Fiducian Group
Annual Report 2016

Plain-text annual report

ANNUAL REPORT FIDUCIAN GROUP LIMITED | 2016 A N N U A L R E P O R T 2 0 1 6 | F I D U C I A N G R O U P L I M I T E D P A G E 2 ABN 41 602 423 610 20 YEARS OF HISTORY P A G E 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDFIDUCIAN MILESTONES 1996 Fiducian Portfolio Services founded by Indy Singh as independent financial services and funds management company 2003 FORCe goes online as does Fiducian Online for investors. Fiducian buys Bodinnars Personal Financial Planners 2010 Fiducian sponsors Fiducian Legends: Australian PGA Senior championship 1997 Fiducian launches master funds, client admin and financial planning services for adviser groups 1998 Two more services launched: superannuation and investment 2004 FORCe FP financial planning software released for advisers 2011 FORCe Desktop v3 debuts with new interface, navigation and tools 2005 Fiducian buys Money & Advice, a Tasmanian financial planning company 2012 Fiducian migrates to FasTrack, state- of-the-art in-house platform admin system 1999 Fiducian Strategic Asset Allocation software launched for planners 2006 Bodinnars Personal Financial Planner and Money & Advice commence trading as Fiducian Financial Services 2013 FABA (Fiducian Accountants & Business Advisers) buys practices on Sunshine Coast, Queensland 2000 Fiducian lists on the ASX Fiducian Portfolio Review software released 2007 Funds Under Management top $1 billion 2014 FoFA-compliant advice and products released through FFS and FPS 2001 Fiducian Online Resource Centre (FORCe) launched 2008 Fiducian pioneers an India Fund for Australia 2015 Company re-structures into Fiducian Group Ltd (FGL) 2002 Fiducian Financial Services (FFS) established and new national headquarters open at York Street, Sydney 2009 Fiducian Business Services launched to grow accounting practices 2016 FGL continues to grow organically and through acquisition, FUMAA tops $4.7 billion P A G E 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDNew South Wales Office Locations Abbotsford Ballina Bathurst Bondi Junction Castle Hill Caves Beach Chatswood Gosford P A G E 2 Hunter Valley Ku-ring-gai Macarthur Manly Newcastle Nowra Randwick Riverwood Roseville Southern Highlands St Ives Sydney CBD Tweed Heads Walcha Windsor ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDCONTENTS FINANCIAL HIGHLIGHTS FIVE YEAR FINANCIAL SUMMARY JOINT REPORT OF THE CHAIRMAN AND THE MANAGING DIRECTOR CORPORATE DIRECTORY DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION SHAREHOLDER INFORMATION FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 5 7 8 14 15 27 28 30 32 33 34 35 36 74 75 P A G E 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDAustralian Capital Territory Office Locations Canberra P A G E 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDFINANCIAL HIGHLIGHTS FOR 2016 UNPAT up 22% to $7.0mil FUMAA up 16% to $4.7bil Dividends up 25% to 12.5 cents 62 Aligned Planners & Associates $243mil of Acquisition 41 Offices across Australia 111 Staff around Australia from over 20 different countries of origin Launched new Diversified Social Aspirations Fund Flagship funds top performance ranking for the year: 4/194 Balanced 2/194 Growth Ultra Growth 5/127 20/122 Cap Stable P A G E 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDQueensland Office Locations Buderim Caboolture Gold Coast – Merrimac P A G E 6 Redcliffe Sunshine Coast ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDFIVE YEAR FINANCIAL SUMMARY FOR THE YEAR 2012 TO 2016 FINANCIAL HISTORY 2016 $’000 2015 $’000 2014 $’000 2013 $’000 2012 $’000 FINANCIAL PERFORMANCE Gross Revenue Underlying Net Profit After Tax (UNPAT) Statutory Net Profit After Tax (NPAT) Cost To Income Ratio (CTI) - ex amortisation % 35,451 26,253 22,874 22,106 23,205 7,036 5,839 63% 5,748 4,622 62% 4,501 3,983 63% 3,719 3,270 70% 2,626 2,211 79% FINANCIAL POSITION Total Assets Total Equity Cash SHAREHOLDER INFORMATION Number of shares outstanding Market Capitalisation ($ in mil) EPS based on UNPAT (in cents) Dividends (in cents) Share Price - 30 June closing (in $) 33,690 24,127 9,691 28,770 21,191 12,374 26,363 19,351 11,194 22,446 18,320 9,440 20,935 17,314 7,674 31,110,855 30,883,398 30,757,897 31,532,429 31,805,231 72 22.6 12.5 2.31 53 18.6 10.0 1.70 50 14.6 9.1 1.62 32 11.8 6.8 1.03 31 8.3 5.0 0.97 28% Annualised Profit Growth 29% Annualised EPS Growth 16% CTI % Reduction P A G E 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDJOINT REPORT OF THE CHAIRMAN AND THE MANAGING DIRECTOR Highlights • Funds Under Management Advice & Administration up 16% • Net underlying profit after tax up 22% • Statutory net profit after tax up 26% • Basic underlying earnings per share up 22% • Established position as a comprehensive financial services provider of Platform Administration, Funds Management, and Financial Planning Western Australia Office Locations Garden City Osborne Park P A G E 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDFINANCIAL INFORMATION Dear Shareholder, On behalf of the directors, we jointly report on the consolidated operating performance of Fiducian Group Limited and its controlled operating entities for the year ended 30 June 2016. RESULTS FOR 2016 The Fiducian Group result continues to show positive momentum in operational activity and application of the Board’s strategy to grow double digit earnings annually. Consolidated Operating Revenue increased by 35% as a result of 16% business growth and 19% due to grossing up of underlying fund manager fees and expense recoveries which were previously netted off. Similarly, the consolidated Net Revenue increased by 27% of which 13% was contributed by business growth. Gross margin remains the same as 2015, but is reported as 74% after adjusting for a 4% impact of the changes mentioned above relating to underlying fund manager fees and expense recoveries. During the year underlying Earnings Before Interest, Tax, Depreciation and Amortisation and Restructure Costs (2015 only) (Underlying EBITDA) increased by 20% to $9.67 million. Underlying Net Profit After Tax (UNPAT) is $7.04 million an increase of 22% over the 2015 results. This represents an underlying earnings per share of 22.6 cents as reported in the Financial Highlights. Underlying NPAT does not include amortisation or one off restructure costs and therefore gives a clearer picture of the Group’s cash generating ability going forward. The Statutory Net Profit for the consolidated entity after providing for income tax was $5.84 million (2015: $4.62 FINANCIAL HIGHLIGHTS Year Ending 30 June ($ in thousands) Operating Revenue* Fees and Charges paid* Net Revenue Gross Margin Underlying EBITDA Depreciation Tax on underlying earnings Underlying NPAT (UNPAT) Amortisation One-off Restructure Expenses (net of tax) Statutory NPAT T R O P E R T N O I J million), an increase of 26%. There were no one-off expense deductions such as restructure costs in the financial year. In summary, all operating divisions contributed positively to the result. A number of new senior appointments have been made to support our corporate changes. The Superannuation Trustee Board established for our public offer superannuation wrap fund in March 2015 with a majority of independent directors is now fully operational. In addition 12 new financial planners and 11 support staff have been appointed or brought into the Fiducian fold to operate acquired financial planning businesses. As a consequence, cash operating expenses have increased by 25.3% in 2016 (2015 increased by 16.7%). The Board is comfortable with the increased staff numbers which should further add to the Group’s growth initiatives and revenues. Fiducian follows a policy of training, building and retaining quality staff in good and poor economic times, so they can participate in the future expansion of the business and more importantly at this juncture, bring to bear their expertise which has been gained through years of loyal service. Our diversity policy encourages persons of different genders, ethnic backgrounds, ages and skills to participate and receive recognition, reward and management responsibility commensurate with their performance. Some senior management positions changed during the year which allowed for a refreshing of some positions. Employees are from 20 different countries of origin, 29% are over 55 years of age and 47% are female with 32% in senior roles. The combined Funds under Management, Administration and Advice (FUMAA) have steadily grown by 52% over the past 3 years to $4.7 billion as at June 2016. 2016 2015 % CHANGE 35,451 26,253 35% -9,385 26,066 74% 9,673 -100 -2,537 7,036 -1,197 - 5,839 -5,715 20,538 78% 8,069 -165 -2,156 5,748 -695 -431 4,622 27% 20% 22% 26% 22% 16% Basic EPS based on UNPAT (in cents) 22.6 18.6 Funds Under Management, Advice and Administration or FUMAA 4,736 Mil 4,084 Mil *(The Operating Revenue includes fees received by Fiducian Investment Management Limited, “FIM”, as responsible entity of the managed investment schemes which includes underlying fund manager fees from 1 March 2015 previously netted off. This is as a result of an amendment to the product disclosure statement whereby fees due to the underlying fund managers are now paid by the responsible entity and not separately charged to unit holders). P A G E 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED T R O P E R T N O I J 6.0 5.0 4.0 3.0 2.0 1.0 - P A G E 1 0 FUMAA (IN $ BIL) +52% 4.1 3.8 4.7 4.4 3.4 3.6 3.1 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 FUM FUA FUAdm CAPITAL MANAGEMENT A key feature of the company is that it currently remains debt free and exhibits a positive working capital and cash flow position. FINAL DIVIDEND The Board remains prudent, but is confident that the future of the business is positive and likely to continue to strengthen. As a result, a fully franked final dividend of 7.0 cents per share has been declared which will bring the total fully franked dividend declared for 2016 financial year to 12.5 cents, an increase of 25% (2015: 10.0 cents). The full year dividend represents 67% of the statutory NPAT for the year. The final dividend will be paid on 12th September 2016 on issued shares held on 29th August 2016. ACQUISITIONS During the year we have acquired around $243 million of Funds Under Advice. The financial planners are now operating under a Fiducian licence and starting to contribute to our revenue. As acquisitions continue to assimilate into our processes, they should deliver increased revenue and demonstrate our disciplined approach to balancing growth and returns. Our funds under advice now stand at around $1.82 billion. ON MARKET BUY-BACK During the year, there was no buy-back of shares (2015: 14,500 shares on market for a total consideration, including brokerage, of $0.03 million at an average price per share of $1.82). There are 31.11 million shares on issue at year end (2015: 30.88 million). CASH FLOW Net operating cash flows of $5.5 million were achieved (2015: $6.5 million) – a decrease of 14.8% due to timing of tax payment. Excluding the impact of tax, the operating cash flow has increased by 6.2% year-on-year. After adjusting for investing activities ($4.8 million) and financing activities ($3.4 million) net cash decreased by $2.7 million (2015: increase $1.2 million). Cash at year end was $9.7 million (2015: $12.4 million). An amount of $5.1 million is required for regulatory purposes. Business acquisitions should assist our future revenue and earning capacity. STAFF AND MANAGING DIRECTOR OPTIONS In accordance with the terms and conditions of the approved Employee and Director Share Option Plan, 100,000 options (2015: Nil) will be issued to the Managing Director in accordance with his contract of employment subject to approval at the Annual General Meeting. These options will be issued at $2.18, a discount of 5% over the weighted volume average price in June 2016 and may be converted to shares by making a payment of their value to the company after 1 year and within 5 years. Options are only calculated at that portion of the profit or share price that shows greater than 15% growth over the previous year. FINANCIAL PLANNING During the year Funds under Advice grew from $1.54 billion in June 2015 to $1.82 billion in June 2016 as financial planner numbers, net inflow and financial markets lifted. Fiducian expects the highest level of compliance and client service from its financial planning network. Even though the generation of higher inflows is important, our commitment is to quality. As such, our extensive internal training program continues and differentiates our financial planners from the marketplace and enables them to deliver superior quality advice in a compliant manner. As a consequence and despite financial market volatility, client retention remains high. Going forward, our focus will remain on generating inflows through organic growth and inorganic growth. This implies further acquisitions of financial planning client bases that satisfy our strict quality criteria and as well, expanding the franchisee network so we can continue to assist clients who wish to achieve their financial and lifestyle goals. SALARIED OFFICES Company owned offices with salaried financial planners are based in New South Wales, Victoria, Western Australia, Queensland and Tasmania and continue to contribute to overall results. Salaried offices now comprise over 54.3% of funds under advice. Acquisitions made continue to assimilate into our existing presence in Tasmania, Queensland and New South Wales and should add to our results in future years. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED FRANCHISED OFFICES Franchised offices now comprise around 45.7% of our funds under advice. Another two franchisees were added during the financial year resulting in a total of 33 franchised financial planners nationally whom we continue to assist through practice development. In addition, referral arrangements continue to be initiated with accountants, some of whom are showing an interest in holistic financial planning given regulatory changes to Self-Managed Super Funds and financial planning advice. As a consequence two accounting practices have joined our ‘Associate’ franchisee program which aims to convert them to a full operating franchise when educational and training programs are completed. PLATFORM ADMINISTRATION Platform Administration offers portfolio wrap administration for superannuation and investment services to financial planners. The hallmark of the Fiducian administration offering is quality in terms of daily processing, accuracy and customer service. FUNDS UNDER ADMINISTRATION Funds under administration increased in total by 12.8% to $1.32 billion (2015: $1.17 billion). We have experienced strong growth in Net Fund inflows driven by our salaried and franchisee financial planners (see graph above). We expect this positive trend to continue. INDEPENDENT FINANCIAL PLANNERS (IFAs) Funds under administration for IFAs are around 9.0% of total funds under administration. Some IFAs have sold their businesses to other dealer groups, which generally have their own recommended product lists and platform arrangements which can result in funds being withdrawn from Fiducian. The bulk of our withdrawals are from IFAs, but we believe that the rate of IFA withdrawals has slowed as many of their clients have been with Fiducian for a long time. Efforts are underway to build new relationships and net inflow from non-aligned financial planner groups. Our full service offer, comprising systems, platforms, investments and training could allow a non-aligned small dealer with a Fiducian relationship to become competitive against large scale financial planning dealer groups. In addition, the Board has directed that a concerted effort be made to try and enter the market providing administration services to Independent Financial Advisers (IFA) many of whom are using our competitors administration platforms. NET FUNDS INFLOWS - SIX MONTHLY (IN $ MIL) T R O P E R T N O I J 100.0 75.0 50.0 25.0 - -25.0 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 FUNDS MANAGEMENT Fiducian manages clients’ investments through its Manage the Manager system of investing. We carefully select a range of investment managers and blend them in our funds to advise on or manage this money through mandates or their funds. In this way, we seek to deliver above average returns over the short to medium term and deliver superior returns, compared with our peers, over the longer term. The process also has the potential to reduce volatility while providing liquidity and transparency. There were some notable performances over the last year for our flagship diversified funds. The performances of these funds to end of June 2016 are reported in the Morningstar Investment Performance Survey. The Growth and Balanced Funds were ranked 2nd and 4th out of 194 funds, the Capital Stable Fund was ranked 20th out of 122 funds and the Ultra Growth Fund was ranked 5th out of 127 funds on the survey. Over the last ten years, thirty seven annualised returns are