Euroz Limited Annual Report 2022

Plain-text annual report

A N N U A L R E P O R T 2022 3 Financial Year Highlights 2022 $3.0b GROUP FUM 1 MARKET CAPITALISATION $315.7m DIVIDENDS FULLY FRANKED DIVIDENDS IN 22 YEARS 11cps $287m 1 CASH & INVESTMENTS NET PROFIT AFTER TAX $194.2m 1 $40.7m 1. As at 30 June 2022 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS 03 05 06 FINANCIAL YEAR HIGHLIGHTS CORPORATE DIRECTORY EXECUTIVE CHAIRMAN’S REPORT 10 12 16 EUROZ HARTLEYS GROUP LIMITED DIRECTORS EUROZ HARTLEYS LIMITED DIRECTORS & OFFICERS EUROZ HARTLEYS GROUP STRUCTURE 17 19 24 CORPORATE TRANSACTIONS MANAGING DIRECTOR’S REPORT EUROZ HARTLEYS FOUNDATION 27 89 FINANCIAL REPORT ASX ADDITIONAL INFORMATION 91 EUROZ HARTLEYS GROUP CONTACT DETAILS 5 CORPORATE DIRECTORY REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 Telephone: +61 8 9488 1400 Facsimile: +61 8 9488 1477 Email: info@euroz.com SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace PERTH WA 6000 Telephone: 1300 787 575 AUDITORS KPMG 235 St Georges Terrace Perth WA 6000 Telephone: +61 8 9263 7171 BANKERS Westpac Banking Corporation 109 St George’s Terrace PERTH WA 6000 Bankwest 306 Murray Street PERTH WA 6000 SECURITIES EXCHANGE LISTINGS Euroz Hartleys Group Limited shares are listed on the Australian Securities Exchange (ASX:EZL) WEBSITE ADDRESS www.euroz.com CORPORATE GOVERNANCE STATEMENT www.euroz.com/investors/ corporate-governance BOARD OF DIRECTORS Andrew McKenzie Executive Chairman Jay Hughes Executive Director Robert Black Executive Director Ian Parker Executive Director Richard Simpson Executive Director Robin Romero Independent Non - Executive Director Fiona Kalaf Independent Non - Executive Director - Appointed 28 June 2022 COMPANY SECRETARY Anthony Hewett NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 20226 Executive Chairman’s Report Last year Euroz Hartleys Group Limited (“Euroz Hartleys” or the “Company”) completed the merger of three separate licenses: Euroz Securities Limited, Hartleys Limited and Entrust Wealth Management Pty Ltd. Throughout 2022, our integration program continued to fully bring these significant WA brands together in order to provide the best possible platform for our staff, clients and shareholders. We believe that Euroz Hartleys Limited is now recognised as Western Australia’s leading financial services business. Following a successful vote at our 2021 AGM the Company changed the name of our listed parent company to “Euroz Hartleys Group Limited” to reflect the deep history of our two iconic Western Australian businesses. The past year delivered strong profitability, a significantly stronger balance sheet and a simplified corporate structure. Euroz Hartleys Group Limited reported an audited result of $40.7 million net profit after tax attributable to members for the financial year ended 30 June 2022. Underlying cash profitability was driven by a solid performance from Euroz Hartleys Limited which delivered Equity Capital Market (“ECM”) raisings of $2.2 billion versus $2.0 billion last year. ECM revenue was down approximately 16% and overall corporate revenues down approximately 23% from the previous exceptional year. Brokerage and recurring Funds Under Management (“FUM”) revenue for the year were broadly in line with the previous year. Euroz Hartleys Limited FUM as at 30 June 2022 was $3.0 billion. Solid underlying cash profitability enabled your Directors to declare and pay a final fully franked dividend of 8.5 cents per share (“cps”) which combined with the interim dividend of 2.5 cps brought the full year dividend to 11 cps. EUROZ HARTLEYS GROUP ANNUAL REPORT 20227 We are proud of our significant shared achievements in what proved to be another strong year for Euroz Hartleys Group Limited. Summary Euroz Hartleys maintains a strong balance sheet with a cash and investments balance at 30 June 2022 of $194.2 million and zero debt (prior to final dividend and $80 million capital management initiative). The best measure of a strong business and underlying cashflow is of course the payment of dividends. We are proud that following the upcoming AGM approval of our capital management initiative we will have returned $327 million in fully franked dividends and $40 million of capital to shareholders across our 22-year history. I would like to sincerely thank our 184 staff who represent 100% of the goodwill in our business. I thank them for their significant efforts and who as our largest shareholders, remain committed to continuing to grow this proudly Western Australian financial services business. Andrew McKenzie Executive Chairman I would like to also thank Rob Black for his tireless efforts as Managing director for the past 8 Years. Rob has helped steer us well through evolving markets and he will continue to serve us well in the increasingly important role of Head of Syndication and as an Executive Director of Euroz Hartleys Group Limited. Your Company has an excellent track record of counter cyclical and well executed acquisitions in a financial landscape that continues to evolve and benefit those that have true scale and that can provide the best investment solutions to their clients. We are the “Best of the Best” combination of four major Western Australian financial advice businesses and with our balance sheet, people and track record of successful integrations/ mergers believe we will continue to be a natural consolidator in an exciting growth industry. Capital Management Post balance date we have announced that subject to shareholder and other approvals we intend to return $80 million of excess capital to shareholders. A wide range of alternatives and combinations of structures (including various buyback methods) were considered after several months of internal analysis and external advice. These funds intend to be distributed as a $40 million fully franked special dividend and a $40 million return of capital by way of an equal capital reduction. Your Directors are confident that the chosen method strikes the right balance between the most tax efficient outcome for shareholders, provides EPS accretion to the Company and rewards all shareholders fairly. Westoz Funds Management Pty Ltd (“WFM”), a wholly owned subsidiary of Euroz Hartleys Group Limited, was responsible for managing the mandates of Westoz Investment Company Limited (“Westoz”) and Ozgrowth Limited (“Ozgrowth”). On 23 December 2021, Westoz and Ozgrowth announced that they had entered into separate Schemes of Arrangements with WAM Capital Limited. On 21 April 2022, WAM Capital Limited acquired Westoz and Ozgrowth following the completion of two separate Scheme of Arrangements. Euroz Hartleys Group Limited received approximately 49.95 million WAM Capital Limited ordinary shares upon the finalisation of the Schemes of Arrangements, which subsequently have been sold resulting in proceeds of approximately $103.9 million. WFM will no longer receive management or performance fees from these funds. We have determined to retain the WFM Australian Financial Services Licence (AFSL) to maintain future low cost optionality in funds management. We have been the beneficiaries of the past two years of very strong markets. We remind staff and shareholders that whilst we are building a stronger overall business with an increasing base of underlying recurring revenues our earnings can still be quite cyclical/ volatile. During the last quarter of FY22 rapidly increasing inflation and interest rates saw a slowdown in broader markets and lower levels of capital raisings and trading volumes. After two very strong years it is likely that we will now experience naturally slower markets. We know that this provides the perfect opportunity to work even harder to improve our underlying business and strategy for the future. In recent months we have made significant changes to our business, in particular by appointing a new Managing Director (Tim Bunney), Head of Corporate Finance (Ben Crossing), Head of Research (Gavin Allen) and Head of Advice (Amanda Boyce). These major appointments and the great energy and enthusiasm they have already brought to our entire business gives me great comfort in our future direction. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT8 N O I L L I M $ E R A H S R E P S T N E C Euroz Hartleys Group P R O F I T B E F O R E T A X & N E T P R O F I T A F T E R T A X 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20. 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 FI NA N CIA L YE AR Profit before tax Net profit after tax attributable to members Euroz Hartleys Group D I V I D E N D H I S T O R Y 30.0 25.0 20.0 15.0 10.0 5.0 0.0 FI NA N CIA L Y EAR 1H Dividend per share 2H Dividend per share EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 9 Euroz Hartleys Group N T A P E R S H A R E E R A H S R E P S T N E C 100.0 80.0 60.0 40.0 20.0 0.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 FI NA N CIA L Y EAR Euroz Hartleys Group F U N D S U N D E R M A N A G E M E N T ) M $ A ( M U F 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 DEC 15 JUN 16 DEC 16 JUN 17 DEC 17 JUN 18 DEC 18 JUN 19 DEC 19 JUN 20 DEC 20 JUN 21 OZG WIC Entrust Euroz Hartleys Other ‘Other’ represents historical FUM from Flinders Investment Partners, Dalton Street Capital and Equus Point Capital Entrust FUM included within Euroz Hartleys from Jun ‘21 onwards NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 2022 10 Euroz Hartleys Group Limited Directors ANDREW MCKENZIE EXECUTIV E CHAIRM AN JAY HUGHES EX EC UT IVE D IR ECTO R RI CH ARD SI MPS ON EX ECU TIVE DIR ECTO R IAN PARKE R EX ECU TIVE DIR ECTOR Jay has worked in stockbroking since 1986, starting his career on the trading floor. He is the Non-Executive Chairman of Westoz Funds Management Pty Ltd. Jay holds a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australasia (FINSIA). He was recognised as an affiliate of the ASX in December 2000 and was admitted in May 2004 as a master member of SIAA. Andrew is Executive Chairman of Euroz Hartleys Group Limited (ASX:EZL), Euroz Hartleys Limited and is Chairman of the Euroz Hartleys Foundation. Andrew is a board member of the Perth Children’s Hospital Foundation and Chairman of their Investment Sub- Committee. Andrew is a past board member of the Australian Stockbrokers Association, Presbyterian Ladies College (PLC) and the PLC Foundation. He holds a Bachelor of Economics from the University of Western Australia (UWA), a Graduate Diploma in Applied Finance and Investment and is a Master Practitioner Member (MSIAA) of the Stockbrokers and Investment Advisers Association (SIAA). Ian has extensive knowledge in the areas of stockbroking, investment advice and domestic equities. Ian holds a Bachelor of Arts (Economics) degree from Murdoch University (WA) and is a master member of SIAA. Ian has been in the financial services industry since 1981 and later became a Director of Gilpear Investment Group. In January 1991 Ian joined Hartleys Limited as a Private Client Adviser, was a member of the Executive Council, Underwriting Committee and Head of the Private Client Advisory Board for 2 years. Ian was appointed a Director of Hartleys Limited in May 2003 as part of the successful management buyout in October 2003 and was appointed Chairman of Hartleys Limited in February 2015. Richard Simpson brings to the board extensive corporate finance, advisory and equity capital market experience and knowledge gained through a number of senior Australian and international corporate finance positions. Richard holds a Bachelor of Applied Science (Hons), and an MBA from the University of Western Australia. Richard began his career as a petroleum engineer prior to joining NM Rothschild & Sons in London working in corporate finance and specialising in natural resources and privatisations. Richard returned to Australia to join the US Investment Bank, Salomon Brothers Inc based in both Sydney and Melbourne, specialising in M&A and corporate advisory transactions in the resource and infrastructure sectors. In 1995 Richard returned to Perth to join Hartleys Corporate Finance. Richard served as Head of Corporate Finance from February 2002 to 2009 and was an Executive Chairman and Managing Director of Hartleys Limited from the successful management buyout in 2003 until August 2008. EUROZ HARTLEYS GROUP ANNUAL REPORT 202211 R OB BLACK EXECUTIV E DIR ECTO R ROBIN ROMERO INDEPENDENT NON-EXECUTIVE DIRECTOR FI O NA KALA F INDEPENDENT NON-EXECUTIVE DIRECTOR Rob has been working in the stockbroking industry since 1995 and has spent time based in Sydney, Melbourne and London. Rob was formally Managing Director of Euroz Hartleys Limited and is an Executive Director of Euroz Hartleys Group Limited and Euroz Hartleys Limited. Rob sits on the Euroz Hartleys Group Limited Audit and Risk committee, and the Euroz Hartleys Limited Remuneration committee and its Underwriting Allocation committee. He is Head of Equity Syndications and holds a Bachelor of Business in Finance and Accounting from Edith Cowan University and is a Graduate of the Australian Institute of Company Directors (AICD). Robin brings to the board extensive legal, accounting and commercial experience. Robin is Legal Counsel and a former Executive Director of FMR Investments Pty Ltd (formerly Barminco Pty Ltd) and a Non-Executive Director of Greening Australia. She has 17 years of in-house legal experience predominantly in the mining sector. Prior to this, Robin spent 11 years working in large commercial law and accounting firms including King & Wood Mallesons, Corrs Chambers Westgarth and KPMG servicing medium to large clients across diverse sectors, predominantly ASX listed companies. Robin holds a Bachelor of Commerce and a Bachelor of Laws, is a graduate of the AICD and holds a practising certificate from the Legal Practice Board of Western Australia. Fiona is an experienced CEO, senior executive and director across a broad range of sectors, including financial services and wealth management, private health insurance and mental health services. Fiona is also a Director of Perth Festival and Celebrate WA. She has held numerous senior executive and directorship roles, including CEO of Lifeline WA and Youth Focus, executive roles at Wesfarmers and HBF, and board roles, including Chair of the Art Gallery of WA and Deputy Presiding Member of Healthway. Fiona holds a Bachelor of Arts, a Bachelor of Architecture and a Master of Business Administration (Advanced), and is a graduate of the AICD. Fiona has also completed the Strategic Perspectives in Non- profit Management course at Harvard Business School. NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 202212 Euroz Hartleys Limited Directors and Officers ANDREW MCKENZIE EXECUTIV E CHAIRM AN TIM BU NNEY MANAGING DIRECTOR AND HEAD OF INSTITUTIONAL SALES IAN PARK ER EX ECU TIVE DIR ECTO R A ND PR IVATE WE ALTH A DVISE R RO B B LACK EX ECU TIVE DIR ECTOR A ND HEA D OF SYND ICATION Tim has been working in the stockbroking industry since 2010 and is the Managing Director of Euroz Hartleys Limited and Head of our Institutional Sales Division. He holds a Bachelor of Commerce from Curtin University majoring in finance and management. He is currently undertaking post graduate study in geology and finance. Tim is a member of the SIAA institutional broking committee. Andrew is Executive Chairman of Euroz Hartleys Group Limited (ASX:EZL), Euroz Hartleys Limited and is Chairman of the Euroz Hartleys Foundation. Andrew is a board member of the Perth Children’s Hospital Foundation and Chairman of their Investment Sub- Committee. Andrew is a past board member of the Australian Stockbrokers Association, Presbyterian Ladies College (PLC) and the PLC Foundation. He holds a Bachelor of Economics from the University of Western Australia (UWA), a Graduate Diploma in Applied Finance and Investment and is a Master Practitioner Member (MSIAA) of the Stockbrokers and Investment Advisers Association (SIAA). Ian has extensive knowledge in the areas of stockbroking, investment advice and domestic equities. Ian holds a Bachelor of Arts (Economics) degree from Murdoch University (WA) and is a master member of SIAA. Ian has been in the financial services industry since 1981 and later became a Director of Gilpear Investment Group. In January 1991 Ian joined Hartleys Limited as a Private Client Adviser, was a member of the Executive Council, Underwriting Committee and Head of the Private Client Advisory Board for 2 years. Ian was appointed a Director of Hartleys Limited in May 2003 as part of the successful management buyout in October 2003 and was appointed Chairman of Hartleys Limited in February 2015. Rob has been working in the stockbroking industry since 1995 and has spent time based in Sydney, Melbourne and London. Rob was formally Managing Director of Euroz Hartleys Limited and is an Executive Director of Euroz Hartleys Group Limited and Euroz Hartleys Limited. Rob sits on the Euroz Hartleys Group Limited Audit and Risk committee, and the Euroz Hartleys Limited Remuneration committee and its Underwriting Allocation committee. He is Head of Equity Syndications and holds a Bachelor of Business in Finance and Accounting from Edith Cowan University and is a Graduate of the Australian Institute of Company Directors (AICD). EUROZ HARTLEYS GROUP ANNUAL REPORT 202213 MARC LINCOLN EXECUTIV E DIR ECTO R AND HEAD OF PR IVATE WE ALTH AMANDA BOYCE EXECUTIVE DIRECTOR AND HEAD OF ADVICE ANTHONY BRITTAIN EX ECU TIVE DIR ECTO R A ND CHIEF OPER ATIN G A ND FIN AN CIA L OFF ICER B EN C ROSS ING EXECUTIVE DIRECTOR AND HEAD OF CORPORATE FINANCE Marc has worked in financial services for more than 25 years. Prior to returning to Euroz Hartleys as Head of Private Wealth, where his stockbroking career began in the late 90’s, he made the move to Bell Potter as their State Manager. Most recently he was CEO of financial services company VSource after a stint running a multi- state commercial insurance business within Suncorp. Ben is Head of Corporate Finance and has been a member of the Corporate Finance team since 2010. During this time, Ben has provided strategic corporate advice in relation to equity capital market transactions, mergers, takeovers and acquisitions for a number of Australian Securities Exchange (ASX) listed resource, energy and industrial companies. Ben has broad corporate advisory experience, having originated and executed a wide range of corporate transactions focussed predominantly in the mid- large cap resources and mining services sectors. Ben holds a Masters in Applied Finance and a Bachelor of Science. Amanda has taken on senior leadership roles in Advice, Institutional Wealth and Strategic Projects, giving her the breadth of experience and insight to focus on shaping the advice strategy as Head of Advice at Euroz Hartleys. Amanda holds a Bachelor of Economics (Hons) from the University of Western Australia. She began her career with Goldman Sachs JBWere, where she was appointed Executive Director before joining JBWere as Head of Syndicate through the sale of that business to NAB in 2009. Amanda has varied experience in Private Wealth Management and Investment Markets, across Advice and specialist trading including equities, derivatives, fixed income and syndicate distribution. She has been based in Perth since 2013, most recently in the nationally focused role of Head of Business Implementation for JBWere prior to joining Euroz Harleys in June 2022. Anthony is the Chief Operating and Financial Officer and an Executive Director of Euroz Hartleys Limited and is a former board member of Euroz Hartleys Group Limited. Prior to joining Euroz Hartleys, he spent 7 years with IWL Limited (and antecedent firms Hartleys Limited and JDV Limited). His career started with KPMG (and antecedent firm Touche Ross) and then worked in London and Singapore for 7 years with a UK fund manager, Newton Investment Management during which it was acquired by BNY Mellon. Anthony holds a Bachelor of Commerce from UWA, is a member of Chartered Accountants Australia and New Zealand (CA), holds a Graduate Diploma in Applied Finance and Investment from FINSIA, is a Graduate of AICD and is an individual member (MSIAA) of SIAA. Anthony is a member of the Audit and Risk Committee, a member of the professional conduct tribunal of the SIAA and is a panel member of the Markets Disciplinary Panel (MDP) of the Australian Securities and Investment Commission (ASIC). EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT14 BRIAN BERESFORD EXECUTIV E DIR ECTO R AND CORPORATE FINANCE DIRE CTO R DALE BRYAN EX EC UT IVE D IR ECTOR AN D CO RP OR ATE FINA NC E DIRE CTO R ROWAN JONES EX ECU TIVE DIR ECTO R A ND HEA D OF ENTR UST WE ALTH G AV IN ALLE N EX ECU TIVE DIR ECTOR A ND HEAD OF RESEARCH Brian is a Director in our Corporate Finance Division. Prior to joining Euroz in 2011, Brian was a Partner at PwC where he led the Corporate Finance and M&A practice in Western Australia. He has provided corporate advice to clients across the resources, mining services, engineering and technology sectors for over 25 years. Brian holds a Masters in Finance from London Business School, a Bachelor of Commerce and Bachelor of Laws from UWA. Gavin heads up the Euroz Hartley’s Research Division and is a Research Analyst with 18 years’ experience specialising in detailed analysis and research of mid cap industrial companies. Prior to joining Euroz, Gavin held a senior position in the Corporate Finance Division of a major accounting firm, specialising in the financial analysis of mergers and acquisitions. Gavin holds a Bachelor of Commerce, is a member of the Chartered Accountants Australia and New Zealand (CA) and holds a Chartered Financial Analyst (CFA) designation. Dale is a Director in our Corporate Finance Division and has been a member of the Corporate Finance team since 2004. During this time, Dale has provided strategic corporate advice to a number of Australian Securities Exchange (ASX) listed resource, energy and industrial clients, including originating and executing most types of corporate finance transactions. Dale holds a Bachelor of Laws and a Bachelor of Commerce (Finance, Accounting and Applied Statistics). Dale is a member of the Euroz Hartleys Remuneration Committee. Prior to the merger of Euroz and Hartleys, Dale was a Board member of Hartleys Limited, Chairman of the Risk Committee and a member of the Operating Committee. Rowan joined Entrust Wealth Management Pty Ltd in January 2008 and was appointed an Executive Director in September 2016. He holds a Bachelor of Commerce from Curtin University, a Graduate Diploma of Applied Finance and Investment from FINSIA and he is a Self- Managed Superannuation Fund Specialist adviser through the SMSF Association. Rowan provides strategic and investment advice to a broad range of clients, including families and Not–For–Profit organisations. Prior to joining Entrust, Rowan spent ten years as a professional sportsperson in the AFL with the West Coast Eagles Football Club. He is now a member of Board of the West Coast Eagles Football Club. Rowan has completed and successfully passed the FASEA professional qualifications required to act as a financial adviser. EUROZ HARTLEYS GROUP ANNUAL REPORT 202215 DAVID SYMTH EXECUTIV E DIR ECTO R AND PRIVATE WEALTH ADVISER David specialises in professional management of investment and superannuation portfolios, and asset allocation. David joined the industry in 2000 and works closely with clients to manage and build their wealth. By having a complete understanding of each client’s financial position and goals, David is able to develop and manage a specifically tailored strategy for each client. David holds a Graduate Diploma in Financial Planning and a Bachelor of Business Degree. David was also on the Hartleys board for 6 years until the merger with Euroz and has served on numerous committees including the investment and Compliance Committee’s. ANTHONY HEWE T T COMPANY SECRETARY Anthony is the group’s Company Secretary and an Executive Director of the Euroz Hartleys Foundation. Anthony commenced his career in financial services in 2000 with Hartleys Limited and JDV Limited. In 2003 Anthony joined DJ Carmichaels before joining Euroz in 2004. During his career he has held a variety of positions in operations, and risk and compliance. Mr Hewett is a Chartered Secretary and Chartered Governance Professional and holds a Master of Business Law from Curtin University and a Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia. Mr Hewett is a Fellow of the Chartered Governance Institute (FCG), a Fellow of the Governance Institute of Australia (FGIA), a Master Member of SIAA and a member of AICD. Mr Hewett is also a board member and honorary treasurer of Holyoake. