Fiducian Group
Annual Report 2019

Plain-text annual report

Annual Report 2019 Fiducian Group Ltd ABN 41 602 423 610 Contents Financial Highlights Five Year Financial Summary Executive Chairman’s Report Directors’ Report Auditor’s Independence Declaration 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 Shareholder Information Corporate Directory Financial Planner Office Locations 2 4 6 12 24 25 26 27 28 29 30 69 70 76 78 79 S T N E T N O C 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610S T H G I L H G I H L A I C N A N I F 2 Financial Highlights For 2019 Fund Performance FUA Acquisitions 1/167 Growth Ultra Growth 3/105 3/167 Balanced 4/105 Flagship funds performance ranking for five years to 30 June 2019 against all funds in the Morningstar survey Cap Stable $219 million FUA* acquired in 2018-19 UNPAT FUMAA Dividends UNPAT up 15% to $12.0m FUMAA* up $0.7 billion (by 10%) to $7.4b Dividends up 11.5% to 22.30 cents / share Financial Planners Offices Diversity 67 Aligned Planners & Associates 41 Offices across Australia 125 Staff around Australia from over 23 different countries of origin * (FUMAA) – Funds Under Management, Advice and Administration | (FUA) – Funds Under Advice 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Financial Highlights (Continued) For 2019 Revenue ($ million) Underlying NPAT ($ million) Statutory NPAT ($ million) . 8 0 4 5 . 5 3 . 3 6 2 . 4 9 4 . 9 5 4 . 0 2 1 . 5 0 1 7 . 8 0 7 . . 7 5 8 . 5 . 6 4 . 4 0 1 2 9 . 5 7 . 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Dividends (cents) Share Price - 30 June Closing ($) EPS based on UNPAT (cents) 3 . 2 2 . 0 0 2 6 1 . 5 6 6 4 . 9 0 4 . 1 3 . 2 0 7 . 1 . 0 6 1 5 . 2 1 . 0 0 1 3 . 8 3 . 6 3 3 . 8 7 2 . 6 2 2 . 6 8 1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 S T H G I L H G I H L A I C N A N I F 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Five Year Financial Summary For the years 2015 to 2019 Financial History Financial Performance Gross Revenue Underlying Net Profit After Tax (UNPAT) Statutory Net Profit After Tax (NPAT) Cost To Income Ratio (CTI) - ex amortisation % Financial Position Total Assets Total Equity Cash Shareholder Information 2019 $’000 49,404 12,047 10,350 56% 45,899 34,826 11,792 2018 $’000 45,873 10,505 9,198 56% 40,561 31,131 13,885 2017 $’000 2016 $’000 2015 $’000 40,752 35,451 26,253 8,710 7,512 60% 36,277 27,620 9,548 7,036 5,839 63% 33,690 24,127 9,691 5,748 4,622 62% 28,770 21,191 12,374 Number of shares outstanding (numbers) 31,442,623 31,242,623 31,264,368 31,110,855 30,883,398 Market Capitalisation (in $ million) EPS based on UNPAT (in cents) EPS based on NPAT (in cents) Dividends (in cents) Share Price - 30 June closing (in $) 162 38.3 33.0 22.3 5.16 146 33.6 29.4 20.0 4.66 128 27.8 24.0 16.0 4.09 72 22.6 18.8 12.5 2.31 53 18.6 15.0 10.0 1.70 20% Annualised UNPAT Growth 20% Annualised EPS Growth 6% Cost to Income % Reduction over the Five Year Period Y R A M M U S L A I C N A N I F 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Y R A M M U S L A I C N A N I F 5 Fiducian’s Executive Chairman, Indy Singh addressing the audience after winning the Lifetime Achievement Award at Money Management’s 2019 Fund Manager of the Year Awards ceremony. Highlights Funds Under Management Advice and Administration up by $0.7 billion (10%) Underlying Net Profit After Tax up by $1.5 million (15%) Basic underlying earnings per share up by 14% Established position as a comprehensive financial services provider of Platform Administration, Funds Management, and Financial Planning Potential for entry into the markets of SMA administration and Financial Planning Software sales to external dealer groups as an IT systems developer 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Executive Chairman’s Report Dear Shareholder, As Executive Chairman and on behalf of the directors, I am pleased to present this report on the consolidated operating performance of Fiducian Group Limited and its controlled operating entities for the year ended 30 June 2019. Financial Information Results for 2018-19 The results show a continuation of the positive momentum from previous years through application of the Board’s strategies to grow the business. This has been achieved despite the share market fall experienced late in 2018 when investors feared a high interest rate driven global recession. Fortunately, calming statements by the US Federal Reserve helped reverse the market decline. There were other events too, that made our client base defer investment decisions, such as media comments of a Trade War, the fallout from Brexit, a Royal Commission Financial highlights Year Ending 30 June Funds Under Management, Advice and Administration (FUMAA) Operating Revenue Fees and Charges paid Net Revenue Gross Margin Underlying EBITDA Depreciation Tax on underlying earnings Underlying NPAT (UNPAT) Amortisation Statutory NPAT Basic EPS based on UNPAT (in cents) Basic EPS based on NPAT (in cents) on the poor conduct of the financial services sector and the Banks and in particular, the federal election that was predicted by the polls to be a Labor Party win bringing in new taxes across the board. In addition, there were cost increases arising from the assimilation of businesses whose client bases we acquired the full revenue benefits are expected in coming years. In spite of these hurdles, the financial results have been positive, and the Underlying Net Profit after Tax, which is a reflection of the Group’s cash generating ability, rose by around 15%. The financial highlights are presented below in tabular format. The Statutory Net Profit for the consolidated entity after providing for income tax was $10.35 million (2018: $9.20 million), an increase of 13%. Underlying earnings per share of 38.3 cents is 14% higher than 2018. The combined Funds under Management, Administration and Advice (FUMAA) have steadily grown by 107% over the past 5 years to $7.40 billion as at June 2019. 2019 2018 $ Growth % Change 7.4 Billion 6.7 Billion 0.7 Billion 10% $’000 49,404 (12,721) 36,682 74% 16,065 (89) (3,929) 12,047 (1,697) 10,350 38.3 33.0 $’000 45,873 3.5 Million 8% (12,117) 33,756 2.9 Million 9% 74% 14,832 1.2 Million 8% (89) (4,239) 10,504 (1,307) 1.5 Million 15% 9,198 1.2 Million 33.6 29.4 13% 14% T R O P E R ’ S N A M R I A H C E V I T U C E X E 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 FUMAA (in $ billion) +107% 5.68 7.40 6.72 6.31 6.30 3.57 3.84 4.08 4.39 5.15 4.74 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 - Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 FUA FUM 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 conservative, but is confident that the future of the business is positive and likely to continue to strengthen through organic growth and acquisitions of client bases that can benefit from the Fiducian process. As a result, a fully franked final dividend of 11.30 cents per share has been declared which will bring the total fully franked dividend declared for the 2019 financial year to 22.30 cents (2018: 20 cents), an increase of 11.5%. The full year dividend represents 68% of the statutory NPAT for the year. The final dividend will be paid on 11 September 2019 on issued shares held on 28 August 2019. On Market Buy-Back During the year, no shares were bought back on the market (2018: 21,745 shares) leaving 31.44 million shares on issue at year end (2018: 31.24 million). At 30 June 2019, 478,255 shares remained available to be repurchased under the most recently announced buy back notice to the ASX. Cash Flow Net operating cash flows of $10.9 million were achieved (2018: $10.4 million). After adjusting for investing activities ($6.7 million) and financing activities ($6.3 million), net cash decreased by $2.1 million (2018: increase $4.3 million). Cash at year end was $11.8 million (2018: $13.9 million). Business acquisitions during the year should assist our future revenue and earning capacity. Staff and Chairman Options In accordance with the terms and conditions of the approved Employee and Director Share Option Plan, no options (2018: 35,000) will be issued to the Executive Chairman in accordance with his contract of employment. Such options are subject to approval at the Annual General Meeting and only granted when the profit or share price increases by more than 15% over the previous year. Financial Planning During the year, Funds under Advice grew from $2.41 billion in June 2018 to $2.74 billion in June 2019 due to acquisitions of financial planning businesses, net inflows and rising financial markets. Fiducian expects the highest level of compliance and client service from its financial planning network. Regulatory oversight and expectation has been raised to a higher level following the Royal Commission and we have responded by increasing further compliance monitoring and supervision of our financial planners with additional recruitment. This is an expensive proposition, but one we feel is necessary, given media reports of high profile failures at the Banks and other large financial institutions. Even though the generation of higher inflows is important, our commitment is to quality. As such, our extensive internal training program that differentiates our financial planners from the marketplace and enables them to deliver superior quality advice in a compliant manner continues. As a consequence, client retention remains high. T R O P E R ’ S N A M R I A H C E V I T U C E X E 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 T R O P E R ’ S N A M R I A H C E V I T U C E X E 8 Net Funds Inflows - Six monthly (in $ million) 115 90 65 40 15 ( 10) Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Going forward, our focus will remain on generating inflows through organic and inorganic growth. During the year, the Group acquired around $219 million of Funds under Advice (2018: $83 million) for our salaried and franchised planners. Financial planners of acquired businesses are now operating under a Fiducian licence and starting to contribute to our revenue. As acquisitions continue to assimilate into our processes, we expect that following proper training, they should deliver increased revenue and demonstrate our disciplined approach to balancing growth and returns. Subsequent to the end of the financial year, the Group entered into purchase agreements to acquire two financial planning businesses in Tasmania and Victoria. In aggregate, these acquisitions will contribute $355 million in Funds under Advice and further grow the Group’s presence in these states. While the Victorian acquisition is in its early stages, the transition of the staff and clients of the Tasmanian acquisition is progressing well and should start to contribute positively to the Group’s revenue in the following six months. 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 51.3% of Funds under Advice. Financial planners of acquired client bases are assimilating well into our existing presence in Victoria and Western Australia and should add to our future results. Franchised Offices Franchised offices now comprise around 48.7% of our Funds under Advice. We have a total of 45 franchised financial planners nationally whom we continue to assist through practice development, marketing, financial planning software and investment products and strategies. In addition, referral arrangements continue to be initiated with accountants, some of whom are showing an interest in holistic financial planning. As a consequence, we now have 4 accounting practices in our ‘Associate’ franchisee program which aims to convert them to full operating franchisees when educational and training programs are completed. Platform Administration Platform Administration offers portfolio wrap administration for superannuation and investment services to financial planners as well as Managed Discretionary Accounts (MDA) which offer investors direct access to a small number of shares that are managed for them. We believe that our capability and systems are comparable to our competitors offerings and negotiations are underway with prospects who could use our services for administration of their client share and fund portfolios, also called Separately Managed Accounts (SMA). We have both the capability and capacity to offer this administration service to the external market in conjunction with the services we currently provide to our own platforms. 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 6.2% to $2.06 billion (2018: $1.94 billion). While we continue to experience overall growth in Net Fund inflows driven by our salaried and franchisee financial planners the inflow rate slowed last year, which we believe was largely due to the negative sentiment prevailing through much of the year and described earlier. On a 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 positive note, supporting our structural growth strategy, white label platform administration for external groups has risen to over $26 million in Funds under Administration and new staff have been employed to grow this part of our business. Independent Financial Planners (IFAs) Funds under Administration for IFAs are around 7.3% of total Funds under Administration. Efforts are underway to build new relationships and increase net inflows from non- aligned financial planner groups, in particular through SMA administration services. changes required by 30 June 2019 to administer a raft of new superannuation and taxation legislation changes enacted by the Government. Enhancements have also been made to our financial planning software ‘FORCe’ to include a leading edge workflow system that creates efficiency for all financial planner activities and provides the transparency required for greater compliance monitoring, a much sought after goal in the industry. Our efforts to market our financial planning software from a standing start to external users is progressing. This business unit has the potential to become a major revenue generator for the Group in years to come. Superannuation The Superannuation Trustee Board established for our public offer, superannuation wrap fund in March 2015 with an equal number of independent directors operates professionally and with independence. The Board is supported by the office of Superannuation Trustee and outsources key operational process to specialist service providers. Funds Management Our in-house Manage-the-Manager system of investment continues to attract the majority of retail funds placed with us. Fiducian Funds have performed well over the medium to long-term in their respective categories as we diversify their assets through a range of underlying fund managers to reduce risk and volatility. There were some notable performances over the five-year return period for our flagship diversified funds. The performances of these funds to end of June 2019 are reported in the Morningstar Investment Performance Survey. The Growth and Balanced Funds were ranked 1st and 3rd out of 167 funds, the Capital Stable Fund was ranked 4th out of 105 funds and the Ultra Growth Fund was ranked 3rd out of 105 funds on the survey. 