reported for them of which thirty six results were ranked in the top quartile against Australian and International investment managers. This is a rare achievement. BUSINESS SERVICES Fiducian Business Services (FBS) is our subsidiary established to provide support to accountants for bookkeeping, accounts preparation and Self-Managed Superannuation Fund administration. It now has two accounting practices which operate as Fiducian Accountants & Business Advisers (FABA) in New South Wales and Queensland. Cross referrals of our financial planning clients needing accounting help and our accounting clients needing financial planning help further supports Fiducian’s value proposition of service to all our clients. Our Self-Managed Superannuation Fund administration facility has been showing steady growth in the number of funds administered and additional staff have been appointed to maintain service quality. P A G E 1 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED T R O P E R T N O I J INFORMATION TECHNOLOGY Fiducian Information Technology division has been busy with enhancements and delivering straight through processing functionality to FasTrack our administration system which provides greater control, efficiency and substantial cost savings and as well, opens up new business opportunities. These improvements are now in place and provide integration with our on-line reporting tools and financial planning software FORCe which is licensed to our aligned financial planning groups. Further improvements towards electronic application and processing are currently being developed. HUMAN RESOURCES MANAGEMENT AND STAFF A number of staff changes occurred during the year, some through retirement and some through a career change. Key persons have been replaced by equally competent and energetic managers. Staff numbers have grown as advised above so has the management team on whom we place a great deal of reliance. Effective reporting processes are in place for all subsidiaries which enhances Group Board oversight of our business activities. Key performance indicators have been documented for management in each area of the business to monitor their performance. PLANNERS COUNCIL, IT AND PLATFORM USER GROUPS The Planners Council is drawn from our supporting financial planners and has again made a significant contribution to the company during the past year. It continues to fulfill its role as a sounding board for the company’s management and Boards and is a valuable resource and forum to allow financial planners to alert the company to issues that may need consideration. The IT User Group and the Platform User Group again deserve commendation for their contributions to the developments and enhancements to our financial planning software (FORCe), on-line reporting tool (Fiducian Online) and platform administration system (FasTrack). Fiducian Professional Development Day, July 2016 BOARD OF DIRECTORS The Board of directors is working constructively to evaluate and support management’s recommendations for the company. The Business Plan for the year ahead has identified measures to lift profits including by acquisitions. Future performance can also be influenced by continuing strength in financial markets and decisive political leadership. Management remains committed to achieving the goals and objectives set down in the plan. Mr Chris Stone, who is due for re-election at the next AGM, has advised that he will not be seeking such reappointment by Shareholders. Chris has contributed P A G E 1 2 Inderjit (Indy) Singh, Managing Director & Robert Bucknell, Chairman ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED On the world scene, we feel that the US should strengthen in 2016-17 and support world growth. China and India should also continue to grow and support global growth. On the other hand, share markets now appear modestly valued and some declines have occurred already while the spectre of an interest rate rise in the US remains. Interest rates remain low and even though some developed nations offer negative yields to investors in fixed interest securities, the mountain of cash continues to build. This environment sets the scene for potentially some renewed confidence in global economic activity and it could only be a matter of time before some of the cash on the sidelines returns to invest in the share markets. As always, we recommend that investors should consult a Fiducian financial planner to develop a financial plan with a diversified investment strategy that could help them achieve their financial goals. OUTLOOK The Board expects profit growth to continue steadily in the coming year as management focuses on realising the full potential of financial planning, platform administration, investment management, information technology and business/accounting services. The foundations of our business pillars are solid and growth strategies are in place by building scale on existing capacity and leveraging its relatively fixed cost base. The revenue from recent business acquisitions has started to be received and should benefit the bottom line in this financial year. Additionally synergy benefits from these businesses are expected. Expenditure controls and profits remain a priority. The Board intends to continue to build scale and maintain its acquisition and distribution growth strategy to deliver consistent double digit earnings growth in coming years. We would like to thank all participants for their individual contributions to the growth and success of Fiducian in what has been an eventful yet successful year. Robert Bucknell Chairman 15 August 2016 Inderjit (Indy) Singh Managing Director 15 August 2016 to the development of the Group over the past 6 years and the remaining Directors wish him well in his ongoing business activities. As a result ,Mr. Sam Hallab is currently a member of the Fiducian Trustee Board and has been appointed to the FGL Board in advance to replace Chris. He is a Bachelor of Economics majoring in accounting and law and is experienced in audit and risk management, finance, investment and operations of the superannuation and investment industry. We believe that he will adequately fill the vacancy that will be left by Chris. His election at the AGM will be supported by all Directors. COMMUNITY SUPPORT Fiducian continues to raise funds for charity. Sponsorship has also been extended to community organisations and sporting teams linked to our planning network. Vision Beyond AUS, a charity supported by the Fiducian Group, has grown to now assist hospitals at eight locations spread out over India, Myanmar, Nepal and Cambodia. Over 18,000 persons who live in abject poverty have now had their eyesight restored. We intend to continue our charitable support to the community. Vision Beyond AUS funded surgery in Battambang, Cambodia CURRENT ECONOMIC AND MARKET ENVIRONMENT Our economic analysis indicates that although there was some slowing of global activity early in calendar 2015 the general economic activity seems to be steadily improving. Widespread implementation of expansionary monetary stimulus has also dispelled the threat of deflation. Interest rates remain at record lows and sharp declines in the price of oil, in particular, could support domestic expenditure in developed economies. In Australia, the Federal Budget lifted business confidence with its tax support to small business. Unfortunately elevated corporate tax rates, a high minimum wage rate and rising electricity prices which are holding back the economy may not be resolved in a hung senate following the recent elections. T R O P E R T N O I J P A G E 1 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED CORPORATE DIRECTORY SHARE REGISTER Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Sydney NSW 2000 AUDITOR PricewaterhouseCoopers Chartered Accountants Darling Park Tower 2 201 Sussex Street Sydney NSW 2000 BANKERS Westpac Banking Corporation 275 Kent Street Sydney NSW 2000 ANZ Banking Group 833 Collins Street Melbourne VIC 3000 AUSTRALIAN SECURITIES EXCHANGE LISTING Fiducian Group Limited (ASX:FID) WEBSITE ADDRESS www.fiducian.com.au DIRECTORS R Bucknell FCA Chairman I Singh CFP, BTech, MComm (Bus), ASIA, ASFA, Dip. FP Managing Director F Khouri B Bus, FCPA, CTA C Stone B Comm, LLB, LLM, CA, ACIS S Hallab B Ec (Accnt & Law), CA, GAICD, FAIST SECRETARY I Singh CFP, BTech, MComm (Bus), ASIA, ASFA, Dip. FP NOTICE OF ANNUAL GENERAL MEETING The annual general meeting of Fiducian Group Limited Will be held at Level 4, 1 York Street, Sydney. Time: 10:00 am Date: Thursday 20 October 2016 PRINCIPAL REGISTERED OFFICE IN AUSTRALIA Level 4 1 York Street Sydney NSW 2000 (02) 8298 4600 WHOLLY OWNED OPERATING ENTITIES Fiducian Business Services Pty Limited Fiducian Financial Services Pty Limited Fiducian Investment Management Services Limited Fiducian Portfolio Services Limited Fiducian Services Pty Limited P A G E 1 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED DIRECTORS’ REPORT Tasmania Office Locations Devonport Hobart Launceston P A G E 1 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDT R O P E R S R O T C E R D I Your directors present their report on the Fiducian Group Limited (“the Company”) and its wholly owned operating entities (referred to hereafter as the Group) for the year ended 30 June 2016. DIRECTORS The following persons were directors of Fiducian Group Limited during the financial year and up to the date of this report: R Bucknell I Singh F Khouri C Stone S Hallab (Appointed 12 August 2016) Mr C Stone who is due for re-election at the next Annual general meeting on 20 October 2016, has advised that he will not be seeking reappointment by shareholders. As a result, Mr S Hallab, who is currently a member of the Fiducian Trustee Board, has been appointed to the board of the Company to replace Mr C Stone. PRINCIPAL ACTIVITIES During the year the principal continuing activities of the Group consisted of: (a) Operating an Investor Directed Portfolio Service and Managed Discretionary Account service, through its wholly owned subsidiary, Fiducian Investment Management Services Limited (b) Acting as the Trustee of Fiducian Superannuation Service through its wholly owned subsidiary, Fiducian Portfolio Services Limited (c) Acting as the Responsible Entity of Fiducian Funds through its wholly owned subsidiary, Fiducian Investment Management Services Limited (d) Providing specialist financial planning services through its wholly owned operating subsidiary, Fiducian Financial Services Pty Limited (e) Providing accountancy resource services through its wholly owned operating subsidiary, Fiducian Business Services Pty Limited (f) Providing administration and professional services to the Group through its wholly owned subsidiary, Fiducian Services Pty Limited. DIVIDENDS FIDUCIAN GROUP LIMITED Dividends paid to members during the financial year were as follows:- Final ordinary fully franked dividend for the year ended 30 June 2015 of 5.50 cents (2014: Fully franked 5.00 cents) per share paid on 24 September 2015. Interim ordinary fully franked dividend for the year ended 30 June 2016 of 5.50 cents (2015: Fully franked 4.50 cents) per share paid on 14 March 2016. Total dividends in the year 2016 $’000 1,706 2015 $’000 1,538 1,711 1,390 3,417 2,928 In addition to the above, since the end of the financial year, the directors of the parent entity, Fiducian Group Limited have declared a final fully franked dividend for the year ended 30 June 2016 of 7.00 cents per ordinary share held at 29 August 2016 and payable on 12 September 2016. P A G E 1 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED REVIEW OF OPERATIONS A summary of consolidated revenues and results by significant industry segments is set out below:- SEGMENT REVENUES SEGMENT RESULTS Funds Management Superannuation Financial Planning Administration Business Services Intersegment Sales Profit from ordinary activities before income tax expenses Income tax expenses Net profit attributable to members of Fiducian Group Limited 2016 $’000 10,579 6,544 13,228 13,224 974 (9,098) 35,451 2015 $’000 2,011 15,673 11,470 3,571 1,142 (7,615) 26,253 2016 $’000 4,501 6 23 4,251 (405) 2015 $’000 1,280 2,576 1,522 1,296 (81) 8,376 (2,537) 5,839 6,593 (1,971) 4,622 Following the restructure of the group on 1 March 2015 the business activities of the group have been significantly re-aligned year on year. This resulted in creation of Funds Management, Superannuation and Administration segments which were reported together as Platform segment prior to the restructure. In the current year, the activities for Funds Management, Superannuation and Administration are reported under the respective segments. Details for the segments are provided in Note 3 of the Financial Statements. COMMENTS ON OPERATIONS AND RESULTS Comments on the operations, business strategies, prospects and financial position are contained in the joint report of the Chairman and Managing Director. SHAREHOLDER RETURNS The valuation of investment funds has improved substantially during the year and favourably impacted the management fees received by the Fiducian Group, as fully detailed in the joint report of the Chairman and Managing Director. This has enabled Fiducian to increase profit for the second half of the year and declare a dividend distribution of 7.00 cents per share, bringing the full year dividend to 12.50 cents per share. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year the Group acquired eight financial planning practices and their portfolio of clients were transferred to Fiducian Financial Services Pty Ltd progressively during the financial year. The contributed equity of the Group increased during the year following the issue of $489,000 fully paid ordinary shares towards the part payment for two of the financial planning practice acquisitions. The Group also de-registered two of its dormant subsidiaries during the financial year. Other than these, there were no significant changes in the state of affairs of the Group. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Subsequent to the end of the financial year the Group has issued 53,513 fully paid ordinary shares at $2.29 on 1 July 2016 towards payment of an installment under the terms of the contract of acquisition of a financial planning practice mentioned above. To the date of this report, the Group has not bought back any shares. Other than the issue of shares mentioned above and the appointment of a new director mentioned earlier in this report, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely in the opinion of the directors of the Group, to affect significantly the operations of the Company, the results of those operations or the state of affairs of the Group in subsequent years. T R O P E R S R O T C E R D I P A G E 1 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED T R O P E R S R O T C E R D I LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Chairman and Managing Director have commented on expected results of operations in their Joint Report. Other than this, there are no likely developments that may have significant impact on the expected results of operation of the Group. ENVIRONMENTAL REGULATION The Group is not subject to significant environmental regulations under a Commonwealth, State or Territory law. EMPLOYEE DIVERSITY Fiducian is proud to be an equal opportunity employer. It endorses diversity and currently has a number of employees that bring different skill-sets from their countries of origin. We recognise that diversity includes, but is not limited to gender, age, ethnicity and cultural backgrounds. Our diversity policy encourages persons of different gender, ethnic backgrounds, ages and skills to participate and receive recognition, reward and authority commensurate with their performance. Employees are comprised of staff from over 20 countries of origin, 29% over 55 years, and 47% female with 32% in senior roles. KEY MANAGEMENT PERSONNEL DISCLOSURES (A) DIRECTORS The following persons were directors of Fiducian Group Limited during the financial year: Chairman (non-executive) R Bucknell Executive director I Singh - Managing Director Non-executive directors F Khouri C Stone S Hallab (Appointed 12 August 2016) (B) INFORMATION ON DIRECTORS R Bucknell FCA. Chairman – non executive. Experience and expertise Chairman since inception in 1996. Extensive experience in accounting and business management over the past 50 years as a Chartered Accountant. Other current directorships in listed entities None Former directorships in the last 3 years in listed entities Fiducian Portfolio Services Limited, which was de-listed on the ASX on 24 February 2015 at the time of restructure. Special responsibilities Chairman of the Group, the Remuneration Committee, and the Group Audit Risk and Compliance Committee. Interest in shares and options 800,000 ordinary shares in Fiducian Group Limited. I Singh CFP, BTech, MComm (Bus), ASIA, ASFA, Dip. FP. Managing Director. Experience and expertise Founder and Managing Director since inception in 1996. General Management and hands-on experience in the investment of savings and superannuation funds over the past 27 years. Other current directorships in listed entities None P A G E 1 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED Former directorships in the last 3 years in listed entities Fiducian Portfolio Services Limited, which was de-listed on the ASX on 24 February 2015 at the time of restructure. Special responsibilities Managing Director Interest in shares and options 10,423,851 ordinary shares in Fiducian Group Limited. 