average expected life of the instrument, expected dividends and risk free interest rate. Service and non- market conditions are not taken into account in determining fair value. 5. Segment Reporting Business segments The segments have been reallocated in the current year and are reported below consistent with internal reporting provided to the chief decision makers: • Technology & Platforms – Proprietary technology and platforms including online broking. • Products & Services – Margin lending, Cash, Portfolio Administration and Superannuation Solutions products and services • Retail Broking division – traditional retail client broking (Retail client focus), • Institutional Broking division – traditional wholesale client broking (Institutional and Wholesale client focus). Margin lending Management monitors exposure to credit risk on an ongoing basis. The Group requires collateral in respect of margin loans made in the course of business. This collateral is generally in the form of the underlying security the margin loan is used to invest in. Loan-to-value ratios (LVRs) are assigned to determine the amounts of lending allowed against each security. Loans balances are reviewed daily and are subject to margin calls once the geared value falls 10% lower than the loan balance. Warnings are sent between 5% and 10%. The lender can also require the borrower to repay on demand part or all of the amount owing at any time, whether or not the borrower or any guarantor is in default. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares and retained earnings of the Group. The Group is required to comply with certain capital and liquidity requirements imposed by regulators as a licensed broking firm. All capital requirements are monitored by the Board and the Group was in compliance with all requirements throughout the year. Security arrangements The ANZ Bank has a Registered Mortgage Debenture over the assets and undertakings of the Company. At the date of issue of this financial report, the impact of COVID-19 on Bell Financial Group has not been material. The future impact on global and domestic economies and investment market indices is uncertain and Bell Financial Group continues to monitor this situation. 4. Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined and disclosed based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Investments in equity The fair values of financial assets at fair value through profit or loss are determined with reference to the quoted bid price, or if unquoted determined using a valuation model at reporting date. Derivatives The fair value of interest rate swaps is based on a mark-to-market model with reference to prevailing fixed and floating interest rates. These quotes are tested for reasonableness by discounting estimated future cash flows based on term to maturity of each contract and using market interest rates for a similar instrument at the measurement date. The fair value of currency swaps is determined using quoted forward exchange rates at the reporting date and present value calculations based on high quality yield curves in the respective currencies. Financial assets and loans at fair value through profit or loss The fair value of options is determined using the Black Scholes option-pricing model. Determination of fair value for loans is based on the option value used to mitigate the risk on the limited recourse margin loans and the interest rate implicit in the loan. 33 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 5. Segment Reporting continued Business segments continued 31 December 2020 Revenue from operations Profit/(loss) after tax Segment assets Total assets Segment liabilities Total liabilities Other segment details Interest revenue Interest expense Depreciation/amortisation 31 December 20191 Revenue from operations Profit/(loss) after tax Segment assets Total assets Segment liabilities Total liabilities Other segment details Interest revenue Interest expense Depreciation/amortisation Technology & Platforms $’000 24,548 4,192 139,637 139,637 Products & Services $’000 19,971 9,293 547,612 547,612 75,364 75,364 495,404 495,404 134 (38) (2,260) Technology & Platforms $’000 17,560 2,545 97,188 97,188 23,653 (4,467) (156) Products & Services $’000 19,026 8,160 629,067 629,067 40,323 40,323 578,426 578,426 290 (44) (1,490) 21,613 (5,984) (88) Retail $’000 139,709 10,685 282,397 282,397 224,187 224,187 1,180 (1,175) (7,322) Retail $’000 127,425 7,034 291,245 291,245 237,808 237,808 2,415 (1,480) (7,276) Institutional $’000 87,237 22,525 96,642 96,642 Consolidated $’000 271,465 46,695 1,066,288 1,066,288 40,392 40,392 835,347 835,347 - (170) (1,439) 24,967 (5,850) (11,177) Institutional $’000 63,451 14,704 74,911 74,911 Consolidated $’000 227,462 32,443 1,092,411 1,092,411 24,550 24,550 881,107 881,107 - (232) (1,516) 24,318 (7,740) (10,370) 1. 2019 comparative amounts have been restated. Geographical segments The Group operates predominantly within Australia and has offices in Hong Kong, London, New York and Kuala Lumpur. 6. Rendering of services Brokerage Fee income Portfolio administration revenue Other 34 Consolidated 2020 $’000 138,002 109,793 19,314 4,356 271,465 2019 $’000 120,056 83,814 18,896 4,696 227,462 Bell Financial GroupAnnual Report 2020 7. Revenue The below Group’s revenue is derived from contracts with customers. In the following table, revenue is disaggregated by major products and service lines. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments in note 5. Technology & Platforms 2020 $’000 21,719 206 2019 $’000 14,326 212 Products & Services Retail 2020 $’000 112 - 2019 $’000 - - 2020 $’000 104,341 34,598 2019 $’000 95,453 31,087 Institutional 2020 $’000 11,830 74,989 2019 $’000 10,277 52,515 Consolidated 2020 $’000 138,002 109,793 2019 $’000 120,056 83,814 - 2,623 24,548 - 3,022 17,560 19,314 545 19,971 18,896 130 19,026 - 770 139,709 - 885 127,425 - 418 87,237 - 659 63,451 19,314 4,356 271,465 18,896 4,696 227,462 Brokerage Fee income Portfolio administration revenue Other 8. Investment gains/(losses) Dividends received Profit/(loss) on financial assets held at fair value through profit or loss – Shares in listed corporations and Unlisted options held in listed corporations Profit/(loss) on financial assets held at fair value through profit or loss – Geared equity investments1 Consolidated 2020 $’000 22 6,772 (4,253) 2,541 2019 $’000 5 4,628 (2,603) 2,030 1. The fair value is based on the option value used to mitigate the risk on the limited recourse margin loans and the interest rate implicit in the loan. 9. Other income Sundry income 10. Finance income and expenses Interest income on bank deposits Interest income on loans and advances Total finance income Bank interest and fee expense Interest expense on deposits Interest expense on leases Total finance expense Net finance income/(expense) Consolidated 2020 $’000 353 353 2019 $’000 660 660 Consolidated 2019 $’000 3,320 20,998 24,318 (3,235) (2,863) (1,642) (7,740) 16,578 2020 $’000 1,710 23,257 24,967 (3,332) (1,215) (1,303) (5,850) 19,117 35 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 11. Employee expenses Wages and salaries Superannuation Payroll tax Other employee expenses Equity-settled share-based payments 12. Income tax expense Current tax expense Current period Taxable loss/(income) not recognised/(utilised) Adjustment for prior periods Utilisation of tax losses Deferred tax expense Recognition of previously unrecognised tax losses Relating to origination and reversal of temporary differences Consolidated 2020 $’000 (157,590) (7,305) (8,425) (1,402) (426) (175,148) 2019 $’000 (135,707) (7,224) (7,330) (1,498) (394) (152,153) Consolidated 2020 $’000 19,149 165 26 - 19,340 - 965 2019 $’000 13,722 40 (131) (3,240) 10,391 - 3,666 Total income tax expense/(benefit) 20,305 14,057 Numerical reconciliation between tax expense and pre-tax profit Accounting profit/(loss) before income tax Income tax using the Company’s domestic tax rate Non-deductible expenses Adjustments in respect of current income tax of previous year Income tax credit not recognised/(utilised) Consolidated 2020 % 30.00% 0.02% 0.04% 0.25% 30.31% $’000 67,000 20,100 14 26 165 20,305 Consolidated 2019 % 30.00% 0.43% (0.28%) 0.09% 30.24% $’000 46,500 13,950 198 (131) 40 14,057 Tax consolidation Bell Financial Group Ltd and its wholly owned Australian controlled entities are a tax-consolidated group. 