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 as well as, opens up new business opportunities. The improvements now in place provide integration with our on-line reporting tools and financial planning software, ‘FORCe’ and give greater flexibility to administer a wider range of investments. Further improvements towards electronic application and processing which allow flexibility to administer different configurations of products have been developed and continually embellished further. A key feature was the timely development and implementation of system Human Resources Management and Staff There were a few staff changes during the year, largely at junior levels. Effective reporting processes are in place for all subsidiaries which enhance 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. Fiducian is an equal opportunity employer. Our diversity policy encourages persons of different race, gender, sexual preferences, religion, national or ethnic origin, age or disability and skills to participate and receive recognition, reward and management responsibility commensurate with their performance. Employees are from 23 different countries of origin, 48% are female with 27% in senior roles and 24% are over 55 years of age. 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 fulfil 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). Board of Directors The Board of Directors is working constructively to evaluate and support management’s recommendations for the company. Mr. R Bucknell retired as Chairman after the last Annual General Meeting, having served in that role with distinction from our inception in 1996. We are fortunate to still have him on the Board as a director and benefit from his vast experience. T R O P E R ’ S N A M R I A H C E V I T U C E X E 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 The Business Plan for the year ahead has identified measures to lift profits including by acquisition. 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. 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 assist hospitals in India, Myanmar, Nepal and Cambodia. Over 34,000 men, women and children who live in abject poverty have now had their eyesight restored. We intend to continue our charitable support to the community. Current Economic and Market Environment The global economy appears to have slowed marginally in recent months but overall still appears likely to grow at a solid rate over the rest of this year and through 2020, according to the International Monetary Fund (IMF), with global growth forecast to be around 3.2% in 2019 and 3.5% in 2020. However, growth in much of the developing world ‘has disappointed’, with growth in Eastern Europe projected to be only 1.0% this year and Latin America 0.6%, although stronger recovery is forecast for 2020. While earnings growth is forecast to be lower this year (3% globally), it is forecast to pick up again in 2020 (10% globally, 11% in the US, 9% in Europe, 6% in Japan, 14% in China and 17% in India). Strong growth in corporate profits reduces the pressure for inflationary price growth and provides scope for further stock market appreciation. The Australian economy has grown only slowly over the past year (1.8% to end-March), prompting the Reserve Bank to reduce interest rates twice to 1.0%. Rates could be cut further, if required, to lift consumer confidence and household income. Most major share markets recovered and performed well over the first half of 2019, with profit growth keeping average valuations reasonable. Royal Commission Fiducian has reviewed the recommendations and welcomed the Final Report by the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Report has reiterated the norms of conduct which imply that the law is to be obeyed, that client interests must come first, that clients should not be misled and that services should be fit for purpose, delivered fairly and with reasonable care. The driving code of conduct for Fiducian and its people has always been to observe these norms and to provide products and professional services in a transparent manner for the benefit of our clients. It is refreshing to note that the way we operate is in line with the expectations detailed within the final report of the Royal Commission. On the Royal Commission’s recommendation, the Government has agreed to end grandfathered commissions from 1 January 2021. Around 4% of the Group’s net revenue is from grandfathered commissions, some of it has come through from client base acquisitions made over the years. Management is working to convert commissions to fees for service before 2021. Insurance commissions and mortgage broking which have been adversely impacted are not our core business and are therefore unlikely to impact our revenue in any material way. Fiducian sees no need to alter our business model or the way we have operated or intends to operate in the future. We shall continue to obey the law and its intent, all it stands for and serve our clients to the best of our ability. The words “Integrity Trust Expertise” is part of our logo and ethics of the Group, should stand us in good stead in the future. Outlook The Board expects profit growth to continue steadily in the coming year as management focuses on realizing the potential of Financial Planning, Platform Administration, Investment Management and Information Technology. 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 should increasingly benefit the bottom line through the course of the coming financial year. Additionally, synergy benefits from these businesses are expected. Expenditure controls and profits remain a priority. The Board policy requires the Group to build scale and deliver consistent double digit earnings growth in coming years. On behalf of the Board, I 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. Inderjit (Indy) Singh Executive Chairman 15 August 2019 T R O P E R ’ S N A M R I A H C E V I T U C E X E 1 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 T R O P E R ’ S N A M R I A H C E V I T U C E X E 1 1 Fiducian Supported Charity Vision Beyond AUS (Public Benevolent Institution) Vision Beyond Australia Ltd, a charity proudly supported by the Fiducian Group, received Public Benevolent Institution status effective from 1 January 2019. The charity remains a registered charitable fund with tax deductible gift recipient status, but is now able to remit donations directly to its overseas projects. The charity which is dedicated to restoring eyesight for people living in poverty, operates in Myanmar, Cambodia, Nepal and India through 7 hospitals and has restored eyesight for over 34,000 men, women and children. 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Directors’ Report 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 2019. Directors The following persons were directors of Fiducian Group Limited during the financial year and up to the date of this report: • I Singh (appointed Executive Chairman on 25 October 2018) • R Bucknell • F Khouri • S Hallab Principal activities During the year the principal continuing activities of the Group consisted of: (a) Operating an Investor Directed Portfolio Service and Managed Discretionary Accounts service, through its wholly owned subsidiary, Fiducian Investment Management Services Limited (b) Acting as the Responsible Entity of Fiducian Funds through its wholly owned subsidiary, Fiducian Investment Management Services Limited (c) Acting as the Trustee of Fiducian Superannuation Service through its wholly owned subsidiary, Fiducian Portfolio Services Limited (d) Providing specialist financial planning services through its wholly owned operating subsidiary, Fiducian Financial Services Pty Limited (e) Providing client account administration platforms, self managed superannuation services to clients and corporate services to other entities within the Group through its wholly owned subsidiary, Fiducian Services Pty Limited (f) Providing accountancy resource services until 31 January 2019 through its wholly owned operating subsidiary, Fiducian Business Services Pty Limited. The company has been restructured and is now responsible for the distribution activities on behalf of the Group (g) Development of IT software systems for financial planning and wrap platform administration Dividends Dividends paid to members during the financial year were as follows: Dividends Final ordinary fully franked dividend for the year ended 30 June 2018 of 11.00 cents (2017: Fully franked 8.90 cents) per share paid on 12 September 2018. Interim ordinary fully franked dividend for the year ended 30 June 2019 of 11.00 cents (2018: Fully franked 9.00 cents) per share paid on 14 March 2019. Total dividends paid during the year 2019 $’000 3,447 3,448 6,895 2018 $’000 2,783 2,814 5,597 Subsequent to 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 2019 of 11.3 cents per ordinary share held on 28 August 2019 and payable on 11 September 2019. T R O P E R ’ S R O T C E R I D 1 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Review of operations A summary of consolidated revenues and results by significant industry segments is set out below: Segment Revenues Segment Results 2019 $’000 13,850 16,836 18,718 2018 $’000 12,740 15,844 17,289 2019 $’000 8,574 (729) 6,434 14,279 (3,929) 10,350 2018 $’000 7,595 (817) 6,659 13,437 (4,239) 9,198 Matters subsequent to the end of the financial year Subsequent to the end of the financial year, the Group entered into purchase agreements to acquire two financial planning businesses, one in Tasmania and the other in Victoria. In aggregate, these acquisitions are expected to add $355 million in Funds under Advice and further grow the Group’s presence in these states. While the Victorian acquisition is in its early stages, the transition of the staff and clients of the Tasmanian acquisition is progressing well and both are expected to start to contribute positively to the Group’s revenue in the next six months. Refer to Note 31 for further details. Other than this, 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. Likely developments and expected results of operations The Executive Chairman has commented on expected results of operations in his Executive Chairman’s Report. Other than this, there are no likely developments that may have significant impact on the expected results or operations of the Group. Funds Management Financial Planning Administration, Corporate & Other Profit from ordinary activities before income tax expenses Income tax expenses Net profit attributable to members of Fiducian Group Limited Comments on operations and results Comments on the operations, business strategies, prospects and financial position are contained in the report of the Executive Chairman. Shareholder returns Despite strong headwinds in a market characterised by slowing growth and a post-Haynes Commission fallout in the financial services sector, the Group has managed to a produce another year of double digit earnings growth. The Executive Chairman, in his report to the shareholders, has given an explanation of how these returns have been generated. As a result of this performance, the Board has declared a dividend distribution of 11.3 cents per share for the second half, bringing the full year dividend to 22.3 cents per share (2018: 20.0 cents). Significant changes in the state of affairs During the financial year, the Group acquired the client bases of three financial planning practices, one in Victoria and two in Western Australia, contributing in aggregate $219 million in Funds under Advice (FUA). The portfolio of clients was transferred to Fiducian Financial Services Pty Ltd progressively during the financial year and should start to contribute positively to the Group’s revenue in the following year. The contributed equity of the Group increased during the year following the payment and issue of 200,000 fully paid ordinary shares as a result of the exercise of previously issued share options by the Executive Chairman. T R O P E R ’ S R O T C E R I D 1 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 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 23 countries of origin, 24% over 55 years, and 48% female with 27% in senior roles. The Group’s current gender diversity report is available to be viewed on the Group website. T R O P E R ’ S R O T C E R I D 1 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Key management personnel disclosures 1. Information on current Directors I Singh BTech, MComm (Bus), ASIA, ASFA, DipFP, CFP Executive Chairman Experience and expertise Appointed Chairman on 25 October 2018. Founder and Managing Director since inception in 1996, Executive Deputy Chairman from 19 October 2017 until 25 October 2018. General Management and hands-on experience in the investment of savings and superannuation funds over the past 30 years. Other current directorships in listed entities None Former directorships in the last 3 years None Special responsibilities Executive Chairman of the Group with effect from 25 October 2018 and Company Secretary since inception. Interest in shares and options 10,723,851 ordinary shares in Fiducian Group Limited. 