100,000 options for ordinary shares in Fiducian Group Limited F G Khouri B Bus, FCPA, CTA Independent non-executive director Experience and expertise Appointed to the Board 6 July 2007. Public accountant, registered company auditor, financial planner and business adviser since 1976 to small and medium enterprises, currently as a partner in the firm HG Khouri & Associates. Other current directorships in listed entities None Former directorships in the last 3 years in listed entities Fiducian Portfolio Services Limited, which was de-listed on the ASX on 24 February 2015 at the time of restructure but remains a director of the unlisted entity. Special responsibilities Member of the Audit Risk and Compliance Committees for both the Group and Trustee Company for Superannuation member of the Group and Trustee Remuneration Committees, and member of the board of the Trustee Company, Fiducian Portfolio Services Ltd. Interest in shares and options 251,373 ordinary shares in Fiducian Group Limited C H Stone B Comm/LLB, LLM, CA, ACIS Independent non-executive director Experience and expertise Appointed to the Board 3 March 2010. Practicing lawyer, holding senior legal and/or legal compliance roles in local and global financial services organizations, with 26 years experience. 11 years experience as a Chartered Accountant dealing with taxation and superannuation matters. Other current directorships in listed entities None Former directorships in the last 3 years in listed entities Fiducian Portfolio Services Limited, which was de-listed on the ASX on 24 February 2015 at the time of restructure. Special responsibilities Member of the Group Audit Risk and Compliance Committee and member of the Group Remuneration Committee. Interest in shares and options 33,700 ordinary shares in Fiducian Group Limited. S Hallab Mr Hallab was appointed to the board after the end of the financial year and therefore he has not been included for the purposes of the disclosures relating to the Key Management Personnel or the Remuneration Report. T R O P E R S R O T C E R D I P A G E 1 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED (C) COMPANY SECRETARY The company secretary is Mr I Singh CFP, M Comm. (Bus), ASIA, ASFA, Dip. FP. Mr. Singh has been the secretary since inception in 1996, and is supported by legal general counsel employed by Fiducian. (D) MEETINGS OF DIRECTORS The numbers of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2016, and the numbers of meetings attended by each director were:- MEETINGS OF DIRECTORS MEETINGS OF COMMITTEES BOARD AUDIT RISK & COMPLIANCE REMUNERATION R Bucknell I Singh F Khouri C Stone A 4 4 4 4 B 4 4 4 4 A 8 - 8 8 B 8 - 8 8 A 1 - 1 1 B 1 - 1 1 A = Number of meetings attended. B = Number of meetings held during the time the director held office or was a member of the committee during the year. (E) OTHER KEY MANAGEMENT PERSONNEL Mr I Singh as Managing Director of Fiducian Group Limited, had authority for and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year ended 30 June 2016. This authority and responsibility is unchanged from the previous year. (F) REMUNERATION REPORT The remuneration report is set out under the following main headings: A Principles used to determine the nature and the amount of remuneration B Details of remuneration C Service agreements D Share-based compensation E Additional information The information provided under headings A - E includes remuneration disclosures that are required under Australian Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been included in the Director’s Report and have been audited. A - Principles used to determine the nature and the amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market practice for delivery of reward. The Board seeks to ensure that executive reward satisfies the following key criteria for good reward governance practices: • • • • • competitiveness and reasonableness acceptability to shareholders performance linkage / alignment of executive compensation transparency capital management T R O P E R S R O T C E R D I P A G E 2 0 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED (a) Non-executive Directors Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Board. Non-executive directors are no longer entitled to options under the Employee and Director Share Option Plan. Directors’ fees The current base remuneration was last reviewed in July 2016. The Chairman and other independent directors are paid a fixed fee for participation in Board and Committees meetings plus a fee based on time spent on any additional matters as approved by the Board. Directors with earnings derived from business placed with the Group may also receive remuneration as financial planners. The Chairman’s fixed fee is higher than other non-executive directors based on comparative roles, time and fees in the external market. Non-executive directors’ fees for the Company are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum pool is proposed at $450,000 a year and approval is being sought from shareholders at the Annual General Meeting on 20 October 2016 for this increase from the current level of $350,000. Retirement allowance for directors There are no retirement allowances for non-executive directors other than superannuation accumulation arising from any contributions made for them. (b) Executive Director Remuneration and other terms of employment for the Managing Director are formalised in a service agreement. The Managing Director’s agreement provides for the provision of performance based cash bonuses and, where eligible, participation in the Employee and Director Share Option Plan. Other major provisions of the agreement are set out below: • • • I Singh, Managing Director Term of agreement - until 30 June 2019 Base salary, inclusive of superannuation and salary sacrifice benefits • Death and TPD/Trauma cover • • • Short term performance incentives Long term incentives through the Fiducian Group Limited Employee and Director Share Option Plan, and Retirement benefits The combination of these comprises the executive’s total remuneration package. An external remuneration consultant advises the Remuneration Committee, at least every 3 years, to ensure that the Group has structured an executive remuneration package that is market competitive and complimentary to the reward strategy of the organisation. Their most recent review was in June 2015. Base salary Mr Singh receives a base pay that comprises the fixed component of pay and the potential for rewards, which reflects the market value for his role. The base salary is reviewed annually by the Remuneration Committee at the commencement of each financial year. There are no guaranteed base pay increases fixed in the executive’s contract. Benefits Executive benefits include TPD/ Trauma insurance cover of $0.2 million. Short-term incentives Mr Singh is entitled to a discretionary cash performance bonus of up to 20% of his total package as assessed by the Remuneration Committee against performance indicators and objectives set by the Board. It is limited to being met within the budget or out of over-budget financial performance. T R O P E R S R O T C E R D I P A G E 2 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED Long-term incentives Mr Singh is entitled to a discretionary performance bonus of up to 100,000 options per year determined as at 30 June each year, based on the following measures: • • the Company‘s pre-tax profit OR the 30 day average of June market value for ordinary shares in the company increasing by at least 15% over the previous year The options are issued under the company’s ESOP at the rate of 5,000 options for each 1% increase in annual profit in excess of 15% or 5000 options for each 1% increase in the 30 day average for June market value for ordinary shares in the Company whichever is higher and only after approval by the shareholders of the Company. Retirement benefits Retirement benefits are delivered under the Fiducian Superannuation Service. This fund provides accumulation benefits based on the SGC contributions by the specified executive, on commercial terms and conditions. Other retirement benefits may be provided directly by the Group only if approved by the shareholders. Payment of a termination benefit on early termination by the Managing Director or by mutual consent is equal to 6 months of the gross annual remuneration. B - Details of remuneration The key management personnel of the Group were the following executive and non-executive directors during the year: • • • R Bucknell Chairman I Singh Managing Director & Company Secretary F Khouri Non- executive Director • C Stone Non-executive Director Amounts of remuneration Details of the remuneration of the key management personnel are set out in the following table:- 2016 NAME Non-executive directors R Bucknell1,2 (Chairman) F Khouri3 C Stone Executive directors I Singh4 Totals SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS SHARE- BASED PAYMENT CASH SALARY & FEES CASH BONUS NON-MON- ETARY BENEFITS SUPERAN- NUATION RETIRE- MENT BENEFITS OPTIONS TOTAL $ $ $ $ $ $ $ 108,000 91,735 43,927 - - - - - - - 8,715 4,173 490,692 25,000 16,724 19,308 734,354 25,000 16,724 32,196 - - - - - - - - 108,000 100,450 48,100 25,071 576,795 25,071 833,345 1 Excludes GST if paid to another firm 2 Including amounts paid to the director’s company only in respect to director’s duties 3 This excludes fees of $210,088 for financial planning services paid to companies in which Mr Khouri has an interest in his capacity as a financial planner 4 Under the terms of his employment Mr I Singh is entitled to 100,000 options in respect of the year ended 30 June 2016. These are subject to approval at the Annual General Meeting. Non-monetary benefits relate to premium paid by the Company for TPD insurance. T R O P E R S R O T C E R D I P A G E 2 2 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 2015 NAME SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS SHARE- BASED PAYMENT CASH SALARY & FEES CASH BONUS NON-MON- ETARY BENEFITS SUPERAN- NUATION RETIRE- MENT BENEFITS OPTIONS TOTAL $ $ $ $ $ $ $ Non-executive directors R Bucknell1,2 (Chairman) F Khouri3,4 C Stone Executive directors I Singh5 Totals 123,000 80,539 76,031 450,217 729,787 1 Excludes GST if paid to another firm - - - - - - - - - 7,651 8,132 14,670 18,784 14,670 34,567 - - - - - - - - - - 123,000 88,190 84,163 483,671 779,024 2 Including amounts paid to the director’s company only in respect to director’s duties 3 This excludes fees of $211,179 for financial planning services paid to companies in which Mr Khouri has an interest in his capacity as a financial planner 4 Non-executive directors fees increased due to the ongoing implementation of the new APRA prudential standards together with time costs related to the restructure of the Group during 2015 5 Mr I Singh was not entitled to any options in respect of the year ended 30 June 2015. Non-monetary benefits relate to premium paid by the Company for TPD insurance C - Service agreements and induction process The service agreement of the Executive Director is detailed in paragraph A(b) earlier. There are no service agreements with non-executive directors or employees. In preparation for appointment to the Board, all non-executive directors undergo an induction program and receive an induction pack of documents necessary for them to understand Fiducian’s charters, policies, procedures, culture and ethical values to enable new directors to carry out their duties in an effective and efficient manner. D - Share-based compensation (i) Option compensation and holdings Options over shares in Fiducian Group Limited are granted under the Employee and Director Share Option Plan, which was approved by shareholders on 28 July 2000. The plan is described under Note 25. The numbers of options for ordinary shares in the Company held directly by directors of Fiducian Group Limited and details of options for ordinary shares in the Company provided as remuneration to the key management personnel of the Group are set out below. 2016 NAME BALANCE AT THE START OF THE YEAR EXERCISED GRANTED DURING THE YEAR AS RE- MUNERATION1 LAPSED DURING THE YEAR BALANCE AT THE END OF THE YEAR VESTED AND EXERCISABLE I Singh 100,000 - - - 100,000 100,000 1 Under the terms of his employment Mr I Singh is entitled to 100,000 options relating to the current year. These are subject to approval at the annual general meeting, therefore it has not been included in the table. T R O P E R S R O T C E R D I P A G E 2 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 2015 NAME BALANCE AT THE START OF THE YEAR EXERCISED GRANTED DURING THE YEAR AS RE- MUNERATION1 LAPSED DURING THE YEAR BALANCE AT THE END OF THE YEAR VESTED AND EXERCISABLE I Singh 140,000 140,000 100,000 - 100,000 - 1 Options granted during the year are in respect of the entitlement relating to the year ended 30 June 2014 (ii) Share holdings The numbers of shares in the Company held by current directors of Fiducian Group Limited, including their personally related and associated entities, are set out below. No shares were granted during the period as compensation. 2016 NAME BALANCE AT THE START OF THE YEAR RECEIVED DURING THE YEAR ON THE EXERCISE OF OPTIONS OTHER CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR I Singh R Bucknell F Khouri C Stone 2015 10,373,764 800,000 251,373 33,700 - - - - 50,087 10,423,851 - - - 800,000 251,373 33,700 NAME BALANCE AT THE START OF THE YEAR RECEIVED DURING THE YEAR ON THE EXERCISE OF OPTIONS OTHER CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR I Singh R Bucknell F Khouri C Stone 10,162,512 140,000 71,252 10,373,764 800,000 251,373 23,700 - - - - - 10,000 800,000 251,373 33,700 Shares provided on exercise of options No ordinary shares in the Company were provided as a result of the exercise of remuneration options to a director of Fiducian Group Limited during the period (2015: 100,000). No amounts are unpaid on any shares issued on the exercise of options. E Additional information Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance The overall level of executive reward takes into account the performance of the Group over a number of years, with greater emphasis given to the current and previous year. For the current year ended 30 June 2016 there has been a small increase in the base salary of the Managing Director. Cash bonuses granted in respect of the current financial year ended on 30 June 2016 is $25,000 (2015: Nil) and the grant of options entitlements have been only in accordance with the incentive programs. The Managing Director is entitled to 100,000 options in respect of the current year ended 30 June 2016 (2015: Nil options). T R O P E R S R O T C E R D I P A G E 2 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED DIRECTOR’S SUPERANNUATION The executive director has superannuation monies invested in Fiducian Superannuation Service. These monies are invested subject to the normal terms and conditions applying to this superannuation fund. LOANS TO DIRECTORS No loans were made to directors during the financial year (2015: Nil). OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL A director, Mr R Bucknell, is a director of Hunter Place Services Pty Ltd, a Company which provides his services as a director to the company. A director, Mr F Khouri, is an authorised representative under the Fiducian Financial Services Pty Ltd Australian Financial Services Licence and is a director and shareholder of Hawkesbury Financial Services Pty Ltd, which is a franchisee of Fiducian Financial Services Pty Ltd. Hawkesbury Financial Services Pty Ltd places business with and receives remuneration from the company for financial planning services. All transactions are on normal commercial terms and conditions. A director, Mr. C Stone, was paid director’s fees for his personal contribution to the Board. Aggregate amounts of each of the above types of other transactions with directors of Fiducian Group Limited:- Amount recognised as expense:- Directors’ fees and committee fees Financial planning remuneration paid and payable CONSOLIDATED 2016 $’000 256,550 210,088 466,638 2015 $’000 295,353 211,179 506,532 SHARES UNDER OPTION Unissued ordinary shares of Fiducian Group Limited under option at the date of this report are disclosed in Note 25 of financial report. No option holder has any right under the options to participate in any other share issue of the Company or any other entity until after the exercise of the option. SHARES ISSUED ON THE EXERCISE OF OPTIONS The details of ordinary shares of Fiducian Group Limited issued during the year in respect of 2016 and 2015 years on the exercise of options granted under the Fiducian Group Limited Employee & Director Share Option Plan are disclosed under Note 26 to the Financial Statements. INDEMNIFICATION AND INSURANCE OF OFFICERS The Constitution of Fiducian Group Limited provides the following indemnification of officers: • • To indemnify officers of the Company and related bodies corporate to the maximum extent permitted by law. To allow the Company to pay a premium for a contract insuring directors, the secretary and executive officers of Fiducian Group Limited and its related bodies corporate. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in the capacity as officers of the company or a related body corporate. No liability has arisen under these indemnities as at the date of this report. During the year Fiducian Group Limited paid a premium under a combined policy of insurance for liability of officers of the Company and related bodies corporate, professional indemnity and crime. In accordance with normal commercial practice, disclosure of the total amount of premium payable under, and the nature of the liabilities covered by, the insurance contract is prohibited by a confidentiality clause in the contract. T R O P E R S R O T C E R D I P A G E 2 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED T R O P E R S R O T C E R D I The officers of the company covered by the insurance policy include the current and previous directors: R Bucknell, I Singh, F Khouri, C Stone, other officers of Fiducian Group Limited and independent members of the Compliance and Investment Committees, B Lacey and M Devlin. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. NON-AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or Group are important. The board of directors is satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES110 Code of Ethics for Professional Accountants The fees paid or payable for services provided during the year by the auditor (PricewaterhouseCoopers) of the parent entity, its related practices and non-related audit firms, are shown in Note 27 to the consolidated financial statements. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 27. ROUNDING OF AMOUNTS The Company is of a kind referred to in Class Order 2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. AUDITOR PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. CORPORATE GOVERNANCE A description of the Group’s current corporate governance practices is available on the Group’s website and can be viewed at http://www.fiducian.com.au/linkref/corporate_governance_statement.pdf. This report is made in accordance with a resolution of the directors. Inderjit (Indy) Singh Managing Director Sydney, 15 August 2016 P A G E 2 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED AUDITOR’S INDEPENDENCE DECLARATION Auditor’s Independence Declaration As lead auditor for the audit of Fiducian Group Limited for the year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been: 1. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Fiducian Group Limited and the entities it controlled during the period. Craig Stafford Partner Sydney 15 August 2016 PricewaterhouseCoopers, ABN 52 780 433 757 Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. P A G E 2 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDSHAREHOLDER INFORMATION A. DISTRIBUTION OF EQUITY SECURITY HOLDERS BY SIZE OF HOLDING Analysis of numbers of equity security holders by size of holding, as at 1 August 2016 DISTRIBUTION 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - and over Total holders OPTION HOLDERS ORDINARY SHARE HOLDER - - - - 1 - 1 102 346 120 149 25 28 770 There were 12 holders of a less than marketable parcel of ordinary shares. B. EQUITY SECURITY HOLDERS TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS The names of the 20 largest registered shareholders of quoted equity securities as at 1 August 2016, are listed below NAME INDYSHRI SINGH PTY LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED LONDON CITY EQUITIES LIMITED SHRIND INVESTMENTS PTY LTD (INDYSHRI SUPER FUND A/C) HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED (COLONIAL FIRST STATE INV A/C) NORCAD INVESTMENTS PTY LTD HUNTER PLACE SERVICES PTY LTD CITICORP NOMINEES PTY LIMITED D R SMITH HOLDINGS PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 MR VICTOR JOHN PLUMMER 13 MR IVAN TANNER + MRS FELICITY TANNER (THE SUPERNATURAL S/F A/C) 14 BNP PARIBAS NOMS (NZ) LTD 15 GARRETT SMYTHE LTD 16 17 18 19 20 BOND STREET CUSTODIANS LIMITED (GANES VALUE GROWTH A/C) H F R PTY LTD (THE F & M KHOURI S/FUND A/C) BNP PARIBAS NOMS PTY LTD ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD (CUSTODIAN A/C) CUSTODIAL SERVICES LIMITED (BENEFICIARIES HOLDING A/C) NUMBER HELD PERCENTAGE OF ISSUED SHARES 8,795,933 2,202,448 1,759,897 1,627,918 1,236,809 1,221,782 969,672 815,500 800,000 685,425 593,689 500,000 377,500 352,000 339,000 223,509 199,187 191,920 172,511 172,230 28.22% 7.07% 5.65% 5.22% 3.97% 3.92% 3.11% 2.62% 2.57% 2.20% 1.91% 1.60% 1.21% 1.13% 1.09% 0.72% 0.64% 0.62% 0.55% 0.55% 23,653,209 75.90% N O I T A M R O F N I R E D L O H E R A H S P A G E 2 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED UNQUOTED EQUITY SECURITIES As at 1 August 2016 TYPE OF SECURITY Options - Managing Director NUMBER ON ISSUE NUMBER OF HOLDERS 100,000 100,000 1 1 C. SUBSTANTIAL SHAREHOLDERS Substantial shareholders and associates as at 1 August 2016 (more than 5% of a class of shares) in the Company are set out below NAME INDYSHRI SINGH PTY LIMITED and associates J P MORGAN NOMINEES AUSTRALIA LIMITED LONDON CITY EQUITIES LIMITED NUMBER HELD PERCENTAGE 10,423,851 2,202,448 1,759,897 33.44% 7.07% 5.65% D. VOTING RIGHTS The voting rights attached to each class of equity securities are set out below:- ORDINARY SHARES On a show of hands each holder of ordinary shares has one vote and upon a poll one vote for each share held OPTIONS No voting rights N O I T A M R O F N I R E D L O H E R A H S P A G E 2 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED FINANCIAL STATEMENTS Victoria Office Locations Berwick Chadstone P A G E 3 0 North Melbourne Sale St Kilda Surrey Hills ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDCONTENTS FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 32 33 34 35 36 74 75 P A G E 3 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDS T N E M E T A T S I L A C N A N I F CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016 NOTES CONSOLIDATED Revenue from ordinary activities Other Income Payments to advisers and service providers Employee benefits expense Depreciation and amortisation expense Other expenses Profit before income tax expense Income tax expense Profit for the year Other comprehensive income for the full year, net of tax Total comprehensive income for the year Profit is attributable to: Owners of Fiducian Group Limited Earnings per share Earnings per share from profit from continuing operations attributable to the ordinary equity holders of the Company: Basic earnings per share (in cents) Diluted earnings per share (in cents) 4 5 6(a) 6(b) 7 23 31 2016 $’000 35,108 343 (9,385) (11,731) (1,297) (4,662) 8,376 (2,537) 5,839 - 5,839 5,839 5,839 2015 $’000 25,918 335 (5,715) (10,740) (860) (2,345) 6,593 (1,971) 4,622 - 4,622 4,622 4,622 18.81 cents 18.77 cents 14.99 cents 14.93 cents The above statement of comprehensive income should be read in conjunction with the accompanying notes. P A G E 3 2 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 NOTES CONSOLIDATED S T N E M E T A T S I L A C N A N I F ASSETS Current assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-current assets Receivables Property, plant and equipment Intangible assets Total Non-Current Assets Total assets LIABILITIES Current liabilities Trade and other payables Current tax liabilities Total Current Liabilities Non-current liabilities Net deferred tax liabilities Provisions Total Non-Current Liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity 2016 $’000 9,691 3,951 13,642 3,479 298 16,271 20,048 33,690 6,624 835 7,459 1,766 338 2,104 9,563 24,127 6,855 67 17,205 24,127 2015 $’000 12,374 3,747 16,121 3,491 388 8,770 12,649 28,770 5,647 1,462 7,109 123 347 470 7,579 21,191 6,366 42 14,783 21,191 9 10 11 14 16 17 18 19 20 21 22 23 The above statement of financial position should be read in conjunction with the accompanying notes. P A G E 3 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2016 NOTES CONTRIBUT- ED EQUITY RESERVES $’000 RETAINED EARNINGS TOTAL Balance as at 30 June 2014 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders Buy-back of shares Dividends provided for or paid Shares issued on exercise of options Options expense Total transactions with equity holders Balance as at 30 June 2015 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders Buy-back of shares Dividends provided for or paid Shares issued for acquisition of business Options expense Total transactions with equity holders Balance as at 30 June 2016 21 8 22 21 8 22 $’000 6,236 - - - (26) - 156 - 130 6,366 - - - - - 489 - 489 6,855 $’000 $’000 $’000 26 13,089 19,351 - - - - - - 16 16 42 - - - - - - 25 25 67 4,622 - 4,622 - (2,928) - - 4,622 - 4,622 (26) (2,928) 156 16 (2,928) (2,782) 14,783 21,191 5,839 - 5,839 5,839 - 5,839 - - (3,417) (3,417) - - 489 25 (3,417) (2,902) 17,205 24,127 The above statement of changes in equity should be read in conjunction with the accompanying notes. S T N E M E T A T S I L A C N A N I F P A G E 3 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 S T N E M E T A T S I L A C N A N I F 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 Income taxes (paid) / refunded Net cash inflow from operating activities 30 Cash flows from investing activities Loans to related parties (associates, planners and staff) Investment in Trusts Payments in relation to acquisitions Repayment of loans by associates & planners Payments for property, plant and equipment Net cash outflow from investing activities Cash flows from financing activities Payments for shares bought back Shares issued on exercise of options Dividends paid Net cash outflow from financing activities Net (decrease)/increase in cash held Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of year 9 NOTES CONSOLIDATED 2016 $’000 2015 $’000 38,098 27,908 (29,402) (19,708) 8,696 343 (3,496) 5,543 - - (4,929) 149 (29) (4,809) - - (3,417) (3,417) (2,683) 12,374 9,691 8,200 313 (2,006) 6,507 (1,719) 112 (987) 94 (29) (2,529) (26) 156 (2,928) (2,798) 1,180 11,194 12,374 The above statement of cash flows should be read in conjunction with the accompanying notes. P A G E 3 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 3 6 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted for the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements includes Fiducian Group Limited and its subsidiaries. (A) BASIS OF PREPARATION This general purpose financial statements has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Fiducian Group Limited is a for-profit entity for the purpose of preparing the financial statements. Compliance with IFRS The financial statements of Fiducian Group Limited also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Historical cost convention The financial statements has been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through profit or loss. Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 2. (B) PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporates the assets and liabilities of all entities controlled by Fiducian Group Limited (Company or parent entity) as at 30 June 2016 and the results of all controlled entities for the year then ended. Fiducian Group Limited and its subsidiaries together are referred to in these financial statements as the Group. Subsidiaries are all entities (including structured 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. Investments in subsidiaries are accounted for at cost in the parent company’s financial statements. The acquisition method of accounting is used to account for the business combinations by the Group. Intercompany transactions and balances 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. Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income. (C) REVENUE RECOGNITION Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns and amounts collected on behalf of third parties. Revenue is recognised for the major business activities as follows:- (i) Management fees and Fees, payments to advisers and service providers Revenues comprising trustee and management fees are recognised on an accruals basis. Fees, payments to advisers and service providers and looks related to this revenue are recognised at the same time and on the same basis. (ii) Interest income Interest income is recognised on a time proportionate basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (C) REVENUE RECOGNITION (CONTINUED) (iii) Dividends Dividends are recognised as revenue when the right to receive payment is established. (iv) Distributions from related trusts Distributions from related trusts are recognised as revenue when the right to receive payment is established. (v) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Fiducian Group Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:- • • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet income and expenses for each statement of comprehensive income are translated at the closing rate at the end of the month, and • all resulting exchange differences are recognised in other comprehensive income. (D) INCOME TAX The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the national income tax rate for Australia adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting or taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to use those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 3 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 3 8 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (D) INCOME TAX (CONTINUED) Tax consolidation With effect from 1 March 2015 Fiducian Group Limited and its wholly owned subsidiaries have implemented the tax consolidation legislation with Fiducian Group Limited as the head entity in the newly formed tax consolidated group. As a consequence these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. The head entity has entered into a tax sharing agreement and a tax funding agreement with the members of the tax consolidated group. Under the tax funding agreement the members of the Group are required to contribute to the head entity for their current tax liabilities. The assets and liabilities arising under the tax funding agreements are recognised as intercompany assets and liabilities at call. Members of the tax consolidated group via the tax sharing agreement may be called to provide for the income tax liabilities between the entities should the head entity default on its tax payment obligations. No amount has been recognised in respect of this component of the agreement as the outcome is considered remote. (E) OPERATING LEASES Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (Note 28). Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. (F) TRUSTEE COMPANY AND RESPONSIBLE ENTITY The Group acts as a Trustee of Fiducian Superannuation Service through a subsidiary, Fiducian Portfolio Services Ltd, and acts as the operator of an Investor Directed Portfolio Service, Fiducian Investment Service and the Responsible Entity of Fiducian Funds (“the trusts”) through another subsidiary, Fiducian Investment Management Services Ltd. The accounting policies adopted by these Companies in the preparation of their financial reports and that of the Group For the year ended 30 June 2016 reflect the fiduciary nature of these company’s responsibilities and that of the Group for the assets and liabilities of the trusts. The financial reports do not include the trusts’ assets and liabilities as future economic benefits and obligations derived from the trusts’ assets and liabilities do not accrue to these Companies or the Group. In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the trust assets and liabilities have not been disclosed as the directors consider the probability of these companies or the Group having to meet the liabilities of the trusts as remote. (G) IMPAIRMENT OF ASSETS Goodwill and 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 assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (H) CASH AND CASH EQUIVALENTS For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (I) TRADE RECEIVABLES Trade receivables are recognised at fair value and subsequently measured at amortised cost, less provision for impairment. Trade receivables are due for settlement no more than 120 days from the date of recognition for trade receivables and financial planning fees, and no more than 30 days for other receivables. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (I) TRADE RECEIVABLES (CONTINUED) Collectability of trade receivables is reviewed on an ongoing basis. Receivables, which are known to be uncollectible, are written off. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (outside settlement terms) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in the statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income. (J) BUSINESS COMBINATIONS The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The purchase consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the acquirer. The purchase consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the purchase consideration and the acquisition-date fair value over the share of the net identifiable assets acquired, is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently re-measured to fair value with changes in fair value recognised in profit or loss. (K) INVESTMENTS AND OTHER FINANCIAL ASSETS The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, and other financial assets. The classification depends on the purposes for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date. (i) Financial assets at fair value through profit or loss Financial assets are classified as held for trading if acquired principally for the purpose of selling in the short- term with the intention of making a profit. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the statement of financial position date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position in Notes 10 and 11. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 3 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 4 0 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FAIR VALUE ESTIMATION The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of 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. (M) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic 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 comprehensive income during the financial period in which they were incurred. Depreciation on assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: Furniture, office equipment and computers 2 – 8 years Leasehold improvements term of the lease The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount in Note 1(g). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. (N) INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary or client portfolio at the date of acquisition. Goodwill on acquisitions is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Client portfolios Consideration payable for the acquisition of client portfolios is deferred and amortised on a straight- line basis over a period of 10 years. Client portfolios are also tested for events or changes in circumstances that indicate that they may be impaired, and are carried at cost less accumulated amortisation and impairment losses. IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems where deemed appropriate. Costs capitalised include direct costs of materials and service and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. Capitalised expenditure is tested for events or changes in circumstances that indicate that they may be impaired and whether they exceed their recoverable amount. (O) TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the Group before the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (P) PROVISIONS Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability (Q) EMPLOYEE BENEFITS (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employee services up to the reporting date and are measured at the amount expected to be paid when the liabilities are settled. Personal/carers and sick leave is brought to account as incurred. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit cost method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms of maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share-based payments Share-based compensation benefits are provided to employees via the share option plans. Information relating to this scheme is set out in Note 25. Subsequent options issued to employees for no consideration have the fair value of options granted under the Fiducian Employee & Director Share Option Plan recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a binomial option-pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. (R) 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. If the entity reacquires its own equity instruments, for example as the result of a share buy-back, those instruments along with the consideration paid is deducted from equity and the shares are regarded as treasury shares until they are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly incremental costs (net of income taxes) is recognised directly in equity. Treasury shares are bought with the intention of cancellation and are not reissued. (S) DIVIDENDS Provision is made only for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 4 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 4 2 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (T) EARNINGS PER SHARE (i) Basic earnings per share Basic earnings per share is determined by dividing the net profit after income tax attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial 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. (U) GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office (ATO). In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to the ATO is included with other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the ATO, are presented as operating cash flow. (V) ROUNDING OF AMOUNTS The Company is of a kind referred to in Class Order 2016/191 issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. (W) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016 reporting periods. The Group has decided not to early adopt any of the standards available for early adoption. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below. AASB 9 Financial Instruments (effective from 1 January 2018) This standard addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2018 but is available for early adoption. When adopted the standard will affect the accounting for available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. In the current reporting period, the Company did not hold any available-for-sale financial assets or available-for-sale debt investments. There will be no impact on Fiducian’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and Fiducian does not have any such liabilities. Fiducian does not have any hedging arrangements and hence there is no impact from the new hedging rules. AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018) The new standard is based on the principle that revenue is recognised when control of a good or service is transferred to a customer so the notion of control replaces the notion of risks and rewards. It applies to all contracts with customers except leases, financial instruments and insurance contracts. It requires reporting entities to provide users of financial statements with more informative and relevant disclosures. Fiducian is in the process of assessing the implications for revenue recognition for the segments of its business. AASB 16 Leases (effective from 1 January 2019) The standard introduces a single lease accounting model and removes the current distinction between operating and financial leases. It requires the recognition of an asset (the right to use leased item) and financial liability to pay rentals for the lease contract. Fiducian is in the process of assessing the implication of this standard on its operating leases. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 2. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (I) ESTIMATED IMPAIRMENT OF GOODWILL The Group tests annually whether goodwill has suffered any impairment, by comparing its current amount with its recoverable amount in accordance with the accounting policy stated in Note 1(n). The recoverable amounts of the cash- generating units have been determined based on earnings multiples requiring the use of sustainable revenue estimates and comparable market transactions. (II) ESTIMATED IMPAIRMENT OF CLIENT PORTFOLIOS The Group assesses at the end of each reporting period whether there is any indication that the investment or accounting portfolios may be impaired in accordance with the accounting policy stated in Note 1(n). If any such indication exists, the Group shall estimate the recoverable amount of the asset. The recoverable amounts of cash-generating units have been determined based on discounted cash flow models which require the use of assumptions on discount rates, recurring revenues and cash flow projections. 3. SEGMENT INFORMATION (A) DESCRIPTION OF SEGMENTS Business segments The business activities of the Group have been segregated into business segments based on legal entities and reviewed by management accordingly. The business segments are as follows:- Superannuation The Group through its subsidiary, Fiducian Portfolio Services Ltd, operates in a segment as RSE for a public offer superannuation fund, Fiducian Superannuation Service. Funds Management The Group through its subsidiary, Fiducian Investment Management Services Ltd, acts as an operator of an Investor Directed Portfolio Service, Fiducian Investment Service and as Responsible Entity for managed investment schemes. Financial Planning The Group continued its specialist financial planning operations through its subsidiary, Fiducian Financial Services Pty Ltd. Administration The administration and professional services are provided to the Group by a subsidiary, Fiducian Services Pty Ltd. Management views this as an operating segment. Business Services The Group provides accountancy resource services through its subsidiary, Fiducian Business Services Pty Ltd. Although this segment does not meet the quantitative thresholds required by AASB 8, management has concluded that this segment should be reported as it is closely monitored by management. Geographical segments The Group operates in the following geographical segments in Australia and in India. The Indian operations are not considered material for a separate geographical segment disclosure during the financial year 2016. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 4 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 3. SEGMENT INFORMATION (CONTINUED) (B) PRIMARY REPORTING - BUSINESS SEGMENTS FUNDS MANAGE- MENT SUPERAN- NUATION FINANCIAL PLANNING ADMINIS- TRATION BUSINESS SERVICES SEGMENT ELIMINA- TIONS CONSOLI- DATED $’000 $’000 $’000 $’000 $’000 $’000 $’000 14,783 14,703 4,725 (226) 1,123 - 35,108 (4,335) (8,166) 8,498 13,251 130 10,578 7 5 199 6,544 13,228 13,224 (150) 2 975 (9,098) - - 343 (9,098) 35,451 4,501 6 23 4,251 (405) - 8,376 (2,537) 5,839 2016 Revenue from external customers Inter-segment sales Other Revenue Total segment revenue Profit from ordinary activities before income tax expense Income tax expense Profit from ordinary activities after income tax expense Segment assets 6,946 1,970 21,221 12,851 1,172 (10,470) 33,690 Segment liabilities 2,486 188 5,091 3,000 42 (1,245) 9,563 Acquisitions of plant and equipment, intangibles and other non-current segment assets Depreciation, amortisation and impairment - - - - 8,747 1,079 19 42 6 176 - - 8,772 1,297 P A G E 4 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 3. SEGMENT INFORMATION (CONTINUED) (B) PRIMARY REPORTING - BUSINESS SEGMENTS (CONTINUED) FUNDS MANAGE- MENT SUPERAN- NUATION FINANCIAL PLANNING ADMINIS- TRATION BUSINESS SERVICES SEGMENT ELIMINA- TIONS CONSOLI- DATED $’000 $’000 $’000 $’000 $’000 $’000 $’000 3,363 16,966 4,390 19 1,179 - 25,918 2015 Revenue from external cus- tomers Intersegment sales Other Revenue Total segment revenue 2,011 15,673 11,470 (1,373) (1,506) 21 213 7,068 12 3,476 76 3,571 (50) 13 (7,615) - - 335 1,142 (7,615) 26,253 Profit from ordinary activities before income tax expense Income tax expense Profit from ordinary activities after income tax expense 1,280 2,576 1,522 1,296 (81) - 6,593 (1,971) 4,622 Segment assets 7,629 4,097 9,434 16,465 1,695 (10,550) 28,770 Segment liabilities 1,150 437 2,420 4,446 341 (1,215) 7,579 Acquisitions of plant and equipment, intangibles and other non-current segment assets Depreciation, amortisation and impairment - - - - 2 592 16 32 11 160 - - 29 859 P A G E 4 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 3. SEGMENT INFORMATION (CONTINUED) (C) OTHER SEGMENT INFORMATION (i) Segment revenue Sales between segments are carried out at arm’s length and are eliminated on consolidation. The revenue from external parties reported to the board is measured in a manner consistent with that in the statements of comprehensive income. Segment revenue reconciles to total revenue from continuing operation as follows:- Total segment revenue Inter-segment eliminations Total revenue from continuing operations (note 4) CONSOLIDATED 2016 $’000 44,206 (9,098) 35,108 2015 $’000 33,533 (7,615) 25,918 The entity is domiciled in Australia. The amount of its revenue from external customers in Australia is $35,108,000 (2015: $25,918,000). (ii) EBITDA The board assesses the performance of the operating segments based on the measures of profit contribution and EBITDA. A reconciliation of EBITDA to operating profit before income tax is provided as follows:- EBITDA Depreciation Amortisation Profit before income tax from continuing operations CONSOLIDATED 2016 $’000 9,673 (46) (1,251) 8,376 2015 $’000 7,453 (165) (695) 6,593 (iii) Segment assets The amounts provided to the board with respect to total assets are measured in a manner consistent with that of the finan- cial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. All assets are located in Australia and in India (which are not material). (iv) Segment liabilities The amounts provided to the board with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 4 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 4. REVENUE FROM ORDINARY ACTIVITIES From continuing operations Sales revenue Fees received 1,2 Other Revenue from ordinary activities S T N E M E T A T S I L A C N A N I F E H T O T S E T O N CONSOLIDATED 2016 $’000 2015 $’000 34,960 148 35,108 25,665 253 25,918 1 Fees received by FIMS as responsible entity of the managed investment schemes, including underlying fund manager fees which prior to 1 March 2015 were netted off. This change was as a result of an amendment to the product disclosure statement whereby fees due to underlying fund managers are paid by the responsible entity and are not separately charged to unitholders. 2 Includes expense recovery fee of $2,813,000. For details refer to Note 6. 5. OTHER INCOME Interest received/receivable Other income 6. EXPENSES Profit before income tax includes the following expenses: a) Depreciation and amortisation expense Depreciation Furniture office equipment and computers Leasehold improvements Total depreciation Amortisation Capitalised computer software Client portfolio acquisition costs Total amortisation Impairment Goodwill Total depreciation, amortisation and impairment expense CONSOLIDATED 2016 $’000 343 343 2015 $’000 335 335 CONSOLIDATED 2016 $’000 2015 $’000 46 54 100 15 1,163 1,178 19 1,297 111 54 165 14 631 645 50 860 P A G E 4 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 6. EXPENSES (CONTINUED) b) Other expenses1 Professional services Sales marketing and travel Rental expense relating to operating leases Premises and equipment Communication and computing Printing and stationery Auditors Renumeration (Note 26) Administration and other Expense Recovery2 751 1,090 925 165 715 225 539 1,718 (1,466) 4,662 901 1,042 1,160 177 557 191 495 1,343 (3,521) 2,345 1 Other expenses in 2015 include $ 616,000 incurred relating to the implementation of the restructure of the Fiducian Group. 2 Fiducian Group Limited through its subsidiary , Fiducian Portfolio Services Limited, as trustee for the Fiducian Superannuation Service, is entitled to the reimbursement of expenses incurred by it in the operation of the service and paid out of the Expense Reserve maintained in the Service. Expense recovery above includes an amount of $1,212,000 (2015: $3,341,000) relating to this reimbursement. Effective 1 September 2015 under a new administration agreement entered into by the Trustee on behalf of the Service with Fiducian Services Pty Ltd (‘the administrator”) the expenses of the Service are paid on the Trustee’s behalf by the administrator and are reimbursed by the Service by way of an Expense Recovery Fee paid out of the Expense Reserve in the Service. For the current year the Expense recovery Fee of $2,813,000 (2015: Nil) has been included in Revenue from ordinary activities in Note 4 as part of Fees received. 