36 Bell Financial GroupAnnual Report 2020 13. Cash and cash equivalents Group cash reserves1 Cash on hand Cash at bank Margin lending cash Cash at bank Client cash Cash at bank (Trust account) Cash at bank (Segregated account) Cash and cash equivalents in the Statement of Cash Flows Cash on hand and at bank earns interest at floating rates based on daily bank deposit rates. Segregated cash and Trust bank balances earn interest at floating rates based on daily bank rates. Consolidated 2020 $’000 12 139,639 139,651 7,208 7,208 44,807 92,377 137,184 284,043 2019 $’000 13 82,534 82,547 16,381 16,381 38,106 58,103 96,209 195,137 Segregated cash and Trust bank balances are client funds, and are not available for general use by the Group. A corresponding liability is recognised within trade and other payables (note 20). The Group’s exposure to interest rate risk for financial assets and liabilities is disclosed in note 30. 1. Group Cash – summary of key movements Group cash – 1 January Cash profit Cash Revenue Less Cash Expenses Employee expenses Occupancy expenses Systems and communications Market information expenses ASX & other clearing expenses Professional expenses Finance expenses Other expenses Total expenses Net Cash operating profit Balance Sheet Tax instalments paid Dividends paid Clearing house deposits received/(paid) Financial asset sales (net) Acquisition of property, plant and equipment General working capital movement Group cash – 31 December 2020 $’000 82,547 2019 $’000 86,956 301,272 253,940 (145,244) (13,726) (9,840) (7,051) (4,863) (2,137) (6,098) (11,046) (200,005) 53,935 (8,895) (24,660) (22,411) (756) (561) (1,062) 82,547 (158,514) (14,275) (10,003) (7,012) (5,924) (3,351) (4,547) (10,786) (214,412) 86,860 (18,122) (27,263) 17,940 (190) (1,589) (532) 139,651 37 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 14. Trade and other receivables Trade debtors Less: provision for impairment Clearing house deposits Segregated deposits with clearing brokers Less: provision for impairment Sundry debtors Consolidated 2020 $’000 82,027 - 82,027 9,159 34,267 - 43,426 4,545 129,998 2019 $’000 86,221 - 86,221 27,129 49,003 - 76,132 5,605 167,958 No impairment allowance in respect of loans and receivables noted during the year (2019: Nil). There are no amounts in arrears or past due. 15. Financial assets Held at fair value through profit or loss Shares in listed corporations Unlisted options held in listed corporations Options held in listed corporations1 Consolidated 2020 $’000 3,931 7,066 4,648 15,645 2019 $’000 2,706 3,744 7,109 13,559 1. Options held as a hedge against limited recourse loans to clients under the Bell Geared Equities Investments product. 38 Bell Financial GroupAnnual Report 2020 16. Property, plant and equipment Consolidated Cost Balance at 1 January 2019 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2019 Balance at 1 January 2020 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2020 Accumulated depreciation Balance at 1 January 2019 Depreciation charge for the year Disposals Effect of movements in exchange rates Balance at 31 December 2019 Balance at 1 January 2020 Depreciation charge for the year Disposals Effect of movements in exchange rates Balance at 31 December 2020 Carrying amount At 1 January 2019 At 31 December 2019 At 31 December 2020 Total $’000 13,276 778 - (30) 14,024 14,024 1,589 - (150) 15,463 (12,573) (379) - 32 (12,920) (12,920) (736) - 150 (13,506) 703 1,104 1,957 Fixtures and fittings $’000 Office equipment $’000 Leasehold improvements $’000 1,941 190 - 5 2,136 2,136 73 - (86) 2,123 (1,699) (84) - (4) (1,787) (1,787) (95) - 86 (1,796) 242 349 327 5,004 196 - (41) 5,159 5,159 924 - (38) 6,045 (4,697) (188) - 42 (4,843) (4,843) (414) - 37 (5,220) 307 316 825 6,331 392 - 6 6,729 6,729 592 - (26) 7,295 (6,177) (107) - (6) (6,290) (6,290) (227) - 27 (6,490) 154 439 805 39 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 17. Goodwill and intangible assets Cost Balance at 1 January 2019 Acquisitions – internally developed Balance at 31 December 2019 Balance at 1 January 2020 Acquisitions – internally developed Balance at 31 December 2020 Accumulated amortisation and impairment losses Balance at 1 January 2019 Amortisation Balance at 31 December 2019 Balance at 1 January 2020 Amortisation Balance at 31 December 2020 Carrying amount At 1 January 2019 At 31 December 2019 At 31 December 2020 18. Deferred tax assets and liabilities The movement in deferred tax balances are as follows: Consolidated 2020 Property, plant and equipment Employee benefits Carry forward tax loss Other items Consolidated 2019 Property, plant and equipment Employee benefits Carry forward tax loss Other items Goodwill $’000 130,413 - 130,413 130,413 - 130,413 - - - - - - 130,413 130,413 130,413 Identifiable intangibles $’000 17,217 3,413 20,630 20,630 3,335 23,965 (6,563) (1,570) (8,133) (8,133) (2,071) (10,204) 10,654 12,497 13,761 Total $’000 147,630 3,413 151,043 151,043 3,335 154,378 (6,563) (1,570) (8,133) (8,133) (2,071) (10,204) 141,067 142,910 144,174 Balance as at 1 January $’000 10 4,478 96 (164) 4,420 Balance as at 1 January $’000 1 3,104 3,343 1,176 7,624 Recognised in profit or loss $’000 16 1,046 (56) (1,286) (280) Recognised in profit or loss $’000 9 1,374 (3,247) (1,340) (3,204) Balance at 31 December $’000 26 5,524 40 (1,450) 4,140 Balance at 31 December $’000 10 4,478 96 (164) 4,420 Unrecognised deferred tax assets relating to tax losses at 31 December 2020: $113,000 (2019: $55,000). Management has determined there is sufficient evidence that there will be profits available in future periods against which the tax losses will be utilised as set out in note 2. 40 Bell Financial GroupAnnual Report 2020 19. Loans and advances Margin Loans measured at amortised cost Margin Loans measured at fair value through profit and loss There were no impaired, past due or renegotiated loans at 31 December 2020 (2019: nil). Refer to note 30 for further detail on the margin lending loans. 20. Trade and other payables Settlement obligations Sundry creditors and accruals Segregated client liabilities Consolidated 2020 $’000 408,928 60,148 469,076 2019 $’000 397,520 145,969 543,489 Consolidated 2020 $’000 112,710 18,553 136,522 267,785 2019 $’000 108,293 19,024 118,294 245,611 Settlement obligations are non-interest bearing and are normally settled on 2-day terms. Sundry creditors are normally settled on 60-day terms. 21. Deposits and borrowings This note provides information about the contractual terms of the Group’s interest-bearing deposits and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 30. Deposits (cash account)1 Bell Financial Trust (previously known as the Bell Cash Trust)2 Cash advance facility3 Consolidated 2020 $’000 615 436,861 40,000 477,476 2019 $’000 635 381,795 177,000 559,430 1. Deposits relate to Margin Lending/Cash Account business (Bell Potter Capital) which are largely at call. 2. Represents funds held on behalf of Bell Potter Capital in the Bell Financial Trust (previously known as Bell Cash Trust) which are held at call. 3. Represents drawn funds from the Bell Potter Capital cash advance facility of $100m (2019: $250m). Interest rate risk exposures Details of the Group’s exposure to interest rate changes on borrowings are set out in note 30. 