35,000 options for ordinary shares in Fiducian Group Limited. R Bucknell FCA Independent non-executive director Experience and expertise Chairman since inception in 1996 until he stepped down as Chairman on 25 October 2018 and remained as a director. Extensive experience in accounting and business management over the past 53 years as a Chartered Accountant. Other current directorships in listed entities None Former directorships in the last 3 years None Special responsibilities Chairman of the Remuneration Committee, and the Group Audit Risk and Compliance Committee. Interest in shares and options 583,000 ordinary shares in Fiducian Group Limited. F G Khouri BBus, 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 None Special responsibilities Director of Fiducian Portfolio Services Limited (Trustee subsidiary), member of the Audit Risk and Compliance Committees for both the Group and Super and member of the Group and Trustee Remuneration Committees. Interest in shares and options 268,323 ordinary shares in Fiducian Group Limited. T R O P E R ’ S R O T C E R I D 1 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 S Hallab BEc (Accnt & Law), CA, GAICD, FAIST Independent non-executive director Experience and expertise Appointed to the Board 12 August 2016. Chartered Accountant and registered company auditor. Has over 36 years of experience in finance and superannuation. Other current directorships in listed entities Company Secretary of Ensurance Limited (ASX code: ENA). Former directorships in the last 3 years None Special responsibilities Director of Fiducian Portfolio Services Limited (Trustee Subsidiary), member of the Audit Risk and Compliance Committee and member of the Remuneration Committee. Interest in shares and options 52,477 ordinary shares in Fiducian Group Limited. 2. Company secretary Mr. I Singh has been the company secretary since inception in 1996, and is currently supported by General Counsel employed by Fiducian. 3. Meeting of directors The number of meetings of the company’s Board of Directors and of each board committee held during the year ended 30 June 2019, and the number of meetings attended by each director were: Meetings of directors Meetings of committees Board Audit Risk & Compliance Remuneration A 7 7 7 7 B 7 7 7 7 A 5 5 5 5 B 5 5 5 5 A - 1 1 - B - 1 1 1 I Singh R Bucknell F Khouri S Hallab 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. 4. Other Mr. I Singh as Executive Chairman of Fiducian Group Limited, has authority for and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year ended 30 June 2019. This authority and responsibility is unchanged from the previous year. 5. Remuneration report The remuneration report is set out under the following main headings: A - Principles used to determine the nature and the E - Additional information amount of remuneration B - Details of remuneration F - Director’s superannuation C - Service agreements and induction process G - Loans to directors D - Share-based compensation H - Other transactions with key management personnel The information provided under headings A - H includes remuneration disclosures that are required under Australian Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been included in the Directors’ Report and have been audited. T R O P E R ’ S R O T C E R I D 1 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 A - Principles used to determine the nature and the amount of remuneration I Singh, Executive Chairman • Term of agreement - until 30 June 2024 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 • 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 (ESOP) • Retirement benefits, and • The employment agreement may be terminated by • performance linkage / alignment of executive either party with six-month notice compensation • transparency • capital management (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 not entitled to options under the Employee and Director Share Option Plan. Directors’ fees The current base remuneration was last reviewed in June 2019. The external directors are paid a fixed fee for participation in Board and Committee meetings plus a fee based on time spent on any additional matters as approved by the Board. Directors who are financial planners, may have received remuneration from placing their financial planning business with the Group. 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 $450,000 per annum, was previously approved by shareholders at the Annual General Meeting on 20 October 2016. Retirement allowance for directors There are no retirement allowances for non-executive directors other than superannuation accumulation arising from any compulsory superannuation guarantee contributions made on their behalf. (b) Executive Chairman Remuneration and other terms of employment for the Executive Chairman are formalised in a service agreement. The Executive Chairman’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: 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 July 2018. Base salary Mr. I 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. Short-term incentives (STI) The STI aims to provide an incentive to the Executive Chairman to act in the best interests of the Company, its shareholders, clients, staff and all stakeholders, such that the Company achieves and possibly exceeds its targets for the financial year. In setting or paying a STI or bonus, the Remuneration Committee ensures that a bonus does not encourage undue risk taking that would be detrimental to any part of the Company or its clients. Board policy dictates that the Executive Chairman’s performance for a financial year is reviewed and evaluated by the Remuneration Committee. The cornerstone to assessing the performance of the Executive Chairman is the fulfilment of three broad objectives namely: a) Activities that ensure delivery of quality output to standards and timeliness which ensure compliance with statutory guidelines and as well, enhance customer and stakeholder relationships; b) Production of results and growth outcomes that enable Business Plan objectives to be achieved; and c) Leadership, management of staff, strengthening good corporate culture and managing risks. T R O P E R ’ S R O T C E R I D 1 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Key Performance Indicators (KPIs) of the Executive Chairman are set by the Remuneration Committee. The Remuneration Committee uses both objective and subjective measures in its evaluation and on the basis of the methodology below, the Executive Chairman achieved 95% of the KPIs set for the financial year. The business and operating areas considered are Financial Planning, Funds Management, Business Development and Distribution, and Fiducian services comprising of Platform Administration, Risk Management, Legal, Information Technology, Marketing and Finance. Each business area’s Executive Leader has a number of underlying KPIs that lie within the broad objectives a), b), and c) outlined above. The underlying KPIs of each Executive Leader may differ and depend on their roles and responsibilities. The Executive Chairman sets the underlying KPIs for each Executive Leader and so each business area has a number of performance measures required to be delivered during the year. Achievement by Executive Leaders of all the KPIs identified for them would satisfy the Board that sufficient personal exertion has been contributed towards achievement of the targets set in the Business Plan for the year, which is approved by the Board. A failure to achieve or deliver on any KPI item within the three broad objectives by any business area stated above is therefore considered a failure by the Executive Chairman to achieve all his KPIs. The employment contract with the Executive Chairman stipulates that a maximum of 20% of that year’s fixed remuneration should be paid to the Executive Chairman if all KPIs are satisfied. The Executive Chairman was therefore entitled to a STI of $106,400 but chose to receive a bonus of only $15,000. Long-term incentives Mr. I 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 Company’s underlying net profit after tax OR • the 30-day average of June market value for ordinary shares in the company 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 5,000 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. For the year ended 30 June 2019, Mr. I Singh is not entitled to any options. Retirement and termination 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 Executive Chairman or by mutual consent is equal to 6 months of the gross annual remuneration. T R O P E R ’ S R O T C E R I D 1 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 B - Details of remuneration Details of the remuneration of the key management personnel are set out in the following table: 2019 Short-Term Employee Benefits Benefits Post-Employment Share- Based Payment Name Executive Chairman I Singh 1 Non-executive directors R Bucknell 2,3 F Khouri 4 S Hallab Totals Cash salary & fees Cash bonus $ $ 539,469 15,000 110,800 86,023 61,770 798,062 - - - 15,000 Non- monetary benefits Super annuation Retirement benefits $ - - - - - $ 20,531 - 8,172 5,868 34,571 $ - - - - - Options $ Total $ 11,045 586,045 - - - 11,045 110,800 94,195 67,638 858,678 T R O P E R ’ S R O T C E R I D 1 Mr I Singh is not entitled to any options in respect of the year ended 30 June 2019. The amount shown as options payment relates to the grant of 35,000 options for 2018 and represents the value of those options expensed over its term in accordance with accounting standards. 2 Excludes GST if paid to another firm. 3 Including amounts paid to the director’s company only in respect to director’s duties. 4 This excludes fees of $205,824 for financial planning services paid to companies in which Mr F Khouri has an interest in his capacity as a financial planner. 2018 Short-Term Employee Benefits Benefits Post-Employment Share- Based Payment Name Non-executive directors R Bucknell 1,2 (Chairman) F Khouri 3 S Hallab Executive director I Singh 4 Totals Cash salary & fees $ 116,200 85,043 61,096 524,991 787,330 Non- monetary benefits Cash bonus Super annuation Retirement benefits Options $ - - - 50,000 50,000 $ - - - - - $ - 8,079 5,804 20,049 33,932 $ - - - - - $ - - - 45,278 45,278 Total $ 116,200 93,122 66,900 640,318 916,540 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 $207,417 for financial planning services paid to companies in which Mr F Khouri has an interest in his capacity as a financial planner. 4 Mr I Singh was entitled to 35,000 options in respect of the year ended 30 June 2018. These were approved at the Annual General Meeting on 25 October 2018. 1 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 C - Service agreements and induction process D - Share-based compensation (i) Options compensation and holdings The service agreement of the Executive Chairman 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. 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 24. The number of options for ordinary shares in the Company held directly by the Executive Chairman 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. 2019 Name I Singh 1 Balance at the start of the year 200,000 Exercised 200,000 Granted during the year as remuneration1 Lapsed during the year Balance at the end of the year Vested and exercisable 35,000 - 35,000 - 1 Under the terms of his employment Mr I Singh is not entitled to any options relating to the current year. Options granted during the year are in respect of the entitlement relating to the year ended 30 June 2018. 2018 Name I Singh 1 Balance at the start of the year Exercised Granted during the year as remuneration1 Lapsed during the year Balance at the end of the year Vested and exercisable 100,000 - 100,000 - 200,000 100,000 1 Under the terms of his employment Mr I Singh was entitled to 35,000 options relating to the year ended 30 June 2018. These were subject to approval at the Annual General Meeting on 25 October 2018 and were issued subsequent to 30 June 2018. Therefore, these have not been included above. Options granted during the year ended 30 June 2018 were in respect of the entitlement relating to the year ended 30 June 2017. T R O P E R ’ S R O T C E R I D 2 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 (ii) Share holdings The number 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. 2019 Name I Singh R Bucknell F Khouri S Hallab 2018 Name I Singh R Bucknell F Khouri S Hallab 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 10,523,851 583,000 268,323 31,000 200,000 - - - - - - 21,477 10,723,851 583,000 268,323 52,477 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 10,523,851 583,000 268,323 - - - - - - - - 31,000 10,523,851 583,000 268,323 31,000 Shares provided on exercise of options G - Loans to directors During the year 200,000 ordinary shares were issued as a result of the exercise of remuneration options by the Executive Chairman of Fiducian Group Limited (2018: Nil). 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 2019 there has been a 1.9% or $10,000 increase in the base salary of the Executive Chairman. Cash bonuses granted in respect of the current financial year ended on 30 June 2019 is $15,000 (2018: $50,000) and the grant of options entitlements have been only in accordance with the incentive programs. The Executive Chairman is not entitled to any options in respect of the current year ended 30 June 2019 (2018: 35,000 options). F - Directors’ superannuation Directors may have superannuation monies invested in the Fiducian Superannuation Service. These monies are invested subject to the normal terms and conditions applying to this superannuation fund. No loans were made to directors during the financial year (2018: Nil). Details of loans to related parties of the directors have been disclosed in Note 28 Related Party Transactions. H - Other transactions with key management personnel Mr. R Bucknell, a director of the Company, is also 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 remuneration from the company for financial planning services. All transactions are on normal commercial terms and conditions. A director, Mr. S Hallab was paid director’s fees for his personal contribution to the Board. T R O P E R ’ S R O T C E R I D 2 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 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 2019 $ 272,633 205,824 478,457 2018 $ 276,222 207,417 483,639 * Details of these fees have been provided in the Remuneration report included in the Directors’ Report. Shares under option Unissued ordinary shares of Fiducian Group Limited under option at the date of this report are disclosed in Note 24 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. 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. Shares issued on the exercise of options The details of ordinary shares of Fiducian Group Limited issued during the year in respect of 2019 and 2018 years on the exercise of options granted under the Fiducian Group Limited Employee and Director Share Option Plan are disclosed under Note 24 to the Financial Report. Indemnification and insurance of officers Under the terms of its constitution, Fiducian indemnifies all past and present directors of Fiducian and its wholly-owned subsidiaries against certain liabilities and costs incurred by them in their respective capacities. 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. 