7. INCOME TAX EXPENSE CONSOLIDATED a) Income tax expense Current tax Deferred tax Income tax expense Deferred income tax/(revenue) expense included in income tax expense comprises:- (Increase)/decrease in deferred tax assets (Note 15) Increase/(decrease) in deferred tax liabilities (Note 19) Deferred tax (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income:- Entertainment Sundry items Income tax expense (c) Tax consolidation legislation 2016 $’000 2,904 (367) 2,537 (5) (362) (367) 8,376 2,513 10 14 2,537 2015 $’000 2,041 (70) 1,971 152 (222) (70) 6,593 1,978 26 (33) 1,971 Fiducian Group Limited and its wholly owned subsidiaries have formed a tax consolidated group with effect from 1 March 2015. As a consequence these financial statements have been prepared on a tax-consolidated basis where the head entity has assumed the tax liabilities initially recognised by the standalone taxpayers. P A G E 4 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 8. DIVIDENDS Final ordinary fully franked dividend for the year ended 30 June 2015 of 5.50 cents (2014: Fully franked 5.00 cents) per share paid on 24 September 2015. Interim ordinary fully franked dividend for the year ended 30 June 2016 of 5.50 cents (2015: Fully franked 4.50 cents) per share paid on 14 March 2016. Total dividends in respect of the year S T N E M E T A T S I L A C N A N I F E H T O T S E T O N CONSOLIDATED 2016 $’000 1,706 2015 $’000 1,538 1,711 1,390 3,417 2,928 The Directors have declared a final fully franked dividend for the year ended 30 June 2016 in the amount of 7.00 cents per Ordinary share to be paid on shares registered on 29 August 2016 and payable on 12 September 2016. Franked dividends The franked portions of the final dividends recommended after 30 June 2016 will be franked out of existing franking credits. Franking credits available for the subsequent financial year based on a tax rate of 30% CONSOLIDATED 2016 $’000 9,475 2015 $’000 9,502 The above amounts represent the balances 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 amount of the provision for income tax (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date The consolidated amounts include franking credits that would be available to the parent entity if distributable profits from subsidiaries were paid as dividends. The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of approximately $934,000 (2015: $728,000). 9. CURRENT ASSETS - CASH AND CASH EQUIVALENTS Cash at bank and in hand Deposits securing bank guarantees CONSOLIDATED 2016 $’000 9,691 - 9,691 2015 $’000 12,340 34 12,374 P A G E 4 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 10. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES Amounts receivable from related entities: Related trusts Business development loans * Staff loans * Other receivables Prepayments Less: Provision for impairment of receivables * Refer to Note 11 for the non-current portion of these receivables. Movements in provision for impairment of receivables Balance at beginning of the year Additional provision during the year Written off against provision Balance at end of the year CONSOLIDATED 2016 $’000 2015 $’000 3,055 2,197 263 3 425 287 4,033 (82) 3,951 (30) (52) - (82) 522 3 804 251 3,777 (30) 3,747 (30) - - (30) At 30 June 2016, a provision for impairment exists for trade receivables outstanding greater than 120 days where management considers that the receivable is impaired. Information about the Group’s exposure to credit and interest rate risk in relation to trade and other receivables is provided in Note 33. 11 NON-CURRENT ASSETS - RECEIVABLES Business development loans * Staff loans * * Refer to note 10 for the current portion of these receivables (A) IMPAIRED RECEIVABLES AND RECEIVABLES PAST DUE No amount has been provided against non-current receivables in the current year (2015: Nil). CONSOLIDATED 2016 $’000 3,453 26 3,479 2015 $’000 3,464 27 3,491 S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 5 0 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 11 NON-CURRENT ASSETS - RECEIVABLES (CONTINUED) (B) FAIR VALUES The fair values and carrying values of non-current receivables of the Group are as follows:- Business development loans Staff loans 2016 2015 CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE $’000 3,453 26 3,479 $’000 3,453 26 3,479 $’000 3,464 27 3,491 $’000 3,464 27 3,491 12 NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS The Group’s principal subsidiaries as at 30 June 2016 are set out below. NAME OF ENTITY COUNTRY OF INCORPORATION CLASS OF SHARES EQUITY HOLDING % Fiducian Investment Management Services Ltd (“FIM”)1 Fiducian Portfolio Services Ltd (“FPS”) 2 Fiducian Services Pty Ltd (“FSL”) 3 Fiducian Financial Services Pty Ltd (“FFS”)4 Fiducian Business Services Pty Ltd (“FBS”)5 Australia Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 1 The company acts as the Responsible entity of the Fiducian Funds and the operator of the Fiducian Investment Service 2 The company acts as the Trustee for the Fiducian Superannuation Service 3 The company provides the administration and professional services to the other entities within the Group 4 The principal activity of the company is the development of a specialist financial planning services network 5 The principal activity of the company is to provide bookkeeping, accounting and tax processing services In addition to the above subsidiaries, Fiducian Business Services has 90% equity investment in Fiducian Resourcing Services Pvt Ltd, a company incorporated in India, providing accounting and tax processing services to the Group. The operations of the company are not considered material to the Group in 2016. 13. NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Investment in unlisted unit trusts At beginning of the year Capital distribution Revaluation – fair value (losses) At end of the year Investment in related trust CONSOLIDATED 2016 $’000 - - - - - 2015 $’000 106 (106) - - - * Financial assets held at fair value through profit and loss related to investments into a related Fiducian trust. The Fund was wound up during 2015 and the entire amount of capital was returned to the unitholders. P A G E 5 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 14. NON-CURRENT ASSETS - PROPERTY, PLANT & EQUIPMENT Plant and Equipment Furniture, office equipment and computers Less: accumulated depreciation CONSOLIDATED 2016 $’000 1,587 (1,289) 298 2015 $’000 1,579 (1,191) 388 Movements Reconciliation of the carrying amount of each class of property, plant and equipment are set out below. FURNITURE AND OFFICE EQUIPMENT COMPUTERS LEASEHOLD IMPROVEMENTS TOTAL $’000 $’000 $’000 $’000 Consolidated at 1 July 2014 Cost Accumulated depreciation Net book amount Year ended 30 June 2015 Opening net book amount Additions Disposals Depreciation/amortisation charge Closing net book amount At 30 June 2015 Cost Accumulated depreciation Net book amount Year ended 30 June 2016 Opening net book amount Additions Disposals Depreciation/amortisation charge Closing net book amount At 30 June 2016 Cost Accumulated depreciation Net book amount 277 (175) 102 102 11 - (20) 93 288 (195) 93 93 2 - (24) 71 290 (219) 71 436 (319) 117 117 18 - (89) 46 454 (408) 46 46 8 - (22) 32 462 (430) 32 837 (532) 305 305 - (2) (54) 249 835 (586) 249 249 - - (54) 195 835 (640) 195 1,550 (1,026) 524 524 29 (2) (163) 388 1,577 (1,189) 388 388 10 - (100) 298 1,587 (1,289) 298 P A G E 5 2 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 15. NON-CURRENT ASSETS – DEFERRED TAX ASSETS CONSOLIDATED The balance comprises temporary differences attributable to: Doubtful debts Employee benefits Accrued expenditure Provision for audit and taxation services Provision for depreciation Restructure expenses Deferred tax assets before set off Set off against deferred tax liabilities (note 19) Movements: Opening balance at 1 July Taken to the statement of comprehensive income Deferred assets before set off Set off against deferred tax liabilities 16. NON-CURRENT ASSETS - INTANGIBLE ASSETS Deferred expenditure Capitalised expenditure – computer software Less: Accumulated amortisation Client portfolios Cost of acquisition of client portfolios Less: Accumulated amortisation Goodwill Goodwill on acquisition Less: Accumulated amortisation and impairment 2016 $’000 25 487 207 93 16 145 973 (973) - 968 5 973 (973) - 2015 $’000 9 446 127 164 17 205 968 (968) - 816 152 968 (968) - CONSOLIDATED 2016 $’000 5,022 (5,002) 20 12,978 (3,712) 9,266 7,449 (464) 6,985 16,271 2015 $’000 5,001 ( 4,989) 12 5,851 ( 2,101) 3,750 5,471 ( 464) 5,007 8,770 S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 5 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (CONTINUED) (A) MOVEMENTS Movements in each category are set out below:- ACQUISITION OF CLIENT PORTFOLIOS GOODWILL ON ACQUISITION CAPITALISED COMPUTER SOFTWARE TOTAL $’000 $’000 $’000 $’000 Consolidated at 1 July 2014 Cost Accumulated depreciation Net book amount Year ended 30 June 2015 Opening net book amount Additions* Disposals/write off Impairment charge Amortisation charge** Closing net book amount At 30 June 2015 Cost Accumulated depreciation Net book amount Year ended 30 June 2016 Opening net book amount Additions* Disposals/write off Impairment charge Amortisation charge** Closing net book amount At 30 June 2016 Cost Accumulated depreciation Net book amount 6,436 (1,918) 4,518 4,518 - (137) - (631) 3,750 6,299 (2,549) 3,750 3,750 6,743 (64) - (1,163) 9,266 12,978 (3,712) 9,266 5,521 (464) 5,057 5,057 - - (50) - 5,007 5,471 (464) 5,007 5,007 1,997 - (19) - 6,985 7,449 (464) 6,985 4,999 (4,973) 26 26 - - - (14) 12 4,999 (4,987) 12 12 22 - - (15) 19 5,022 (5,002) 20 16,956 (7,355) 9,600 9,601 - (137) - (645) 8,819 16,769 (7,999) 8,770 8,769 8,763 (64) (19) (1,178) 16,271 25,449 (9,178) 16,271 * Capitalised computer software costs includes an internally generated intangible asset. The assets in this category have been amortised on the basis of 5 year useful life. ** Amortisation of $ 1,178,000 (2015 : $645,000) is included in depreciation, and amortisation expense in the statement of comprehensive income. P A G E 5 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (CONTINUED) (B) IMPAIRMENT TESTS FOR GOODWILL AND CLIENT PORTFOLIOS Goodwill and client portfolios are allocated to the Group’s Cash Generating Units (CGUs) identified according to business segment. The recoverable amount of a CGU is determined based on discounted cash flows and market value calculations. These calculations use recurring income measures consistent with market valuations of similar financial services businesses. (C) IMPACT OF POSSIBLE CHANGES IN KEY ASSUMPTIONS Changes in assumptions made in the assessment of impairment of goodwill relate to updating the earnings multiple used to estimate sustainable revenues. These assumptions are compared to market each year and adjusted appropriately. (D) IMPAIRMENT CHARGE During the year an impairment charge amounting to $19,000 was recorded against goodwill to reflect the lower payment on final settlement for the acquisition of a portfolio of client assets relating to financial planning and business services respectively (2015: $50,000). (E) SENSITIVITY ANALYSIS The estimates and judgments included in the fair value calculations are based on historical experience and other factors, including management’s and the Directors’ expectations of future events that are believed to be reasonable under the current circumstances. Other than (D) above there has been no impairment recognised for the Fiducian Group CGUs in the impairment assessment performed at 30 June 2016. Based on management’s current assessment, the recoverable amount of Fiducian’s CGU exceeds the carrying amount by $4.98 million. The Fiducian Group’s CGU recoverable amount is sensitive to reasonably possible movements in key assumptions including changes to the earnings multiple of 3.1 used to determine the fair value of the CGU. Management has modeled below the impact of changes in these key assumptions with the following result:- • • if earning multiple were to decrease to 2.7, the CGU’s recoverable amount would exceed carrying amount by $3.45 million. if earning multiple were to decrease to 2.9, the CGU’s recoverable amount would exceed carrying amount by $4.47 million. (F) BUSINESS COMBINATION During the year the Group made the following acquisitions:- SEGMENT FIDUCIAN ENTITY Date Purchased Vendor staff employed by Group FINANCIAL PLANNING FIDUCIAN FINANCIAL SERVICES PTY LTD TOTAL 1/07/2015 1/08/2015 21/10/2015 11/03/2016 Various Client portfolio Yes Client portfolio Yes Client portfolio Yes Client portfolio Yes Client portfolio Yes Maximum purchase price $1,225,458 $2,566,200 $1,432,173 $965,838 $553,561 $6,743,230 Paid by 30 June 2016 $735,274 $2,334,020 $1,295,776 $289,752 $516,070 $5,170,892 Deferred consideration at 30 June 2016 $490,184 $232,180 $136,397 $676,086 $37,491 $1,572,338 Value attributed on the Statement of Financial Position as at 30 June 2016 Business combination or asset only Provisional fair value of assets recognized as a result of acquisition are as follows:- 100% 100% 100% 100% 100% Business Combination Business Combination Business Combination Business Combination Business Combination Intangible assets Deferred tax liabilities $1,225,458 $2,566,200 $1,432,173 $965,838 $553,561 $6,743,230 ($367,637) ($769,860) ($429,652) ($289,751) ($140,068) ($1,996,969) Net Identifiable assets acquired $857,821 $1,796,340 $1,002,521 $676,087 $413,493 $4,746,261 Goodwill Net assets acquired $367,637 $769,860 $429,652 $289,751 $140,068 $1,996,969 $1,225,458 $2,566,200 $1,432,173 $965,838 $553,561 $6,743,230 P A G E 5 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (CONTINUED) (F) BUSINESS COMBINATION (CONTINUED) The acquired businesses did not contribute significantly to the group’s current year profits. However if the acquisitions had taken place on 1 July 2015, management estimates a maximum revenue impact of $2.2 million for the year ended 30 June 2016. It is not practicable to estimate the profit contribution given the significant change in the cost bases to the operation of the business once within the Fiducian Group. Under the terms of the agreement for the acquisitions the deferred consideration may be reduced in respect of any clients that have not transferred to the Group within the period specified in the agreements or should the recurring income be lower than contracted for. 17. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES Trade payables Other payables* Client portfolio deferred settlement Annual leave entitlements accrued Long service leave entitlements accrued CONSOLIDATED 2016 $’000 2,015 1,751 1,572 600 686 6,624 2015 $’000 1,694 2,505 308 566 574 5,647 Information about the Group’s exposure to credit and interest rate risk is shown in Note 33. * Other payables include retirement benefits payable to planners covered under salary agreements with Fiducian Financial Services Pty Limited. Under the terms of the agreement with certain long serving salaried financial planners, those planners are entitled to a service fee subsequent to their retirement from the Company, under conditions designed to protect the Company’s client base. Eligibility to this service fee is based on service period and payment is subject to further ongoing conditions, including client retention, provision of support services to the entity to achieve this aim. The benefit is personal to the planner, is not transferable, can be stopped by or repaid to Fiducian Financial Services Pty Ltd should there be a breach of conditions, and will be reduced if the planner purchases some or all of their client base at or after retirement. This arrangement has been accounted for in accordance with AASB 119 Employee Benefits. 18. CURRENT LIABILITIES - CURRENT TAX LIABILITIES CONSOLIDATED 2016 $’000 835 835 2015 $’000 1,462 1,462 Income tax P A G E 5 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 19. NON-CURRENT LIABILITIES-DEFERRED TAX LIABILITIES CONSOLIDATED The balance comprises temporary differences attributable to: Amounts recognised in profit and loss: Depreciation and amortisation Deferred tax liabilities before set off Set off against deferred tax assets (Note 15) Net deferred tax liabilities Movements: Opening balance at 1 July Addition during the year Taken to the statement of comprehensive income Deferred tax liabilities at 30 June before set off Set off against deferred tax assets Net deferred tax liabilities Expiration of net deferred tax liabilities within 12 months after 12 months 20. NON - CURRENT LIABILITIES-PROVISIONS Employee benefits: long service leave 2016 $’000 2,738 2,738 (973) 1,766 1,091 2,009 (362) 2,738 (973) 1,766 366 1,400 1,766 CONSOLIDATED 2016 $’000 338 338 2015 $’000 1,091 1,091 (968) 123 1,313 - (222) 1,091 (968) 123 123 - 123 2015 $’000 347 347 The provision for long service leave includes all pro-rata entitlements where employees have not yet completed the required period of service and also those where employees are entitled to pro-rata payments. 21. CONTRIBUTED EQUITY (A) SHARE CAPITAL Ordinary shares - fully paid CONSOLIDATED 2016 $’000 6,855 6,855 2015 $’000 6,366 6,366 P A G E 5 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 21. CONTRIBUTED EQUITY (CONTINUED) (B) MOVEMENTS IN ORDINARY SHARE CAPITAL DATE DETAILS NUMBER OF SHARES AVERAGE PRICE $’000 1 July 2014 Opening balance 30,757,897 - 6,236 Shares bought back on-market and cancelled Shares issued on exercise of options Shares issued 30 June 2015 Balance Shares issued for the acquisition of business Shares issued for the acquisition of business 30 June 2016 Balance (14,500) 140,000 1 30,883,398 133,552 93,905 31,110,855 $1.82 $1.12 $1.00 $1.83 $2.61 (26) 156 - 6,366 244 245 6,855 (C) ORDINARY SHARES AND TREASURY 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. 