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT16 Euroz Hartleys Group Structure E U R O Z H A R T L E Y S G R O U P L I M I T E D ASX CODE: EZL S T O C K B R O K I N G , C O R P O R A T E F I N A N C E A N D W E A LT H M A N A G E M E N T EN TR UST WEA LT H MA NAGEMEN T EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Selected Corporate Transactions FY22 17 T W O T R A N C H E P L A C E M E N T $50 MILLION J O I N T L E A D M A N A G E R Euroz Hartleys Ltd AUG 21 P L A C E M E N T S + A N R E O E N T I T L E M E N T O F F E R P L A C E M E N T S $188.4 MILLION J O I N T L E A D M A N A G E R + J O I N T U N D E R W R I T E R Euroz Hartleys Ltd AUG 21, MAY 22 $24 MILLION L E A D M A N A G E R + U N D E R W R I T E R Euroz Hartleys Ltd AUG 21 $56 MILLION L E A D M A N A G E R Euroz Hartleys Ltd AUG 21, FEB 22 P L A C E M E N T P L A C E M E N T P L A C E M E N T P L A C E M E N T S $65 MILLION $40 MILLION $126.2 MILLION $43.5 MILLION J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R Euroz Hartleys Ltd SEP 21 Euroz Hartleys Ltd SEP 21 Euroz Hartleys Ltd OCT 21 Euroz Hartleys Ltd NOV 21, MAR 22 P L A C E M E N T P L A C E M E N T I P O P L A C E M E N T $19 MILLION $20 MILLION $7 MILLION $20 MILLION L E A D M A N A G E R J O I N T L E A D M A N A G E R L E A D M A N A G E R J O I N T L E A D M A N A G E R Euroz Hartleys Ltd NOV 21 Euroz Hartleys Ltd NOV 21 Euroz Hartleys Ltd JAN 22 Euroz Hartleys Ltd JAN 22 NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 202218 P L A C E M E N T P L A C E M E N T P L A C E M E N T P L A C E M E N T $20 MILLION $45 MILLION $40.7 MILLION $70.4 MILLION J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R Euroz Hartleys Ltd FEB 22 Euroz Hartleys Ltd MAR 22 Euroz Hartleys Ltd MAR 22 J O I N T L E A D M A N A G E R + J O I N T U N D E R W R I T E R Euroz Hartleys Ltd MAR 22 P L A C E M E N T P L A C E M E N T P L A C E M E N T I P O $15 MILLION $30 MILLION $35 MILLION $8 MILLION L E A D M A N A G E R J O I N T L E A D M A N A G E R J O I N T L E A D M A N A G E R L E A D M A N A G E R Euroz Hartleys Ltd APR 22 Euroz Hartleys Ltd APR 22 Euroz Hartleys Ltd APR 22 Euroz Hartleys Ltd MAY 22 I P O P L A C E M E N T + A N R E O $100 MILLION $244 MILLION J O I N T L E A D A R R A N G E R Euroz Hartleys Ltd JUN 22 J O I N T L E A D M A N A G E R + J O I N T U N D E R W R I T E R Euroz Hartleys Ltd JUN 22 C O R P O R A T E B R O K E R T O R A M E L I U S R E S O U R C E S L I M I T E D I N R E L A T I O N T O I T S T A K E O V E R O F F E R F O R A P O L L O C O N S O L I D A T E D $181 MILLION Euroz Hartleys Ltd NOV 21 C O R P O R A T E A D V I S E R T O E M E R A L D R E S O U R C E S N L I N R E L A T I O N T O I T S O F F ‑ M A R K E T T A K E O V E R B I D F O R B U L L S E Y E M I N I N G $117 MILLION Euroz Hartleys Ltd JAN 22 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Managing Director’s Report 19 It’s a great privilege to be appointed to the role of Managing Director. I am extremely fortunate to have succeeded Rob Black, who oversaw a significant transformation of our business with the merger of Euroz and Hartleys. With the completion of the merger, I am fully committed to executing our company’s vision of being recognised as Western Australia’s leading financial services business. To deliver this, I believe we need to maximise our existing asset base; we have the best people, a strong proud culture and supportive resources. Bringing these all together, under one banner of Euroz Hartleys Limited (“Euroz Hartleys”), will ensure that we deliver exceptional outcomes for our clients across our Private Wealth and Wholesale divisions. Market Conditions Global markets in the first nine months of FY22 were characterised by both strength and volatility, which saw strong agency brokerage for Euroz Hartleys as investors took advantage of market conditions. The last quarter of FY22 saw tightening macro conditions driven, in part, by increases to official interest rates, not only in Australia, but also in other OECD countries, global inflationary pressures as well as a tumultuous geopolitical backdrop. Notwithstanding these challenges, we experienced good trading months, however, significant economic concerns remain within the investment community and wider economy. Financial Performance Turning to our financial performance, Euroz Hartleys reported a net profit after tax of $14.7m for the year ended 30 June 2022, compared to $16.6 million in the previous corresponding period, a decrease of 11.5%, and revenue of $106.2 million for the year ended 30 June 2022 compared to $79.4 million in the previous corresponding period, an increase of 33.8%. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT20 This result in any market would be viewed as a solid year, but given the wider economic concerns and other disruptions this result is a credit to our people. Operational Performance 2022 continued the theme of transformation from 2021 for Euroz Hartleys. The integration of Euroz Hartleys Securities Limited (formerly Euroz Securities Limited), Euroz Hartleys Limited (formerly Hartleys Limited) and Entrust Wealth Management Pty Ltd continued throughout 2022. Bringing these iconic WA businesses together has created Western Australia’s largest financial services firm driving excellent outcomes for clients and staff alike. As an organisation we will continue to reflect on areas of improvement to ensure we remain at the forefront of excellence for our three main stakeholders: shareholders, clients and our people. Many of the initiatives undertaken over the past 18 months continue into FY23 as we seek further operating efficiencies and continue to enhance our platforms to provide better services to all our clients. Throughout this period our operations team have continued to work tirelessly to ensure business continuity whilst managing the integration of the three businesses including trading, back office and finance systems. People FY22 saw a number of leadership changes as we set Euroz Hartleys up for its next phase of growth. I believe our Wealth and Wholesale business are led by some truly exceptional people. Amanda Boyce was appointed as Head of Advice, joining Euroz Hartleys from JBWere, with over 18 years of wealth management and financial markets experience. The depth of Amanda’s professional experience and networks, combined with her passion for our people will see the Private Wealth business continue to evolve and grow. We were excited to make two additional internal promotions, with Ben Crossing assuming the role as Head of Corporate Finance and Gavin Allen the Head of Research. It’s a testament to the talent within our business that we were able to fill these important roles in the leadership team internally. We are grateful for the effort and leadership from Dale Bryan and Brian Beresford who together have brought together the Corporate teams from the 2 businesses. They have stepped down from their roles as Head of Corporate, but importantly remain within our corporate division to continue to service our clients with their wealth of experience. Jon Bishop, our former Head of Research left the business after 15 years and we wish him all the best on his next endeavours. I am pleased to announce the Euroz Hartleys graduate program has completed recruitment ready to commence in the new year. People are our most important asset, and it is essential we have avenues for talent to join our organisation and grow with us, we are excited for Sonali, Moulika, John and Amr to join the team. We are all extremely proud of what the Euroz Hartleys Foundation delivers to the Western Australian community each year. In FY22 we donated in excess of $555,000 to more than 20 separate charitable causes. Our annual Commission for a Cause this year was more lively than usual with some big cricket personalities trying their hand EUROZ HARTLEYS GROUP ANNUAL REPORT 202221 at stockbroking. The enthusiasm and commitment that our people and clients bring to these events is a testament to our connections with the community. Euroz Hartleys ties to the community extend well beyond our business dealings and the Foundation reminds us of this throughout the year. We are proud of the contribution we can make to our community. Divisional Update The Private Wealth division hosts one of the largest teams in Western Australia. We have a team of 63 investment & wealth advisers which include some of the most experienced advisors in Western Australia. Our wealth advisory team oversees $3.0 billion of Funds Under Management (FUM) (2021: $3.1 billion) across a diverse range of clients including high net worth individuals, family offices and Not–For–Profit organisations. The continued growth of our Private Wealth division remains a key priority for the business. Our Wholesale division consists of Research, Institutional Sales and Corporate Finance. Our Research division has incredibly strong connections to the WA business community, with over 120 stocks under coverage. Our knowledge of the WA mining and industrial landscape remains unparalleled. In FY22 Euroz Hartleys raised ~$2.2 billion (2021: $2.0 billion) for our corporate clients in what was a solid year of Equity Capital Markets (ECM) activity. Our Institutional Sales team is the largest small-mid cap institutional desk in Australia and provides significant domestic and global distribution capabilities. Both divisions generate revenue across a range of services including brokerage, ECM transactions, corporate advisory, FUM fees and incentive fees. This diversity of our earnings provides the business with a solid foundation for continued growth. The business is supported by an incredible operations team, the day to day execution that our advisors provide their client is underpinned by the talent and dedication of our operations team. We continue to work with our operations team to enhance the client experience. We will continue to review, refine and improve our operations to facilitate better client outcomes and, in turn, lead to better returns for our shareholders. Notwithstanding the macroeconomic and geopolitical challenges that take us into FY23, the combination of our people, our improved client offering and our strong balance sheet ensures that I remain optimistic that we can deliver another successful period for all stakeholders. I would like to take this opportunity to thank all Euroz Hartleys staff for their continued efforts in delivering a strong FY22 result and ensuring the company is in an enviable position for the years ahead. Tim Bunney Managing Director EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT22 EUROZ HARTLEYS LIMITED C O M B I N E D C A P A B I L I T Y A N D E A R N I N G S L E V E R A G E O F W A ’ S T W O M O S T S U C C E S S F U L B R O K I N G F I R M S CORP ORATE F INANC E RESEARCH 14 CORPORATE FINANCE EXECUTIVES 9 RESEARCH ANALYSTS • • Deep relationships and knowledge across WA resources and industrial sectors Specialising in: – – – Equity Capital markets transactions M&A Advisory Strategic Corporate Advisory • • • Extensive coverage of ASX small-mid cap resources, energy, mining services and WA industrial companies Focus on institutional quality research to a global client base Over 100 stocks under research LARGEST FI NAN CI AL SE RVICES FI RM IN WESTERN AUSTRAL IA S IGN IF ICA N T GLOB A L & D O MESTI C DIST RIB U TION CA PAB ILITY +1 00 STOC KS U ND ER R ESEAR CH COV ERAGE EUROZ HARTLEYS LIMITED I N C O M E B Y D I V I S I O N EUROZ HARTLEYS LIMITED I N C O M E B Y S O U R C E FUM Fees (18%) ECM (42%) Other (1%) Advisory (5%) Brokerage (35%) Wholesale (48%) Private Wealth (52%) EUROZ HARTLEYS GROUP ANNUAL REPORT 202223 INSTITUTIONAL SALE S PRIVATE WEALTH 9 INSTITUTIONAL SALES ADVISERS 64 PRIVATE CLIENT ADVISERS • • • Significant small-mid cap institutional desk with specific focus on resources, energy, mining services and WA industrials Long term relationships with all key domestic institutional investors • • • • Targeted global distribution network Largest private wealth desk in WA FUM of $3.0B1 Extensive high net worth and family office client base Focus on providing timely and high quality financial advice to clients Note 1: As at 30 June 2022 and includes Entrust Wealth Management A LONG HISTORY OF DELIV ERI NG RESULTS D EEP R ELATIO N SHIPS AN D KN OWLE DGE AC ROSS WA R ESOU RCE S A ND IND USTRIA L SECTOR S FU LL SPE CTR UM OF CORPO RATE FI NA N CE, STOCK B ROK IN G, WEA LT H MA N AGEME NT, IN STI TUT ION AL SA LE S A ND R ESEA RCH SERVICES EUROZ HARTLEYS LIMITED F Y 2 2 W H O L E S A L E R E V E N U E T O T A L = $ 5 1 . 4 M * EUROZ HARTLEYS LIMITED F Y 2 2 P R I VA T E W E A LT H R E V E N U E T O T A L = $ 5 6 . 7 M * ECM ($32.8m) ECM ($10.8m) Brokerage ($10.2m) Equity Incentive Fees ($2.4m*) Other ($0.3m) Advisory ($5.7m) *Includes realized equity incentive fees FUM Fees ($18.4m) Equity Incentive Fees ($1.1m*) Other ($0.05m) Brokerage ($26.3m) NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 202224 Euroz Hartleys Foundation EUROZ HARTLEYS GROUP ANNUAL REPORT 202225 In 2006, the Euroz Hartleys Foundation (the Foundation) was formed in a Private Ancillary Fund structure through which the Euroz Group and its staff could make donations, invest these funds, make distributions to worthy charities and contribute to our broader community. Since its inception, the Foundation has donated in excess of $3.1 million to over 100 individual charities and worthy causes. The Foundation forms the central plank in our social giving program. As a proudly Western Australian company, we feel it is our obligation to give back to the community that has supported us over the past 22 years. The Foundation’s focus is on Western Australian charitable causes where we believe we can make a positive community impact. On 17 June 2022 the Foundation held its 4th annual Commission for a Cause event. This year, the event raised $400,000 which is an amazing outcome given the volatile market conditions and trading headwinds. The funds were divided equally between Perth Children’s Hospital Foundation (PCHF), Women and Infants Research Foundation (WIRF), WA Cricket Foundation (WACF) and Lifeline WA (Lifeline). Perth Children’s Hospital Foundation are deploying their funds to secure a revolutionary piece of surgery visualisation technology. The Vitom 3D allows for magnification and image quality equivalent to a microscope during surgery, improving medical outcomes for children. This cutting- edge technology at Perth Children’s Hospital will change the lives of the 50-60 Western Australian children born each year with cleft lip and cleft palate issues. Without corrective surgery these children face a lifetime of struggle. They may have eating and speech difficulties, other facial development complications and potential social issues. support and inspire our state to be a better, healthier and more inclusive community. Driven by a vision of a community safe from suicide, Lifeline WA has been providing a free, 24-hour, telephone crisis support service, 13 11 14, in Western Australia for more than 30 years. Lifeline WA’s mission is to prevent suicide, support people in crisis and reduce stigmas around mental health and suicide, which can be a barrier to people seeking help. Lifeline WA are utilising funds from Commission for a Cause to provide ongoing resources, supervision and professional development to existing crisis supporters and onboard and train new crisis supporters who will collectively help more than 50,000 people via phone, text and online chat. We are delighted with our significant contributions to support and give back to our local Western Australian community through our Foundation in this past year and look forward to continuing this important work in the years ahead. The Women & Infants Research Foundation is utilising the funds from Commission for a Cause to advance and accelerate its Predict 1000 Study. WIRF’s doctors and scientists have unveiled a new research discovery which could reduce premature birth by up to 40%. Through the Predict 1000 study, WIRF are seeking to determine if it is possible to reduce the risk of preterm birth by implementing a simple antibiotic and probiotic treatment program in midpregnancy. WIRF are pioneering a new era of preventative medicine, solving problems at the earliest stages before they start. Their world’s first national preterm birth prevention program, which has its origins firmly rooted here in WA, is making pregnancy safer and saving untold heartache for Australian families. This transformative work is complemented by collaborative efforts in the fields of women’s cancers and women’s mental health which is focussed on curing disease and improving outcomes across a life course. The Euroz Hartleys Foundation is proud to have supported the WA Cricket Foundation and its female, disability and Aboriginal cricket programs as they strive to support positive social outcomes. The WA Cricket Foundation is the philanthropic arm of the Western Australian Cricket Association and was established in December 2017 to support the future of cricket in Western Australia and the community in which it operates. Through the WACF, the Association is funding and supporting key initiatives that will deepen its engagement in the community. The WA Cricket Foundation is active and engaged with leaders in Australian sport, who seek to enrich, EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT26 EUROZ HARTLEYS GROUP ANNUAL REPORT 202227 FINANCIAL REPORT 2022 28 DIRECTORS’ REPORT 44 AUDITOR’S INDEPENDENCE DECLARATION 45 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 46 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 47 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 48 CONSOLIDATED STATEMENT OF CASH FLOWS 49 NOTES TO THE FINANCIAL STATEMENTS 84 DIRECTORS’ DECLARATION 85 INDEPENDENT AUDITOR’S REPORT NOTES TO FINANCIAL STATEMENTFINANCIAL REPORTOVERVIEWCHAIRMAN’S REPORTCONTENTS PAGEEUROZ HARTLEYS GROUP ANNUAL REPORT 202228 Directors’ Report FOR THE YEAR ENDED 30 JUNE 2022 The Directors present their report on the consolidated group consisting of Euroz Hartleys Group Limited (Euroz Hartleys Group) and the entities it controlled (Group) at the end of, or during the year ended 30 June 2022. On 22 November 2021, Euroz Limited changed its name to Euroz Hartleys Group Limited. The following persons were Directors of Euroz Hartleys Group at any time during or since the end of the financial year and up to the date of this report: EXECUTIVE CHAIRMAN Andrew McKenzie INDEPENDENT NON‑EXECUTIVE DIRECTORS Robin Romero Fiona Kalaf – Appointed 28 June 2022 EXECUTIVE DIRECTORS Jay Hughes Robert Black Ian Parker Richard Simpson CHIEF OPERATING OFFICER / CHIEF FINANCIAL OFFICER Anthony Brittain is the Chief Operating Officer and Chief Financial Officer. Mr Brittain is an Executive Director of Euroz Hartleys Limited (Euroz Hartleys). He is a member of the Euroz Hartleys Group Limited Audit and Risk Committee as well as a member of Euroz Hartleys Limited Underwriting Committee and Compliance Committee. Mr Brittain holds a Bachelor of Commerce degree from the University of Western Australia (UWA) and is a member of the Chartered Accountants Australia and New Zealand (CA). He also holds a