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 risk and compliance 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 APES 110 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 25 to the consolidated financial report. T R O P E R ’ S R O T C E R I D 2 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Auditors’ independence declaration A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 24. 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 https://www.fiducian.com.au/wp-content/ uploads/corporate_docs/Corporate_Governance_ Statement.pdf. This report is made in accordance with a resolution of the directors. Inderjit (Indy) Singh Executive Chairman Sydney, 15 August 2019 T R O P E R ’ S R O T C E R I D 2 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Fiducian Group Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Fiducian Group Limited and the entities it controlled during the period. Darren Ross Partner PricewaterhouseCoopers Sydney 15 August 2019 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. I N O T A R A L C E D E C N E D N E P E D N I S ’ R O T I D U A 2 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 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 26 27 28 29 30 69 70 Fiducian Group Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is : Fiducian Group Limited Level 4, 1 York Street, Sydney, NSW 2000. This financial statements were authorised for issue by the directors on 15 August 2019. The directors have the powers to amend and reissue the financial statements. S T N E M E T A T S L A I C N A N I F 2 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Consolidated Statement of Comprehensive Income For the year ended 30 June 2019 Notes Consolidated Revenue from ordinary activities Other income Payments to advisers and service providers Employee benefits expense Amortisation, depreciation and impairment 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 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 30 2019 $’000 48,927 477 (12,721) (13,109) (1,786) (7,509) 14,279 (3,929) 10,350 - 10,350 10,350 33.03 32.94 2018 $’000 45,438 435 (12,117) (12,428) (1,396) (6,495) 13,437 (4,239) 9,198 - 9,198 9,198 29.42 29.28 The above statement of comprehensive income should be read in conjunction with the accompanying notes. S T N E M E T A T S L A I C N A N I F 2 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Consolidated Statement of Financial Position As at 30 June 2019 Notes Consolidated ASSETS Current assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-current assets Loan 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 2019 $’000 11,792 8,694 20,486 5,150 172 20,081 25,403 45,889 7,939 696 8,635 1,960 468 2,428 11,063 34,826 7,636 22 27,168 34,826 2018 $’000 13,885 4,976 18,861 5,738 186 15,776 21,700 40,561 6,081 1,460 7,541 1,357 532 1,889 9,430 31,131 7,041 130 23,960 31,131 9 10 11 13 15 16 17 18 19 20 21 22 The above statement of financial position should be read in conjunction with the accompanying notes. S T N E M E T A T S L A I C N A N I F 2 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Consolidated Statement of Changes in Equity As at 30 June 2019 Contributed Notes Equity Reserves Balance as at 30 June 2017 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders Shares bought back-on market and cancelled Dividends paid Options expense 8 21 Total transactions with equity holders Balance as at 30 June 2018 Change on initial application of AASB 9 $’000 7,141 - - - (100) - - (100) 7,041 $’000 120 - - - - - 10 10 130 Restated balance at beginning of the year 7,041 130 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders Shares issued on exercise of option Dividends paid Transfer to retained profits Transfer from reserves Options expense Total transactions with equity holders Balance as at 30 June 2019 8 21 - - - 595 - - - - 595 7,636 - - - - - (119) - 11 (108) 22 The above statement of changes in equity should be read in conjunction with the accompanying notes. Retained Profits $’000 20,359 9,198 - 9,198 - (5,597) - (5,597) Total $’000 27,620 9,198 - 9,198 (100) (5,597) 10 (5,687) 23,960 31,131 (366) (366) 23,594 10,350 - 30,765 10,350 - 10,350 10,350 - (6,895) - 119 - 595 (6,895) (119) 119 11 (6,776) (6,289) 27,168 34,826 S T N E M E T A T S L A I C N A N I F 2 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Notes Consolidated 2019 $’000 53,910 2018 $’000 49,143 (38,023) (34,756) Consolidated Statement of Cash Flows For the year ended 30 June 2019 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 Net cash inflow from operating activities 29 Cash flows from investing activities Payments in relation to acquisitions Net receipts from advisers on business development loans 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 The above statement of cash flows should be read in conjunction with the accompanying notes. 15,887 477 (5,425) 10,939 (6,882) 225 (75) (6,732) - 595 (6,895) (6,300) (2,093) 13,885 11,792 14,387 435 (4,444) 10,378 (827) 526 (44) (345) (100) - (5,597) (5,697) 4,337 9,548 13,885 S T N E M E T A T S L A I C N A N I F 2 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Notes to the Financial Statements 1. Summary of significant accounting policies The principal accounting policies adopted for the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes Fiducian Group Limited and its subsidiaries. B. Principles of consolidation The consolidated financial report incorporates the assets and liabilities of all entities controlled by Fiducian Group Limited (Company or parent entity) as at 30 June 2019 and the results of all controlled entities for the year then ended. Fiducian Group Limited and its subsidiaries together are referred to in this financial report as the Group. Subsidiaries are all 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 entity’s financial report. 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. Non- controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income. C. Revenue recognition The accounting policy for the Group’s revenue from contracts have been explained in Note 1-W. A. Basis of preparation This general purpose financial report 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 report of Fiducian Group Limited also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). New accounting standards adopted by the Group in the current period The Group has applied the following standards for the first time for the annual reporting period commencing 1 July 2018. • AASB 9 Financial Instruments • AASB 15 Revenue from Contracts with Customers Changes to the Group’s key accounting policies as a result of the application of the new standards are explained in Note 1-W. Historical cost convention The financial report 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 reports 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. S T N E M E T A T S L A I C N A N I F 3 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) D. Income tax Tax consolidation 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 reports. 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. Fiducian Group Limited and its wholly owned subsidiaries have implemented the tax consolidation legislation with Fiducian Group Limited as the head entity of the 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 27). 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. With effect from 1 July 2019, the Group will apply AASB 16 Leases as discussed in Note 1-X. 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, Managed Discretionary Accounts 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 2019 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. S T N E M E T A T S L A I C N A N I F 3 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) 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. G. Impairment of goodwill and intangible 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. 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. S T N E M E T A T S L A I C N A N I F 3 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) K. Investments and other financial N. Intangible assets instruments 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. Business Development Loans The accounting policy for the classification and accounting for business development loans has been explained in Note 1-W. 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 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. The asset’s residual values and useful lives are reviewed, and adjusted, if appropriate, at each reporting date. P. Provisions An asset’s carrying amount is written down immediately to its estimated 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 amounts. These are included in the statement of comprehensive income. 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. S T N E M E T A T S L A I C N A N I F 3 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) 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. 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 re-issued. 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. 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. 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 corporate 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 24. Subsequent options issued to employees for no consideration have the fair value of options granted under the Fiducian Employee and 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. S T N E M E T A T S L A I C N A N I F 3 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) 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 or other 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 report. Amounts in the financial report 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 AASB 9 Financial Instruments AASB 9 Financial Instruments replaces the provisions of AASB 139 Financial Instruments that relate to the recognition and measurement of financial assets and financial liabilities, de-recognition of financial instruments, impairment of financial assets and hedge accounting. The Group has adopted this standard from 1 July 2018 and has applied all the applicable provisions of the standard from that date to its trade receivables and loan receivables books. The key changes of this standard that have impacted the accounting policies and on transition are summarized below: Classification and subsequent measurement AASB 9 has three classification categories for financial assets: Amortised cost, Fair value through Other Comprehensive Income (FVOCI) and Fair value through Profit and Loss (FVTPL). The classification is based on the business model under which the financial assets are managed and their contractual cash flows. In determining the business model, the Group exercised its judgment based on all evidence available at initial recognition of the financial asset. The following indicators were considered in the determination: • The objectives of the business model and how they were achieved • The basis on which the financial assets were managed • The basis on which the financial assets performance was evaluated and reported to Key Management Personnel (“KMP”) • The management of risks in the business model • The basis of compensation of KMP in the business model On application of the business model assessment to business development loans, management concluded that the business model for these loans was ‘Hold and Collect’ as there was no intention at the time when the assets were acquired to either trade them or sell them later. A similar assessment was conducted on the contractual cash flows of the business loans to determine if their contractual terms gave rise to cash flows that were solely payments of principal and interest (SPPI) on the principal outstanding. Based on this assessment management concluded the cash flows of business development loans were SPPI. After considering the conclusions of the assessment of the business model and the SPPI test, management concluded that the assets previously classified as Loans and Receivables under AASB 139 would be classified as Amortised Cost under AASB 9. The Group does not have any financial assets which could be classified as FVOCI or FVTPL which is consistent with the previous classification of financial assets under AAB 139 where the Group did not have any Fair Valued or Available for Sale financial assets. Under the new classification of AASB 9, receivables, including business development loans held for collection of contractual cash flows where cash flows represent solely payment of principal and interest, are measured at amortised cost. Interest income from these financial assets are included in income using the effective interest rate method. Any gain or loss arising on de-recognition is recognised directly in the profit or loss. AASB 9 largely retains the existing requirements of AASB 139 for classification and measurement of financial liabilities and therefore there were no changes to the Group’s accounting for these liabilities. S T N E M E T A T S L A I C N A N I F 3 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) Impairment The expected credit loss model (ECL) introduced by AASB 9 as a replacement for the incurred loss model of AASB 139 requires earlier recognition of credit impairments based on all reasonable and appropriate information on past events, current conditions and forward looking information. With the ECL impairment requirements of AASB 9 only applicable to financial assets measured at amortised cost and FVOCI, the Group’s assessment of ECL focused on receivables, including development loans given to financial planners, which were classified as amortised cost. AASB 9 requires measuring ECL for the development loans portfolio by applying a 3-stage approach where individual loans are categorized based on changes in the credit risk since origination. An unbiased and probability weighted ECL is then computed for the individual loan as the product of the probability of default (PD), the loss given default (LGD) probability and the exposure at the time of default (EAD). The ECL was determined with reference to the following stages: Stage 1: Performing loans 12 month ECL At initial recognition and for financial assets for which credit risk was low, ECL was determined based on the probability of default (PD) over the next 12 months and the losses associated with such default, adjusted for forward looking information. Interest income was determined with reference to the effective interest rate and the gross carrying amount of the