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. (D) SHARE BUY-BACK The Company did not buy and cancel any ordinary shares on-market during the year. At 30 June 2016, 500,000 shares remained available to be re-purchased under the most recently announced buy-back notice to the ASX. (E) OPTIONS Information relating to Fiducian Group Employee & Director and options issued, exercised and lapsed during the year is set out in Note 25. (F) CAPITAL RISK MANAGEMENT The Group’s objectives when managing capital of the wholly owned subsidiaries within the Group are to safeguard its ability to continue as a going concern, to individually continue to meet externally imposed capital requirements of APRA and ASIC under its Registrable Superannuation Entity (RSE) License, Responsible Entity (RE) licence and their Australian Financial Services (AFS) License, and to continue to provide returns to shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders via an on-market share buy back, or issue new shares upon exercise of outstanding options. There has been no borrowing to maintain capital adequacy. The externally imposed requirements are: a. Under its ASIC RE licence, the RE, Fiducian Investment Management Services Limited, must maintain $ 5,000,000 net tangible assets at all times during the financial year. b. Under its ASIC licence, Fiducian Portfolio Services Limited must maintain $150,000 cash at all times during the financial year. The requirement under the RSE licence and RE licences are maintained by placing cash on deposit with an ADI. The requirement under the AFS license is monitored monthly when management accounts are prepared, and is reported to the Board monthly at each meeting. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 5 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 22. RESERVES Movements Share-based payments reserve Balance 1 July Option expense Option lapses Balance at 30 June S T N E M E T A T S I L A C N A N I F E H T O T S E T O N CONSOLIDATED 2016 $’000 2015 $’000 42 25 - 67 26 16 - 42 The share-based payments reserve is used to recognise the fair value of options issued but not exercised. 23. RETAINED PROFITS Movements Balance 1 July Net profit for the year Dividends paid (Note 8) Balance at 30 June 24. KEY MANAGEMENT PERSONNEL DISCLOSURES (A) KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Share-based payment CONSOLIDATED 2016 $’000 14,783 5,839 (3,417) 17,205 2015 $’000 13,089 4,622 (2,928) 14,783 CONSOLIDATED 2016 $’000 776,078 32,196 25,071 2015 $’000 744,457 34,567 - 833,345 779,024 Detailed remuneration disclosures are provided in sections A-E of the Remuneration Report contained in the Directors’ Report. (B) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL (i) Options provided as remuneration and shares issued on exercise of such options, together with terms and conditions of the options, can be found in section D of the Remuneration Report. (ii) Option holdings The numbers of options over ordinary shares in the Company held during the financial year by each director of Fiducian Group Limited, including their personally related and associated entities, are set out on the next page. P A G E 5 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 0 24. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (B) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL (CONTINUED) NAME BALANCE AT THE START OF THE YEAR EXERCISED 2016 GRANTED DURING THE YEAR AS RE- MUNERATION LAPSED DURING THE YEAR BALANCE AT THE END OF THE YEAR VESTED AND EXERCISABLE I Singh1 100,000 - - - 100,000 100,000 1 Mr I Singh is entitled to 100,000 options relating to the current year. These are subject to approval at the annual general meeting, therefore they have not been included in the table. NAME BALANCE AT THE START OF THE YEAR EXERCISED 2015 GRANTED DURING THE YEAR AS RE- MUNERATION1 LAPSED DURING THE YEAR BALANCE AT THE END OF THE YEAR VESTED AND EXERCISABLE I Singh 140,000 140,000 100,000 - 100,000 - 1 Options granted during this year are in respect of Mr Singh’s entitlement relating to the year ending 30 June 2014. (iii) Shareholdings The numbers of shares in the Company held during the financial year by each director of Fiducian Group Limited, includ- ing their personally related and associated entities, are set out below. There were no shares granted during the period as compensation. NAME BALANCE AT THE START OF THE YEAR 2016 RECEIVED DURING THE YEAR ON THE EXERCISE OF OP- TIONS OTHER CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR I Singh R Bucknell F Khouri C Stone 10,373,764 800,000 251,373 33,700 - - - - 50,087 10,423,851 - - - 800,000 251,373 33,700 NAME BALANCE AT THE START OF THE YEAR 2015 RECEIVED DURING THE YEAR ON THE EXERCISE OF OP- TIONS OTHER CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR I Singh R Bucknell F Khouri C Stone 10,162,512 140,000 71,252 10,373,764 800,000 251,373 23,700 - - - - - 10,000 800,000 251,373 33,700 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 24. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (B) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL (CONTINUED) Shares provided on exercise of options No ordinary shares in the company were provided as a result of the exercise of remuneration options to the Managing Director of Fiducian Group Limited, as key management person of the Group, during the period (2015:140,000). No amounts are unpaid on any shares issued on the exercise of options. (C) LOANS TO DIRECTORS No loans were made to directors during the financial year (2015: Nil). (D) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL A director, Mr R Bucknell, is a director of Hunter Place Services Pty Ltd, a company which provides his services as a director to the Group. A director, Mr F Khouri, is an authorised representative under the Fiducian Financial Services Pty Ltd Australian Financial Services Licence and is a director and shareholder of Hawkesbury Financial Services Pty Ltd, which is a franchisee of Fiducian Financial Services Pty Ltd. Hawkesbury Financial Services Pty Ltd places business with and receives financial planning remuneration from the Group. All transactions are on normal commercial terms and conditions. A director, Mr C Stone, was paid director’s fees for his personal contribution to the Board. Aggregate amounts of each of the above types of other transactions with directors of Fiducian Group Limited:- Directors’ fees and committee fees Financial planning fees paid or payable CONSOLIDATED 2016 2015 $ 256,550 210,088 466,638 $ 295,353 211,179 506,532 Shares under option Unissued ordinary shares of Fiducian Group Limited under option at the date of this report are disclosed in Note 25 of the financial statements. No option holder has any right under the options to participate in any other share issue of the company or any other entity until after the exercise of the option. Shares issued on the exercise of options The details of ordinary shares of Fiducian Group Limited issued during the year ended 30 June 2016 on the exercise of options granted under The Fiducian Group Limited Employee & Director Share Option Plan is disclosed under Note 25 to the financial statements. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 24. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (E) LOANS TO KEY MANAGEMENT PERSONNEL BALANCE AT 1 JULY 2015 INTEREST PAID/PAYABLE FOR THE YEAR BALANCE AT 30 JUNE 2016 NUMBER OF KMP IN THIS AGGREGATION $ $ $ Aggregate details of business development and staff loans made to key management personnel of the Group, including their close family members and entities related to them. 77,927 3,737 79,023 2 Business development and staff loans have been made at arm’s length and at the same terms and conditions provided to other franchisees and staff. 25. SHARE BASED PAYMENTS (A) EMPLOYEE AND DIRECTOR SHARE OPTION PLAN (ESOP) The establishment of the Fiducian Group Limited ESOP was approved by shareholders at the 2000 annual general meeting. The ESOP is designed to provide long-term incentives for senior managers and directors to deliver long-term shareholder returns. Under the plan, participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or receive any guaranteed benefits. Fiducian Group Limited (‘FGL’) has established the ESOP, which is designed to provide incentives to employees and directors. All grants of options under the ESOP are subject to compliance with the Corporations Act 2001 and ASX Listing Rules. The directors may, from time to time, determine which employees and directors may participate in the ESOP, and the number of options that may be issued to them. The directors have an absolute discretion to determine who will participate and the number of options that may be issued. The ESOP provides for an upper limit on the number of options that may be outstanding, the exercise price, exercise period and expiry, and adjustments in the event of capital restructuring. The directors have resolved that the ESOP no longer applies to non-executive directors. Options are granted under the plan for no consideration. Employee options are granted for a five-year period where 35% vest after one year, a further 45% vest after two years and the balance vest after three years. Director options vest after one year. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is converted into one ordinary share on payment of the exercise price. The exercise price of options is based on the volume weighted average price at which the Company’s shares are traded on the Australian Securities Exchange during the month preceding the date the options are granted. During the year the directors have not issued options (2015: Nil) to the Managing Director and no options expired during the same period (2015: Nil). Subject to prior approval by shareholders, the Company may issue each year a maximum of 100,000 options to the executive director for each year of service, subject to performance criteria being met in accordance with his executive agreement. The Directors have resolved to issue 100,000 options (2015 : Nil) at an exercise price of $2.18 to the executive director in respect of the year ended 30 June 2016. The assessed fair value at reporting date of the share based payments during the year ended 30 June 2016 was $ 0.58 per option (2015: Nil options granted). The fair value at reporting date has been independently calculated using the Black Scholes pricing model. The assumptions included in the valuation of these options include a risk-free interest rate of 1.75%, a nil dividend yield on the ordinary shares of the Company and a volatility in the Company’s share price of 56%. Set out on the next page are summaries of options granted under the option plan:- S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 2 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 25. SHARE BASED PAYMENTS (CONTINUED) (A) EMPLOYEE AND DIRECTOR SHARE OPTION PLAN (ESOP) (CONTINUED) GRANT DATE EXPIRY DATE EXERCISE PRICE Consolidated 2016 ESOP-Managing Director 23-Oct-14 23-Oct-19 $1.63 Weighted average exercise price BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR EXERCISED DURING THE YEAR LAPSED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED & EXERCIS- ABLE AT THE END OF YEAR NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER 100,000 100,000 $1.63 - - - - - - - - - 100,000 100,000 $1.63 100,000 100,000 The volume weighted average remaining contractual life of share options outstanding at the end of the period was 3.32 years (2015 : 4.32 Years) GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR EXERCISED DURING THE YEAR LAPSED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED & EXERCIS- ABLE AT THE END OF YEAR NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER Consolidated 2015 ESOP-Managing Director 27-Oct-10 23-Oct-13 23-Oct-14 29-Oct-15 23-Oct-18 23-Oct-19 $1.28 $1.05 $1.63 40,000 100,000 - - (40,000) (100,000) - 100,000 - 140,000 100,000 (140,000) Weighted average exercise price $1.12 $1.63 $1.12 - - - - - - - 100,000 100,000 $1.63 - - - - - (B) EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS The total expense arising from share-based payment transactions recognised during the period as part of the Employee and Director share option plan was $25,071 (2015: $15,320) P A G E 6 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 26. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its relat- ed practices and nonrelated audit firms:- Audit services PricewaterhouseCoopers Australian firm: Audit and review of financial reports Other audit related work, including audit of entities for which a group entity is trustee, manager or responsible entity (gross of any amounts reimbursed ) Total remuneration CONSOLIDATED 2016 2015 $ $ 124,218 120,600 415,379 539,597 374,760 495,360 It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to its statutory audit duties where PricewaterhouseCoopers’ expertise and experience with the Group are important. 27. CONTINGENT LIABILITIES The parent entity and Group had contingent liabilities at 30 June 2016 in respect of bank guarantees for property leases of parent and group entities amounting to $444,000 (2015: $438,000). 28. COMMITMENTS FOR EXPENDITURE (A) CAPITAL EXPENDITURE Commitment payable within one year (B) OPERATING LEASES CONSOLIDATED 2016 $’000 - 2015 $’000 - The Group leases various offices under non-cancellable operating leases expiring within 12 months to four years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of leases are renegotiated. CONSOLIDATED 2016 $’000 1,052 2,633 3,685 2015 $’000 1,026 3,642 4,668 Within one year Later than one year but not later than 5 years 29. RELATED-PARTY TRANSACTIONS (A) PARENT ENTITY The parent entity within the Group is Fiducian Group Limited. P A G E 6 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 29. RELATED-PARTY TRANSACTIONS (CONTINUED) (B) SUBSIDIARIES Interests in subsidiaries are set out in Note 12. The consolidated financial report incorporate the assets, liabilities and results of the subsidiaries set out in Note 12 in accordance with the accounting policy described in Note 1(b). (C) KEY MANAGEMENT PERSONNEL Disclosures relating to key management personnel are set out in Note 24. (D) TRANSACTIONS WITH RELATED PARTIES (i) Transactions between the Group and other related entities a. Operator fee income received from related trusts b. Trustee fee income received from related trusts c. Recovery of group costs from related trusts d. Collection of fees by Responsible entities from the related funds. The above transactions were on normal commercial terms and conditions and at market rates. All transactions between Group entities are eliminated on consolidation. (ii) Transactions with related parties of directors a. Financial planning fees paid by Fiducian Financial Services Pty Limited to entities associated with the directors b. Financial planning fees paid by Fiducian Financial Services Pty Limited to entities associated with relatives of the directors The above transactions were on normal commercial terms and conditions and at market rates. The transactions occurred with related parties is mentioned on the following page:- S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 29. RELATED-PARTY TRANSACTIONS (CONTINUED) (D) TRANSACTIONS WITH RELATED PARTIES (CONTINUED CONSOLIDATED OWNERSHIP INTEREST1 2016 2015 $ $ Nil Nil Nil Related trusts Fiducian Investment Service Operator fees income Expense recovery Fiducian Superannuation Service Trustee fees income Expense recovery Fiducian Funds Responsible Entity fees income Expense recovery Entities associated with directors or their relatives Hawkesbury Financial Services Pty Ltd2 Financial planning fees paid Fiducian Financial Services Bondi Junction Pty Ltd3 Financial planning fees paid 3,819,931 3,779,488 357,247 376,566 14,744,496 1,211,754 9,121,465 3,348,012 9,473,136 5,872,640 258,589 248,645 210,088 211,179 37,492 38,961 1 “Ownership Interest” means the percentage of capital of the Company held directly and/or indirectly through another entity by Fiducian Group Limited. 2 Payments to Franchisee associated with director, F Khouri in the normal course of business in arm’s length transactions. 