41 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 21. Deposits and borrowings continued Terms and debt repayment schedule Terms and conditions of outstanding deposits and borrowings were as follows: Consolidated Cash advance facility Deposits (Cash Account) Bell Financial Trust (previously known as the Bell Cash Trust) Balance at 1 January Changes from financing cash flows Deposits/(withdrawals) from client cash balances Drawdown/(repayment) of borrowings Total changes from financing cash flows Changes in fair value Other charges Liability-related Interest expense Interest paid/(payable) Total liability-related other changes 2020 2019 2020 2019 Average effective interest rate 1.35% 0.18% 2.08% 0.61% Face value $’000 40,000 615 Carrying amount $’000 40,000 615 Face value $’000 177,000 635 Carrying amount $’000 177,000 635 0.18% 0.61% 436,861 477,476 436,861 477,476 381,795 559,430 381,795 559,430 2020 Liabilities Deposits (Cash Account) $’000 635 Cash advance facility $’000 177,000 Bell Financial Trust $’000 381,795 Derivatives (assets)/ liabilities held to hedge long-term borrowings Interest rate swap contracts used for hedging Assets $’000 - Liabilities $’000 380 Total 559,810 - (137,000) (137,000) - (20) - (20) - - 55,066 55,066 - - - - - - (20) (81,934) (81,954) - 238 (380) (142) 612 (612) - 1,249 (1,249) - 1,215 (1,215) - - - - - - - - 3,076 (3,076) - 477,714 Balance at 31 December 40,000 615 436,861 238 42 2019 Derivatives (assets)/ liabilities held to hedge long-term borrowings Interest rate swap contracts used for hedging Liabilities Cash advance facility $’000 36,000 Deposits (Cash Account) $’000 1,644 Bell Financial Trust $’000 274,797 Assets $’000 Liabilities $’000 75 Total $’000 312,516 141,000 141,000 106,998 106,998 - - - 1,664 (1,664) (1,009) (1,009) - - 422 (422) - - - - 2,558 (2,558) 305 305 - - - - - - (1,009) 247,998 246,989 4,644 (4,644) - 177,000 635 381,795 380 559,810 - - - - - - - - - Bell Financial GroupAnnual Report 2020 21. Deposits and borrowings continued Terms and debt repayment schedule Terms and conditions of outstanding deposits and borrowings were as follows: Consolidated Cash advance facility Deposits (Cash Account) Bell Financial Trust (previously known as the Bell Cash Trust) 2020 2019 2020 2019 Average effective interest rate 1.35% 0.18% 2.08% 0.61% Face value $’000 40,000 615 Carrying amount $’000 40,000 615 Face value $’000 177,000 635 Carrying amount $’000 177,000 635 0.18% 0.61% 436,861 477,476 436,861 477,476 381,795 559,430 381,795 559,430 2020 Derivatives (assets)/ liabilities held to hedge long-term borrowings Liabilities Cash Deposits Bell Interest rate swap contracts (Cash Financial used for hedging Account) $’000 635 Trust $’000 381,795 Assets $’000 Liabilities $’000 380 Total 559,810 advance facility $’000 177,000 Drawdown/(repayment) of borrowings Total changes from financing cash flows (137,000) (137,000) 55,066 55,066 Balance at 1 January Changes from financing cash flows Deposits/(withdrawals) from client cash balances Changes in fair value Other charges Liability-related Interest expense Interest paid/(payable) Total liability-related other changes - - 612 (612) - (20) (20) - - - 1,249 (1,249) 1,215 (1,215) - - - - - - - - - - (20) (81,934) (81,954) 3,076 (3,076) - - - - - - - - 2019 Liabilities Cash advance facility $’000 36,000 Deposits (Cash Account) $’000 1,644 Bell Financial Trust $’000 274,797 Derivatives (assets)/ liabilities held to hedge long-term borrowings Interest rate swap contracts used for hedging Assets $’000 - Liabilities $’000 75 Total $’000 312,516 (1,009) 247,998 246,989 - - - 305 305 - - - 4,644 (4,644) - 380 559,810 238 (380) (142) - - - - 141,000 141,000 (1,009) - (1,009) - 106,998 106,998 1,664 (1,664) - 422 (422) - 2,558 (2,558) - Balance at 31 December 40,000 615 436,861 238 477,714 177,000 635 381,795 - - - - - - - - 43 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 22. Current tax liabilities The current tax liability of the Group is $4,055,506 (2019: $2,152,006). This amount represents the amount of income taxes payable in respect of current and prior financial periods. 23. Provisions Legal provision Balance at 1 January Arising during the year: Legal/other Utilised: Legal/other Balance at 31 December Consolidated 2020 $’000 500 500 - 802 (302) 500 2019 $’000 - - - - - - Legal provision This amount represents a provision for certain legal claims brought against the Group. In the Directors’ opinion, the provision is appropriate to cover known contingent liabilities at 31 December 2020. 24. Employee benefits Salaries and wages accrued Liability for annual leave Total employee benefits Liability for long-service leave Total employee benefits Consolidated 2020 $’000 51,239 6,828 58,067 4,868 62,935 2019 $’000 33,174 5,416 38,590 4,376 42,966 The present value of employee entitlements not expected to be settled within twelve months of balance date have been calculated using the following inputs or assumptions at the reporting date: Assumed rate of increase on wage/salaries Discount rate Settlement term (years) Number of employees at year end Consolidated 2020 $’000 3.0% 0.95% 7 732 2019 $’000 3.0% 1.25% 7 719 44 Bell Financial GroupAnnual Report 2020 25. Reconciliation of cash flows from operating activities Cash flows from operating activities Profit after tax: Adjustments for: Depreciation & amortisation Net (gain)/loss on investments Equity settled share-based payments Decrease/(increase) client receivables Decrease other receivables (Increase) derivative asset (Increase)/decrease other assets (Increase)/decrease deferred tax assets (Increase) intangibles Increase client payables (Decrease)/increase other payables lncrease/decrease derivative liability Increase current tax liabilities Increase provisions Increase/(decrease) deferred tax liability Net cash from operating activities Reconciliation of cash For the purpose of the cash flow statement, cash and cash equivalents comprise: Group cash reserves Cash on hand Cash at bank Margin lending cash Cash at bank Client cash Cash at bank (Trust account) Segregated cash at bank (client) Consolidated 2020 $’000 2019 $’000 46,695 32,443 10,370 (2,045) 394 41,162 (48,176) 877 (103) 30 3,660 (3,413) 34,447 6,734 (57) 1,990 10,323 (456) 47,018 13 82,534 82,547 16,381 16,381 38,106 58,103 96,209 195,137 11,177 (2,093) 426 56,205 36,900 1,060 (2) (98) (1,155) (3,336) 22,290 (471) - 1,904 20,469 1,435 135,201 12 139,639 139,651 7,208 7,208 44,807 92,377 137,184 284,043 45 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 26. Capital and reserves Ordinary shares On issue at 1 January Share issue On issue at 31 December Movements in ordinary share capital Date 1 January 2019 Share issue 31 December 2019 1 January 2020 Share issue 31 December 2020 Consolidated 2020 $’000 204,237 - 204,237 2019 $’000 204,237 - 204,237 Number of shares 320,743,948 - 320,743,948 320,743,948 - 320,743,948 Detail Opening balance Balance Opening balance Balance Ordinary Shares The authorised capital of the Group is $204,236,590 representing 320,743,948 fully paid ordinary shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets. Retained earnings As at 31 December 2020, there were retained profits of $55.4m (2019: $35.2m). Foreign currency reserve The foreign currency reserve comprises of any movements in the translation of foreign currency balances. Balance at 31 December 2020: $415,000 (2019: $771,000). Other equity Other equity comprises movements in equity as a result of transactions with subsidiaries in Bell Financial Group Ltd’s capacity as a shareholder. Balance at 31 December 2020: $28,858,000 debit (2019: $28,858,000 debit). Cash flow hedging reserve The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of the interest rate swap related to hedged transactions. Balance at 31 December 2020: $238,000 debit (2019: $380,000 debit). Share based payments reserve The share based payments reserve arises on the grant of options, performance rights and deferred share rights to select employees under the Company’s equity-based remuneration plans. Balance at 31 December 2020: Nil (2019: $9,000). Treasury shares reserve The treasury shares reserve represents the cost of shares held by the Employee Share Trust that the Group is required to include in the Consolidated Financial Statements. Balance at 31 December 2020: Nil (2019: $0.3m). 46 Bell Financial GroupAnnual Report 2020 27. Dividends Dividends recognised in the current year by the Group are: Cents per share Total amount $ ‘000 Franked/ unfranked Date of payment 2020 Interim 2020 ordinary dividend Final 2020 ordinary dividend 2019 Interim 2019 ordinary dividend Final 2019 ordinary dividend 4.00 - 3.50 4.50 12,830 - 11,137 14,433 Dividend franking account 30 percent franking credits available to shareholders of Bell Financial Group Ltd for subsequent financial years Franked - 27 August 2020 - Franked Franked 29 August 2019 18 March 2020 Company 2020 $ ‘000 2019 $ ‘000 32,742 26,558 The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: 1. Franking credits that will arise from the payment of current tax liabilities. 2. Franking debits that will arise from payment of dividends recognised as a liability at year-end. 3. Franking credits that will arise from the receipt of dividends recognised as receivable at year-end. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends declared but not recognised as a liability is to reduce it by $8.9m (2019: $6.2m). 28. Earnings per share Earnings per share at 31 December 2020 based on profit after tax and a weighted average number of shares outlined below was 14.6 cents (2019: 10.2 cents). Diluted earnings per share at 31 December 2020 was 14.6 cents (2019: 10.2 cents). Reconciliation of earnings used in calculating EPS Basic earnings per share Profit/(loss) after tax Profit attributable to ordinary equity holders used for basic EPS Adjustments for calculation of diluted earnings per share Profit attributable to ordinary equity holders used to calculate basic EPS Effect of stock options issued Profit attributable to ordinary equity holders used for diluted EPS Weighted average number of ordinary shares used as the denominator Weighted average number of ordinary shares used to calculate basic EPS (net of treasury shares) Weighted average number of ordinary shares at year-end Weighted average number of ordinary shares used to calculate diluted EPS Consolidated 2020 $’000 46,695 46,695 46,695 - 46,695 2019 $’000 32,443 32,443 32,443 - 32,443 Consolidated 2020 2019 320,507,243 320,507,243 320,507,243 318,559,138 318,599,138 318,599,138 47 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 29. Share-based payments Long-Term Incentive Plan (LTIP) The Board is responsible for administering the LTIP Rules and the terms and conditions of specific grants of options or performance rights to participants in the LTIP. The LTIP Rules include the following provisions: • The Board may determine which persons will be eligible to participate in the LTIP from time to time. Eligible persons may be invited to apply to participate in the LTIP. The Board may in its discretion accept such applications. • A person participating in the LTIP (“Executive”) may be granted options or performance rights on conditions determined by the Board. • The options or performance rights will vest on, and become exercisable on or after, a date predetermined by the Board (“the Vesting Date”), provided that the Executive remains employed as an executive of the Company as at that date. These terms may be accelerated at the discretion of the Board under specified circumstances. • An unvested option or performance right will generally lapse at the expiry of the exercise period applicable to that option or performance right. • Following the Vesting Date, the vested option or performance right may be exercised by the Executive subject to any exercise conditions and the payment of the exercise price (if any), and the Executive will then be allocated or issued shares on a one for one basis. • The Company has established an Employee Share Trust for the purpose of acquiring and holding shares in the Company for the benefit of participants. Fair value of options granted There were no share options granted during the year to 31 December 2020 (2019: Nil). Performance Rights Under the LTIP Rules, performance rights are deferred equity taken as 100% shares, with the conditions, including vesting and the period of deferral, governed by the terms of the grant. Unvested performance rights are forfeited in certain situations set out in the LTIP Rules. Ordinary shares allocated under the LTIP on exercise of performance rights may be held in trust beyond the deferral period. The issue price for the performance rights is based on the closing price of the shares traded on the ASX on the grant date and performance hurdles are time related. Reconciliation of outstanding performance rights: Outstanding 1 January Granted during the year Forfeited during the year Exercised during the year Outstanding balance 31 December Expenses arising from share-based payment transactions Employee share options Performance rights Employee share issue Total expense recognised as employee costs 48 Consolidated 2020 000 - - - - - 2019 000 2,000 - - (2,000) - Consolidated 2020 $’000 - - 426 426 2019 $’000 - - 394 394 Bell Financial GroupAnnual Report 2020 30. Financial instruments Exposure to credit, interest rate, currency and liquidity risks arise in the normal course of the Group’s business. Credit risk Management has a process in place to monitor the exposure to credit risk on an ongoing basis. The Group requires collateral in respect of margin loans made in the course of business within Bell Potter Capital. This collateral is generally in the form of the underlying security the margin loan is used to invest in. A loan-to-value ratio (LVR) is determined for each security with regard to market weight, index membership, liquidity, volatility, dividend yield, industry sector and advice from Bell Financial’s research department. A risk analyst performs a review of the LVR and the recommendation is submitted to management. Management does not expect any counterparty to fail to meet its obligations. There are no individual loans greater than 10% of the total loans and advance balance. Advisers and clients are provided with early warning of accounts in deficit from 5% up to 10% and clients receive a margin call if their account is in deficit by more than 10%. Margin calls are made based on the end-of-day position but can be made intraday at management’s discretion. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Statement of Financial Position as outlined below: Trade debtors Clearing house deposits Segregated deposits with clearing brokers Loans and advances Sundry debtors The ageing of trade receivables at reporting date is outlined below: Consolidated Ageing of receivables Not past due Past due 0 – 30 days Past due 31 – 365 days More than one year Consolidated 2020 $’000 82,027 9,159 34,267 469,076 4,545 2019 $’000 86,221 27,129 49,003 543,489 5,605 Note 14 14 14 19 14 Gross 2020 $’000 Impairment 2020 $’000 Gross 2019 $’000 Impairment 2019 $’000 81,667 348 12 - - - - - 85,909 78 234 - - - - - Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off. A provision for impairment of trade receivables is established based on lifetime expected credit losses. This assessment is based on past events, current conditions and reasonable and supportable information about future events and economic conditions. 49 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 30. Financial instruments continued Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest and excluding the impact of netting agreements. Consolidated 2020 Non-derivative liabilities Trade & other payables Cash deposits Cash advance facilities Bell Financial Trust Derivative liabilities Hedging derivative Foreign currency swap Consolidated 2019 Non-derivative liabilities Trade & other payables Cash deposits Cash advance facilities Bell Financial Trust Derivative liabilities Hedging derivative Foreign currency swap Carrying Amount $’000 Contracted Cashflow $’000 6-months or less $’000 6-12 months $’000 1-2 years $’000 2-5 years $’000 5+ years $’000 267,785 615 40,000 436,861 (267,785) (615) (40,000) (436,861) (267,785) (615) (40,000) (436,861) 238 - (238) - (238) - - - - - - - - - - - - - - - - - - - - - - - - - Carrying Amount $’000 Contracted Cashflow $’000 6-months or less $’000 6-12 months $’000 1-2 years $’000 2-5 years $’000 5+ years $’000 245,611 635 177,000 381,795 (245,611) (635) (177,000) (381,795) (245,611) (635) (177,000) (381,795) 380 - (380) - (380) - - - - - - - - - - - - - - - - - - - - - - - - - The Group manages liquidity by maintaining reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows and matching up maturity profiles of financial assets and liabilities. Rolling cash projections are used to monitor cash flow requirements and optimise cash returns on investments. A bank facility is also available to be drawn upon in order to meet both short and long-term liquidity requirements. Market risk Market risk is the risk that changes in market prices, such as interest rates, equity prices and foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control exposures within acceptable parameters, while optimising returns. 