Graduate Diploma in Applied Finance and Investment from FINSIA, is a Graduate member of (GAICD) of Australian Institute of Company Directors (AICD) and a Master Member (MSIAA) of the Stockbrokers and Investment Advisers Association of Australia (SIAA). COMPANY SECRETARY Anthony Hewett is the Company Secretary. Mr Hewett is a Chartered Secretary, Chartered Governance Professional and holds a Master of Business Law (MBusLaw) from Curtin University and a Graduate Diploma in Applied Corporate Governance (GradDipACG) from the Governance Institute of Australia. Mr Hewett is a Fellow of the Chartered Governance Institute (FCG), a Fellow of the Governance Institute of Australia (FGIA), a Master Member (MSIAA) of SIAA and a member of the AICD. PRINCIPAL ACTIVITIES During the year the principal activities of the Group consisted of: (a) Stockbroking & Corporate Finance; (b) Funds Management; (c) Wealth Management; and (d) Investing. REVIEW OF RESULTS The consolidated entity reports a net profit attributable to members of $40.7 million for the financial year ended 30 June 2022 (2021: $52.5 million). This result represents basic earnings per share of 21.68 cents (2021: 29.16 cents). Westoz Funds Management Pty Ltd (WFM), a wholly owned subsidiary of Euroz Hartleys Group was responsible for managing the mandates of Westoz Investment Company Limited (Westoz) and Ozgrowth Limited (Ozgrowth). On 21 April 2022, WAM Capital Limited acquired Westoz and Ozgrowth following the completion of two separate Schemes of Arrangements. Euroz Hartleys Group received approximately 49.95 million WAM Capital Limited ordinary shares upon the finalisation of the Schemes of Arrangements, which subsequently have been sold resulting in proceeds of approximately $103.9 million. Underlying cash profitability was driven by a solid performance from Euroz Hartleys which delivered Equity Capital Market (ECM) raisings of $2.2 billion versus $2.0 billion last year. ECM revenue is down approximately 16% and overall corporate revenues down approximately 23% from the previous exceptional year. Brokerage and recurring Funds Under Management (FUM) revenue for the year were broadly in line with the previous year. Euroz Hartleys FUM as at 30 June 2022 was $3.0 billion (2021: $3.1 billion). Solid underlying cash profitability enabled your Directors to declare and pay a final fully franked dividend of 8.5 cents per share (“cps”) which combined with the interim dividend of 2.5 cps brought the full year dividend to 11 cps (2021: 16 cps). EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REVIEW OF OPERATIONS Revenues Brokerage Underwriting and placement fees Performance and management fees Wealth management fees Corporate advisory Dividends and trust distributions received Interest received Other revenue Net Profit after tax (i) Refer to Note 7 OPERATING AND FINANCIAL REVIEW 29 2022 $ 36,499,569 43,613,675 13,791,010 18,433,771 5,740,096 107,589 239,070 266,118 RESTAT E D (i) 2021 $ 31,115,479 51,658,163 17,218,045 14,531,619 12,381,468 76,452 197,344 889,808 118,690,898 128,068,378 40,723,715 52,540,905 The purpose of this review is to set out information that shareholders may require to assess Euroz Hartleys Group’s operations, financial position, business strategies and prospects for future financial years. This information complements and supports the report presented herein. DISCLOSURE OF OPERATIONS – PROFIT Net profit after tax attributable to members was $40.7 million compared to $52.5 million in the 2021 financial year. Headline profitability comprises underlying “cash” profits after tax of $52.1 million and “non – cash” after tax adjustments of $11.4 million mostly from the equity accounting of investments in Westoz and Ozgrowth and mark to market of other investments. DISCLOSURE OF OPERATIONS – SALES Revenue has decreased by 7.3% to $118.7 million from previous year restated amount of $128.1 million (inclusive of 9 months contribution from Hartleys since 1 October 2020 for the 2021 financial year). (a) Stockbroking & Corporate Finance Stockbroking and Corporate Finance revenue decreased by 9.8% to $85.9 million from $95.2 million. Euroz Hartleys managed 76 (2021: 76) Equity Capital Market (ECM) transactions this year raising $2.2 billion (2021: $2.0 billion). FUM in the business remained steady at $3.0 billion (2021: $3.1 billion). (b) Funds Management Revenue from Funds Management decreased by 19.9% to $13.8 million from $17.2 million in the prior year. Revenue predominantly related to the performance fees of $11.3 million (2021: $14.5 million) and management fees of $2.5 million (2021: $2.7 million) received from Westoz and Ozgrowth. On 21 April 2022, pursuant to two separate Schemes of Arrangements, Westoz and Ozgrowth were acquired by WAM Capital Limited and WFM no longer manages the investment mandates. (c) Wealth Management Wealth Management revenue increased by 26.9% to $18.4 million from $14.5 million. We are pleased with the quality and stability of our wealth management service offering at a time of significant change in the Wealth Management landscape. Euroz Hartleys is well positioned for continued growth given our established team of private wealth advisers. (d) Investment Income Investment income increased by 40.7% to $0.1 million (restated 2021: $0.08 million). EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 30 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 DISCLOSURE OF OPERATIONS The Group is principally involved in the following activities: (a) Stockbroking & Corporate Finance; (b) Funds Management; (c) Wealth Management; and (d) Investing. Our operations are conducted in Perth, Western Australia (WA) and details of our operations are outlined below: (a) Stockbroking & Corporate Finance The Euroz Hartleys stockbroking operation comprises 4 main divisions as follows: i. Equities Research • • • • Highly rated research from market leading research team of 9 analysts Our views are highly regarded by Australian and international institutional investors Access to the latest online news and financial information Based on fundamental analysis, strict financial modelling and regular company contact - - - Goal: Identify and maximise equity investment opportunities for our clients Approach: Intimate knowledge of the companies we cover Coverage: Broad cross section of mostly WA based industrial & resource companies • Research Products: - - - - Company Reports: Detailed analysis on companies as opportunities emerge Morning Note: Overnight market updates Weekly Informer: Compilation of all company reports throughout the preceding week Quarterly and / or Semi-annual Review: Regular coverage on companies in book format ii. Institutional Sales • • • • • One of the largest institutional small to mid-cap dealing desks in the Australian market with a sales team of 9 staff Extensive client base of Australian and International institutional investors with strong relationships with small company fund managers Distribution network strength - long standing relationships with major institutional investors in the small to mid-cap market Western Australia’s geographic isolation makes it difficult for institutional investors to maintain close contact with companies based here - investors can rely on our “on the ground” information Institutional dealing team “highly focused” on providing the following services: - - - - - Quality advice and idea generation Efficient execution Regular company contact Site visits Roadshows EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 31 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 DISCLOSURE OF OPERATIONS (CONT’D) (a) Stockbroking & Corporate Finance (cont’d) iii. Private Wealth • • • • • • Team of 64 highly experienced and qualified private wealth advisers providing a broader investment offering for clients of Euroz Hartleys. Our wealth management service provides strategic investment advice, superannuation advice, investment management and portfolio administration service Significant capacity to support new issues and construct quality retail share registers Substantial “high net worth” client base (s.708 compliant investors) Exposure to high net worth clients via in-house conferences and one-on-one presentations Extensive research support - high quality research on WA based resource and industrial companies enable our advisers to provide quality investment and trading advice Specialised broking allows: - - Close interaction between research analysts and private wealth advisers Timely communication of ideas with clients • Sophisticated investors are able to participate in many of our capital raisings iv. Corporate Finance • • The corporate finance team of 14 staff focused on developing strong, long term relationships with our clients Clients are provided with specialised Corporate Advisory services in: - - - - Equity Capital Raisings and Underwriting Mergers and Acquisitions Strategic Planning and Reviews Privatisation and Reconstructions • Established track record in raising equity capital via: - - - Initial Public Offerings (IPO) Placements Rights Issues (b) Funds Management WFM was responsible for managing the mandates of two listed investment companies; Westoz and Ozgrowth. Both funds have enjoyed competitive portfolio returns since inception. On 21 April 2022, pursuant to two separate Scheme of Arrangements, Westoz and Ozgrowth were acquired by WAM Capital Limited. WFM no longer manages the investment mandates and will no longer receive management or performance fees from these funds. We retain the WFM Australian Financial Services Licence (AFSL) to maintain future funds management optionality. (c) Wealth Management In July 2015, the Group acquired Entrust Wealth Management Pty Ltd (“Entrust”) which has a 19-year track record as a leading wealth management business. The strategy in acquiring Entrust was to leverage an established wealth management business with long term ongoing revenues as a platform for further acquisitions and organic growth. In October 2020, the Group acquired Euroz Hartleys Limited (then Hartleys Limited) with a FUM of $1.2 billion. Euroz Hartleys FUM remains broadly in line with the previous year at $3.0 billion. (d) Investing Euroz Hartleys Group owned significant shareholdings of 26.25% in Westoz and 40.58% in Ozgrowth. These investments have been disposed of during the financial year but the business retains a number of other smaller and mostly listed investments. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 32 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 DISCLOSURE OF BUSINESS STRATEGIES AND PROSPECTS ‑ GROWTH Our aim is to build real diversification of revenues across our business. We are cognisant that we need to continue to grow our wealth management FUM and report a Group FUM as at 30 June 2022 of $3.0 billion (2021: $3.4 billion). The reduction in FUM is mostly due to the ceasing of managing the WFM mandates of Westoz and Ozgrowth. The Directors believe that Euroz Hartleys Group has laid the foundations for our strategy to build a more consistent base of underlying recurring revenues through our growing wealth management businesses whilst still retaining the transaction-based upside of our traditional stockbroking business. DISCLOSURE OF BUSINESS STRATEGIES AND PROSPECTS ‑ MATERIAL BUSINESS RISKS Due to the impact of Coronavirus (COVID-19) pandemic, the past year continues the trend of good but volatile trading conditions. Like many businesses we adapted quickly to remote working and our continued provision of key client services and operations. We have experienced good trading months within the volatility of these markets, however, significant economic concerns remain within the investment community and wider economy. Given this backdrop and the increasingly competitive landscape it has created, we are pleased with our overall results for the financial year. Our entire team has worked hard to manage our costs and generate profits and dividends for shareholders. FINANCIAL POSITION The net assets of the Group have increased to $193.2 million at 30 June 2022 from $171.1 million at 30 June 2021. The Group’s financial performance has enabled it to continue to pay dividends to shareholders during the year while maintaining a healthy working capital ratio. The Group’s working capital, being current assets less current liabilities, is $149.0 million at 30 June 2022 (30 June 2021: $51.0 million). During the past 22 years the Group has invested in expanding each of its business units to secure its long-term success. In particular it has increased its strategic investments via the acquisitions of Hartleys Limited in 2020 and Entrust in 2015 to develop a market leading platform for our future wealth management ambitions. This financial year, the Group has realised a significant investment in Westoz and Ozgrowth and wound back the operations of WFM. Our Group remains in an extremely sound financial position with cash and investments of $194.2 million as at 30 June 2022. We have a Net Tangible Assets (NTA) of 82¢ per share and no debt to further develop our market leading financial services offering. Euroz Hartleys Group has a proud history of consistent profits and dividends having paid a total of $287.5 million in fully franked dividends over the past 22 years. The Directors believe the Group is in a strong and stable financial position to expand and grow its current operations. Earnings per share Basic earnings per share Diluted earnings per share Dividends – Euroz Hartleys Group Limited Dividends paid or provided for during the financial year were as follows: Interim ordinary dividend of 2.5 cents (2021: 2.5 cents) per fully paid ordinary share was paid on 25 February 2022. Provision for final ordinary dividend for 30 June 2022 of 8.5 cents (2021: 13.5 cents) per fully paid ordinary share paid on 5 August 2022. 2022 CENTS 21.68 20.68 2022 $ 2021 C E NTS 29.16 28.17 2021 $ 4,925,483 4,910,292 16,770,251 26,394,973 21,695,734 31,305,265 Of the total dividends paid during the year, $42,983 (2021: $63,005) was paid to the Euroz Share Trust and is undistributed. Therefore, it has been eliminated on consolidation. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 33 STATE OF AFFAIRS Westoz Funds Management Pty Ltd, a wholly owned subsidiary of Euroz Hartleys Group was responsible for managing the mandates of Westoz and Ozgrowth. On 21 April 2022, WAM Capital Limited acquired Westoz and Ozgrowth following the completion of two separate Scheme of Arrangements. Euroz Hartleys Group received approximately 49.95 million WAM Capital Limited ordinary shares upon the finalisation of the Scheme of Arrangements, which subsequently have been sold resulting in proceeds of approximately $103.9 million. Other than described above there has been no other significant changes in the state of affairs of the Group. SHARE OPTIONS There were no options on issue at 30 June 2022 and 30 June 2021. ENVIRONMENTAL, SOCIAL AND GOVERNANCE In recognition of its increasing importance to our stakeholders, we have initiated a corporate Environmental, Social and Governance (ESG) program. The program will include a group wide review of our sustainability practices and the development of an ESG strategy and associated plans that consider topics material to our business, along with a reporting framework. i. Environmental • • • • • • We are looking to better understand our carbon footprint over financial year 2023 with a view to formulating a suitable future carbon emissions reduction strategy A green office policy was implemented in 2015 with a view to reducing our environmental footprint and a focus of reducing paper use where practicable We participate in proactive waste management with a recycling system in place for all paper / cardboards We introduced online account opening in 2009 and where possible use electronic signatures in corporate and client documentation (except those that require a wet signature under law) Our head office location has a 5.5 star NABERS energy rating and 4.5 star NABERS water rating We participate in the “Containers for Change” program ii. Social • • • • • • • • Commission for a Cause - $400,000 raised as part of our annual “Commission for a Cause” on the 17th of June 2022 with four equal donations of $100,000 to worthy WA charities, being Perth Children’s Hospital Foundation, Lifeline WA, WA Cricket Foundation and the Women and Infants Research Foundation. This program has raised $1.24 million in the four years since inception We support the Financial Services Red Cross Blood Drive by providing leave to staff to give blood We benchmark salaries by gender to ensure equality with the results published in the Workplace Gender Equality Agency (WGEA) website and our corporate website (www.euroz.com) 28% Euroz Hartleys Group Limited Board of Directors are female 42% of Euroz Hartleys employees are female We encourage diversity in our recruitment process and have robust policies around sexual harassment and domestic violence We provide 12 weeks paid parental leave and support flexible working arrangements We provide free flu vaccination to all staff for their well-being and health and free COVID-19 tests on request iii. Governance • • • Two Independent Non Executive Board members on Euroz Hartleys Group Limited Board Robust Audit and Risk Committee, Remuneration Committee and Underwriting and Compliance Committee with representatives holding relevant qualifications Employee biographical data (e.g. average age, tenure, gender) reported to the Euroz Hartleys Group Limited Board of Directors on a monthly basis EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT34 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 IMPACTS OF CORONAVIRUS (COVID‑19) The impact of the COVID-19 pandemic is ongoing and while it has not significantly impacted the Group up to 30 June 2022, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation continues to evolve globally and is continuing to impact various supply chains, resourcing and various industries in many ways. EVENTS AFTER REPORTING DATE The Directors are not aware of any matter or circumstance subsequent to 30 June 2022 that has significantly affected, or may significantly affect: (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. LIKELY DEVELOPMENTS The Directors are confident that a strong statement of financial position and established business platforms will support the Group in increasingly volatile market conditions. Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. INFORMATION ON DIRECTORS I NFORMATION O N DIR ECTORS PARTICULAR S O F DIRECTORS’ INTE RE STS IN SHARES OF E UROZ HARTL EYS GROUP L IM I TE D DIRE CTOR E XPERIENC E SPECIAL RESPONSIBILITIES AND QUALIFICATIONS ORDINARY SH ARE S * A McKenzie Executive Chairman Mr McKenzie has worked in the stockbroking industry since 1991. J Hughes Director Mr Hughes has worked in the stockbroking industry since 1986. R Black Director Mr Black has worked in stockbroking industry since 1993. Executive Chairman of Euroz Hartleys Group Limited and Euroz Hartleys Limited 13,390,097 Member of Euroz Hartleys Group Limited Remuneration Committee, Euroz Hartleys Limited Executive Remuneration Committee and Euroz Hartleys Limited Underwriting Committee Holds a Bachelor of Economics Degree from UWA, a Graduate Diploma in Applied Finance and Investment from FINSIA and is a Master Member (MSAFAA) of SIAA Executive Director of Euroz Hartleys Group Limited 13,866,497 Non-Executive Chairman of Westoz Funds Management Pty Ltd and former Non-Executive Chairman of Westoz Investment Company Limited and Ozgrowth Limited Member of Euroz Hartleys Limited Executive Remuneration Committee and Euroz Hartleys Limited Underwriting Committee Holds a Graduate Diploma in Applied Finance and Investment from FINSIA and is a Master Member (MSAFAA) of SIAA Executive Director of Euroz Hartleys Group Limited and Euroz Hartleys Limited Managing Director of Euroz Hartleys Limited from 2015 to 2022 Member of Euroz Hartleys Group Limited Audit and Risk Committee Member of Euroz Hartleys Limited Executive Remuneration Committee, Euroz Hartleys Limited Underwriting Committee, Euroz Hartleys Limited Research Committee and Euroz Hartleys Limited Compliance Committee Holds a Bachelor of Business Degree from Edith Cowan University (ECU) and is a Graduate member (GAICD) of AICD 5,262,362 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 INFORMATION ON DIRECTORS (CONT’D) I NFORMATION O N DIR ECTORS 35 PARTICULAR S O F DIRECTORS’ INTE RE STS IN SHARES OF E UROZ HARTL EYS GROUP L IM I TE D DIRE CTOR E XPERIENC E SPECIAL RESPONSIBILITIES AND QUALIFICATIONS ORDINARY SH ARE S * R Simpson Director Mr Simpson has worked in the stockbroking industry since 1990. Executive Director of Euroz Hartleys Group Limited 2,537,181 Chairman of Euroz Hartleys Group Limited Audit and Risk Committee Member of Euroz Hartleys Group Limited Remuneration Committee, Euroz Hartleys Limited Underwriting Committee and Euroz Hartleys Limited Research Committee Holds a Bachelor of Applied Science (Hons) from Curtin University and a Masters in Business Administration (MBA) from UWA I Parker Director Mr Parker has worked in the stockbroking industry since 1991. Executive Director of Euroz Hartleys Group Limited and Euroz Hartleys Limited 1,988,473 R Romero Independent Non-executive Director Ms Romero has over 26 years’ experience in law and accounting. Member of Euroz Hartleys Group Limited Remuneration Committee, Euroz Hartleys Limited Underwriting Committee and Euroz Hartleys Limited Research Committee Holds a Bachelor of Arts (Economics) from Murdoch University and is a Master Member (MSAFAA) of SIAA Independent Non-executive Director of Euroz Hartleys Group Limited 22,575 Chairperson of Euroz Hartleys Group Limited Remuneration Committee Member of Euroz Hartleys Group Limited Audit and Risk Committee Holds a Bachelor of Laws from UWA and a Bachelor of Commerce from UWA, is a graduate of the AICD and holds a practising