3 Payments to Franchisee associated with a relative of R Bucknell, in the normal course of business in arm’s length transactions. (E) OUTSTANDING BALANCES ARISING FROM SALES / PURCHASES OF SERVICES PROVIDED The following balances are outstanding at the reporting date in relation to transactions with related parties: Current receivables (income from related trusts) CONSOLIDATED 2016 2015 $ $ 2,640,643 2,389,381 2,640,643 2,389,381 No provisions for doubtful receivables have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad and doubtful receivables due from related parties. S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 30. RECONCILIATION OF PROFIT OR LOSS AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES Profit for the year Non-cash employee (expense)/ benefit Depreciation,amortisation and impairment Net (gain) loss on sale of non-current assets Changes in operating assets and liabilities: Change in accounts receivable Change in income tax payable Change in trade creditors Change in other creditors Change in deferred income tax liability Net cash inflow from operating activities 31. EARNINGS PER SHARE CONSOLIDATED 2016 $’000 5,839 292 1,297 - (473) (622) 282 (737) (335) 5,543 2015 $’000 4,622 (89) 910 79 (551) 289 713 908 (374) 6,507 CONSOLIDATED 2016 2015 Earnings per share using weighted average number of ordinary shares outstanding during the period:- (A) BASIC EARNING PER SHARE (IN CENTS) Profit from continuing operations attributable to the ordinary equity of the company 18.81 14.99 (B) DILUTED EARNING PER SHARE (IN CENTS) Profit from continuing operations attributable to the ordinary equity and potential ordinary equity of the company 18.77 14.93 C) WEIGHTED AVERAGE NUMBER OF SHARES USED AS DENOMINATOR CONSOLIDATED 2016 2015 NUMBER NUMBER Weighted average number of ordinary shares used as denominator in calculating basic earnings per share 31,036,045 30,835,861 Adjustments for calculation of diluted earnings per share options 73,223 119,782 Weighted average number of ordinary shares and potential ordinary shares used as denominator in calculating diluted earnings per share 31,109,268 30,955,643 S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 6 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 31. EARNINGS PER SHARE (CONTINUED) (D) RECONCILIATION OF EARNINGS USED IN CALCULATING BASIC AND DILUTED EARNINGS PER SHARE Net profit and earnings used calculating basic and diluted earnings per Share (E) INFORMATION CONCERNING THE CLASSIFICATION OF SECURITIES CONSOLIDATED 2016 $’000 5,839 2015 $’000 4,622 Options granted to employees under the Fiducian Group Limited Employee Share Option Plan (ESOP) are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent that they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in Note 25. 32. EVENTS OCCURRING AFTER BALANCE DATE / REPORTING DATE Subsequent to the end of the financial year the Group has issued 53,513 fully paid ordinary shares at $2.29 on 1 July 2016 towards payment of an installment under the terms of the contract of acquisition of a financial planning practice. To the date of this report, the Group has not bought back any shares. Other than the issue of shares and the appointment of a new director mentioned in the Director’s report, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely in the opinion of the directors of the Group, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent years. 33. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group holds the following financial instruments :- Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables (A) MARKET RISK (i) Foreign exchange risk CONSOLIDATED 2016 $’000 9,691 7,429 17,120 2015 $’000 12,374 7,238 19,612 5,938 5,073 The Group has limited operations outside Australia and is not exposed to any material foreign exchange risk. (ii) Interest rate risk The Group’s main interest rate risk arises from deposits in Australian dollars, and short-term loans to staff and planners. The Group has no borrowings. P A G E 6 8 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 33. FINANCIAL RISK MANAGEMENT (CONTINUED) (A) MARKET RISK (CONTINUED) 30 JUNE 2016 30 JUNE 2015 WEIGHTED AVERAGE INTEREST RATE WEIGHTED AVERAGE INTEREST RATE BALANCE % 1.74% 4.30% $’000 9,691 3,744 13,435 % 1.70% 5.10% BALANCE $’000 12,374 4,016 16,390 Cash at bank and on deposit Staff & financial planner loans Bank deposits are at call and staff and planner loans have terms extending between 1 and 7 years, and may be repayable sooner in certain circumstances. Interest rates on loans are reviewed and adjusted at least quarterly. The Group’s main interest rate risk arises from cash and cash equivalents with variable interest rates. At 30 June 2016 if interest rates change by +/- 100 basis points (2015: +/- 100 basis points) from the year end rates with all other variables held constant, post-tax profit would have been $94,000 higher or lower (2015: $ 115,000). (B) CREDIT RISK Credit risk for the group is the potential of loss arising from the failure of a debtor or counterparty to meet their contractual obligations. The Group has negligible credit risk from receivables as management fees and financial planning income is received within one month of it falling due and financial planning fees are only paid following the receipt of this income. The group also provides loans to the financial planners which gives rise to credit risk. This is governed in accordance with the Credit Risk Framework and Policy. For all financial planners and staff loans, an initial assessment and ongoing quarterly credit reviews are performed. Collateral against the loans is also assessed as part of the quarterly credit review. This collateral can be called upon if the counterparty is in default under the terms of the agreements. The credit quality of these financial assets have been assessed against external credit ratings as follows:- Cash at bank and on deposit AA- Loans to staff and financial planners Unrated CONSOLIDATED 2016 $’000 2015 $’000 9,691 12,374 3,744 4,016 The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarized on this page. (C) LIQUIDITY RISK The Group maintains sufficient liquid reserves to meet all foreseeable working capital, investment and regulatory licensing requirements. The Group has no undrawn credit or other borrowing facilities in place. Due in less than 1 year Due between 1 and 2 years CONSOLIDATED 2016 $’000 5,938 - 5,938 2015 $’000 5,073 - 5,073 P A G E 6 9 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 7 0 33. FINANCIAL RISK MANAGEMENT (CONTINUED) (D) FAIR VALUE ESTIMATION The fair value of financial assets and financial liabilities must be estimated for recognition and measurements or for disclosure purposes. (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) (b) 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) (level 2), and (c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3) The Group did not have any assets or liabilities recognised at fair value as at 30 June 2016. (E) ASSETS AND LIABILITIES NOT CARRIED AT FAIR VALUE BUT FOR WHICH FAIR VALUE IS DISCLOSED The following table analyses within the fair value hierarchy the Group’s assets and liabilities not measured at fair value at 30 June 2016 but for which fair value is disclosed:- AT 30 JUNE 2016 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL $’000 $’000 $’000 $’000 Assets Cash and cash equivalents Trade and other receivables (excluding loans) Business development and staff loans Total assets Liabilities Trade and other payables Total Liabilities 9,691 - - 9,691 5,938 5,938 - - - - - - - 3,685 3,744 7,429 - - 9,691 3,685 3,744 17,120 5,938 5,938 AT 30 JUNE 2015 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL $’000 $’000 $’000 $’000 Assets Cash and cash equivalents Trade and other receivables (excluding loans) Business development and staff loans Total assets Liabilities Trade and other payables Total Liabilities 12,374 - - 12,374 5,073 5,073 - - - - - - - 3,222 4,016 7,238 - - 12,374 3,222 4,016 19,612 5,073 5,073 Assets and liabilities included in this table are carried at amortised cost; their carrying value is a reasonable approximation of fair value. Cash and cash equivalents include cash in hand, deposits held with bank and other short-term investments in an active market. Trade receivables include the contractual amount for settlement of the trade debts due to the Group. The carrying amount of the trade receivables is assumed to approximate their fair values due to their short-term nature. Trade and other payables include amounts due to creditors and accruals and represent the contractual amounts and obligations due by the Company for expenses. The carrying amount of the trade and other payables are assumed to approximate the fair value due to their short-term nature. ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 33. FINANCIAL RISK MANAGEMENT (CONTINUED) (E) ASSETS AND LIABILITIES NOT CARRIED AT FAIR VALUE BUT FOR WHICH FAIR VALUE IS DISCLOSED (CONTINUED) Business development and staff loans represent contractual payments by advisers and staff over the period of the loan. Loans classified as current have not been discounted as the carrying values are a reasonable approximation of fair value due to the short-term nature. Non-current loans have been valued at the present value of estimated future cash flows discounted at the original effective interest rates of the loans 34. UNCONSOLIDATED STRUCTURED ENTITIES A structured entity is an entity that has been designed so that the voting or similar rights are not the dominant factor in deciding who controls the entity and the relevant activities are directed by means of contractual arrangements. A subsidiary of the Group, FIM, acts as Responsible entity (“RE”) for the Fiducian Funds and has significant influence over the funds due to its power to participate in financial and operating policies of the investee through the powers vested in it by the various contractual agreements. The Group considers all these funds to be structured entities. The RE receives management fees and netting fees from the funds. The Group does not invest in any of the funds it manages nor has any other form of involvement such as the provision of funding, liquidity support or providing guarantees. Despite this, the Group has determined that it has an interest in the funds based on the variability of returns from management fees it receives linked to the net asset valuation of the respective funds. The funds’ objectives range from achieving medium to long- term capital growth and their investment strategy does not include the use of leverage. The funds finance their operations by issuing redeemable units which are puttable at the holder’s option and entitle the holder to a proportional stake in the respective fund’s net assets. The nature and extent of the Group’s interest in the funds has been aggregated and is summarised below:- 2016 TYPE OF FUND ACCRUED INCOME* FINANCIAL ASSETS** MAXIMUM EXPOSURE TO LOSS FUND NET ASSET VALUE FUND’S INVESTMENT PORTFOLIO $’000 $’000 $’000 Australian Equity Funds Global Equity Funds Property Fund Diversified Funds Technology Fund Fixed Interest Fund 349 243 76 144 45 1 - - - - - - 349 243 76 144 45 1 $’000 426,920 306,653 101,035 639,584 40,688 95,839 $’000 420,400 304,316 100,318 632,918 40,115 95,774 * Shown as other receivables in Current Assets under trade and other receivables subheading in the statement of Financial Position ** Shown as Non-current assets - other financial assets at fair value through profit and loss (refer to note 13 for details) S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 7 1 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 34. UNCONSOLIDATED STRUCTURED ENTITIES (CONTINUED) 2015 TYPE OF FUND ACCRUED INCOME* FINANCIAL ASSETS** MAXIMUM EXPOSURE TO LOSS FUND NET ASSET VALUE FUND’S INVESTMENT PORTFOLIO $’000 $’000 $’000 Australian Equity Funds Global Equity Funds Property Fund Diversified Funds Technology Fund Fixed Interest Fund 275 331 54 106 66 4 - - - - - - 275 331 54 106 66 4 $’000 365,469 270,644 74,845 539,848 30,691 88,665 $’000 363,886 272,212 75,459 539,234 30,639 88,412 * Shown as other receivables in Current Assets under trade and other receivables subheading in the statement of Financial Position ** Shown as Non-current assets - other financial assets at fair value through profit and loss (refer to note 13 for details) Unless specified otherwise, the Group’s maximum exposure to loss is the total of its on-balance sheet position as at the reporting date. There are no additional off balance sheet arrangements which would expose the Group to potential loss. During the year the Group earned management fees and netting fees from the structured entities. A subsidiary of the Group, FPS, acts as the trustee of the Fiducian Superannuation Service under the provisions of the Trust deed for the fund. Due to its fiduciary and statutory obligations to manage the assets of the trust on behalf of the beneficiaries, FPS exercises significant influence over the superannuation fund and therefore the superannuation fund is considered a structured entity as defined above. For its service the subsidiary receives a management fee for managing the investment from the members of the fund. In addition to this the subsidiary is entitled to reimbursement of expenses incurred by it in the operation of the service (for details refer to Note 6). The nature and extent of the subsidiary’s interest in the fund is summarised below:- 2016 TYPE OF FUND ACCRUED INCOME* FINANCIAL ASSETS** MAXIMUM EXPOSURE TO LOSS FUND NET ASSET VALUE FUND’S INVESTMENT PORTFOLIO Fiducian Superannuation Service $’000 1,379 $’000 - $’000 1,379 $’000 $’000 986,032 975,300 2015 TYPE OF FUND ACCRUED INCOME* FINANCIAL ASSETS** MAXIMUM EXPOSURE TO LOSS FUND NET ASSET VALUE FUND’S INVESTMENT PORTFOLIO Fiducian Superannuation Service $’000 1,248 $’000 - $’000 1,248 $’000 $’000 889,522 882,539 S T N E M E T A T S I L A C N A N I F E H T O T S E T O N P A G E 7 2 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED 35. PARENT ENTITY FINANCIAL INFORMATION The stand-alone summarised financial statements of the Company is as follows:- (a) Balance sheet Current Assets Non Current Assets Total Assets Current Liabilities Non Current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained Earnings Equity (b) Profit for the period Dividend from subsidiary and other income (c) Total comprehensive income (d) Contingent liability of the parent entity The Company did not have any contingent liabilities as at 30 June 2016 S T N E M E T A T S I L A C N A N I F E H T O T S E T O N 2016 $’000 11,516 10,323 21,839 (365) - (365) 22,204 6,855 67 15,282 22,204 2015 $’000 7,459 10,419 17,878 2,470 - 2,470 15,408 6,366 42 9,000 15,408 9,676 9,000 - - (e) Contractual commitment for the acquisition of property, plant or equipment. As at 30 June 2016 the Company did not have any contractual commitments for the acquisition of property, plant or equipment. 36. DEED OF CROSS- GUARANTEE The Company has in place a deed of cross-guarantee, substantially in the form of ASIC Pro Forma 24 with each wholly owned member of the Fiducian Group. The effect of the deed of cross-guarantee is that each member that has entered into the deed, guarantees to each creditor of any member of the Fiducian Group that has entered into the deed payment in full of any debt owed to that creditor in the event of winding up of that relevant member of the Fiducian Group. P A G E 7 3 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N DIRECTORS’ DECLARATION In the directors’ opinion: (a) the financial statements and notes set out on pages 32 to 73 are in accordance with the Corporations Act 2001, including (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements and (ii) giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2016 and of their performance for the financial year ended on that date and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (c) at the date of this declaration, there are reasonable grounds to believe that the members of the wholly owned group identified in note 12 will be able to meet any obligations or liabilities to which they are, or may become subject by virtue of the deed of cross guarantee described in Note 36. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Inderjit (Indy) Singh Managing Director Sydney, 15 August 2016 P A G E 7 4 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FIDUCIAN GROUP LIMITED S T N E M E T A T S I L A C N A N I F E H T O T S E T O N Independent auditor’s report to the members of Fiducian Group Limited Report on the financial report We have audited the accompanying financial report of Fiducian Group Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Fiducian Group Limited group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at year’s end or from time to time during the financial year. Directors' responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the consolidated entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. P A G E 7 5 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FIDUCIAN GROUP LIMITED Auditor’s opinion In our opinion: (a) the financial report of Fiducian Group Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the remuneration report included in pages 20 to 25 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion, the remuneration report of Fiducian Group Limited for the year ended 30 June 2016 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Craig Stafford Partner Sydney 15 August 2016 P A G E 7 6 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDSouth Australia Office Locations Adelaide City Central P A G E 7 7 ANNUAL REPORT 2016 | FIDUCIAN GROUP LIMITEDFIDUCIAN GROUP LIMITED Level 4, 1 York Street, Sydney NSW 2000 Australia GPO Box 4175, Sydney NSW 2001 Australia Telephone: +61 (2) 8298 4600 Fax: + 61 (2) 8298 4611 www.fiducian.com.au A N N U A L R E P O R T 2 0 1 6 | F I D U C I A N G R O U P L I M I T E D P A G E 1 

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