50 Bell Financial GroupAnnual Report 2020 Interest rate risk The Group’s investments in fixed-rate debt securities and its fixed-rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s investments in variable-rate debt securities and its variable-rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Interest rate swaps are used to hedge exposure to fluctuations in interest rates. Changes in the fair value of these derivative hedging instruments are recognised directly in equity to the extent that the hedge is effective. To the extent the hedge is ineffective, changes in the fair value are recognised in profit or loss. In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in interest rates will have an impact on profit. Investments in equity securities and short-term receivables and payables are not exposed to interest rate risk. Equity price risk All instruments are subject to the risk that future changes in market conditions may make an instrument less valuable. As trading instruments are valued with reference to the market or Black Scholes model, changes in equity prices directly affect reported income each period. The Group monitors equity price movements to ensure there is no material impact on the Group’s activities. The Group is exposed to equity price risks through its listed and unlisted investments. These investments are classified as financial assets or liabilities at fair value through the profit or loss. Foreign currency risk The Group is exposed to insignificant currency risk on monetary assets and liabilities held in a currency other than the respective functional currency of the Group. The Group ensures the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. Sensitivity analysis Interest rate risk At 31 December 2020, it is estimated that a general decrease of one-percentage point in interest rates would decrease the Group’s profit before income tax by approximately $2,766,000 (2019: $1,800,000 decrease to profit) and would decrease equity by approximately $1,936,200 (2019: $1,260,000 decrease to equity). Interest rate swaps have been included in this calculation. A general increase of one-percentage point in interest rates would have an equal but opposite effect. Equity price risk At 31 December 2020, it is estimated that a 10% decrease in equity prices would decrease the Group’s profit before income tax by approximately $1,565,000 (2019: $1,356,000 decrease to profit) and would decrease equity by approximately $1,095,500 (2019: $949,000 decrease to equity). A 10% increase in equity prices would have an equal but opposite effect. The impact of an equity price decrease excludes the impact on options that are used to mitigate the risk on limited recourse margin loans issued to clients. 51 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 30. Financial instruments continued Effective interest rates In respect of income-earning financial assets and interest-bearing financial liabilities, the following tables indicate their average effective interest rates at the reporting date and the expected periods in which they mature. Consolidated Fixed rate instruments Loans and advances Cash advance facility Variable rate instruments Cash and cash equivalents Loans and advances Deposits and borrowings Bell Financial Trust Average Effective interest rate % Note Total $’000 6 months or less $’000 6–12 months $’000 1–2 years $’000 2–5 years $’000 More than 5 years $’000 2020 19 21 13 19 21 21 5.30% 1.35% 129,688 (40,000) 89,688 128,198 (40,000) 88,198 1,490 - 1,490 0.31% 4.36% 0.18% 0.18% 284,043 339,388 (615) (436,861) 185,955 284,043 339,388 (615) (436,861) 185,955 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Fair value measurements (a) Accounting classifications and fair values The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. Carrying Amount Designated at fair value $’000 Note Fair value hedging instruments $’000 Loans and receivables $’000 Other financial liabilities $’000 31 December 2020 Financial assets measured at fair value Equity securities/unlisted options Foreign currency swap Loans and advances Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents Loans and advances Financial liabilities measured at fair value Interest rate swaps used for hedging Foreign currency swap Financial liabilities not measured at fair value Trade and other payables Deposits and borrowings 15 19 14 13 19 20 21 15,645 105 - 15,750 - - - - - - - - - - - - - - - - - - 238 - 238 - - - - - 60,148 60,148 129,998 284,043 408,928 822,969 - - - - - - Total $’000 15,645 105 60,148 75,898 129,998 284,043 408,928 822,969 238 - 238 - - - - - - - - - - - 263,847 477,476 741,323 263,847 477,476 741,323 1. Loans and advances measured at fair value decreased from $145,969,000 at 31 December 2019 to $60,148,000 at 31 December 2020 due to net new/repaid loans of $86,019,000 with the remaining movement due to net fair value changes. 52 Average Effective interest rate % 5.14% 2.08% 1.17% 5.43% 0.61% 0.61% Total $’000 221,752 (177,000) 44,752 195,137 321,737 (635) (381,795) 134,444 2019 6–12 months $’000 6,711 6,711 - - - - - - 6 months or less $’000 215,041 (177,000) 38,041 195,137 321,737 (635) (381,795) 134,444 Level 1 $’000 3,931 3,931 - - - - - - - - - - - - Fair Value Level 2 $’000 11,714 105 11,819 - - - - - - - - - 238 238 1–2 years $’000 2–5 years $’000 More than 5 years $’000 - - - - - - - - Level 3 $’000 60,148 60,148 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total $’000 15,645 105 60,148 75,898 238 238 Bell Financial GroupAnnual Report 2020 30. Financial instruments continued Effective interest rates In respect of income-earning financial assets and interest-bearing financial liabilities, the following tables indicate their average effective interest rates at the reporting date and the expected periods in which they mature. Consolidated Note % Average Effective interest rate Total $’000 6 months or less $’000 6–12 months $’000 1–2 years $’000 2–5 More than years $’000 5 years $’000 Average Effective interest rate % 2020 5.14% 2.08% 1.17% 5.43% 0.61% 0.61% Fixed rate instruments Loans and advances Cash advance facility Variable rate instruments Cash and cash equivalents Loans and advances Deposits and borrowings Bell Financial Trust 19 21 13 19 21 21 5.30% 1.35% 129,688 128,198 1,490 (40,000) (40,000) 89,688 88,198 1,490 0.31% 4.36% 0.18% 0.18% 284,043 339,388 284,043 339,388 (615) (615) (436,861) (436,861) 185,955 185,955 - - - - - - - - - - - - - - Fair value measurements (a) Accounting classifications and fair values in the fair value hierarchy. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels Carrying Amount Fair value Designated hedging Loans and at fair value instruments receivables Note $’000 $’000 $’000 Other financial liabilities $’000 31 December 2020 Financial assets measured at fair value Equity securities/unlisted options Foreign currency swap Loans and advances Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents Loans and advances Financial liabilities measured at fair value Interest rate swaps used for hedging Foreign currency swap Financial liabilities not measured at fair value Trade and other payables Deposits and borrowings 15 19 14 13 19 20 21 15,645 105 15,750 - - - - - - - - - - - - - - - - - - - - - - - 238 238 60,148 60,148 129,998 284,043 408,928 822,969 - - - - - - - - 1. Loans and advances measured at fair value decreased from $145,969,000 at 31 December 2019 to $60,148,000 at 31 December 2020 due to net new/repaid loans of $86,019,000 with the remaining movement due to net fair value changes. - - - - - - - - - - - - - - - - - - - - - - - - - - - Total $’000 15,645 105 60,148 75,898 129,998 284,043 408,928 822,969 238 - 238 263,847 477,476 741,323 263,847 477,476 741,323 2019 6–12 months $’000 6,711 - 6,711 - - - - - 6 months or less $’000 215,041 (177,000) 38,041 195,137 321,737 (635) (381,795) 134,444 Total $’000 221,752 (177,000) 44,752 195,137 321,737 (635) (381,795) 134,444 Level 1 $’000 3,931 - - 3,931 - - - - - - - - - - Fair Value Level 2 $’000 11,714 105 - 11,819 - - - - 238 - 238 - - - 1–2 years $’000 2–5 years $’000 More than 5 years $’000 - - - - - - - - Total $’000 15,645 105 60,148 75,898 - - - - 238 - 238 - - - - - - - - - - - Level 3 $’000 - - 60,148 60,148 - - - - - - - - - - - - - - - - - - 53 Bell Financial GroupAnnual Report 2020 Level 1 $’000 2,706 2,706 - - - - - - - - - - - - Fair Value Level 2 $’000 10,853 103 10,956 - - - - - - - - - 380 380 Level 3 $’000 145,969 145,969 - - - - - - - - - - - - Total $’000 13,559 103 145,969 159,631 - - - - - - - - 380 380 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 30. Financial instruments continued Fair value measurements continued (a) Accounting classifications and fair