asset. Stage 2: Non-performing loans: Lifetime ECL The Group assessed whether there had been a significant increase in credit risk (SICR) of the loans since initial recognition, based on qualitative and quantitative factors, and reasonable forward looking information, which included significant management judgement. Qualitative factors included but were not limited to payment history, requests to modify contractual payments and compliance reviews. Quantitative analysis utilised an internally developed model based on loan to value ratios and forecasted cash flows, adjusted for forward looking indicators such as the level of the ASX 200. Where the Group’s modelling indicated a SICR, an ECL was determined with reference to the loan’s lifetime probability of default and the lifetime loss associated with that probability of default. Interest income was determined with reference to the financial asset’s effective interest rate and the gross carrying amount of the asset. Stage 3: Credit impaired loans: Lifetime ECL Where one or more events which have a detrimental impact on estimated future cash flows has occurred, the loans would be classified as credit impaired and included in stage 3. Management have pre-defined some events that would objectively indicate credit impairment such as loan to value ratio increasing beyond a certain percentage and bankruptcy of the adviser. Lifetime ECL continues to be recognised but interest income is taken on a net of provision basis. The Group does not have any assets in stage 3 Transition The carrying amount of the Group’s financial assets have not been impacted by the new classification category introduced by AASB 9. However, as a result of the application of the new ECL methodology on receivables held at amortised cost, a transition adjustment on initial adoption of the standard is necessary. Management have noted that the SICR methodology is a relative credit risk approach involving significant management judgment in determining whether there has been a SICR in underlying exposures, this could result in exposures being classified as stage 2 despite these assets not being of a lower credit quality than exposures classified in stage 1. Based on AASB 9 modelling, management have determined that there has been an increase in credit risk since initial recognition for a few development loans included in receivables and therefore in accordance with the ECL methodology, these loans have transitioned from stage 1 to stage 2, requiring the provision of a Lifetime ECL. The transition adjustment to retained earnings relates to this provision. In accordance with AASB 9 the Group has not restated the comparatives in the financial statements and has recorded a transition adjustment to its opening balance sheet as at 1 July 2018. The impact of this transition adjustment has reduced the Group’s shareholders’ equity by $366,000 and increased the provision for impairment of business development loans by a similar amount. The Group does not have exposure to hedging instruments and therefore the hedging requirements of AASB 9 are not appropriate. AASB 15 Revenue from Contracts with Customers AASB 15 replaces all the previous guidance on revenue recognition from contracts with customers. It requires the identification of discrete performance obligations within a customer contract and an associated transaction price that is allocated to these obligations. Revenue is recognised upon satisfaction of these performance obligations, which occur when control of the goods or services is transferred to the customer. The key judgments in applying AASB 15 include determining whether the contract is a single performance contract, whether the performance obligation is satisfied over time, as well as the timing and amount of variable consideration to be recognised. The five steps approach to revenue recognition prescribed by AASB 15 was adopted by the Group from 1 July 2018 and despite the change in approach to revenue recognition, no material adjustment to opening retained earnings was recognised as the amendments to accounting policies did not result in significant changes to the timing or amount recognised. S T N E M E T A T S L A I C N A N I F 3 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 1. Summary of significant accounting policies (Continued) The primary revenue streams from contracts with customers for the Group are in the nature of management fee income earned from funds management, fees earned from offering platform services and fee income from offering advice to customers. interpretations not mandatory in the current period X. New accounting standards and AASB 16 Leases (effective for financial years commencing after 1 Jan 2019) • Fees earned from the funds management services have been accounted for as single performance obligations to each fund satisfied over time. The fees received based on a fixed percentage on the assets under management are considered variable consideration but with the uncertainty in the variable element being resolved within the reporting period. Fund management services are held to be performed on an ongoing daily basis and therefore fees are accrued daily and paid monthly in arrears for the service provided. • Revenue streams earned from platform administration services are identified as separate single performance obligations to individual customers with customers exercising control over the funds transitioned onto the platform. Platform administration services are held to be performed on an ongoing daily basis and therefore fees are accrued daily and paid monthly in arrears for the service provided by the platform. • Fees earned from offering advice to customers are a combination of fees earned for ongoing service, and one off fees. Ongoing fees based on funds under advice are treated as single performance obligations satisfied over time. The fees received based on a fixed percentage on the funds under advice are considered variable consideration but with the uncertainty in the variable element being resolved within the reporting period. Advice service fees are therefore accrued daily and paid monthly in arrears for the service period, and therefore the revenue is attributed to services provided for within the period and accounted for as such. One off fees are identified as a single performance obligation with service performed at a point in time and revenue recognised in line with the service. There are no other standards, interpretations or amendments to existing standards that are effective for the first time for the current financial year that have material impact on the amounts recognised in prior periods or will affect the current or future periods. 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 a leased item) and financial liability to pay rentals for the lease contract. The Group has reviewed its operating leasing arrangements in light of the new standard. As at the reporting date, the Group has non-cancellable operating lease commitments of $1,110,000 (refer to Note 27). The Group expects to recognise right-of-use assets of approximately $1,442,240 and lease liabilities of $1,442,240 on 1 July 2019. The Group expects the net profit after tax in year 1 to decrease by $88,274 as a result of the adoption of the new standard. However, no change in overall total cash flow is anticipated resulting from the change to the accounting standard. Management notes that the lease for the head office premises is in the midst of negotiations and due to the uncertainty of the final outcome has been treated as short term and not reflected in these amounts. Other than the above, a number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019, and have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Group. S T N E M E T A T S L A I C N A N I F 3 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 2. Critical accounting estimates 3. Segment information and judgements In preparing the Annual report, the Group makes estimates and assumptions which management believes are reasonable. However, outcomes may differ from management’s assumptions and estimates and may require adjustments to the carrying amounts of the assets and liabilities reported. These estimates and judgements 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. (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 earnings multiples requiring the use of sustainable revenue estimates and comparable market transactions. (iii) Estimated impairment of loans and receivables The Group raises a provision for impairment of loans and receivables when there is objective evidence of impairment. The evaluation process involves estimates and judgements and any changes will directly impact the level of provision ascertained. 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: Financial Planning The Group continued its specialist financial planning operations through its subsidiary, Fiducian Financial Services Pty Ltd. Funds Management The Group continues to act as an operator of an Investor Directed Portfolio Service, Fiducian Investment Service and as Responsible Entity for managed investment schemes and managed discretionary accounts through its subsidiary, Fiducian Investment Management Services Ltd. Administration, Corporate and Other The administration and professional services are provided to the Group by a subsidiary, Fiducian Services Pty Ltd. Management views this as an operating segment. The operations of Fiducian Portfolio Services Ltd, which acts as a Registrable Superannuation Entity (RSE) of the public offer superannuation fund, and Fiducian Business Services Pty Ltd, which provided accountancy resources services until 31 January 2019, when the business was sold, and now provides distribution activities for the Group, have been aggregated in this segment as management have concluded that these segments do not meet the quantitative thresholds required by AASB 8 Operating Segments. The figures and segments of the previous year have been adjusted to make them comparable with the current year. Geographical segments The Group operates in the geographical segments of Australia and India. The Indian operations, which are in the course of winding up, are not considered material for a separate geographical segment disclosure during the financial year 2019. S T N E M E T A T S L A I C N A N I F 3 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 3. Segment information (Continued) B. Primary reporting - Business segments Funds Financial Administration, Segment Management Planning Corporate & Other Eliminations Consolidated $’000 $’000 $’000 $’000 $’000 2019 Revenue from external customers Inter-segment sales 1 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 Segment liabilities Acquisitions of plant and equipment, intangible and other non-current segment assets Depreciation, amortisation and impairment 17,465 (3,735) 120 13,850 17,165 (600) 271 16,836 8,574 (729) 14,297 4,335 86 18,718 6,434 - - - - - 8,724 2,182 31,316 6,939 17,358 4,225 (11,509) (2,283) - - 6,228 1,552 (151) 234 - - 48,927 - 477 49,404 14,279 (3,929) 10,350 45,889 11,063 6,077 1,786 1 Intersegment sales for the current period represents internal service charges from the Administration entity to other business lines. S T N E M E T A T S L A I C N A N I F 3 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 3. Segment information (Continued) B. Primary reporting - Business segments (Continued) Funds Financial Administration, Segment Management Planning Corporate & Other Eliminations Consolidated $’000 $’000 $’000 $’000 $’000 2018 Revenue from external customers Inter-segment sales 1 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 Segment liabilities Acquisitions of plant and equipment, intangibles and other non-current segment assets Depreciation, amortisation and impairment 15,631 (3,000) 109 12,740 15,849 (276) 271 15,844 7,595 (817) 13,958 3,276 55 17,289 6,659 - - - - - 9,163 5,147 24,697 5,114 17,926 1,168 (11,225) (1,999) - - 1,251 1,305 69 91 - - 45,438 - 435 45,873 13,437 (4,239) 9,198 40,561 9,430 1,320 1,396 1 Intersegment sales for the current period represents internal service charges from the Administration entity to other business lines. S T N E M E T A T S L A I C N A N I F 4 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 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 statement of comprehensive income. Segment revenue reconciles to total revenue from continuing operations as follows: Total revenue from continuing operations (Note 4) Consolidated 2019 $’000 48,927 2018 $’000 45,438 The Group is domiciled in Australia. The amount of its revenue from external customers in Australia is $48,927,000 (2018: $45,438,000). (ii) Segment assets The amounts provided to the board with respect to total assets are measured in a manner consistent with that of the financial report. 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. The Indian assets are not material. (iii) Segment liabilities The amounts provided to the board with respect to total liabilities are measured in a manner consistent with that of the financial report. These liabilities are allocated based on the operations of the segment. 4. Revenue from ordinary activities From continuing operations Sales revenue Fees received 1 Other Revenue from ordinary activities 1 Includes expense recovery fee of $3,800,000 (2018 : $3,826,000). For details refer to Note 6. 