certificate from the Legal Practice Board of Western Australia Fiona Kalaf Independent Non-executive Director Ms Kalaf has over 25 years’ experience in strategy, marketing and management. Independent Non-executive Director of Euroz Hartleys Group Limited Nil Holds a Bachelor of Arts from UWA, a Bachelor of Architecture from UWA, a Master of Business Administration (Advanced) from Curtin and is a graduate of the AICD * Balance as at the date of signing the report and total shares includes shares allocated under the Performance Rights Plan. MEETINGS OF DIRECTORS The numbers of meetings of the Company’s Board of Directors held during the year ended 30 June 2022 and the numbers of meetings attended by each Director were: D IREC TOR DIRECTORS MEETINGS COMMITTEE MEETINGS NUMBER ELIGIBLE NUMBER NUMBER ELIGIBLE TO NUMBER NUMBER ELIGIBLE TO NUMB E R TO ATTEND ATTENDED ATTEND ATTENDED ATTEND ATTE NDE D AUDIT REMUNERATION Andrew McKenzie Jay Hughes Robert Black Richard Simpson Ian Parker Robin Romero Fiona Kalaf 17 15 17 17 17 17 1 17 15 16 16 14 16 1 - - 4 4 - 4 - - - 4 4 - 4 - 2 - - - 3 3 - 2 - - - 3 3 - EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 36 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (AUDITED) This Remuneration Report outlines the Key Management Personnel (KMP) remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, KMP of the Group are defined as those persons having authority for the strategic management and direction of the Group including any Director (whether executive or otherwise) of the parent Company. Key Management Personnel Remuneration Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the Group’s operations. The Board undertakes regular reviews of its performance and the performance of the Board against expectations made at the start of the year. Performance related bonuses are available to KMP based on their performance and that of the Company. Remuneration Policy The remuneration policy has been designed to align the interests of shareholders, Directors and executives. Euroz Hartleys Group remunerates its Directors, executives and other employees by way of a fixed base salary, commission and a combination of short and long term incentives. The Group believes this policy to have been effective in increasing shareholder wealth since inception. The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate to the results delivered. The Board / Remuneration Committee ensure that executive rewards satisfy the following key criteria for good reward governance practices: • • • • • competitiveness and reasonableness acceptability to shareholders performance linked transparency capital management Directors’ fees No Directors fees are paid to Executive Directors. Non-Executive Directors are paid a fixed base fee and superannuation for their role on the Board. Base pay All Directors and executives are offered a competitive base salary and superannuation. Base pay for senior executives is reviewed semi annually by the Remuneration Committee to ensure it is competitive with the market. Base pay is also reviewed upon promotion or additional responsibilities. There is no guarantee of base pay increases fixed in any senior executive or Directors contracts. Executives are offered a competitive salary that comprises of a base salary plus superannuation and a combination of some of the following short term incentives, dependant on the terms of the individual employment contract: • • • Participation in the profit share pool Commission Discretionary bonus Profit share pool Directors and executives are invited to participate in the profit share pool. The Remuneration Committee determines the allocation of up to 45% of pre tax profits on an ongoing basis. In consultation with relevant Department Heads, the Committee uses the following informal criteria to assist in the allocation: • • • • • • Ability to perform individual tasks within the relevant department. Ability to add value and innovate beyond the job standard specifications. Development of new and existing client relationships. Ability to interact with other relevant departments as part of a larger team approach. Relevant industry salary benchmarking. General requirements to attract and retain staff. EUROZ HARTLEYS GROUP ANNUAL REPORT 202237 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (CONT’D) Remuneration Policy (cont’d) Profit share pool (cont’d) The profit share payment is made as a combination of cash (75%) and equity (25%) in the Performance Rights Plan (PRP) to employees that opt in the Performance Rights Plan as detailed below in “Equity based payments”. Employees that opt out have their entire profit share paid in cash. In 2021 financial year, the Board introduced an additional bonus sacrifice arrangement as part of the Performance Rights Plan. Employees who qualify for this have the opportunity to elect to sacrifice an additional amount of their bonus above the 25% to be settled via the issue or allotment of shares in accordance with the terms of the Performance Rights Plan, instead of cash. Shares acquired as part of the bonus sacrifice arrangement are subject to escrow for a period of 14 years and one day from the date of the allotment of the shares. The four Directors on the Remuneration Committee are Ms Robin Romero (Chair) (Independent Non-Executive Director), Ian Parker, Richard Simpson (Executive Director) and Andrew McKenzie (Executive Director). Ms Romero and Mr Parker are not entitled to participate in the profit share pool. Ms Romero is not entitled to participate in the Performance Rights Plan. Commission Private Wealth Advisers are paid commission in addition to a base salary and superannuation. This is calculated on a sliding scale. Eligible Private Wealth Advisers are also invited to participate in the Performance Rights Plan based on certain performance hurdles set out in their employment contract. Discretionary bonus Executives and other staff members who do not participate in the profit share pool are paid a discretionary bonus based on the profitability of the Group. Similar to the profit share pool, the distribution of the discretionary bonus is also leveraged to the individual’s performance and is made as a combination of cash (75%) and equity (25%) in the Performance Rights Plan to employees that opt in the Performance Rights Plan as detailed below in “Equity based payments”. Employees that opt out have their entire profit share paid in cash. Equity based payments The Performance Rights Plan was established in 2014 as a long term incentive to assist in the reward, retention and motivation of Directors, executives and staff members. The overarching intention is to increase the alignment of staff with shareholder return. Eligible employees are invited to participate in this plan. Where an eligible employee elects to opt in to the Performance Right Plan, they are awarded a Performance Right at the beginning of June of that financial year. There are three separate long term incentives depending on the individual employment contract as below: • • • Profit share Discretionary bonus Commission The Performance Right represents a right to be issued a number of ordinary shares in Euroz Hartleys Group to reflect 25% of the profit share or the discretionary bonus that is paid to the participant who opts in. Private Wealth Advisers who are paid a commission may also opt in to be paid a portion of their total monthly brokerage and portfolio administration revenue in equity based payments. The shares issued will only vest to the employee after 3 years subsequent service following the initial year of service and are escrowed for a further 11 years. During the 2022 financial year, employees and executives eligible for the Performance Rights Plan were given the option to elect whether to opt in / opt out into the Performance Rights Plan. Any election to opt out would mean that the entire profit share, discretionary bonus or commission payment will be paid entirely in cash. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT38 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (CONT’D) Details of remuneration Details of the nature and amount of each element of the emoluments paid or payable of each KMP of the Group are set out in the following tables. SHORT‑TERM POST‑EMPLOYMENT PAYMENT SHARE BASED PROFIT SHARE BASE / BONUS / OTHER PERFORMANCE TERMINATION PERFORM ANCE SALARY COMMISSION BENEFITS SUPER ANNUATION RIGHTS BENEFIT TOTAL RE LATE D 2022 $ $ $ Andrew McKenzie 249,568 615,000 36,078 Jay Hughes Robert Black 249,568 249,568 615,000 21,844 577,500 16,256 Anthony Brittain 249,568 281,250 19,000 Dermot Woods * 193,507 250,000 8,583 Richard Simpson 190,125 168,750 5,174 Ian Parker 66,000 1,244,596 9,626 Robin Romero 75,000 Fiona Kalaf** 852 - - - - $ 27,500 27,500 27,500 27,500 27,500 20,845 23,567 7,500 85 $ 173,125 173,125 169,063 88,125 $ - - - - $ 1,101,271 1,087,037 1,039,887 665,443 75,938 502,504 1,058,032 51,563 - - - - - - - 436,457 1,343,789 82,500 937 72% 73% 72% 56% 31% 50% 93% 0% 0% Total 1,523,756 3,752,096 116,561 189,497 730,939 502,504 6,815,353 * Resigned on 20 May 2022 as Executive Director of Westoz Funds Management Pty Ltd and KMP ** Appointed Non-Executive Director on 28 June 2022 Executive Directors did not receive any Directors fees. SHORT‑TERM PROFIT SHARE POST‑EMPLOYMENT PAYMENT SHARE BASED BASE / BONUS / OTHER PERFORMANCE PERFOR MANC E SALARY COMMISSION BENEFITS SUPER ANNUATION RIGHTS TOTAL REL AT E D 2021 $ $ $ Andrew McKenzie 250,587 842,796 28,492 Jay Hughes Robert Black 230,452 250,587 843,750 26,776 842,796 19,526 Anthony Brittain*** 250,587 524,046 23,147 Dermot Woods Richard Simpson Ian Parker Robin Romero* Greg Chessell** Russell Kane** Simon Yeo** 225,129 185,236 50,000 43,750 63,326 63,326 63,326 618,748 12,143 2,692,118 16,655 1,068,432 16,136 - 150,000 120,000 90,000 - 4,961 5,451 7,007 $ 25,999 23,725 25,999 25,999 25,000 21,159 16,271 4,156 5,424 5,424 5,424 $ $ 162,500 1,310,374 162,500 1,287,203 152,188 1,291,096 78,750 902,529 85,546 966,566 37,500 2,952,668 - - 1,150,839 47,906 58,750 282,461 77,813 272,014 54,063 219,820 77% 78% 77% 67% 73% 92% 93% 0% 74% 73% 66% Total 1,676,306 7,792,686 160,294 184,580 869,610 10,683,476 * Appointed Non-Executive Director on 2 December 2020 ** Ceased being KMP on 9 October 2020 *** Resigned 9 October 2020 as Executive Director but remains a KMP EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 39 REMUNERATION REPORT (CONT’D) Details of remuneration (cont’d) Richard Simpson and Ian Parker were appointed to the Board on 6 October 2020, following completion of the off-market takeover offer by Euroz of Hartleys Limited on 1 October 2020. In connection with the takeover offer, it was agreed that certain amounts would be permitted to be distributed by Hartleys to its shareholders prior to completion of the takeover offer. This included cash proceeds from the sale of the securities held by Zenix Nominees Pty Ltd (a subsidiary of Hartleys) as at 30 June 2020 distributed by way of a dividend / return of capital as approved by Hartleys shareholders. Richard Simpson and Ian Parker each received (i) a completion bonus in connection with the takeover offer (paid from Hartleys cash reserves pre-completion of the takeover offer); and (ii) a corporate bonus which was paid following their respective appointments to the Euroz Hartleys Group Board, however, which relates to the period up to completion of the takeover offer (such amount predominantly as a result of the sale of securities held by Zenix Nominees Pty Ltd). Executive Directors did not receive any Directors fees. Service agreements Remuneration and other terms of employment for the Key Management Personnel are formalised in service agreements. Each of these agreements provide for performance related cash bonuses and other benefits. Notwithstanding the agreed salary in the service agreement, the base salary may be reduced or increased based on trading conditions. Other major provisions of the agreements relating to remuneration are set out below. Andrew McKenzie, Executive Chairman • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $253,500 (2021 - $253,500) plus profit share Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary Jay Hughes, Director • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $253,500 (2021 - $253,500) plus profit share Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary Robert Black, Director • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $253,500 (2021 - $253,500) plus profit share Payment on termination of employment by the employer, other than for gross misconduct three – months’ salary Anthony Brittain, Director Euroz Hartleys Limited - Chief Operating and Financial Officer • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $253,500 (2021 - $253,997) plus discretionary bonus Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary Richard Simpson, Director • • • Term of contract – ongoing part time employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $253,500 (2021 - $253,500) plus profit share Payment on termination of employment by the employer, other than for gross misconduct – six months’ salary Ian Parker, Director • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $66,000 (2021 - $66,000) plus commission Payment on termination of employment by the employer, other than for gross misconduct – six months’ salary Robin Romero, Non-Executive Director • • Term of contract – ongoing consulting contract Directors fee, exclusive of superannuation for the year ended 30 June 2022 of $75,000 (2021 - $75,000) EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT40 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (CONT’D) Service agreements (cont’d) Fiona Kalaf, Non-Executive Director – appointed 28 June 2022 • • • Term of contract – ongoing consulting contract Directors fee, exclusive of superannuation for the year ended 30 June 2022 of $852 Annual entitlement of Directors fee, exclusive of superannuation of $75,000 Dermot Woods, Director Westoz Funds Management Pty Ltd - resigned 20 May 2022 • • • • Term of contract – ongoing employment contract Base salary, exclusive of superannuation for the year ended 30 June 2022 of $229,000 (2021 - $229,000) plus discretionary bonus Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary Resigned on 20 May 2022 as Executive Director of Westoz Funds Management Pty Ltd and KMP Shareholdings of Key Management Personnel The movement during the reporting year in the number of shares in Euroz Hartleys Group Limited held, directly, indirectly or beneficially, by each member of KMP, including related parties, is as follows: 2022 Ordinary shares A McKenzie J Hughes R Black A Brittain R Simpson I Parker R Romero D Woods*** F Kalaf **** BALANCE AT RECEIVED BOUGHT NET CHANGE BALANCE AT 3 0 1 JULY 2021 VIA PRP (i) & (S OLD)* OTHER ** JUN E 2022 13,268,724 13,745,094 5,042,340 863,029 2,503,878 1,869,604 22,575 1,006,235 - 121,373 121,373 113,972 55,506 33,303 - - - - - - 106,050 - - 118,869 - - - - - - - - - - (1,006,235) - 13,390,097 13,866,467 5,262,362 918,535 2,537,181 1,988,473 22,575 - - 38,321,479 445,527 224,919 (1,006,235) 37,985,690 *Inclusive of shares allocated in Dividend Reinvestment Plan (DRP) ** Net change reflects cessation as a KMP ***Resigned on 20 May 2022 as Executive Director of Westoz Funds Management Pty Ltd and KMP **** Appointed on 28 June 2022 as an Independent Non-Executive Director of Euroz Hartleys Group Limited EUROZ HARTLEYS GROUP ANNUAL REPORT 202241 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (CONT’D) Shareholdings of Key Management Personnel (cont’d) 2021 Ordinary shares A McKenzie J Hughes R Black A Brittain R Simpson I Parker R Romero D Woods R Kane S Yeo G Chessell BALANCE AT RECEIVED BOUGHT NET CHANGE 1 JULY 2020 VIA PRP (i) & (S OLD)* OTHER ** BALANC E AT 30 JUN E 2021 12,844,846 12,955,676 4,578,068 643,633 - - - 876,948 3,501,647 4,792,972 4,952,924 232,716*** 599,418*** 317,340*** 219,396*** 191,162 190,000 146,932 - 188,054*** 50,000 - - 129,287 - - - 23,683 22,575 - 5,000 172,028 114,771 - - - - 2,265,824 1,845,921 - - (3,506,647) (4,965,000) (5,067,695) 13,268,724 13,745,094 5,042,340 863,029 2,503,878 1,869,604 22,575 1,006,235 - - - 45,146,714 1,686,211 916,151 (9,427,597) 38,321,479 *Inclusive of shares allocated in Dividend Reinvestment Plan (DRP) ** Net change reflects commencement or cessation as a KMP *** Inclusive of shares allotted via the sacrifice of amounts greater than 25% in to the PRP (i) These shares are held by the Euroz Share Trust and are currently vesting in accordance with the Euroz Hartleys Group PRP. Performance Rights held by Key Management Personnel The movement during the reporting period in performance rights in Euroz Hartleys Group Limited held, directly, indirectly or beneficially, by each KMP, including related parties, is as follows: 2022 Performance Rights A McKenzie J Hughes R Black A Brittain R Simpson D Woods* DATE GRANTED REMUNERATION VESTED GRANTED AS 1 June 2022 1 June 2022 1 June 2022 1 June 2022 1 June 2022 - 1 1 1 1 1 - 5 (1) (1) (1) (1) (1) - (5) * Resigned on 20 May 2022 as Executive Director of Westoz Funds Management Pty Ltd and KMP EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT42 Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 REMUNERATION REPORT (CONT’D) Performance Rights held by Key Management Personnel (cont’d) 2021 Performance Rights A McKenzie J Hughes R Black A Brittain R Simpson D Woods R Kane S Yeo G Chessell DATE GRANTED REMUNERATION VESTED GRANTED AS 1 July 2020 1 July 2020 1 July 2020 1 July 2020 18 May 2021 1 July 2020 1 July 2020 1 July 2020 1 July 2020 1 1 1 1 1 1 1 1 1 9 (1) (1) (1) (1) (1) (1) (1) (1) (1) (9) These performance rights were issued in accordance with the PRP. In financial year 2022, rights were granted on 1 June 2022 and vested on 30 June 2022. SHARE BASED COMPENSATION A performance right was issued to KMPs as part of their annual bonus / profit share plan. The fair value of each right is calculated as 25% of each member’s profit share or bonus entitlement. The performance rights are subject to a vesting period of up to 1 year. Total fair values of shares resulting from the exercise of the performance rights issued to KMPs in the year amounts to $752,500 (2021: $1,495,000). LOANS KEY MANAGEMENT PERSONNEL No loans were made to Directors of Euroz Hartleys Group Limited and the KMPs of the Group, including their personally related entities during the year. Remuneration Report – end EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Directors’ Report (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 43 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS Euroz Hartleys Group Limited has a Deed of Indemnity for all the Directors and Officers of the Group against all losses or liabilities incurred by each Director and Officer in their capacities as Directors and Officers of the Group. The Group agreed to indemnify and keep indemnified the Directors and Officers against all liabilities by the Directors and Officers as a Director and Officer of the Group to the extent permitted under the Corporations Act 2001. During the financial year, Euroz Hartleys Limited paid a premium on behalf of the Group to insure the Directors and Officers of the Group. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and Officers in their capacity as Directors and Officers of the Group. INDEMNIFICATION OF AUDITORS The Group has not indemnified the auditor and has not paid an insurance premium to insure the auditor. PROCEEDINGS ON BEHALF OF THE GROUP No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to such proceedings during the year. NON‑AUDIT SERVICES There were no non-audit services provided by the group’s auditor, KPMG during the year. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2022 has been received and follows the Directors’ report. This report is made in accordance with a resolution of the Directors. Andrew McKenzie Executive Chairman Date: 31 August 2022 Richard Simpson Executive Director EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT44 Auditor’s Independence Declaration To the Directors of Euroz Hartleys Group Limited FOR THE YEAR ENDED 30 JUNE 2022 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Euroz Hartleys Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Euroz Hartleys Group Limited for the financial year ended 30 June 2022 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 KPMG Trevor Hart Partner Perth 31 August 2022 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. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Consolidated Statement of Profit or Loss and other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2022 45 Revenue from continuing operations Share of profits of equity accounted investments, net of tax Gain / (Loss) on investments Employee benefits expense Depreciation and amortisation expenses Regulatory expenses Legal, professional and consultancy expenses Conference and seminar expenses Stockbroking expenses Impairment reversal Other expenses Profit before income tax expense Income tax expense NOTE 4 14 5, 14 5 6 2022 $ RESTAT E D (i) 2021 $ 118,690,898 128,068,378 15,808,439 2,246,212 (67,215,981) (2,471,480) (989,341) (1,479,492) (755,337) (5,758,370) 6,510,348 (6,518,919) 17,648,033 14,959,262 (70,228,999) (2,722,739) (716,330) (1,406,836) (379,667) (8,410,708) 3,898,087 (6,260,140) 58,066,977 74,448,341 (17,343,262) (21,907,436) Profit after income tax expense for the year 40,723,715 52,540,905 Other comprehensive income Other comprehensive income net of tax - - Total comprehensive income for the year attributable to owners of Euroz Hartleys Group Limited 40,723,715 52,540,905 Basic earnings per share (cents) Diluted earnings per share (cents) (i) Refer to note 7 34 34 21.68 20.68 29.16 28.17 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT46 Consolidated Statement of Financial Position AS AT 30 JUNE 2022 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other financial assets at fair value Other current assets Total current assets NON‑CURRENT ASSETS Financial assets at amortised cost Investments at fair value through profit and loss Equity accounted investments Property, plant and equipment Deferred tax assets Intangible assets Right of use asset Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Current tax liabilities Current provisions Lease liability Total current liabilities NON‑CURRENT LIABILITIES Deferred tax liabilities Non-current provisions Lease liability Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY (i) Refer to Note 7 NOTE 8 9 10 11 12 13 14 15 6 16 20 17 18 19 20 6 21 20 22 (a) 22 (g) 2022 $ 190,667,525 18,071,214 15,317,064 2,482,114 RESTATE D (i) 2021 $ 96,050,325 28,779,550 21,455,932 2,804,724 226,537,917 149,090,531 1,069,380 - - 2,097,562 4,238,048 39,362,702 4,244,049 1,362,701 826,040 75,827,068 1,129,497 9,013,841 39,969,660 5,494,070 51,011,741 133,622,877 277,549,658 282,713,408 59,537,023 8,834,084 7,788,835 1,354,750 81,057,681 8,123,786 7,526,510 1,354,249 77,514,692 98,062,226 3,131,101 140,970 3,552,525 8,602,736 109,882 4,836,380 6,824,596 13,548,998 84,339,288 111,611,224 193,210,370 171,102,184 136,740,320 134,665,226 8,917,497 47,552,553 7,955,369 28,481,589 193,210,370 171,102,184 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2022 47 Balance at 1 July 2020 102,167,440 4,869,667 7,267,597 29,813 114,334,517 SHARE BASED NON‑ ISSUED PAYMENT RETAINED CONTROLLING CAPITAL RESERVE EARNINGS INTEREST TOTAL $ $ $ $ $ 52,540,905 52,540,905 (29,813) 52,511,092 (29,813) 52,511,092 Profit for the period Total comprehensive income for the period - - Transactions with owners, recorded directly in equity Shares issued during the period 38,280,087 - - - Vested shares under employee share plan Treasury shares Share based payments Dividends declared 2,167,647 (2,167,647) (7,949,948) - 5,253,349 - - - - - (31,326,913) Total contributions by and distributions to owners 32,497,786 3,085,702 (31,326,913) Balance at 30 June 2021 134,665,226 7,955,369 28,481,589 Balance at 1 July 2021 134,665,226 7,955,369 28,481,589 Profit for the period Total comprehensive income for the period - - Transactions with owners, recorded directly in equity Shares issued during the period 2,868,844 - - - Vested shares under employee share plan Treasury shares Share based payments Dividends declared 2,101,174 (2,101,174) (2,894,924) - 3,063,302 40,723,715 40,723,715 - - - - - (21,652,751) - - - - - - - - - ‑ ‑ ‑ - - - - - - - 38,280,087 - (7,949,948) 5,253,349 (31,326,913) 4,256,575 171,102,184 171,102,184 40,723,715 40,723,715 2,868,844 - (2,894,924) 3,063,302 (21,652,751) Total contributions by and distributions to owners 2,075,094 962,128 (21,652,751) ‑ (18,615,529) Balance at 30 June 2022 136,740,320 8,917,497 47,552,553 ‑ 193,210,370 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT48 Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2022 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Proceeds from sale of trading shares Income taxes paid Payments for trading shares NOTE 2022 $ 2021 $ 124,142,518 111,728,760 (90,132,105) (59,370,947) 34,010,413 52,357,813 233,152 9,831,789 (17,328,806) (4,148,814) 207,963 13,961,244 (7,953,595) (8,058,362) Net cash flows from operating activities 32 22,597,734 50,515,063 CASH FLOWS FROM INVESTING ACTIVITIES Cash acquired on acquisition of subsidiary FinClear Services security deposit Receipts on disposal of investments Maturity of term deposit Dividends and trust distributions received Payments for property, plant and equipment - - 21,553,544 4,600,000 105,011,618 216,699 1,674,202 (2,132,213) - - 3,060,278 (762,533) Net cash flows from investing activities 104,770,306 28,451,289 CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Payments for treasury shares Repayment of lease liabilities Interest paid on lease liabilities Proceeds from share issue (31,277,473) (2,894,927) (1,206,174) (241,110) 2,868,844 (14,683,034) (7,949,948) (1,141,310) (248,125) - Net cash flows used in financing activities (32,750,840) (24,022,417) Net increase in cash and cash equivalents 94,617,200 54,943,935 Cash and cash equivalents at 1 July 96,050,325 41,106,390 Cash and cash equivalents at 30 June 8 190,667,525 96,050,325 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2022 49 CONTENTS PAGE NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES NOTE 2: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS NOTE 3: SEGMENT INFORMATION NOTE 4: REVENUE NOTE 5: PROFIT BEFORE INCOME TAX EXPENSE NOTE 6: INCOME TAX NOTE 7: RESTATEMENT NOTE 8: CASH AND CASH EQUIVALENTS NOTE 9: TRADE AND OTHER RECEIVABLES NOTE 10: OTHER FINANCIAL ASSETS AT FAIR VALUE NOTE 11: OTHER CURRENT ASSETS NOTE 12: FINANCIAL ASSETS AT AMORTISED COST NOTE 13: INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS NOTE 14: EQUITY ACCOUNTED INVESTMENTS NOTE 15: PROPERTY, PLANT AND EQUIPMENT NOTE 16: INTANGIBLE ASSETS NOTE 17: TRADE AND OTHER PAYABLES NOTE 18: CURRENT TAX LIABILITIES NOTE 19: CURRENT PROVISIONS NOTE 20: RIGHT OF USE ASSET AND LEASE LIABILITY NOTE 21: NON-CURRENT PROVISIONS NOTE 22: CONTRIBUTED EQUITY NOTE 23: DIVIDENDS NOTE 24: FINANCIAL INSTRUMENTS NOTE 25: REMUNERATION OF AUDITORS NOTE 26: CONTINGENT LIABILITIES NOTE 27: COMMITMENTS FOR EXPENDITURE NOTE 28: RELATED PARTIES NOTE 29: INVESTMENTS IN CONTROLLED ENTITIES NOTE 30: ACQUISITION OF EUROZ HARTLEYS LIMITED NOTE 31: EVENTS SUBSEQUENT TO REPORTING DATE NOTE 32: RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES NOTE 33: NON-CASH INVESTING AND FINANCING ACTIVITIES NOTE 34: EARNINGS PER SHARE NOTE 35: PARENT ENTITY DISCLOSURES NOTE 36: COMPANY DETAILS 50 59 60 61 62 62 64 65 65 65 65 65 66 66 66 67 68 68 69 69 70 71 72 73 76 76 76 77 78 79 81 81 82 82 83 83 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT50 Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2022 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements as issued by the Australian Accounting Standards Board and the Corporations Act 2001 as appropriate for “for-profit” oriented entities. This financial report has been authorised by the Directors to be issued on 31 August 2022. Euroz Hartleys Group Limited is a listed public company, trading on the Australian Securities Exchange and Cboe, limited by shares, incorporated and domiciled in Australia. The financial report of Euroz Hartleys Group Limited and its controlled entities (the Group), complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Separate financial information of the Parent Company has been included in Note 35 as permitted by amendments to the Corporations Act 2001. The financial report is presented in Australian dollars which is the Group’s functional and presentation currency. Amounts are rounded to the nearest dollar in accordance with Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191. The following is a summary of the material accounting policies adopted by the Group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of preparation Reporting basis and conventions The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Presentation and functional currency The consolidated financial statements are presented in Australian Dollars, which is the Group’s functional currency. All amounts have been rounded to the nearest dollar, unless otherwise indicated. Accounting policies (a) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Euroz Hartleys Group Limited (‘Company’ or ‘parent entity’) as at 30 June 2022 and the results of all controlled entities for the year then ended. Euroz Hartleys Group Limited and its controlled entities together are referred to in this financial report as the Group. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. A change in ownership interest without the loss of control is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. All controlled entities have a 30 June financial year end. (b) Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 51 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (b) Income tax (cont’d) Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity’s which intend to settle simultaneously. Euroz Hartleys Group Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. The Group formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax sharing agreement whereby each Company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. (c) Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, and the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. (d) Revenue recognition Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability. The Group recognises revenue when it transfers control over a service to a customer. The nature and timing of satisfaction of performance obligations for each of the Group’s main revenue streams is set out below. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 52 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (d) Revenue recognition (cont’d) Brokerage revenue Brokerage revenue from share trading is considered to be derived from a single obligation being the completion of a share trading transaction. Accordingly, at the completion of the transaction the revenue is recognised. Underwriting, placement fees and corporate retainers Corporate retainers relate to the service fee for work performed such as corporate advisory services. This service is considered a distinct performance obligation and accordingly revenue is recognised as the service is completed in accordance with the engagement mandate. Placement fees are fees charged on raising capital for clients. This is determined to be the single performance obligation and revenue is recognised as the service is completed in accordance with the engagement mandate. Underwriting fees are derived upon the satisfactory completion of the engagement criteria which may be the execution of a capital raising or the sale of a pre-determined number of shares for a client. The performance obligation is determined to be the completion of the capital raise or sale of the shares and revenue is recognised as the service is completed in accordance with the engagement mandate. The payment terms in relation to this source of revenue is up to 7 days. Performance and management fees Performance fee income is derived from investment management agreements based on the performance of an underlying fund over a contracted period of time. If the fund performance exceeds a specified threshold the performance fee payable is determined and recorded as revenue at the conclusion of the performance period. The performance obligation is determined to be singular being to achieve a certain performance target over a specified period. Management fee income is derived from investment management agreements whereby a monthly management fee is payable based on the fund value. The performance obligation is the monthly management of the fund and revenue is recorded monthly following the completion of the month. The payment terms in relation to this source of revenue is up to 20 days. Wealth management fees Wealth management fee income is derived from agreements with clients individually whereby a monthly management fee is payable based on the portfolio value or alternatively a fixed fee arrangement. The performance obligation is the monthly management of the portfolio and revenue is recorded monthly following the completion of the month. Proceeds from the sale of investments Gross proceeds on sale of investments are shown as part of the gain/loss on fair value movement in investments along with cost of the disposal in investments and unrealised gains in investments held. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. (e) Receivables Trade receivables are recognised as current receivables as they are generally settled within 30 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 53 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (e) Receivables (cont’d) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. For the Group it arises from receivables from subsidiaries, as well as from customers. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and has established a credit and trading policy which sets certain trading limits and guidelines. These limits are reviewed and adjusted by management when and, if required, depending on circumstances prevailing at that time. (f) Other Financial Assets Other financial assets are securities in listed and unlisted companies held at fair value through profit and loss. Refer to Note 1(v) financial assets at fair value through profit or loss. (g) Property, plant and equipment Each class of property, plant and equipment is carried at cost as indicated less, where applicable, any accumulated depreciation and impairment losses. The cost of property, plant and equipment constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all property, plant and equipment is depreciated on a straight-line basis over their useful lives to the residual values commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: CL ASS OF PROPERTY, PLANT AND EQUIPMENT Leasehold improvements Plant and equipment DEPRECIATION RAT E 2 - 25% 25 – 33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss. When revalued assets are sold, amounts included in the revaluation reserve relating to the asset are transferred to retained earnings. (h) Leasehold improvements The cost of improvements to or on leasehold properties are amortised over the unexpired period of the lease or the estimated useful life of the improvement to the Group, whichever is the shorter. (i) Leases Short term lease payments are charged to the statement of profit or loss in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. Right of use assets A right of use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right of use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right of use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 54 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (i) Leases (cont’d) Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. (j) Trade and other payables Trade and other payables also include other liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. (k) Dividends Provision is made for the amount of any dividend declared and authorised by the Directors on or before the end of the financial year, but not distributed at reporting date. (l) Options The fair value of options in the shares of the Company issued to Directors and other parties is recognised as an expense in the financial statements in relation to the granting of these options. (m) Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. (n) Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. (o) Employee benefits (i) Wages, salaries and annual leave Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Employee benefits payable later than one year Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. There have been no changes to the method used to calculate this liability. (iii) Superannuation Contributions are made by the Group to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred. (iv) Employee benefit on costs Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 55 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (o) Employee benefits (cont’d) (v) Options / performance rights Options and/or performance rights issued are equity settled. The fair value of options/performance rights granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date. For the right to vest, the employee has to be an Eligible Employee. The fair value of options at grant date is independently determined using the Black-Scholes option pricing model that considers the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value of performance rights is estimated at grant date based on expectations of the bonus that will be paid at year end to eligible employees. Each performance right is subject to a service based vesting condition. At the end of each, the performance right converts to plan shares that are subject to a further 3-year service condition. The Board may, at their discretion accelerate the vesting period. Unvested shares are subject to leaver clawback provisions during the 3 year period. (vi) Profit-sharing The Group recognises a liability and an expense for profit-sharing based on a formula that takes into consideration the profit attributable to the Company’s employees after certain adjustments. (vii) Termination benefits The Group recognises a liability and an expense when the Group demonstrates a commitment to either terminate the employee before the normal retirement date or provide termination benefits as a result of an offer made to the employee prior to retirement date. (p) Cash and cash equivalents For purposes of the statement of cash flows, cash and cash equivalents includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. (q) Earnings per share (i) Basic earnings per share Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. The potential impact of issuing treasury shares externally is considered when calculating diluted earnings per share. (r) Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on 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; and assumes that the transaction will take place either: in the principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 56 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (r) Fair value measurement (cont’d) For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (s) Fair value estimation The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available- for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current closing price; the appropriate quoted market price for financial liabilities is the current closing price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows and Black-Scholes model are used to determine fair value for the remaining financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. (t) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. 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 in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (u) Treasury Shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in share-based payments reserve. (v) Investments and Other Financial Assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at Fair Value Through Profit or Loss (“FVTPL”). Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 57 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (v) Investments and Other Financial Assets (cont’d) Financial assets at amortised cost The Group measures financial assets at amortised cost if both of the following conditions are met: (i) (ii) The financial asset is held within a business model with the objective to hold financial assets to collect contractual cashflows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Expected Credit Losses (ECL’s) on financial assets at amortised costs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. (w) Current / non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. (x) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. (y) Intangible asset Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Indefinite life intangibles are tested for impairment annually or more frequently if events, conditions or circumstances indicate that they might be impaired. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 58 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Accounting policies (cont’d) (z) Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash- generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. (aa) Equity accounted investments Associates are those entities which the Group has significant influence, but not control or joint control, over the financial and operating policies. Interests in associates are accounted for using the equity method. These equity accounted investments are initially recognised at cost. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of profit or loss of equity accounted investees until the date on which significant influence ceases. Dividends received from associates are recognised as a reduction to the equity accounted investments. At each reporting date, the Group reviews the carrying amounts of its equity accounted investments to determine whether there is an indication of impairment. If any indication exists, then the asset’s recoverable amount is estimated, being the higher of value in use and fair value less costs of disposal. The Group measures fair value of its equity accounted investments using a quoted price in an active market for that investment, when one is available. An impairment loss is recognised if the carrying amount of the asset exceeds its recoverable amount and is recognised in profit or loss. Any impairment loss recognised is reversed only to the extent that the asset’s carrying amount does not exceed its carrying amount that would have been determined if no impairment loss had been recognised. (ab) New standards and interpretations The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current year. New Accounting Standards and Interpretations not yet mandatory or early adopted The AASB has issued the following new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has not early adopted any of these standards. AAS B NO. NEW STANDARDS OR AMEND MENTS AASB 2014-10 Sale or Contributions of Assets between an Investor and its Associate or Joint Venture AP PLICATI O N DAT E 1 January 2022 AASB 2020-3 Annual Improvements 2018 – 2020 and Other Amendment 1 January 2022 AASB 137 AASB 116 AASB 108 Onerous Contracts – Cost of Fulfilling a Contract (Amendments to AASB 137) Property, Plant and Equipment: Proceeds before Intended Use (Amendments to AASB 116) 1 January 2022 1 January 2022 Definition of Accounting Estimates (Amendments to AASB 108) 1 January 2023 AASB 2020-1 Classification of Liabilities as Current or Non-current AASB 17 Insurance Contracts 1 January 2023 1 January 2023 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 59 2. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements incorporated in the financial statements are based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates and judgments (i) Impairment of non-financial assets At each reporting date, the Group compares the carrying values and market values of investments to determine whether there is any indication of impairment. If impairment indicators exist, any excess of the investment entity’s carrying value over the 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. (ii) Classification of other financial assets The Group classifies investments in listed securities at fair value through profit and loss. These securities are accounted for at fair value. Any increments or decrements in their value at year end are charged or credited to the statement of profit or loss. (iii) Taxation Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from temporary differences and tax losses, are recognised only where it is considered more likely than not they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences are recognised to the extent that there are future profits. (iv) 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, the goodwill on acquisition of Blackswan Equities Limited and on the acquisition of Entrust have been allocated to the Retail CGU. Goodwill on the acquisition of Hartleys Limited has been allocated to the Retail and Wholesale CGU respectively at $3,139,199 and $4,368,420. The Board have assessed that there is no indication the goodwill is impaired. The assumptions used for determining the recoverable amount are based on past experience and expectations for the future. Projected cash flows for each CGU were over a 5-year period and a terminal value using a value in use model, discounted using an appropriate discount rate. The discount rate deemed applicable amounted to 9.5 % and a 1% growth rate on cash flows for determining the terminal value. (v) Intangible assets Upon acquisition of Entrust, Euroz Hartleys Group acquired $1,736,240 in other intangible assets consisting 3 separate client portfolios. The useful life of these intangibles is assessed as 10 years and the balance as at 30 June 2022 was $520,872. On acquisition of Hartleys Limited, the Group recognised an intangible for Hartleys Limited brand name of $19,500,000 with an indefinite useful life and customer relationship asset of $3,900,000 with a useful life of 9 years. The values of these intangibles were measured by an external professional valuer. Amortisation expense of the customer relationship of $433,333 was recognized during the year. The intangible assets associated with the Hartley Limited’s brand name was allocated to the retail and wholesale CGU respectively at $8.2 million and $11.3 million. The brand name intangible was tested for impairment along with the goodwill as noted above. The Board have assessed that there is no indication the intangible assets are impaired. (vi) Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. (vii) Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the consolidated entity based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 60 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 3. SEGMENT INFORMATION Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive team (the chief operating decision makers) in assessing performance and in allocating resources. Euroz Hartleys Group Limited business segments have been determined to be: Retail Retail refers to private wealth advisers who deal with high net wealth non-institutional clients. The private wealth advisers provide a broad investment offering for the clients. The wealth management team provides strategic investment advice, superannuation advice, investment management and portfolio administration service. The specialised broking services allows close interaction between research analysts and private wealth advisers and hence allowing timely communication with clients. Wholesale Wholesale refers to the Institutional Dealing, Research and Corporate Finance team who deal with companies and other institutional clients. The Institutional dealing team provides quality advice, idea generation, site visits, roadshows highly focused on resources, mining services and small to mid- cap Western Australia (WA) industrials. Working along the Institutional team is the Research team which has extensive coverage of ASX listed industrials, resources and energy companies. The Corporate Finance team specialises in Equity Capital Markets (ECM), Mergers and Acquisitions (M&A) and strategic Corporate Advisory. Funds Management The Group provides funds management services. During the year, the Group managed mandates from two listed investment companies; Westoz and Ozgrowth. On 21 April 2022, pursuant to two separate Scheme of Arrangements, Westoz and Ozgrowth were acquired by WAM Capital Limited. WFM no longer manages the investment mandates and will no longer receive management or performance fees from these funds. We retain the WFM Australian Financial Services Licence (AFSL) to maintain future funds management optionality. Due to the nature of the business providing financial services to the clients driven by the employees, management does not consider asset and liabilities separation to be an appropriate measure of segments. Basis of accounting for purpose of reporting by operating segments The accounting policies used by the Group in reporting segments internally are consistent with those adopted in the financial statements of the Group, unless otherwise stated. Segment performance 2022 Brokerage Underwriting and placement fees Performance and management fees Wealth management fees Corporate advisory Dividends received Interest received Other revenue RETAIL WHOLESALE MANAGEMENT OTHER TOTAL FUNDS $ $ 26,301,047 10,198,522 10,843,132 32,770,543 $ - - - 13,791,010 - 18,375,377 - - - 58,393 5,740,096 - - 51,490 206,555 - - - 29,684 - $ - - - - - 107,589 209,386 8,074 $ 36,499,569 43,613,675 13,791,010 18,433,770 5,740,096 107,589 239,070 266,119 Total segment revenue 55,571,046 48,974,109 13,820,694 325,049 118,690,898 Segment income tax expense 3,603,568 2,137,204 3,679,858 7,922,632 17,343,262 Segment net operating profit after tax 8,552,775 13,044,100 7,931,491 11,195,349 40,723,715 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 61 3. SEGMENT INFORMATION (CONT’D) Segment performance (cont’d) 2021 Brokerage Underwriting and placement fees Performance and management fees Wealth management fees Corporate advisory Dividends received (i) Interest received Other revenue Total segment revenue RETAIL WHOLESALE MANAGEMENT OTHER (i) RESTAT E D (i) FUNDS TOTAL $ $ 22,151,431 8,964,048 10,307,152 41,351,011 $ - - - - 17,218,045 14,495,036 - - - - 36,583 12,381,468 - - 177,000 - - - 11,002 - $ - - - - - 76,452 186,342 712,808 $ 31,115,479 51,658,163 17,218,045 14,531,619 12,381,468 76,452 197,344 889,808 46,953,619 62,910,110 17,229,047 975,602 128,068,378 Segment income tax expense 4,739,088 6,116,805 4,598,369 6,453,174 21,907,436 Segment net operating profit after tax 6,497,804 14,941,039 10,712,822 20,389,240 52,540,905 (i) Refer to note 7 for restatement impact of prior period adjustment. As a result, dividend revenue decreased from $3,063,965 to $76,452 in the comparative financial information. Entity‑wide disclosures The Group predominately operates with in the geographical region of Australia. Therefore, the total revenue and non-current assets are reflected on the face of the financial statements. During the year ended 30 June 2022, approximately 11.62% (2021: 13.44%) of the Group’s external revenue was derived from management and performance fees from Westoz and Ozgrowth. Following the acquisition of these entities by WAM Capital Limited, the Group no longer manages their investment mandates. 4. REVENUE Revenue The disaggregation of revenue is as follows: Brokerage Underwriting and placement fees Performance and management fees Wealth management fees Corporate advisory fees Dividends and trust distributions received (i) Interest received Other revenue 2022 $ RESTATE D (i) 2021 $ 118,690,898 128,068,378 118,690,898 128,068,378 36,499,569 43,613,675 13,791,010 18,433,771 5,740,096 107,589 239,070 266,118 31,115,479 51,658,163 17,218,045 14,531,619 12,381,468 76,452 197,344 889,808 118,690,898 128,068,378 (i) Refer to Note 7 for restatement impact of prior period adjustment. As a result, dividend revenue decreased from $3,063,965 to $76,452 in the comparative financial information. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 62 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 5. PROFIT BEFORE INCOME TAX EXPENSE Profit before income tax is determined after accounting for the following specific expenses: Property, plant and equipment – depreciation Leasehold improvements – amortisation Right of use asset – amortisation Right of use asset – impairment Intangible asset – amortisation 2022 $ RESTAT E D (i) 2021 $ 216,115 396,264 1,252,144 - 606,957 354,278 128,305 983,041 270,371 986,744 2,471,480 2,722,739 Finance costs Interest and finance charges paid / payable on lease liabilities 241,110 248,125 Superannuation expense 2,919,314 2,040,313 Share based payments – PRP 3,063,302 5,253,350 Impairment expenses Impairment (reversal) / expense – equity accounted investments (6,510,348) (4,168,458) Impairment – intangible asset (i) Refer to Note 7 - 270,371 The equity accounted investments were recorded at their recoverable amounts which was lower than their pre impairment carrying amounts. Given an increase in share price (fair value) compared to equity accounting value, recorded impairments were reversed in the financial year 2021 and 2022. 6. INCOME TAX The components of tax expense / (benefit) comprise: Current tax Deferred tax 2022 $ 2021 $ 18,039,103 (695,841) 13,800,596 8,106,840 17,343,262 21,907,436 Numerical reconciliation between tax expense and pre-tax accounting profit: Profit before income tax expense 58,066,977 74,448,341 Income tax using Group’s tax rate of 30% (2021: 30%) 17,420,093 22,334,502 Add tax effect of: - deferred tax not recognised on temporary differences - other non-allowable items Less tax effect of: - franked dividends received Income tax expense attributable to entity 227,500 185,253 (116,263) 82,542 17,832,846 22,300,781 (489,584) (393,345) 17,343,262 21,907,436 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 63 6. INCOME TAX (CONT’D) Reconciliations i. Gross movements The overall movement in the deferred tax account is as follows: Balance at 1 July Recognised in statement of profit or loss Balance at 30 June ii. Deferred tax liability Movement in temporary differences during the year: Fair value gain adjustments Balance at 1 July Recognised in the statement of profit or loss Balance at 30 June Share based payments and prepaid expenses Balance at 1 July Recognised in the statement of profit or loss Balance at 30 June iii. Deferred tax assets Movement in temporary difference during the year: Fair value gain adjustments Balance at 1 July Recognised in the statement of profit or loss Balance at 30 June Provisions Balance at 1 July Recognised in the statement of profit or loss Balance at 30 June Other (i) Balance at 1 July Recognised in the statement of profit or loss Balance at 30 June (i) Deferred tax arising from right of use $0.1m (2021: $0.1m) and debt forgiven and impairment $0.1m (2021: $4.6m). Effective tax rate Tax consolidation legislation 2022 $ 2021 $ 411,105 695,841 1,106,946 8,517,945 (8,106,840) 411,105 7,264,953 (6,558,963) 705,990 1,337,783 1,087,328 2,425,111 3,131,101 35,212 7,229,741 7,264,953 911,663 426,120 1,337,783 8,602,736 - - - 2,292,692 (2,292,692) - 4,014,769 58,727 4,073,496 1,088,718 2,926,051 4,014,769 4,999,072 (4,834,520) 164,552 4,238,048 6,083,410 (1,084,338) 4,999,072 9,013,841 2022 29.9% 2021 29.4% Euroz Hartleys Group Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 July 2003. The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly-owned entities reimburse Euroz Hartleys Group Limited for any current income tax payable by Euroz Hartleys Group Limited arising in respect of their activities. The reimbursements are payable at the same time as the associated income tax liability falls due and have therefore been recognised as a current tax-related receivable by Euroz Hartleys Group Limited. In the opinion of the Directors, the tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the wholly owned entities in the case of a default by Euroz Hartleys Group Limited. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 64 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 7. RESTATEMENT Previously, Euroz Hartleys Group Limited applied the investment entity accounting exemption within AASB 10 Consolidated Financial Statements (the investment entity exemption) to its investments in Westoz and Ozgrowth and accounted for these investments at fair valued through profit and loss. Dividends received from associates were recognised as revenue from continuing operations. During the year, a reassessment of the accounting treatment of the investments in Westoz and Ozgrowth was performed. As a result, Euroz Hartleys Group Limited accounted for the investments in Westoz and Ozgrowth as associates using the equity accounting method and tested these investments for impairment as described in the accounting policy Note 1(aa). Applying the Group’s accounting policy to associates (refer to Note 1(aa)) the carrying amounts of these investments equalled their recoverable amounts which was measured at fair value at each comparative reporting date. As a result, no change was required to the Group’s opening retained earnings at 1 July 2020, net profit before or after income tax for the year ended 30 June 2021 nor total assets or net assets as at 30 June 2021. On 21 April 2022, pursuant to two separate Schemes of Arrangements, Westoz and Ozgrowth were acquired by WAM Capital Limited and the Group no longer manages the investment mandates and the Group no longer holds investments in these entities. The following table summarises the impact of the restatement on the comparatives on each line item affected of the Group’s consolidated financial statements. CO NS OLIDAT ED STATEMENT OF PROFIT OR LOSS AND OTHER CO MPREHENS IVE INCOME AS PREVIOUSLY REPORTED ADJ USTMENTS RESTATE D $ $ $ 30 June 2021 Revenue from continuing operations Share of profits of equity accounted investments, net of tax Gain / (Loss) on fair value movement on investments Impairment (expense) / reversal (i) Profit before income tax expense Profit after income tax expense 131,055,891 - (2,987,513) 17,648,033 33,788,240 (18,828,978) (270,371) 74,448,341 52,540,905 4,168,458 - - 128,068,378 17,648,033 14,959,262 3,898,087 74,448,341 52,540,905 (i) The adjustment represents a partial reversal of impairment of equity accounted investments recognised in previous years. CO NSO LIDATED STATEMEN T OF FINANCIAL POSIT ION 30 June 2021 Investment entities at fair value Equity accounted investments Total assets Total liabilities Net assets Total equity 75,827,068 (75,827,068) - 75,827,068 282,713,408 111,611,224 171,102,184 171,102,184 - - - - - 75,827,068 282,713,408 111,611,224 171,102,184 171,102,184 There is no impact on the Group’s basic or diluted earnings per share and no impact on the total operating, investing or financing cash flows for the year ended 30 June 2021. 30 June 2020 Investment entities at fair value Equity accounted investments Total assets Total liabilities Net assets Total equity 56,998,090 (56,998,090) - 56,998,090 139,166,490 24,831,973 114,334,517 114,334,517 - - - - - 56,998,090 139,166,490 24,831,973 114,334,517 114,334,517 There is no impact on the Group’s basic or diluted earnings per share and no impact on the total operating, investing or financing cash flows for the year ended 30 June 2020. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 65 8. CASH AND CASH EQUIVALENTS Cash at bank and on hand 175,256,542 78,587,456 2022 $ 2021 $ Restricted cash: Cash margin account Client trust account Total restricted cash Total cash and cash equivalents 3,593,551 11,817,432 15,410,983 3,330,943 14,131,926 17,462,869 190,667,525 96,050,325 The cash margin account is held by the Australian Securities Exchange (ASX) as a margin requirement to cover possible market participant default and is adjusted each day to reflect the Group’s current obligation to the clearing house at ASX. Client trust bank balances are client funds and not available for general use by the Group. 9. TRADE AND OTHER RECEIVABLES Trade receivables Broker receivable (i) Other receivable 1,138,100 16,849,172 83,942 2,191,154 26,505,144 83,252 18,071,214 28,779,550 The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has established a credit and trading policy which sets certain trading limits and guidelines. These limits are reviewed and adjusted by management when and, if required, depending on circumstances prevailing at that time. Receivables are measured at amortised cost and their carrying amount approximates fair value. (i) Broker receivables relates to outstanding client accounts and amounts owed to the Group by ASX Clearing. This is offset by broker payable as disclosed in Note 17. 10. OTHER FINANCIAL ASSETS AT FAIR VALUE Fair value of securities in listed companies Fair value of unlisted securities Total 6,779,359 8,537,705 14,683,377 6,772,555 15,317,064 21,455,932 These securities are held at fair value through profit or loss and the fair values are based on the closing price of each investment at year end. 11. OTHER CURRENT ASSETS Prepayments Accrued income Total 12. FINANCIAL ASSETS AT AMORTISED COST Security deposit Financial guarantee – term deposit Other non-current receivable 2,313,978 168,136 2,647,821 156,903 2,482,114 2,804,724 400,000 625,935 43,445 400,000 842,122 120,579 1,069,380 1,362,701 Security deposit is held by FinClear Services Pty who is the clearing and trading participant on behalf of Euroz Hartleys Limited for international trades. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 66 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 13. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS Fair value of investment in managed investment schemes - 826,040 2022 $ 2021 $ Investment was disposed during the year. 14. EQUITY ACCOUNTED INVESTMENTS Reconciliation Equity accounted investments as at 1 July Add: Share of profits of equity accounted investments, net of tax Add: Impairment reversal / (expense) (Note 5) Less: Dividend received Disposal (ii) 2022 $ RESTAT E D (i) 2021 $ 75,827,068 15,808,439 6,510,348 (1,566,614) (96,579,241) 56,998,090 17,648,033 4,168,458 (2,987,513) - Equity accounted investment as at 30 June - 75,827,068 Equity accounted investment entities were Westoz and Ozgrowth and these investments have since been disposed during the year. (i) (ii) Refer to Note 7 Equity accounted investments were the investments in Westoz and Ozgrowth. On April 21, 2022, pursuant to two separate Scheme of Arrangements, all the shares in Westoz and Ozgrowth were acquired by WAM Capital Limited in return for shares in WAM Capital Limited. Following the completion of the Schemes, the Group received 49.95 million shares valued at $107.9 million. These WAM Capital Limited shares were subsequently sold during the financial year resulting in proceeds of $103.9 million. The net gain/loss on these transactions are recorded in the profit and loss under gain/loss on investments. 15. PROPERTY, PLANT AND EQUIPMENT Leasehold improvements At cost Less: Accumulated amortisation Software At cost Less: Accumulated depreciation Office equipment At cost Less: Accumulated depreciation Furniture, fixtures and fittings At cost Less: Accumulated depreciation 2022 $ 2021 $ 2,384,745 (674,166) 1,710,579 - - - 1,149,396 (852,857) 296,539 132,839 (42,395) 90,444 476,351 (277,902) 198,449 2,215,907 (1,612,339) 603,568 880,582 (662,311) 218,271 219,759 (110,550) 109,209 2,097,562 1,129,497 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 67 15. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial years are set out below: 2022 Carrying amount at 1 July 2021 Additions Reclassification Write-off Depreciation / amortisation expense LEASEHOLD PLANT AND IMP ROVEMENTS EQUIP MENT $ $ 198,449 1,846,035 62,589 (230) (396,264) 931,048 286,178 (62,589) (551,539) (216,115) TOTAL $ 1,129,497 2,132,213 - (551,769) (612,379) Carrying amount at 30 June 2022 1,710,579 386,983 2,097,562 2021 Carrying amount at 1 July 2020 Additions as a result of acquisition of business Additions Disposal Depreciation / amortisation expense 92,132 246,279 201,441 (213,098) (128,305) 380,855 391,790 561,092 (48,411) (354,278) 472,987 638,069 762,533 (261,509) (482,583) Carrying amount at 30 June 2021 198,449 931,048 1,129,497 Capital commitments – Property, plant and equipment The Group had no capital commitments at 30 June 2022 (30 June 2021: $2,328,592). 16. INTANGIBLE ASSETS Goodwill (a) Other intangible assets (b) (a) Allocation of goodwill: Goodwill on acquisition of Blackswan Goodwill on acquisition of Entrust Goodwill on acquisition of Hartleys 2022 $ 2021 $ 15,950,164 23,412,538 15,950,164 24,019,496 39,362,702 39,969,660 2,803,345 5,639,200 7,507,619 2,803,345 5,639,200 7,507,619 15,950,164 15,950,164 Goodwill balances are deemed to have an indefinite useful life and accordingly an impairment test was performed during the year. Based on the assessment, no impairment was identified. Note 2 (iv) contains additional information on this assessment. (b) Other intangible assets Client portfolios (i) Hartleys Brand (ii) Customer relationship - Hartleys (ii) ASX Licence 520,871 19,500,000 3,141,667 250,000 694,496 19,500,000 3,575,000 250,000 23,412,538 24,019,496 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 68 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 16. INTANGIBLE ASSETS (CONT’D) 2022 Balance as at 1 July 2021 Amortisation expense CUSTOMER CLIENT RELATIONSHIP ‑ PORTFOL IOS HARTL EYS $ $ TOTAL $ 694,496 (173,625) 3,575,000 (433,333) 4,269,496 (606,958) Balance as at 30 June 2022 520,871 3,141,667 3,662,538 2021 Balance as at 1 July 2020 Additions as a result of acquisition of business Amortisation expense Balance as at 30 June 2021 1,356,240 - (661,744) - 3,900,000 (325,000) 1,356,240 3,900,000 (986,744) 694,496 3,575,000 4,269,496 (i) (ii) The useful life of the intangibles was assessed as 10 years and amortised accordingly. On acquisition of Hartleys Limited, the Group recognised an intangible for the Hartleys brand name of $19,500,000 with an indefinite useful life and customer relationship asset of $3,900,000 with a useful life of 9 years. An impairment assessment was performed during the year. Refer to Note 2 (v). 