values continued Carrying Amount Designated at fair value $’000 Note Fair value hedging instruments $’000 Loans and receivables $’000 Other financial liabilities $’000 31 December 2019 Financial assets measured at fair value Equity securities/unlisted options Foreign currency swap Loans and advances Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents Loans and advances Financial liabilities measured at fair value Interest rate swaps used for hedging Foreign currency swap Financial liabilities not measured at fair value Trade and other payables Deposits and borrowings 15 19 14 13 19 20 21 13,559 103 - 13,662 - - - - - - - - - - - - - - - - - - 380 - 380 - - - - - 145,969 145,969 167,958 195,137 397,520 760,615 - - - - - - Total $’000 13,559 103 145,969 159,631 167,958 195,137 397,520 760,615 380 - 380 - - - - - - - - - - - 242,701 559,430 802,131 242,701 559,430 802,131 (b) Accounting classifications and fair values The following shows the valuation techniques used in measuring level 1, 2 and 3 values, as well as the significant unobservable inputs used. Level 1 – Equity securities – the valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 – Unlisted options – the valuation technique uses observable inputs. The observable inputs include strike price, expiry date and market price. The valuation is based on Black Scholes model. Level 2 – Interest rate swaps – the fair values are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. Level 2 – Currency swaps – the fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on high quality yield curves in the respective currencies. Level 3 – Loans and advances – the fair value is based on the option value used to mitigate the risk on the limited recourse margin loans and the interest rate implicit in the loan. There were no reclassifications on the fair value levels during the years ended 31 December 2020 and 2019. 54 Bell Financial GroupAnnual Report 2020 30. Financial instruments continued Fair value measurements continued (a) Accounting classifications and fair values continued 31 December 2019 Financial assets measured at fair value Equity securities/unlisted options Foreign currency swap Loans and advances Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents Loans and advances Financial liabilities measured at fair value Interest rate swaps used for hedging Foreign currency swap Financial liabilities not measured at fair value Trade and other payables Deposits and borrowings 15 19 14 13 19 20 21 Carrying Amount Fair value Designated hedging Loans and at fair value instruments receivables Note $’000 $’000 $’000 Other financial liabilities $’000 13,559 103 13,662 - - - - - - - - - - - - - - - - - - - - - - - 380 380 145,969 145,969 167,958 195,137 397,520 760,615 - - - - - - - - Total $’000 13,559 103 145,969 159,631 167,958 195,137 397,520 760,615 380 - 380 - - - - - - - - - - - 242,701 559,430 802,131 242,701 559,430 802,131 (b) Accounting classifications and fair values inputs used. The following shows the valuation techniques used in measuring level 1, 2 and 3 values, as well as the significant unobservable Level 1 – Equity securities – the valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 – Unlisted options – the valuation technique uses observable inputs. The observable inputs include strike price, expiry date and market price. The valuation is based on Black Scholes model. Level 2 – Interest rate swaps – the fair values are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. Level 2 – Currency swaps – the fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on high quality yield curves in the respective currencies. Level 3 – Loans and advances – the fair value is based on the option value used to mitigate the risk on the limited recourse margin loans and the interest rate implicit in the loan. There were no reclassifications on the fair value levels during the years ended 31 December 2020 and 2019. Level 1 $’000 2,706 - - 2,706 - - - - - - - - - - Fair Value Level 2 $’000 10,853 103 - 10,956 - - - - 380 - 380 - - - Level 3 $’000 - - 145,969 145,969 - - - - - - - - - - Total $’000 13,559 103 145,969 159,631 - - - - 380 - 380 - - - 55 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 31. Leases The Group has entered into commercial property leases for its office accommodation. These leases have a remaining life of up to 10 years. The Group has no other capital or lease commitments. Consolidated 2020 $’000 22,801 (8,370) 1,783 (92) 16,122 2019 $’000 31,019 (8,420) 132 70 22,801 Consolidated 2020 $’000 30,568 1,303 1,784 (11,200) (98) 22,357 2019 $’000 39,677 1,642 131 (10,955) 73 30,568 Consolidated 2020 $’000 8,370 1,303 1,919 11,592 2019 $’000 8,420 1,642 1,658 11,720 Consolidated 2020 $’000 (11,200) 2019 $’000 (10,955) Right-of-use assets Balance at 1 January Depreciation charge for the year Additions to right-of-use assets Effect of movements in exchange rates Balance at 31 December Lease Liabilities Balance at 1 January Interest on lease liabilities for the year Addition to lease liabilities Rent payments Effect of movements in exchange rates Balance at 31 December Amounts recognised in profit or loss Depreciation on right-of-use assets Interest on lease liabilities Expenses relating to short-term leases Amounts recognised in statements of cash flows Total cash outflows for lease 56 Bell Financial GroupAnnual Report 2020 32. Parent entity disclosures As at, and throughout the financial year ending 31 December 2020, the parent company of the Group was Bell Financial Group Ltd. Consolidated Results of the parent entity Profit for the year Total comprehensive income for the year Financial position of parent entity at year end Current assets Non-current assets Total assets Current liabilities Total liabilities Total equity of the parent entity comprising of: Contributed equity Reserves Retained earnings/(losses) Total equity 2020 $’000 26,189 26,189 16,149 217,724 233,873 45,277 45,277 204,237 - (15,641) 188,596 2019 $’000 24,441 24,441 2,029 206,125 208,154 18,904 18,904 204,237 290 (15,277) 189,250 There are currently no complaints or claims made against the parent entity. Parent entity contingent liabilities The Directors are of the opinion that apart from that already provided for in the financial statements, no further provisions are required in respect of any matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement. 33. Related parties The following were key management personnel of the Group at any time during the reporting period: Executive Directors A Provan Senior Executives L Bell A Bell R Fell D Davenport Non-Executive Directors C Coleman G Cubbin B Wilson AO C Feldmanis Key management personnel compensation The key management personnel compensation comprised: Short-term employee benefits Other long-term benefits Post-employment benefits Termination benefits Share-based payments Consolidated 2020 3,525,980 29,961 131,379 - 59,500 3,746,820 2019 3,919,181 81,383 172,331 - 48,000 4,220,895 57 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 33. Related parties continued Loans to key management personnel and their related parties Details regarding loans outstanding at the reporting date to key management personnel and their related parties at any time in the reporting period, are as follows: Total for key management personnel 2020 Total for key management personnel 2019 Total for other related parties 2020 Total for other related parties 2019 Total for key management personnel and their related parties 2020 Total for key management personnel and their related parties 2019 Opening balance $ 2,273,518 3,039,829 - - Interest paid and payable in the reporting period $ 67,056 120,672 - - Closing balance $ 1,896,810 2,835,739 - - 2,273,518 1,896,810 67,056 3,039,829 2,835,739 120,672 Number in Group at 31 December1 21 42 - - 21 42 1. Number in Group includes KMP and other related parties with loans at any time during the year. Interest is payable at prevailing market rates on all loans to key management persons and their related entities. These rates are available to all clients and may vary marginally depending on individual negotiations. The principal amounts are repayable per terms agreed on an individual basis. Interest received on the loans totalled $67,056 (2019: $120,672). No amounts have been written-down or recorded as allowances for impairment, as