5. Other income Interest received/receivable Other income Consolidated 2019 $’000 47,929 998 48,927 Consolidated 2019 $’000 477 477 2018 $’000 44,605 833 45,438 2018 $’000 435 435 S T N E M E T A T S L A I C N A N I F 4 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 6. Expenses Consolidated Profit before income tax includes the following expenses: a) Amortisation, depreciation, and impairment expense Amortisation Capitalised computer software Client portfolio acquisition costs Total amortisation Depreciation Furniture, office equipment and computers Leasehold improvements Total depreciation Impairment Goodwill Total impairment Total amortisation, depreciation and impairment expense b) Other expenses Professional services Sales, marketing and travel Rental expense relating to operating leases Premises and equipment Communication and computing Printing and stationery Auditors remuneration (Note 25) Regulatory fees Administration and other Expense Recovery 1 Total other expenses 2019 $’000 5 1,497 1,502 35 54 89 195 195 1,786 440 2,029 1,073 633 808 262 755 332 1,977 (800) 7,509 2018 $’000 9 1,307 1,316 26 54 80 - - 1,396 458 1,402 1,071 192 757 231 562 352 2,089 (619) 6,495 1 Under the administration agreement entered into by the Trustee, Fiducian Portfolio Services Limited, on behalf of Fiducian Superannuation Service (FSS) with Fiducian Services Pty Ltd (‘the administrator’), the expenses of FSS are paid on the Trustee’s behalf by the administrator and are reimbursed by FSS by way of an Expense Recovery Fee. Additional out of pocket expense reimbursements of $445,297 (2018: $224,059) have been included in Expense recovery in Note 6(b). For the current year the Expense Recovery Fee of $3,800,000 (2018: $3,826,000) has been included in Revenue from ordinary activities in Note 4 as part of Fees received. S T N E M E T A T S L A I C N A N I F 4 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 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 14) (Decrease) in deferred tax liabilities (Note 18) 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 27.5% (2018: 30%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Entertainment Sundry items Income tax (over)/under provided in previous year Income tax expense c) Tax consolidation legislation 2019 $’000 4,728 (799) 3,929 (248) (551) (799) 14,279 3,927 54 76 (128) 3,929 2018 $’000 4,620 (381) 4,239 6 (387) (381) 13,437 4,031 51 48 109 4,239 Fiducian Group Limited and its wholly owned subsidiaries have formed a tax consolidated group. 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. S T N E M E T A T S L A I C N A N I F 4 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 8. Dividends Final ordinary fully franked dividend for the year ended 30 June 2018 of 11.00 cents (2017: Fully franked 8.90 cents) per share paid on 12 September 2018. Interim ordinary fully franked dividend for the year ended 30 June 2019 of 11.00 cents (2018: Fully franked 9.00 cents) per share paid on 14 March 2019. Total dividends paid during the year Consolidated 2019 $’000 3,447 3,448 6,895 2018 $’000 2,783 2,814 5,597 Subsequent to 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 2019 of 11.3 cents per ordinary share held on 28 August 2019 and payable on 11 September 2019. Franked dividends The franked portions of the final dividends recommended after 30 June 2019 will be franked out of existing franking credits. Franking credits available for the subsequent financial year based on a tax rate of 27.5% Consolidated 2019 $’000 15,878 2018 $’000 13,688 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 $1,347,696 (2018: $1,303,572). 9. Current assets – Cash and cash equivalents Cash at bank and in hand Balance at end of the year Consolidated 2019 $’000 11,792 11,792 2018 $’000 13,885 13,885 S T N E M E T A T S L A I C N A N I F 4 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 10. Current assets – Trade and other receivables Consolidated Amounts receivable from related entities: Related trusts Business development loans * Staff loans * Other Prepayments Advance to acquire a business Less: provision for impairment of receivables * Refer to Note 11 for the non-current portion of these receivables. Movement in provision for impairment of receivables Balance at beginning of the year Additional provision during the year Balance at end of the year 2019 $’000 4,038 534 3 835 385 3,399 9,194 (500) 8,694 (464) (36) (500) 2018 $’000 3,818 410 3 1,067 142 - 5,440 (464) 4,976 (287) (177) (464) At 30 June 2019, a provision for impairment exists for trade receivables outstanding greater than 120 days where management considers that the receivable is impaired. There is no material loss expected, other than the provisions made. Information about the Group’s exposure to interest rate risk in relation to trade and other receivables is provided in Note 32. 11. Non-current assets – Loan receivables Business development loans * Staff loans * Less: provision for impairment of loans Movement in provision for impairment of receivables Balance at beginning of the year Change on initial application of AASB 9 Restated balance at beginning of the year Additional provision during the year Balance at end of the year Consolidated 2019 $’000 5,699 5 (554) 5,150 (188) (366) (554) - (554) 2018 $’000 5,916 10 (188) 5,738 (128) - (128) (60) (188) * Refer to Note 10 for the current portion of these receivables. A. Impaired receivables and receivables past due but not impaired $366,000 has been provided against business development loans in the current year as an opening adjustment resulting from application of AASB 9 (Refer to Note 1-W) resulting in a total provision $554,000. (2018: $188,000). S T N E M E T A T S L A I C N A N I F 4 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 11. Non-current assets – Loan 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 * 2019 2018 Carrying amount Fair value Carrying amount Fair value $’000 5,145 5 5,150 $’000 5,145 5 5,150 $’000 5,728 10 5,738 $’000 5,728 10 5,738 * Business development loans and staff loans are carried at amortised cost; their carrying value is a reasonable approximation of fair value. 12. Investment in Subsidiaries The Group’s principal subsidiaries as at 30 June 2019 are set out below. Country of Equity Holding Name of Entity Incorporation Class of Shares 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 for the Fiducian Funds and Managed Discretionary Accounts, and is the operator of the Fiducian Investment Service. 2 The company acts as the Trustee for the Fiducian Superannuation Service. 3 The company provides platform administration and self-managed superannuation services to clients and corporate services to 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 was to provide bookkeeping, accounting and tax processing services until 31 January 2019 when the business was sold. The company has been restructured and is now responsible for the distribution activities on behalf of the Group. In addition to the above subsidiaries, Fiducian Business Services Pty Ltd has a 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 this company, which are in the process of being wound up, are not considered material to the Group in 2019. S T N E M E T A T S L A I C N A N I F 4 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 13. Non-current assets – Property, plant & equipment Plant and Equipment Furniture, office equipment and computers Less: accumulated depreciation/amortisation Total plant and equipment Movements Consolidated 2019 $’000 1,716 (1,544) 172 Reconciliation of the carrying amount of each class of property, plant and equipment are set out below. Furniture and Office Leasehold Equipment Computers Improvements $’000 $’000 $’000 At 30 June 2017 Cost Accumulated depreciation/amortisation Net book amount Year ended 30 June 2018 Opening net book amount Additions Depreciation/amortisation charge Closing net book amount At 30 June 2018 Cost Accumulated depreciation/amortisation Net book amount Year ended 30 June 2019 Opening net book amount Additions Depreciation/amortisation charge Closing net book amount At 30 June 2019 Cost Accumulated depreciation/amortisation Net book amount 295 (237) 58 58 - (14) 44 295 (251) 44 44 5 (13) 36 300 (264) 36 468 (441) 27 27 44 (13) 58 512 (454) 58 58 70 (22) 106 582 (476) 106 835 (697) 138 138 - (54) 84 834 (750) 84 84 - (54) 30 834 (804) 30 2018 $’000 1,641 (1,455) 186 Total $’000 1,598 (1,375) 223 223 44 (81) 186 1,641 (1,455) 186 186 75 (89) 172 1,716 (1,544) 172 S T N E M E T A T S L A I C N A N I F 4 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 14. 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 FBT Restructure expenses Deferred tax assets before set off Set off against deferred tax liabilities (Note 18) Movements: Opening balance at 1 July Taken to the statement of comprehensive income Deferred tax assets before set off Set off against deferred tax liabilities 15. 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: Impairment/amortisation Total intangible assets 2019 $’000 317 596 348 140 9 37 1,447 (1,447) - 1,199 248 1,447 (1,447) - Consolidated 2019 $’000 5,029 (5,028) 1 18,143 (6,604) 11,539 9,200 (659) 8,541 20,081 2018 $’000 196 573 215 130 11 74 1,199 (1,199) - 1,205 (6) 1,199 (1,199) - 2018 $’000 5,029 (5,023) 6 14,028 (5,593) 8,435 7,799 (464) 7,335 15,776 S T N E M E T A T S L A I C N A N I F 4 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 15. Non-current assets – Intangible assets (Continued) A. Amortisation and impairment movements Movements in each category are set out below: Acquisition of Goodwill on Client Portfolios Acquisition Capitalised Computer Software At 30 June 2017 Cost Accumulated amortisation/impairment Net book amount Year ended 30 June 2018 Opening net book amount Additions 1 Amortisation charge 3 Closing net book amount At 30 June 2018 Cost Accumulated amortisation/impairment Net book amount Year ended 30 June 2019 Opening net book amount Additions 1 Sale of business 2 Amortisation/impairment charge 3 Closing net book amount At 30 June 2019 Cost 4 Accumulated amortisation/impairment 4 Net book amount $’000 12,949 (4,286) 8,663 8,663 1,079 (1,307) 8,435 14,028 (5,593) 8,435 8,435 4,776 (175) (1,497) 11,539 18,143 (6,604) 11,539 $’000 7,600 (464) 7,136 7,136 199 - 7,335 7,799 (464) 7,335 7,335 1,401 - (195) 8,541 9,200 (659) 8,541 $’000 5,029 (5,014) 15 15 - (9) 6 5,029 (5,023) 6 6 - - (5) 1 5,029 (5,028) 1 Total $’000 25,578 (9,764) 15,814 15,814 1,278 (1,316) 15,776 26,856 (11,080) 15,776 15,776 6,177 (175) (1,697) 20,081 32,372 (12,291) 20,081 1 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. 2 On 1 February 2019, the client portfolio relating to the accountancy business was sold for $163,417. At the time of sale, the book value of this portfolio was $137,280 ($175,100 at 1 July 2018), the related goodwill was $194,768 and related deferred tax liability was $27,825. The overall loss therefore from the transaction was $140,806. 3 Amortisation/impairment of $1,697,000 (2018 : $1,316,000) is included in amortisation, depreciation and impairment expense in the statement of comprehensive income. 4 Excludes original cost and accumulated amortisation of the accountancy business sold during the year. B. Impairment tests for goodwill and client portfolios Goodwill and client portfolios are allocated to the financial planning business reportable segment which has been identified as the applicable cash-generating unit (CGU). The CGU is the lowest level within the entity at which the goodwill and client portfolios are monitored for internal management purposes on an ongoing basis. The recoverable amount of the CGU is determined based on market value calculations. These calculations apply income multiples consistent with the market valuations of similar financial services businesses to recurring revenue from the CGU at the year end, less cost to sell. S T N E M E T A T S L A I C N A N I F 4 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 15. Non-current assets – Intangible assets (Continued) C. Impact of reasonably possible changes in key assumptions The estimates and judgments included in the fair value calculations are based on historical experience, observed transactions in the market for similar financial services businesses 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) below there has been no impairment recognised for the Group’s CGUs in the impairment assessment performed at 30 June 2019. The key assumption made in the assessment of impairment of goodwill is the income multiple applied to recurring revenues. The income multiple assumption is compared to market each year and adjusted appropriately. In the current year, there has been considerable volatility of income multiples observed in the market, with the industry affected by the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and potential future regulation. Based on management’s current assessment, the recoverable amount of the Group’s CGU exceeds the carrying amount by $3.7 million. A change in assumption of 0.5 times would be required before the carrying value of the CGU would exceed the recoverable amount. D. Impairment charge During the year, an impairment charge of $194,768 was recorded against goodwill relating to the sale of the accountancy resource business (2018: Nil). E. Business Combination During the year the Group had made the following acquisitions: Segment Fiducian entity Date Purchased Vendor staff employed by Group Maximum purchase price Paid by 30 June 2019 Deferred consideration at 30 June 2019 Value attributed on the Statement of Financial Position as at 30 June 2019 Financial Planning Financial Planning Financial Planning Fiducian Financial Services Pty Ltd Fiducian Financial Services Pty Ltd Fiducian Financial Services Pty Ltd 8 Dec 2018 17 Dec 2018 4 Jul 2018 Client portfolio Client portfolio Client portfolio Yes $1,778,195 $1,071,029 $707,166 Yes $2,389,461 $1,556,650 $832,811 Yes $617,567 $605,871 - 100% 100% 100% Business combination or asset only Business Combination Business Combination Business Combination Provisional fair value of assets recognized as a result of acquisition are as follows: Intangible assets Deferred tax liabilities Net identifiable assets acquired Goodwill Net assets acquired $1,778,195 ($499,176) $1,279,019 $499,176 $1,778,195 $2,389,461 ($716,838) $1,672,623 $716,838 $2,389,461 $605,871 ($185,270) $420,601 $185,270 $605,871 While each acquistion is considered on its own merits, a number of synergies are expected to result once the business combination has been fully implemented. This may include leverage from the existing scale Fiducian has from its infrastructure in Risk, Compliance, IT, Legal, Finance and other support functions, products and processes. The acquired businesses did not contribute significantly to the Group’s current year profits. However if the acquisitions had taken place on 1 July 2018, management estimate a maximum revenue impact of $1,577,228 from the acquisitions for the year ended 30 June 2019. 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 acquistions 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. S T N E M E T A T S L A I C N A N I F 5 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 16. Current liabilities – Trade and other payables Trade payables Other payables 1,2 Client portfolio deferred settlement Annual leave entitlements accrued Long service leave entitlements accrued Total trade and other payables Consolidated 2019 $’000 2,179 2,638 1,604 649 869 7,939 2018 $’000 2,032 2,319 198 705 827 6,081 Information about the Group’s exposure to credit and interest rate risk is shown in Note 32. 1 Includes provision for fee for no service of $100,000 (2018: Nil). 