17. TRADE AND OTHER PAYABLES Trade and other payables Broker payable (i) Dividend payable Accruals 2022 $ 4,860,636 27,254,709 16,770,251 10,651,427 2021 $ 4,275,581 38,516,434 26,394,973 11,870,693 59,537,023 81,057,681 Payables are measured at amortised cost and their carrying amount approximates fair value. Dividend payable represents the dividend declared by the Board before the reporting date and to be paid out to shareholders subsequent to year end. (i) Broker payable relates to outstanding client accounts and amounts owed by the Group to ASX Clearing. This is offset by broker receivable as disclosed in Note 9. Movement in dividend payable is set out below: Opening balance Amount provided during the year Amounts paid out Balance as at 30 June 18. CURRENT TAX LIABILITIES Opening balance Amount provided during the year Amounts paid out Balance as at 30 June 26,394,973 21,695,735 9,751,095 31,389,918 (31,320,457) (14,746,040) 16,770,251 26,394,973 8,123,786 18,039,104 2,548,489 13,528,892 (17,328,806) (7,953,595) 8,834,084 8,123,786 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 69 19. CURRENT PROVISIONS Employee benefits (annual leave) Employee benefits (long service leave) 2022 $ 3,636,514 4,293,291 2021 $ 3,320,114 4,316,278 Total Current and Non-Current 7,929,805 7,636,392 Disclosed as current (Refer Note 21 for non-current) 7,788,835 7,526,510 Movements in employee benefits, are set out below: Annual leave: Carrying amount at 1 July Additional provisions recognised Addition as a result of acquisition of business Amounts paid out Carrying amount at 30 June Long service leave: Carrying amount at 1 July Additional provisions recognised Addition as a result of acquisition of business Amounts paid out 3,320,114 2,014,565 - (1,698,165) 1,483,615 1,739,372 1,088,152 (991,025) 3,636,514 3,320,114 4,316,278 701,229 - 1,928,818 1,517,642 1,375,858 (724,216) (506,040) Carrying amount at 30 June including non-current portion as disclosed in Note 21 4,293,291 4,316,278 20. RIGHT OF USE ASSET AND LEASE LIABILITY Leased premises Accumulated amortisation Office Equipment Accumulated amortisation Right of use asset Lease liability – current Lease liability – non current Reconciliation of right of use asset: Balance as at 1 July Right of use assets on acquisition of Hartleys Limited Additions Amortisation expense Impairment Lease payout, transfer to lease receivable and write off 7,716,294 (3,554,360) 4,161,934 221,324 (139,209) 82,115 8,271,695 (2,852,240) 5,419,455 159,692 (85,077) 74,615 4,244,049 5,494,070 1,354,750 1,354,249 3,552,525 4,836,380 5,494,070 - 61,630 (1,252,144) - (59,507) 4,556,400 2,633,583 - (983,041) (270,371) (442,501) Balance as at 30 June 4,244,049 5,494,070 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT70 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 20. RIGHT OF USE ASSET AND LEASE LIABILITY (CONT’D) Reconciliation of right of use lease liability: Balance as at 1 July Right of use assets on acquisition of Hartleys Limited Additions Interest expense Interest paid Lease payments Balance as at 30 June 2022 $ 6,190,629 - 61,630 241,110 (241,110) (1,344,984) 2021 $ 4,533,295 2,793,840 - 248,125 (248,125) (1,136,506) 4,907,275 6,190,629 The following table sets out a maturity analysis of lease liabilities showing the undiscounted lease payments to be paid after the reporting date. Less than one year One to two years Two to three years Three to four years Four to five years More than 5 years 1,354,751 1,358,111 1,379,300 535,289 279,824 - 1,354,249 1,334,508 1,336,492 1,374,675 505,614 285,091 4,907,275 6,190,629 The above right of use asset and lease liability relates to: • • • • • The lease on the premises at Level 18 Alluvion, 58 Mounts Bay Road, Perth WA is for a period of 15 years commencing 2 July 2010 and expiring on 1 July 2025. The lease on the premises at Level 6 Westralia, 141 St Georges Terrace, Perth WA is for a period of 8 years commencing 1 January 2019 and expiring on 31 December 2026. The licence on the premises at Level 9, 20 Bond Street, Sydney NSW is for a period of 5 years commencing 15 December 2018 and expiring on 14 December 2023. In December 2020, the Group sublet the Sydney office space. Lease receivable of $0.1 million was recognised as at 30 June 2022 ( 2021:$0.2 million). The lease of Minolta Copiers due to expire in November 2022 and Pitney Bowes franking and folding machines due to expire on November 2024. The lease of Franke coffee machine due to expire in August 2024 and Top Brewer coffee machine due to expire on September 2024. 21. NON‑CURRENT PROVISIONS 2022 $ 2021 $ Employee benefits (long service leave) 140,970 109,882 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 71 22. CONTRIBUTED EQUITY (a) Share capital Ordinary shares Issued and paid up capital consisting of ordinary shares (net of Treasury shares) (b) Movements in ordinary share capital At the beginning of the reporting period Issue of new shares Acquisition of Treasury shares Vested shares under Performance Rights Plan At the end of the year (c) Movements in ordinary share capital Balance at the beginning of the reporting period Shares issued during the period Acquisition of Treasury shares Vested shares under Performance Rights Plan At the end of the year (d) Treasury shares 2022 SHARES 2021 SHARES 2022 $ 2021 $ 187,106,282 185,374,535 136,740,320 134,665,226 2022 SHARES 2021 S HA RE S 185,374,535 1,778,756 (1,800,000) 1,752,991 155,676,401 33,000,075 (5,298,017) 1,996,076 187,106,282 185,374,535 2022 $ 2021 $ 134,665,226 2,868,844 (2,894,924) 2,101,174 102,167,440 38,280,087 (7,949,948) 2,167,647 136,740,320 134,665,226 2022 SHARES 2021 SHARES 2022 $ 2021 $ Balance at the beginning of the reporting period (10,143,782) (6,841,841) 13,025,440 Acquisition of Treasury shares (1,800,000) (5,298,017) 2,894,924 7,137,510 7,949,948 Vested shares under Performance Rights Plan 1,752,991 1,996,076 (2,004,082) (2,062,018) Balance of Treasury shares at the end of the reporting period (10,190,791) (10,143,782) 13,916,281 13,025,440 Treasury shares were acquired by the Employee Share Trust at various times during the year. The acquisition of Treasury shares forms part of the Performance Right Plan. (e) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Ordinary shares have no par value. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (f) Options There were no options on issue at 30 June 2022 (30 June 2021: Nil). EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 72 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 22. CONTRIBUTED EQUITY (CONT’D) (g) Share based payments reserve The reserve records items recognised as expenses on valuation of share based payments. The movement in the current period totalling $3,063,302 (2021: $5,253,349) relates to the vesting expense related to the fair value of performance rights issued in the prior year and the current year in connection with the Performance Rights Plan. Balance on share based payment reserve at 1 July Recognised during the year Vested shares under Performance Rights Plan 2022 $ 7,955,369 3,063,302 (2,101,174) 2021 $ 4,869,667 5,253,349 (2,167,647) Balance on share based payments reserve at 30 June 8,917,497 7,955,369 (h) Capital management The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the Group. At reporting date, the Group has no external borrowings and significant cash reserves. As the holder of various Australian Financial Services Licences and as a market participant of the Australian Securities Exchange the Group is exposed to externally imposed capital requirements, which have been complied with throughout the year. 23. DIVIDENDS Relating to ordinary shares Interim dividend for the half year ended 31 December 2021 of 2.5 cents (2020 – 2.5 cents) per fully paid ordinary share paid on 25 February 2022 Fully franked based on tax paid @ 30% Final dividend declared and provided for at 30 June 2022 of 8.5 cents (2021 – 13.5 cents) per fully paid ordinary share paid on 5 August 2022. Fully franked based on tax paid @ 30% Total dividends provided for or paid 2022 $ 2021 $ 4,925,483 4,910,292 16,770,251 26,394,973 21,695,734 31,305,265 Of the total dividends paid during the year, $42,983 (2021: $63,005) was paid to the Euroz Share Trust and is undistributed. Therefore, it has been eliminated on consolidation. Franked dividends The franked portions of the dividends recommended after 30 June 2022 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2022. Franking credits available for subsequent financial years based on a tax rate of 30% (2021: 30%) 2022 $ 2021 $ 26,119,761 7,609,902 These dividends are fully-franked and therefore, there are no income tax consequences for the owners of Euroz Hartleys Group Limited. The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of the current tax liability (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and (d) franking credits that may be prevented from being distributed in subsequent financial years. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of controlled entities were paid as dividends. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 73 24. FINANCIAL INSTRUMENTS (a) Financial risk management The Group’s financial instruments consist of deposits with banks, trade receivables and payables, short term investments and long term investments. Derivative financial instruments are not used by the Group. Senior executives meet regularly to analyse and monitor the financial risk associated with the financial instruments used by the Group. (b) Financial risk exposure and management (i) Interest rate risk The Group has no borrowings and therefore is not exposed to interest rate risk associated with debt. The Group has significant cash reserves and the interest income earned from these cash reserves will be affected by movements in the interest rate. A sensitivity analysis has been provided in the note to illustrate the effect of interest rate movements on interest income earned. (ii) Liquidity risk The Group manages liquidity risk using forward cash flow projections, maintaining cash reserves and having no borrowings or debt. Current lease liability Non-current lease liability Total lease liability ( Note 20) Interest on lease liabilities are expected to be paid as follows: Less than one year One to two years Two to three years Three to four years Four to five years More than 5 years Trade and other payables are expected to be paid as follows: Less than 1 month 1 to 3 months (iii) Credit risk 2022 $ 2021 $ 1,354,750 3,552,525 1,354,249 4,836,380 4,907,275 6,190,629 181,251 126,268 71,435 29,040 4,172 - 239,589 181,251 126,268 71,435 29,040 4,172 412,166 651,755 42,766,772 54,662,708 16,770,251 26,394,973 59,537,023 81,057,681 Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. For the Group it arises from receivables from subsidiaries, as well as from customers. Senior management monitors its exposure to customers on a regular basis to ensure recovery and repayment of outstanding amounts. Cash deposits are only made with Australian based banks. The maximum exposure to credit risk, excluding the value of any collateral or security, at reporting date is the carrying amount of the financial assets disclosed in the statement of financial position. There is no collateral or security held for those assets at 30 June 2022. The carrying amount of the consolidated entity’s cash and cash equivalents, receivables and deposits represents the maximum credit exposure. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 74 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 24. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk exposure and management (cont’d) (iii) Credit risk (cont’d) The consolidated entity’s maximum exposure to credit risk at the reporting date was: NOTE CARRYING AMOUNT 8 9 12 2022 $ 2021 $ 190,667,525 96,050,325 18,071,214 1,069,380 28,779,550 1,362,701 209,808,119 126,192,576 Cash and cash equivalents Trade and other receivables Financial assets at amortised cost Impairment losses All of the Group’s receivables are considered recoverable. (iv) Financial instruments composition WEIGHTED AVERAGE EFFECTIVE INTEREST FLOATING INTER EST NON‑INTEREST RATE RATE BEARING 2022 % 2021 % 2022 $ 2021 $ 2022 $ RESTAT E D (i) 2021 $ 0.05 0.29 190,667,525 96,050,325 - - - - - - - - - - 18,071,214 28,779,550 15,317,064 21,455,932 - - 75,827,068 826,040 83,252 0.05 0.36 1,025,935 1,279,449 43,446 191,693,460 97,329,774 33,431,724 126,971,842 - - 59,537,023 81,057,681 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Financial assets held for trading Equity accounted investments Other investments Financial assets Total financial assets FINANCIAL LIABILITIES Trade and other payables Lease liability (current and non-current) 4.25 4.25 4,907,275 6,190,629 - - 4,907,275 6,190,629 59,537,023 81,057,681 (i) Refer to Note 7 (v) Fair value hierarchy The following table details the Group’s fair value of financial instruments categorised by the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Techniques, such as estimated discounted cash flows and Black-Scholes model are used to determine fair value for the financial instruments. Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 75 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 24. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk exposure and management (cont’d) (v) Fair value hierarchy (cont’d) CARRYING AMOUNT FAIR VALUE FINANCIAL ASSETS / LIABILITIES AT MANDATORILY AMORTISED 2022 AT FVTPL (ii) TOTAL LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Current financial assets Cash and cash equivalents (i) Trade and other receivables (i) Other Financial Assets Non ‑ Current financial assets Financial assets (i) Investments Investment entities at fair value Current financial liabilities Trade and other payables (i) NOTE 8 9 10 12 13 14 17 COST $ $ 190,667,525 190,667,525 18,071,214 18,071,214 $ - - $ - - $ - - $ - - $ - - 15,317,064 - 15,317,064 6,779,359 8,184,570 353,135 15,317,064 - - - - 1,069,380 1,069,380 - - - - 59,537,023 59,537,023 - - - - - - - - - - - - - - - - 15,317,064 150,271,096 165,588,160 6,779,359 8,184,570 353,135 15,317,064 (i) (ii) Balances are measured at amortised cost and their carrying amount approximates fair value Fair value through profit and loss (FVTPL) CARRY ING AMOUNT FAIR VALUE FINANCIAL ASSETS / LIABILITIES AT MANDATORILY AMORTISED 2021 AT FVTPL (ii) COST TOTAL LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Current financial assets Cash and cash equivalents (i) Trade and other receivables (i) Other Financial Assets Non ‑ Current financial assets Financial assets (i) Investments Investment entities at fair value (iii) Current financial liabilities Trade and other payables (i) NOTE 8 9 10 12 13 14 17 $ - - $ $ 96,050,325 96,050,325 28,779,550 28,779,550 $ - - $ - - $ - - $ - - 21,455,932 - 21,455,932 14,683,377 6,589,954 182,601 21,455,932 - 1,362,701 826,040 75,827,068 - - 1,362,701 826,040 - - - - - - 826,040 826,040 75,827,068 75,827,068 - 81,057,681 81,057,681 - - - - 75,827,068 - - 98,109,040 45,134,895 143,243,935 90,510,445 6,589,954 1,008,641 98,109,040 (i) (ii) (iii) Balances are measured at amortised cost and their carrying amount approximates fair value Fair value through profit and loss (FVTPL) Refer to Note 7 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 76 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 24. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk exposure and management (cont’d) (vi) Market risk Market risk is the risk that changes in market prices will affect the fair value the Group’s financial instruments. The Group is subject to market risk as it invests in financial instruments which are not risk free and are traded in active markets where prices of securities fluctuate. (vii) Sensitivity analysis Assuming all variables remain constant and the interest rate fluctuated by 1% at year end the effect on the Group’s equity and profit as follows: Increase by 1% Decrease by 1% 2022 $ 1,342,158 (1,342,158) 2021 $ 681,891 (681,891) Assuming all variables remain constant and the equity market fluctuated by 5% at year end the effect on the Group’s equity and profit is as follows: Increase by 5% Decrease by 5% 25. REMUNERATION OF AUDITORS Audit services Audit and review of financial reports for the Group - KPMG Other services Other fees paid to KPMG 26. CONTINGENT LIABILITIES The parent entity and the Group had contingent liabilities at 30 June as follows: Secured guarantees in respect of leases of a controlled group entity: Westpac Banking Corporation Bankwest 536,097 (536,097) 779,869 (779,869) 2022 $ 2021 $ 354,000 285,000 - 15,000 796,816 625,935 1,013,514 625,423 1,422,751 1,638,937 As detailed in note 12, the Group has a deposit with FinClear Services Pty Ltd as part of Euroz Hartleys Limited international trading and settlement arrangements. This deposit totalled $400,000 at reporting date (2021: $400,000). The Group has no contingent assets at reporting date (2021: Nil). 27. COMMITMENTS FOR EXPENDITURE Capital commitments Office renovations and property, plant and equipment Within one year Later than one year but not later than five years Later than five years Commitments not recognised in the financial statements - - - - 2,328,592 - - 2,328,592 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 77 27. COMMITMENTS FOR EXPENDITURE (CONT’D) The lease on the premises at Level 18 Alluvion, 58 Mounts Bay Road, Perth WA is for a period of 15 years commencing 2 July 2010 and expiring on 1 July 2025. The lease on the premises at Level 6 Westralia, 141 St Georges Terrace, Perth WA is for a period of 8 years commencing 1 January 2019 and expiring on 31 December 2026. The licence on the premises at Level 9, 20 Bond Street, Sydney NSW is for a period of 5 years commencing 15 December 2018 and expiring on 14 December 2023. The lease commitment has been included as part of lease liabilities. Refer to Note 20. 28. RELATED PARTIES (a) Key Management Personnel compensation Short-term employee benefits Post-employment benefits Share based payments Termination benefit Total compensation 2022 $ 5,392,413 189,497 730,939 502,504 2021 $ 9,629,286 184,580 869,610 - 6,815,353 10,683,476 In financial year 2021, Richard Simpson and Ian Parker were appointed to the Board on 6 October 2020, following completion of the off-market takeover offer by Euroz of Hartleys Limited on 3 October 2020. In connection with the takeover offer, it was agreed that certain amounts would be permitted to be distributed by Hartleys to its shareholders prior to completion of the takeover offer. This included cash proceeds from the sale of the securities held by Zenix Nominees Pty Ltd (a subsidiary of Hartleys) as at 30 June 2020 distributed by way of a dividend / return of capital as approved by Hartleys shareholders. Richard Simpson and Ian Parker each received (i) a completion bonus in connection with the takeover offer (paid from Hartleys cash reserves pre-completion of the takeover offer); and (ii) a corporate bonus which was paid following their respective appointments to the Euroz Hartleys Group Board however which relates to the period up to completion of the takeover offer (such amount predominantly as a result of the sale of securities held by Zenix Nominees Pty Ltd). (b) Individual Key Management Personnel (KMP) compensation disclosure Information regarding individual KMP compensation and some equity instruments disclosures as required by Corporations Regulation is provided in the remuneration report section of the Directors’ Report. Apart from the details disclosed in this note, no KMP has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving KMP interest existing at year end. (c) Parent entity The ultimate parent entity within the Group is Euroz Hartleys Group Limited. (d) Share‑based payments During the year performance rights were issued to 77 employees who opted in the Performance Rights Plan (2021: 127 employees). This performance right entitles the holder to a number of shares in Euroz Hartleys Group Limited calculated as 25% of their profit share, bonus or commission entitlement for the year if they opt in. At point of issue, these performance rights are subject to a 4-year vesting period. The fair value of each performance right is calculated as 25% of the individual’s bonus entitlement. During the 2021 financial year, the Board introduced an additional bonus sacrifice arrangement as part of the Performance Rights Plan. Employees who qualify for this will have the opportunity to elect to sacrifice an additional amount of their bonus above the 25% to be settled via the issue of a separate Performance Right, instead of cash. Shares acquired as part of the bonus sacrifice arrangement will not be subject to any vesting conditions. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 78 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 28. RELATED PARTIES (CONT’D) (e) Group transactions Wholly‑owned group The wholly-owned group consists of Euroz Hartleys Group Limited and its wholly-owned controlled entities. See Note 29. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 2022 $ 2021 $ Transactions with related parties consisting of: (i) Subsidiaries • • • • Loans advanced by Euroz Hartleys Group Limited to subsidiaries 11,083,104 18,531,540 Payments of dividends to Euroz Hartleys Group Limited by subsidiaries Management fees charged by Euroz Hartleys Limited Impairment of intercompany loan by Euroz Hartleys Group Limited to subsidiaries 21,250,000 1,555,242 37,175,000 1,748,262 295,058 351,000 (ii) Other • Dividends received by Euroz Hartleys Group Limited from equity accounted investments • Management fee received by the Euroz Hartleys Group from equity accounted investments • Performance fee received by the Euroz Hartleys Group from equity accounted investments 1,566,613 2,987,513 2,471,785 2,688,557 11,319,224 14,545,035 Ownership interests in related parties Interests held in controlled entities are set out in Note 29. Other transactions with Directors and specified Executives During the year ended 30 June 2022 the Directors and KMP transacted share business through Euroz Hartleys Limited on normal terms and conditions. Aggregate amounts of the above transactions with Directors and KMP of the Group: Amounts recognised as revenue Brokerage earned on Key Management Personnel accounts 29. INVESTMENTS IN CONTROLLED ENTITIES 2022 $ 2021 $ 59,124 62,923 NA ME O F ENTITY INCORPORATION SHARES EQUITY HOLDING COUNTRY OF CLASS OF Euroz Hartleys Limited Euroz Hartleys Securities Pty Ltd * Detail Nominees Pty Ltd (i) * Zero Nominees Pty Ltd (i) Westoz Funds Management Pty Ltd Invesco Nominee Pty Ltd (i) Saltbush Nominee Pty Ltd (i) Zenix Nominees Pty Ltd (i) Poynton Pty Ltd (i) * Poynton Investments Pty Ltd (i) * Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 2022 % 2021 % Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 79 29. INVESTMENTS IN CONTROLLED ENTITIES (CONT’D) NA ME O F ENTITY INCORPORATION SHARES EQUITY HOLDING COUNTRY OF CLASS OF Poynton Corporate Pty Ltd (i) * Poynton Nominees Pty Ltd (i) * Euroz Employee Share Trust Ozgrowth Limited (ii) Westoz Investment Company Limited (ii) Westoz Investment Company Pty Ltd * Ozgrowth Pty Ltd * Prodigy Investment Partners Pty Ltd Westoz Australian Resources Limited * WIM Small Cap Limited * Entrust Wealth Management Pty Ltd * * Dormant company Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 2022 % 100 100 - - - 100 100 100 100 100 100 2021 % 100 100 - 40.58 26.25 - - 100 100 100 100 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary The ultimate parent entity in the wholly owned group is Euroz Hartleys Group Limited. (i) Owned by Euroz Hartleys Limited (ii) Investments in Westoz and Ozgrowth were disposed during the year. A brief description of each entity (unless inactive and dormant) is as follows: (a) Euroz Hartleys Group Limited – Group holding entity listed on the Australian Securities Exchange. Euroz Hartleys Group Limited manages cash and investments. (b) Euroz Hartleys Limited – Financial services entity providing stockbroking services with a focus on Western Australian companies. This is the merged entity containing the businesses of Euroz Hartleys, Euroz Hartleys Securities Pty Ltd and Entrust Wealth Management Pty Ltd from 26 April 2021. (c) Euroz Hartleys Securities Pty Ltd – Financial services entity providing stockbroking services with a focus on Western Australian companies. This business is inactive effective 26 April 2021 following the restructure of the Group. (d) Westoz Funds Management Pty Ltd – Provides management services for investment funds. (e) Zero Nominees – Custodian Company holding shares on behalf of clients of Euroz Hartleys Limited. (f) Detail Nominees – Dormant Company that was previously used to for settlement obligation in relation to shares for the Group. (g) (h) Euroz Employee Share Trust – Vehicle established to acquire treasury shares on-market for distribution to eligible employees in connection with the Performance Rights Plan. Entrust Wealth Management Pty Ltd – Wealth management business providing advice in relation to wealth management and strategic financial planning support for the entire Euroz Group. This business is inactive effective 26 April 2021 following the restructure of the Group. (i) Prodigy Investment Partners Pty Ltd – In 2020, the Company closed the Prodigy operations, including the partnership with the three separate boutiques. 30. ACQUISITION OF EUROZ HARTLEYS LIMITED On 1 October 2020, the Group completed the acquisition of Hartleys Limited (now Euroz Hartleys Limited) when the Group received 100% acceptances of the takeover offer from shareholders of Hartleys Limited. The Group determines that with the takeover, Euroz Hartleys Limited has become one of Western Australia’s largest stockbroking and wealth management business. In addition, the Group has also experienced cost synergies from the merger of the operations. Consideration transferred The consideration transferred in relation to the acquisition was the issue of 33,000,075 Euroz Hartleys Group Limited (“EZL”) shares. As all shares were issued on 1 October 2020, the fair value of the ordinary shares issued was $38,280,087, based on the listed share price of EZL at 1 October 2020 of $1.16. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 80 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 30. ACQUISITION OF EUROZ HARTLEYS LIMITED (CONT’D) Consideration transferred (cont’d) A portion of the consideration to the Hartleys Limited shareholders who are also employees was placed on voluntary escrow as follows: • • 12% of the EZL shares are subject to voluntary escrow period of 42 months. Further 12% of the EZL shares are subject to voluntary escrow period of 46 months. Acquisition related costs The Group incurred acquisition-related costs of $208,188 on legal fees and due diligence costs. These costs have been included in “Consultancy expenses”. Identifiable assets acquired and liabilities assumed The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of the acquisition. Cash and cash equivalents Trade and other receivables Other financial assets Other current assets Right of use asset Plant and equipment Identifiable intangible assets Deferred tax assets Trade and other payables Subordinated loans Current tax liabilities Employee benefits provision Lease liability Total net assets acquired Measurement of fair values 1 OCTOBER 2020 $ 32,168,127 14,856,238 652,048 210,240 2,633,883 638,069 23,650,000 596,351 (29,049,989) (10,000,000) (324,648) (2,464,011) (2,793,840) 30,772,468 The valuation techniques used for measuring the fair value of the material assets acquired were as follows: • • • • Other financial assets – The fair value of other financial assets is determined by reference to their quoted bid price at reporting date or by an appropriate valuation model considering parameters applicable to the securities, such as last close price, depth and bid/ask spread, liquidity, relationship discount, escrow, relative size of the holdings and volatility. Right of use asset – The fair value of the right of use asset is determined by reference to its cost net of depreciation. Intangible asset – The fair value of the intangible asset (ASX licence) is determined by reference to its cost. Consideration has been made of the legal, commercial and technical factors that are likely to impact the useful life of the licence and determined that indefinite useful life to be appropriate. As at the date of the acquisition, no economic, market or legal indicators to suggest the licence is impaired. Property, plant and equipment – The fair value of property, plant and equipment is determined by reference to its cost net of depreciation. All trade and other receivables of $14,856,238 were expected to be collectable at the date of acquisition. Fair values An assessment of the intangible assets was conducted by a third-party valuer. There has been no new information since nor any additional provisions recognized that existed at the date of acquisition. The difference between the purchase consideration and the fair value of identified assets and liabilities has been allocated to goodwill. The fair value of identifiable intangible assets has been valued by a third-party professional valuer as below: EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 30. ACQUISITION OF EUROZ HARTLEYS LIMITED (CONT’D) Fair values (cont’d) Consideration transferred Fair value of identifiable net assets Goodwill on acquisition Allocation of Intangibles Customer relationship – Hartleys Hartleys Brand Goodwill 81 $ 38,280,087 (30,772,468) 7,507,619 3,900,000 19,500,000 7,507,619 30,907,619 31. EVENTS SUBSEQUENT TO REPORTING DATE The Directors are not aware of any matter or circumstance subsequent to 30 June 2022 that has significantly affected, or may significantly affect: (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. 32. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year Adjustments for: Depreciation and amortisation Impairment (reversal) / expense Share of profits of equity accounted investments, net of tax Share based payments Gain arising from disposal of investments Write-off / loss on disposal of property, plant and equipment Interest paid on lease liabilities Interest on security deposit Distributions received from investing activity investments Changes in assets and liabilities Decrease / (increase) in trade and other receivables Decrease / (increase) in other current assets Decrease / (increase) in other financial assets Decrease in deferred tax assets (Decrease) / increase in trade and other payables Increase in current tax liabilities Increase / (decrease) in deferred tax liabilities Increase in provisions (excluding dividends) Net cash from operating activities (i) Refer to Note 7 2022 $ RESTAT E D (i) 2021 $ 40,723,715 52,540,905 2,471,480 (6,510,348) (15,808,439) 3,063,302 (7,608,459) 551,769 241,110 (512) (107,589) 10,708,336 322,610 6,138,868 4,775,793 (11,895,978) 710,298 (5,471,635) 293,413 2,722,739 (3,898,087) (17,648,033) 5,253,350 (210,250) 261,508 248,125 - (72,764) (11,554,387) (1,175,545) (13,639,219) 1,401,703 21,972,934 5,250,649 7,301,488 1,759,947 22,597,734 50,515,063 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 82 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 33. NON‑CASH INVESTING AND FINANCING ACTIVITIES Share issued under employee share plan Addition to the right of use assets - Hartleys Conversion of debt to equity 34. EARNINGS PER SHARE Earnings per share attributable to the owners of Euroz Hartleys Group Limited Basic earnings per share (cents) Diluted earnings per share (cents) 2022 $ 3,063,302 - - 2021 $ 5,253,349 2,633,882 10,000,000 3,063,302 17,887,231 2022 CENTS 21.68 20.68 2022 NUMBER 2021 C E NTS 29.16 28.17 2021 N UMB E R Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share. 187,826,101 180,197,903 Weighted average number of ordinary shares and potential ordinary shares (including treasury shares) used as the denominator in calculating diluted earnings per share. 196,966,210 186,543,022 The profit after tax figure used to calculate the earnings per share for both the basic and diluted calculations was the same as the profit after tax figure from Consolidated Statement of Profit or Loss and Other Comprehensive Income. EUROZ HARTLEYS GROUP ANNUAL REPORT 202283 Notes to the Financial Statements (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 35. PARENT ENTITY DISCLOSURES Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Reserves Share based payment reserve Total equity Financial performance Profit for the year Total comprehensive income (i) Refer to Note 7 Contingent liabilities 2022 $ RESTAT E D (i) 2021 $ 130,246,455 89,509,831 50,573,249 160,491,555 219,756,286 211,064,804 26,259,147 2,752,482 29,011,629 34,862,857 6,270,235 41,133,092 136,804,690 45,084,643 134,785,172 27,253,564 8,855,324 190,744,657 7,892,976 169,931,712 39,526,767 54,226,371 39,526,767 54,226,371 The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following: • • • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. Dividends received from subsidiaries are recognised as other income by the parent entity. 36. COMPANY DETAILS The registered office and principal place of business address of the Company is: Euroz Hartleys Group Limited Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 84 Directors’ Declaration FOR THE YEAR ENDED 30 JUNE 2022 The Directors declare that: 1. The financial statements, notes and additional disclosures included in the Directors’ Report and designated as audited, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and Corporations Regulations 2001; (b) (c) give a true and fair view of the Company’s and consolidated group’s financial position as at 30 June 2022 and of their performance for the year ended on that date; and the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the financial statements. 2. The Executive Chairman and Chief Financial and Operating Officer have declared in accordance with section 295A of the Corporations Act 2001 that: (a) the financial records of the Group for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. In the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Andrew McKenzie Executive Chairman Date: 31 August 2022 Richard Simpson Executive Director EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Independent Auditor’s Report To the Members of Euroz Hartleys Group Limited FOR THE YEAR ENDED 30 JUNE 2022 85 Independent Auditor’s Report To the shareholders of Euroz Hartleys Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Euroz Hartleys Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2022 • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Notes including a summary of significant • complying with Australian Accounting Standards and the Corporations Regulations 2001. accounting policies • Directors’ Declaration. The Group consists of the Company 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 (including Independence Standards) (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. Emphasis of matter – restatement of comparative balances We draw attention to Note 7 of the Financial Report which states that the amounts reported in the previously issued 30 June 2021 Financial Report have been restated and disclosed as comparatives in this Financial Report. Our opinion is not modified in respect of this matter. 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. 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. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 86 Independent Auditor’s Report To the Members of Euroz Hartleys Group Limited (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 Valuation of Goodwill and Indefinite Life Intangible Assets ($35.5 million) Refer to Note 16 of the Group 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 impairment testing of indefinite life intangibles and goodwill. Our procedures included: Working with our valuation specialists, our procedures included the following: The Group has prepared value in use cash flow models for its Retail and Wholesale business cash generating units (CGU), where portions of goodwill and indefinite life intangible assets (collectively referred to as “Intangibles”) have been allocated. We focused on the significant forward-looking assumptions the Group applied in their value in use models, including: • Forecast cash flows – which were based on historical averages • Forecast growth rates and terminal value • Discount rates - these are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time. The models and the forward-looking assumptions tend to be prone to greater risk 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. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. • We considered the appropriateness of the value in use models applied by the Group to perform the annual test for impairment against the requirements of the accounting standards. • We assessed the integrity of the value in use models used, including the accuracy of the underlying formulas. • We compared forecast cash flows contained in the value in use models to Board approved forecasts. • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. • We challenged the Group’s forecast cashflows, growth rate assumptions and terminal value multiples considering competitive market conditions and the continuing volatility in the global investment market. • We used our knowledge of the Group, the Group’s past and recent performance, business and customers, and our industry experience. • Working with our valuation specialists, we independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and its CGUs and the industry it operates in. • We considered the sensitivity of the models by varying key assumptions, such as forecast cash flows, growth rates and discount rates, within a reasonably possible range. We did this to identify those CGUs at higher risk of impairment and to focus our further procedures. • We assessed the disclosures in the Financial Report using our understanding obtained from our testing and against the requirements of the accounting standards. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 Independent Auditor’s Report To the Members of Euroz Hartleys Group Limited (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 87 Other Information Other Information is financial and non-financial information in Euroz Hartleys Group Limited’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. The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report. The Executive Chairman’s Report, Euroz Hartleys Group Limited Board of Directors profiles, Euroz Hartleys Group Structure, Euroz Hartleys Limited – Managing Directors Report, Euroz Hartleys Limited Board of Directors profiles, Corporate Transactions, Euroz Hartleys Limited Report, Entrust Wealth Management Report, Westoz Fund Management Report, Euroz Hartleys Foundation Report, Euroz Hartleys Foundation Board of Directors profiles are expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will 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. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT 88 Independent Auditor’s Report To the Members of Euroz Hartleys Group Limited (CONT’D) FOR THE YEAR ENDED 30 JUNE 2022 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Euroz Hartleys Group Limited for the year ended 30 June 2022, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 12 to 18 of the Directors’ report for the year ended 30 June 2022. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Trevor Hart Partner Perth 31 August 2022 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022 ASX Additional Information AS AT 31 AUGUST 2022 A) DISTRIBUTION OF SHAREHOLDERS AN ALYSIS OF NUMBER OF S HAREHOLDERS BY SIZ E OF HOL DING. RAN GE 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over Total Number of holders holding less than a marketable parcel: 220 at $1.60 per unit B) TOP HOLDERS The twenty largest holders of ordinary fully paid shares are listed below. RAN K N AM E 89 HOLDERS 497 627 339 750 251 UNITS 216,484 1,816,808 2,562,648 25,345,501 167,355,632 2,464 197,297,073 % UNI T 0.11 0.92 1.30 12.85 84.82 100 ORDINARY SH AR E S MR JAY EVAN DALE HUGHES CITICORP NOMINEES PTY LIMITED CPU SHARE PLANS PTY LTD MRS CATHERINE PATRICIA MCKENZIE ICE COLD INVESTMENTS PTY LTD MR ANDREW MCKENZIE + MRS CATHERINE MCKENZIE UBS NOMINEES PTY LTD ICE COLD INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR JAY HUGHES + MRS LINDA HUGHES BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD MR ROBERT HIRZEL BLACK MR SIMON DAVID YEO + MRS JENNIFER DALE YEO ICE COLD INVESTMENTS PTY LTD MR GREGORY CHESSELL + MRS MELANIE CHESSELL LEXTON HOLDINGS PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 MR SIMON DAVID YEO + MRS JENNIFER DALE YEO 2,150,000 MRS MELANIE JANE CHESSELL BNM HOLDINGS PTY LTD 20 WESTRADE RESOURCES PTY LTD Total Remainder Grand Total UNITS 7,600,000 7,562,786 7,343,543 5,950,000 5,222,661 4,814,092 4,010,039 4,002,510 3,613,988 3,240,000 3,200,754 2,865,000 2,732,870 2,524,000 2,397,549 2,265,824 2,070,272 2,020,100 2,010,000 77,595,988 119,701,085 197,297,073 % 3.85 3.83 3.72 3.02 2.65 2.44 2.03 2.03 1.83 1.64 1.62 1.45 1.39 1.28 1.22 1.15 1.09 1.05 1.02 1.02 39.33 60.67 100 EUROZ HARTLEYS GROUP ANNUAL REPORT 2022CONTENTS PAGECHAIRMAN’S REPORTOVERVIEWFINANCIAL REPORTNOTES TO FINANCIAL STATEMENT90 ASX Additional Information (CONT’D) AS AT 31 AUGUST 2022 C) SHAREHOLDERS WITH GREATER THAN 5% As at 31 August 2022, the Company had 3 shareholders with greater than 5% of the issued ordinary share capital: UNITS 13,866,467 13,390,097 10,619,049 % 7.00% 6.78% 5.43% S HA REHO LDER Jay Evan Dale Hughes Andrew William McKenzie Ice Cold Investments Pty Ltd D) ON‑MARKET BUY‑BACK The Company has a current on-market buy-back. E) VOTING RIGHTS The voting rights for each class of security on issue as at 31 August 2022 are: Ordinary fully paid shares Each ordinary shareholder is entitled to one vote for each ordinary fully paid share held. F) WORKPLACE GENDER EQUALITY REPORT The Company’s Workplace Gender Equality Agency report for FY22 is available on its website. EUROZ HARTLEYS GROUP ANNUAL REPORT 2022Euroz Hartleys Group contact details EUROZ HARTLEYS LIMITED Level 18 Alluvion 58 Mounts Bay Road Perth WA 6000 PO Box Z5036 St Georges Terrace Perth WA 6831 T: +61 8 9488 1400 F: +61 8 9488 1477 Level 6 Westralia Square 141 St Georges Terrace Perth WA 6000 GPO Box 2777 Perth WA 6001 T: +61 8 9268 2888 F: +61 8 9268 2800 eurozhartleys.com Euroz Hartleys Limited Participant of the ASX, Cboe and NSX Authorised to provide financial services ABN 33 104 195 057 AFSL 230052 ENTRUST WEALTH MANAGEMENT Level 6 Westralia Square 141 St Georges Terrace Perth WA 6000 PO Box Z5034 Perth 6831 Western Australia T: +61 8 9476 3900 F: +61 8 9321 6333 info@entrustwealth.com.au entrustwealth.com.au Entrust Wealth Management A Division of Euroz Hartleys Limited ABN 33 104 195 057 Authorised to provide financial services AFSL 230052 Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 PO Box Z5036 St Georges Terrace Perth 6831 Western Australia T: +61 8 9488 1400 F: +61 8 9488 1477 euroz.com Euroz Hartleys Group ACN 000 364 465 BBD 14641

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