the balances are considered fully collectable. Movements in shares 2020 The movement during the reporting period in the number of ordinary shares in Bell Financial Group Ltd held, directly, indirectly or beneficially, by each Director and key management person, including their related parties, is as follows: Held at 1 January 2020 Purchases Received on exercise of options Held at 31 December 2020 Sales Directors A Provan2 C Coleman G Cubbin B Wilson AO C Feldmanis Senior Executives LM Bell2 AG Bell2 R Fell D Davenport 43,457,863 2,176,740 216,000 1,200,000 - 42,723,555 32,303,972 875,000 228,039 300,000 - - - 50,000 303,537 220,000 25,000 35,000 - - - - - - - - - - - - - - - - - - 43,757,863 2,176,740 216,000 1,200,000 50,000 43,027,092 32,523,972 900,000 263,039 2. The number of shares held by Alastair Provan, Lewis Bell and Andrew Bell includes those held indirectly through Bell Group Holdings Pty Limited and Bell Securities Pty Ltd. 58 Bell Financial GroupAnnual Report 2020 Movements in shares 2019 Directors A Provan2 C Coleman G Cubbin B Wilson AO C Bell2 Senior Executives LM Bell2 AG Bell2 R Fell D Davenport Held at 1 January 2019 Purchases Received on exercise of options Held at 31 December 2019 Sales 43,457,863 2,126,740 216,000 1,200,000 43,083,154 42,548,555 32,089,972 840,000 221,939 - 50,000 - - - 175,000 214,000 35,000 106,100 - - - - - - - - - - - - - - - - - (100,000) 43,457,863 2,176,740 216,000 1,200,000 43,083,154 42,723,555 32,303,972 875,000 228,039 2. The number of shares held by Colin Bell, Alastair Provan, Lewis Bell and Andrew Bell includes those held indirectly through Bell Group Holdings Pty Limited and Bell Securities Pty Ltd. Other key management personnel transactions There are no other transactions with key management persons or their related parties other than those that have been disclosed in this report. Ultimate parent Bell Group Holdings Pty Ltd is the ultimate parent company of Bell Financial Group Ltd. There are no outstanding amounts owed by or to the ultimate parent entity at 31 December 2020 (2019: nil). There is no interest receivable or payable at 31 December 2020 (2019: nil). Subsidiaries The table below outlines loans made by the Company to wholly owned subsidiaries. Subsidiary Bell Potter Platforms Pty Ltd1 Third Party Platform Pty Limited1 Bell Potter Capital Limited2 Bell Potter (US) Holdings Inc1 Bell Potter Securities (US) LLC 1. Loan is interest free and unsecured. 2020 $ 691 230,803 8,098,527 1,940,125 1,912 10,272,058 2019 $ 632 - 8,052,473 1,935,735 1,912 9,990,752 2. The loan from the parent entity to Bell Potter Capital Limited represents a subordinated loan that attracts interest at 1.82% per annum (2019: 2.67% per annum). Loans made by wholly owned subsidiaries to the Company: $21,023,657 (2019: $17,036,667). During the course of the financial year subsidiaries conducted transactions with each other on terms equivalent to those on an arm’s length basis. They are fully eliminated on consolidation. As at 31 December 2020, all outstanding amounts are considered fully collectable. 59 Bell Financial GroupAnnual Report 2020 NOTES TO THE FINANCIAL STATEMENTS continued For the year ended 31 December 2020 34. Group entities Bell Financial Group Ltd Significant subsidiaries Bell Potter Securities Limited Bell Potter Capital Limited Third Party Platform Pty Ltd Bell Potter Securities Limited (UK) Bell Potter Securities (HK) Limited Bell Potter (US) Holdings Inc Incorporation Australia Australia Australia United Kingdom Hong Kong United States Consolidated Interest 2020 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 35. Guarantees From time to time Bell Financial has provided financial guarantees in the ordinary course of business which amount to $7.0m (2019: $6.6m) and are not recorded in the Statement of Financial Position as at 31 December 2020. 36. Contingent liabilities and contingent assets The Company has agreed to indemnify its wholly owned subsidiary, Bell Potter Securities Limited, in the event that any contingent liabilities of Bell Potter Securities Limited results in a loss. Contingent liabilities of the Company exist in relation to claims and/or possible claims which, at the date of signing these accounts, have not been resolved. An assessment of the likely loss to the Company has been made in respect of the identified claims, on a claim by claim basis, and specific provision has been made where appropriate. The Company does not consider that the outcome of any other current proceedings, either individually or in aggregate, is likely to materially affect its operations of financial position. 37. Subsequent events Except as noted below, there were no significant events from 31 December 2020 to the date of this report. Final Dividend On 17 February 2021, the Directors resolved to pay a fully franked final dividend of 6.5 cents per share. 38. Auditor’s remuneration Audit services Auditor of the Company KPMG: Audit and review of financial reports Total remuneration for audit services Audit related services Auditor of the Company KPMG Australia: Other regulatory audit services Total remuneration for audit related services Non-audit related services Tax services 60 Consolidated 2020 $ 2019 $ 366,490 366,490 366,204 366,204 106,000 106,000 29,405 501,895 109,000 109,000 27,185 502,389 Bell Financial GroupAnnual Report 2020 DIRECTORS’ DECLARATION 1. In the opinion of the Directors of Bell Financial Group Limited (‘the Company’): (a) the Consolidated Financial Statements and notes that are set out on pages 18 to 60 and the Remuneration Report on pages 12 to 16 in the Directors’ Report, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer (who is the Executive Chairman) and the Chief Financial Officer for the financial year ended 31 December 2020. Note 1(a) of the Consolidated Financial Statements includes a statement of compliance with International Financial Reporting Standards. This declaration is made on 17 February 2021 in accordance with a resolution of the Directors: Alastair Provan Executive Chairman 17 February 2021 61 Bell Financial GroupAnnual Report 2020 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report To the shareholders of Bell Financial Group Ltd Report on the audit of the Financial Report Opinion We have audited the Financial Report of Bell Financial Group Ltd (the Group). In our opinion, the accompanying Financial Report of the Group is in accordance with the Corporations Act 2001, including: The Financial Report comprises: • Consolidated Statement of financial position as at 31 December 2020; • • financial position as at giving a true and fair view of the Group’s 31 December 2020 and of its financial performance for the year ended on that date; and complying with Australian Accounting the Corporations Standards Regulations 2001. and • Consolidated Statement of Profit or Loss, Consolidated Income, Consolidated in Equity, and Consolidated Statement of Comprehensive Statement of Changes Statement of Cash Flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors’ Declaration. The Group consists of the Group and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 62 Bell Financial GroupAnnual Report 2020 Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Valuation of Goodwill ($130,413,000) Refer to Note 17 to the financial report The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill for impairment given the size of the balance (being 12% of total assets). We focused on the identification of new Cash Generating Units (CGUs) and the reallocation of goodwill including the events and changes in conditions that lead to a change of CGUs and the method used to reallocate goodwill. We focused on the significant forward-looking assumptions the Group applied in their value in use model, including: • Forecast cash flows – the Group has continued to experience competitive market conditions and volatility the global investment market. This increases the risk of inaccurate forecasts for us to consider and goodwill being impaired. in • Forecast growth rates and terminal multiples – in addition to the uncertainties described above, the Group’s models are sensitive to small unfavourable changes these assumptions, reducing available headroom. This drives additional audit effort specific to their of and application to the Group’s strategy. consistency feasibility in