2 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. 17. Current liabilities – Current tax liabilities Income tax Total current tax liabilities Consolidated 2019 $’000 696 696 2018 $’000 1,460 1,460 S T N E M E T A T S L A I C N A N I F 5 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 18. Non-current liabilities – Deferred tax liabilities Consolidated The balance comprises temporary differences attributable to: Amounts recognised in profit and loss: Amortisation, depreciation and impairment Deferred tax liabilities before set off Set off against deferred tax assets (Note 14) 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 Total deferred tax liabilities 19. Non-current liabilities – Provisions Client portfolio deferred settlement - payments Employee benefits - long service leave Total provisions 2019 $’000 3,407 3,407 (1,447) 1,960 2,556 1,402 (551) 3,407 (1,447) 1,960 523 1,437 1,960 Consolidated 2019 $’000 - 468 468 2018 $’000 2,556 2,556 (1,199) 1,357 2,625 318 (387) 2,556 (1,199) 1,357 413 944 1,357 2018 $’000 154 378 532 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. The entire amount is presented as non-current as no material amounts are expected to be settled within the next 12 months. S T N E M E T A T S L A I C N A N I F 5 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 20. Contributed equity A. Share Capital Ordinary shares - fully paid Total share capital B. Movements in ordinary share capital Date Details 1 July 2017 Opening balance Shares bought back-on market and cancelled 30 June 2018 Balance Shares issued on exercise of options 30 June 2019 Balance Number of shares 31,264,368 (21,745) 31,242,623 200,000 31,442,623 Consolidated 2019 $’000 7,636 7,636 Average price - $4.55 - $2.98 - 2018 $’000 7,041 7,041 $’000 7,141 (100) 7,041 595 7,636 C. Ordinary shares D. Share buy-back 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 amount 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. Between 1 July 2018 and 30 June 2019, the Company did not purchase and cancel any ordinary shares on-market. At 30 June 2019, 478,255 shares remained available to be repurchased under the most recently announced buy back notice to the ASX. E. Options Information relating to Fiducian Group Employee and Director options issued, exercised and lapsed during the year is set out in Note 24. S T N E M E T A T S L A I C N A N I F 5 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 20. Contributed equity (Continued) 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) License and their Australian Financial Services (AFS) License, and to continue to provide returns to shareholders and benefits to 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. 21. Reserves 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 AFS licence, Fiducian Portfolio Services Limited must maintain $150,000 cash at all times during the financial year. The requirements under the AFS License and RE License are maintained by placing cash on deposit with an ADI. The requirement under the AFS License is reported to the Board at each quarterly meeting. Movements Share-based payments reserve Balance at 1 July Option expense Transfer to retained profits (on exercise of options) Balance at 30 June Consolidated 2019 $’000 130 11 (119) 22 The share-based payments reserve is used to recognise the fair value of options issued but not exercised. 22. Retained profits Movements Balance at 1 July Change on initial application of AASB 9 Restated balance at 1 July Net profit for the year Dividends paid (Note 8) Transfer from share-based payment reserve (on exercise of options) Balance at 30 June Consolidated 2019 $’000 23,960 (366) 23,594 10,350 (6,895) 119 27,168 2018 $’000 120 10 - 130 2018 $’000 20,359 - 20,359 9,198 (5,597) - 23,960 S T N E M E T A T S L A I C N A N I F 5 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 23. Key management personnel disclosures A. Key management personnel Short-term employee benefits Post-employment benefits Share-based payment Total payments to key management personnel Consolidated 2019 $ 813,062 34,571 11,045 858,678 2018 $ 837,330 33,932 45,278 916,540 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 number 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 below. 2019 Name I Singh 1 Balance at the start of the year 200,000 Granted during the year as remuneration 35,000 Exercised 200,000 Lapsed during the year Balance at the end of the year Vested and exercisable - 35,000 - 1 Under the terms of his employment Mr I Singh is not entitled to any options relating to the current year. Options granted during the year are in respect of the entitlement relating to the year ended 30 June 2018. 2018 Name I Singh 1 Balance at the start of the year 100,000 Granted during the year as remuneration Exercised Lapsed during the year Balance at the end of the year - 100,000 - 200,000 Vested and exercisable 100,000 1 Under the terms of his employment Mr I Singh was entitled to 35,000 options relating to the year ended 30 June 2018. These were subject to approval at the Annual General Meeting on 25 October 2018 and were issued subsequent to 30 June 2018. Therefore, these have not been included in the table. Options granted during the year ended 30 June 2018 are in respect of the entitlement relating to the year ended 30 June 2017. S T N E M E T A T S L A I C N A N I F 5 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 23. Key management personnel disclosures (Continued) B. Equity instrument disclosures relating to key management personnel (Continued) (iii) Shareholdings The number of 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 below. There were no shares granted during the period as compensation. 2019 Name I Singh R Bucknell F Khouri S Hallab 2018 Name I Singh R Bucknell F Khouri S Hallab 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 10,523,851 583,000 268,323 31,000 200,000 - - - - - - 21,477 10,723,851 583,000 268,323 52,477 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 10,523,851 583,000 268,323 - - - - - - - - 31,000 10,523,851 583,000 268,323 31,000 Shares provided on exercise of options During the year 200,000 ordinary shares were issued as a result of the exercise of remuneration options by the Executive Chairman of Fiducian Group Limited (2018: Nil). 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 (2018: Nil). Details of loans to related parties of the directors have been disclosed in Note 28 Related Party Transactions. S T N E M E T A T S L A I C N A N I F 5 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 23. Key management personnel disclosures (Continued) 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. S Hallab 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 Total payments relating to other transactions with key management personnel Consolidated 2019 $ 272,633 205,824 478,457 2018 $ 276,222 207,417 483,639 Details of these fees and explanations for the increase have been provided in the Remuneration report included in the Director’s 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 under option Shares issued on the exercise of options Unissued ordinary shares of Fiducian Group Limited under option at the date of this report are disclosed in Note 24 of the financial report. The details of ordinary shares of Fiducian Group Limited issued during the year ended 30 June 2019 on the exercise of options granted under The Fiducian Group Limited Employee and Director Share Option Plan is disclosed under Note 24 to the financial report. 24. Share based payments A. Employee and director share option plan (ESOP) 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 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. The parent entity 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, S T N E M E T A T S L A I C N A N I F 5 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 24. Share based payments (Continued) 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, 35,000 options @ $4.35 were issued (2018: 100,000 @ $3.77) to the Executive Chairman in respect of his entitlement relating to financial year ended 30 June 2018 and no employee options expired during the same period (2018: 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 not to issue any options (2018: 35,000 options) to the Executive Chairman in respect of the year ended 30 June 2019. Since no options were issued in the current year, the assessed fair value at reporting date of the share based payments during the year ended 30 June 2019 was nil per option (2018: $0.72). 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, a nil dividend yield on the ordinary shares of the Company and a volatility in the Company’s share price of 30% based on historical share price. Set out below are summaries of options granted under various option plans: Vested & Grant Expiry Exercise Start of the During the During the During the End of the at the End of Balance at Granted Exercised Lapsed Balance at Exercisable Date Date Price Consolidated 2019 ESOP-Executive Chairman 20 Oct 16 20 Oct 21 20 Oct 17 20 Oct 22 25 Oct 18 25 Oct 23 $2.18 $3.77 $4.35 Weighted average exercise price Year Number Year Number Year Number Year Number Year Number Year Number 100,000 100,000 - 200,000 $2.98 - - 35,000 35,000 $4.35 100,000 100,000 - 200,000 - - - - - - - - 35,000 35,000 $4.35 - - - - - The volume of weighted average remaining contractual life of share options outstanding at the end of the period was 4.32 years (2018 : 3.81 Years). Grant Expiry Exercise Start of the During the During the During the End of the at the End of Balance at Granted Exercised Lapsed Balance at Exercisable Date Date Price Consolidated 2018 ESOP-Executive Deputy Chairman 20 Oct 16 20 Oct 21 20 Oct 17 20 Oct 22 $2.18 $3.77 Weighted average exercise price Year Number 100,000 - 100,000 $2.18 Year Number - 100,000 100,000 $3.77 Year Number Year Number Year Number - - - - - - - - 100,000 100,000 200,000 $2.98 Year Number 100,000 - 100,000 - Vested & The volume weighted average remaining contractual life of share options outstanding at the end of the period was 3.81 years (2017: 4.31 Years). B. Expenses arising from share-based payment transactions Expenses of $11,045 (2018: $45,278) arising from share-based payment transactions were recognised during the period as part of employee benefit expense. This expense is in respect of option entitlements relating to the year ended 30 June 2018 expensed over the term in accordance with the accounting standards. S T N E M E T A T S L A I C N A N I F 5 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 25. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity and its related practices: Audit services PricewaterhouseCoopers Australian firm: (i) Audit and other assurance services Audit and review of financial statements Other assurance services (ii) Taxation services Tax compliance services and agreed upon procedures Consolidated 2019 $ 2018 $ 199,105 418,779 617,884 137,200 137,200 142,447 419,498 561,945 - - Total remuneration 755,084 561,945 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, on the proviso that the auditor’s independence is not affected. Additionally, we have carried out an enterprise wide investigation over six months to ensure that fees have only been charged when a service has been provided. While management is confident in its procedures and controls, a provision of $100,000 has nevertheless been provided for in these financial statements and has been disclosed in Note 16. 26. Contingent liabilities The parent entity and Group had contingent liabilities at 30 June 2019 in respect of bank guarantees for property leases of parent and group entities amounting to $602,547 (2018: $590,357). Royal Commission In February 2019, the Royal Commission into Misconduct in Banking, Superannuation and Financial Services Industry delivered its final report. Some themes included obeying the law and delivering services that are fit for purpose. Specifically, a major point of discussion was the charging of fees without the provision of advice. Our compliance and legal teams have conducted extensive reviews into this matter, with no systemic issues being identified. We credit this to compliance with the following processes: • We have a strict compliance framework and code of conduct expected from our financial planners, who also participate in training programs for professional development • We carry out frequent reviews of compliance with the law and appropriateness of financial planning strategies. These are conducted randomly and as well through face-to-face meetings by our compliance team and practice development managers • We have mandated since inception that all financial planners must provide regular reviews to their clients’ portfolios which is part of our operating culture S T N E M E T A T S L A I C N A N I F 5 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 27. Commitments for expenditure A. Capital expenditure Commitment payable within one year B. Operating leases Consolidated 2019 $’000 - 2018 $’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 2019 $’000 813 297 1,110 2018 $’000 1,021 565 1,586 Payable within one year Payable later than one year but not later than 5 years Total operating lease commitments 28. Related-party transactions A. Parent entity The parent entity within the Group is Fiducian Group Limited at year end. B. Subsidiaries Interests in subsidiaries are set out in Note 12. The consolidated financial report incorporates 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 23. 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 and Managed Discretionary Accounts 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 c. Loans to related parties of directors The above transactions were on normal commercial terms and conditions and at market rates. S T N E M E T A T S L A I C N A N I F 6 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 28. Related-party transactions (Continued) D. Transactions with related parties (Continued) The following transactions occurred with related parties: Related trusts Fiducian Investment Service Operator fees income Expense recovery Fiducian Superannuation Service Operator fees income Expense recovery Fiducian Funds Operator fees income Expense recovery Entities associated with directors or their relatives Hawkesbury Financial Services Pty Ltd 2 Financial planning fees paid Fiducian Financial Services Bondi Junction Pty Ltd 3 Financial planning fees paid Consolidated Ownership Interest 1 Nil Nil Nil 2019 $ 2018 $ 6,279,584 283,624 5,699,653 322,266 16,833,620 4,245,297 15,806,889 3,946,610 17,465,219 15,630,767 270,000 270,000 205,824 207,417 123,669 134,343 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. Loans to Related Parties of Balance at Payable for the During the Balance at KMP in This Directors 1 July 2018 Year Year 30 June 2019 Aggregation Interest Paid/ Repaid Number of $ $ $ $ Aggregate details of staff loans made to key management personnel of the Group, including their close family members and entities related to them. 12,773 498 (5,390) 7,881 1 S T N E M E T A T S L A I C N A N I F 6 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 28. Related-party transactions (Continued) 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) Total current receivables Consolidated 2019 $ 3,645,417 3,645,417 2018 $ 3,492,186 3,492,186 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. 