the • Discount rates - these are complicated in nature and vary according to the conditions and environment specific Cash Generating Unit (CGU) is subject to. The Group’s modelling is sensitive to small changes in the discount rate. We involved the our assessment. specialists with valuation Working with our valuation specialists, our procedures included the following: • We considered the Group’s determination of their new CGUs based on our understanding of changes to the operations of the Group’s business and how independent cash flows were generated, against the requirements of the accounting standards. • We analysed the Group’s internal reporting to assess changes to the Group’s monitoring and management of activities and assessed the reallocation of goodwill and intangible assets on this basis. • We analysed the Group’s assessment of impairment prior to the reallocation of goodwill. • We considered the appropriateness of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards. • We assessed the integrity of the value in use model used, including the accuracy of the underlying formulas. • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the model. We noted previous trends where forecasts for certain CGU’s were not achieved and how they impacted the business, for use in our testing. • We considered the sensitivity of the model by varying key assumptions, such as forecast growth rates, terminal multiples and discount rates, within a reasonably possible range, to identify those CGUs at higher risk of impairment and to focus our further procedures. 63 Bell Financial GroupAnnual Report 2020 INDEPENDENT AUDITOR’S REPORT continued and growth assumptions • We challenged the Group’s significant forecast cash flow considering competitive market conditions. We applied increased scepticism to forecasts in the CGU’s where previous forecasts were not achieved. We compared forecast expense growth rates to published studies and considered differences for the Group’s operations. We used our knowledge of the Group, the Group’s past performance, business and customers, and our industry experience. • We checked the consistency of the growth rate to the past performance of the Group, and our experience regarding the feasibility of these in the industry in which they operate and compared the forecast cash flows contained in the value in use model to those contained within the Board reviewed goodwill impairment assessment memorandum. • We assessed the current net profit after tax multiples and to those of comparable companies. • We independently developed a discount rate range considered comparable using publicly available market data for comparable entities to the Group and the industry it operates in. • We assessed the Group’s analysis of the market capitalisation compared to net assets of the Group. This the market capitalisation range implied by recent share price trading ranges to the Group’s net assets. included consideration of • We assessed the disclosures in the Financial Report using our understanding of the issues obtained from our testing and against the requirements of the accounting standards. The Group uses a complex model to perform their annual testing of goodwill for impairment. The model uses historical performance adjusted for a range of internal and external sources as inputs to the assumptions. Certain CGU’s of the Group have not met prior forecasts in some instances historically, increasing our audit effort in assessing the reliability of current forecasts for each CGU. Complex modelling, using forward- looking assumptions tends to be prone to greater for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. risk We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. 64 Bell Financial GroupAnnual Report 2020 Other Information Other Information is financial and non-financial information in Bell Financial Group Ltd’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; • • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. 65 Bell Financial GroupAnnual Report 2020 INDEPENDENT AUDITOR’S REPORT continued Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Bell Financial Group Ltd for the year ended 31 December 2020, complies with Section 300A of the Corporations Act 2001. The Directors of the Group are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 12 to 16 of the Directors’ report for the year ended 31 December 2020. responsibility Our the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. to express an opinion on is Chris Wooden Partner Melbourne 17 February 2021 KPMG 66 Bell Financial GroupAnnual Report 2020 SHAREHOLDER INFORMATION The following information is current as at 31 January 2021. Distribution of shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of shareholders 477 994 670 1,508 244 3,893 Number of shares 268,007 2,952,853 5,373,677 49,757,851 262,391,560 320,743,948 % of issued capital 0.08 0.92 1.68 15.51 81.81 100.00 There were 105 shareholders who held less than a marketable parcel (less than $500 of shares). Twenty largest shareholders Rank Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. BELL GROUP HOLDINGS PTY LIMITED CITICORP NOMINEES PTY LIMITED MR JAMES GORDON MOFFATT MR ANAND SELVARAJAH HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BELL POTTER NOMINEES LTDCOLIN BELL PTY LTD MR ALASTAIR PROVAN + MRS JANIS PROVAN J P MORGAN NOMINEES AUSTRALIA PTY LIMITED MORSON HOLDINGS PTY LTD NATIONAL NOMINEES LIMITED MR LEE WILLIAM MUCO BELL SECURITIES PTY LIMITED CERTUS CAPITAL PTY LTD FRANUNTA SUPER PTY LTD MR LIONEL ALEXANDER MCFADYEN + MRS JENNIFER JUNE MCFADYEN BOND STREET CUSTODIANS LIMITED MILDRIDGE PTY LTD NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> MR ALASTAIR PROVAN + MRS JANIS PROVAN 17. 18. 19. 20. Number of shares 143,998,350 5,807,772 5,400,000 3,892,334 3,655,296 3,484,750 2,814,627 2,700,000 2,611,495 2,609,699 2,526,364 2,300,000 2,232,000 2,129,623 1,819,400 1,687,480 1,669,097 1,640,000 1,611,769 1,560,876 % of issued capital 44.90 1.81 1.68 1.21 1.14 1.09 0.88 0.84 0.81 0.81 0.79 0.72 0.70 0.66 0.57 0.53 0.52 0.51 0.50 0.49 67 Bell Financial GroupAnnual Report 2020 SHAREHOLDER INFORMATION continued Substantial shareholdings The following shareholders were registered by the Company as substantial shareholders, having declared a relevant interest in accordance with the Corporations Act: Substantial shareholder BELL GROUP HOLDINGS PTY LIMITED ALASTAIR PROVAN COLIN BELL LEWIS BELL Number of shares 146,230,350 151,229,420 150,554,711 149,998,649 % of issued capital 45.591 47.101,2 46.941,3 46.921,4 1. Bell Group Holdings Pty Limited (BGH) holds 143,998,350 BFG ordinary shares. BGH’s wholly-owned subsidiary, Bell Securities Pty Limited (BSPL) holds 2,232,000 BFG ordinary shares. Colin Bell, Alastair Provan and Lewis Bell each hold more than 20% of BGH and therefore under the Corporations Act they are each deemed to have a relevant interest in the 146,230,350 BFG ordinary shares held by BGH and BSPL. 2. Alastair Provan has a relevant interest in 4,999,070 BFG ordinary shares. 3. Colin Bell has a relevant interest in 4,324,361 BFG ordinary shares. 4. Lewis Bell has a relevant interest in 3,768,299 BFG ordinary shares. Voting rights Bell Financial has one class of fully paid ordinary shares. On a show of hands, every member present at the meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no voting rights attached to the options or performance rights. On-market buy-back There is no current on-market buy-back. 68 Bell Financial GroupAnnual Report 2020 DIRECTORY Bell Financial Group Ltd ABN 59 083 194 763 Directors Alastair Provan, Executive Chairman Graham Cubbin, Independent Director Brian Wilson AO, Independent Director Christine Feldmanis, Non-Executive Director Craig Coleman, Independent Director Company Secretary Cindy-Jane Lee Registered Office Level 29, 101 Collins Street Melbourne VIC 3000 Telephone 03 9256 8700 Share Registry Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford VIC 3067 Telephone 03 9415 5000 ASX Code BFG Shares are listed on the Australian Securities Exchange Banker Australia and New Zealand Banking Group Limited Auditor KPMG Website Address www.bellfg.com.au Annual Report 2020 69 Bell Financial Group Bell Financial Group Limited Level 29, 101 Collins Street Melbourne VIC 3000 Australia GPO Box 4718 Melbourne VIC 3001 Australia www.bellfg.com.au