29. Reconciliation of profit or loss after income tax to net cash inflow from operating activities Profit for the year Non-cash employee benefit Amortisation, depreciation, and impairment 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 Consolidated 2019 $’000 10,350 76 1,786 83 (763) (96) 236 (733) 10,939 2018 $’000 9,198 117 1,396 (762) 180 372 262 (385) 10,378 S T N E M E T A T S L A I C N A N I F 6 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 30. Earnings per share Earnings per share using weighted average number of ordinary shares outstanding during the period: A. Basic earnings per share (in cents) Profit from continuing operations attributable to the ordinary equity and potential ordinary equity of the company B. Diluted earnings per share (in cents) Profit from continuing operations attributable to the ordinary equity of the company Consolidated 2019 2018 33.03 29.42 32.94 29.28 Consolidated 2019 Number 2018 Number C. Weighted average number of shares used as denominator Weighted average number of ordinary shares used as denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share options Weighted average number of ordinary shares and potential ordinary shares used as denominator in calculating diluted earnings per share 31,331,664 31,263,238 91,996 152,269 31,423,660 31,415,506 Consolidated 2019 $’000 2018 $’000 D. Reconciliation of earnings used in calculating basic and diluted earnings per share Net profit and earnings used to calculate basic and diluted earnings per share 10,350 9,198 E. Information concerning the classification of securities 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 24. S T N E M E T A T S L A I C N A N I F 6 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 31. Events occurring after balance date / reporting date Subsequent to the end of the financial year, the Group entered into purchase agreements to acquire two financial planning businesses. Details are as follows: Segment Fiducian entity Date Purchased Location Funds under advice Vendor staff employed by Group Maximum purchase price Settled by 30 June 2019 Deferred consideration at 30 June 2019 Value attributed on the Statement of Financial Position as at 30 June 2019 Business combination or asset only Provisional fair value of assets recognized as a result of acquisition are as follows: Intangible assets Deferred tax liabilities Net identifiable assets acquired Goodwill Net assets acquired Financial Planning Financial Planning Fiducian Financial Services Pty Ltd Fiducian Financial Services Pty Ltd 16 Jul 2019 1 Jul 2019 Client portfolio Client portfolio Victoria Tasmania $15,000,000 $340,000,000 No $361,942 - - Nil Yes $3,491,332 $3,491,332 - Nil Business Combination Business Combination $361,942 ($108,582) $253,360 $108,582 $361,942 $3,491,332 ($1,047,400) $2,443,932 $1,047,400 $3,491,332 Other than this, 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. S T N E M E T A T S L A I C N A N I F 6 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 32. 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 Loan receivables Advance to acquire a business Total financial assets Financial liabilities Trade and other payables A. Market risk (i) Foreign exchange risk Consolidated 2019 $’000 11,792 4,758 5,687 3,399 25,636 2018 $’000 13,885 4,703 6,151 - 24,739 8,407 6,613 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 loans to staff and planners. The Group has no borrowings. Cash at bank and on deposit Business development and staff loans 30 June 2019 Weighted Average Interest Rate % 1.32% 3.45% 30 June 2018 Weighted Average Interest Rate % 1.58% 4.26% Balance $’000 11,792 5,687 17,479 Balance $’000 13,885 6,151 20,036 Bank deposits are at call and staff and planner loans have terms extending between 1 and 10 years, and may be repayable sooner in certain circumstances. Interest rates are reviewed and adjusted at least quarterly. The Group’s main interest rate risk arises from cash and cash equivalents and loans with variable interest rates. At 30 June 2019 if interest rates change by +/- 100 basis points (2018: +/- 100 basis points) from the year end rates with all other variables held constant, post-tax profit would have been $126,886 higher or lower (2018: $ 141,570). B. Credit risk Credit risk for the Group arises from trade receivables, cash at bank and on deposits, business development and staff loans. Risk Management The Group has low credit risk from trade receivables, as management fee and financial planning income is received within one month of it falling due. Financial planning fees are only paid following the receipt of the related income, thereby mitigating credit risk. S T N E M E T A T S L A I C N A N I F 6 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 32. Financial risk management (Continued) B. Credit risk (Continued) For cash at bank and on deposits, the credit quality assessed against external credit ratings and only parties with minimum rating as detailed below in the table are accepted. For business development and staff loans which are unrated management assesses the credit quality of the franchisee based on credit rating scorecard taking into account financial position, collateral to provide security for the loan and cultural alignment to the business. The compliance with credit limits are monitored regularly by line management. The credit quality of other financial assets can be assessed against external credit ratings as follows: Cash at bank and on deposit AA- Business development and staff loans Unrated Consolidated 2019 $’000 2018 $’000 11,792 13,885 5,687 6,151 Business development and staff loans have been categorised in line with the Group’s internal credit classification as follows: Performing Under performing Non performing Loans written off Total gross loan receivables Less: Loan loss allowance Less: Write off Loan receivables net of expected credit losses Security Consolidated 2019 $’000 4,261 1,980 - - 6,241 (554) - 5,687 2018 $’000 4,840 1,499 - - 6,339 (188) - 6,151 Under the terms of the agreement for business development loans, the Group has a security deed over all the assets of the franchisee’s business which is registered on the Personal Property Security Register. This security may be called upon if the franchisee defaults under the terms of agreement. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised on this page. S T N E M E T A T S L A I C N A N I F 6 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 32. Financial risk management (Continued) C. Liquidity risk The Group maintains sufficient liquid reserves to meet all foreseeable working capital, investment and regulatory licensing requirements. The Group has a $4 million undrawn overdraft facility (2018: $4 million) available with their bank. Financial Liabilities Due in less than 1 year Due between 1 and 2 years Total financial liabilities D. Fair value estimation Consolidated 2019 $’000 7,939 468 8,407 2018 $’000 6,081 532 6,613 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) The Group did not have any assets or liabilities recognised at fair value as at 30 June 2019. E. Assets and liabilities not carried at fair value but for which fair value is disclosed Cash and cash equivalents include 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. 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 market interest rates for these types of loan. 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. S T N E M E T A T S L A I C N A N I F 6 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 33. 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. Total comprehensive income Dividend from subsidiary and other income Parent Entity 2019 $’000 23,899 9,349 33,248 - - - 2018 $’000 19,011 9,349 28,360 - - - 33,248 28,360 7,636 22 25,590 33,248 7,041 130 21,189 28,360 11,100 8,300 34. Deed of Cross – Guarantee The Company has in place a deed of cross-guarantee, substantially in the form of ASIC Pro Forma 24 covering each wholly owned member of the Fiducian Group, with the exception of Fiducian Portfolio Services Ltd. This entity has been excluded from the Group deed of cross-guarantee following the release of an ASIC class order disallowing APRA regulated entities from being part of a closed group covered by a deed of cross-guarantee. Since the financial statements of this excluded entity are not material to the consolidated financial statements, management do not consider it necessary to disclose additional consolidation information related to the closed group excluding this entity. The effect of the deed of cross-guarantee is that each participating member has entered into the deed, guarantees to each creditor of any participating 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. S T N E M E T A T S L A I C N A N I F 6 8 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Directors’ Declaration In the directors’ opinion: (a) the financial statements and notes set out on pages 26 to 68 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 2019 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 34. 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 Executive Chairman 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 Executive Chairman Sydney, 15 August 2019 I N O T A R A L C E D ’ S R O T C E R I D 6 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Independent Auditor’s Report to the Members Independent auditor’s report To the members of Fiducian Group Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Fiducian Group Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: • • • • • • the consolidated statement of financial position as at 30 June 2019 the consolidated statement of comprehensive income for the year then ended the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the notes to the financial statements, which include a summary of significant accounting policies the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 1 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality •For the purpose of our audit we used overall Group materiality of $713,900, which represents approximately5% of the Group’s profit before tax.•We applied this threshold, together with qualitative considerations, to determine the scope of our audit andthe nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on thefinancial report as a whole.•We chose Group profit before tax because, in our view, it is the benchmark against which the performance ofthe Group is most commonly measured.•We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonlyacceptable thresholds.Audit Scope •Our audit focused on where the Group made subjective judgements; for example, significant accountingestimates involving assumptions and inherently uncertain future events.•Our audit procedures covered the Group’s most significant operations being “Financial planning”, “Fundsmanagement” and “Corporate, administration & other”.Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. Key audit matter How our audit addressed the key audit matter Revenue Refer to note 4 - $49.4m Our procedures included:  evaluating the design and testing the Revenue from ordinary activities of the Group includes income from ‘financial planning’, ‘funds management’ and ‘corporate administration & other’. Revenue was a key audit matter because it is the most significant account balance in the consolidated statement of comprehensive income. On 1 July 2018, the Group implemented it’s transition to AASB 15 Revenue from Contracts with Customers.     operating effectiveness of certain controls related to recognition and calculation of revenue for revenue streams based on fee rates stipulated in contracts, including administration fees, portfolio review fees, and funds management fees, manually re- performing the fee calculations for a sample of transactions with reference to Product Disclosure Statements (PDS), member application forms or other forms of documentation of terms for revenue streams earned through provision of advice, understanding management’s controls to monitor the provision of advice and agreeing a sample of transactions to the relevant Statement of Advice (SoA) or Record of Advice (RoA) for revenue streams earned from a non Fiducian product, agreeing a sample of transactions to relevant external supplier statements for revenue streams where amounts are at the discretion of the Group’s financial planners, agreeing a sample of transactions to correspondence between the planner and the relevant client  assessing whether the revenue recognition was consistent with the requirements of AASB15 Recoverability of loans to financial planners Refer to note 10 and 11 - $6.2m From time to time, the Group enters into lending arrangements with some financial planning franchisees. Outstanding loans totalled $6.2m gross of provisions at the reporting date. The recoverability of the loans was a key audit matter due to the judgement involved in assessing the ability of each financial planner to repay their loan as and when they fall due. Our procedures included:  obtaining an understanding of and evaluating the Group’s year-end assessment of the Expected Credit Losses (ECL) model used to assess the recoverability of loans to financial planners and adequacy of any provisions  making inquiries of management about any changes in each borrower’s circumstances and evaluating a sample of the Group’s assessment of the financial health and performance of each borrower by comparing the key inputs and assumptions to supporting T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 2 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Key audit matter How our audit addressed the key audit matter On 1 July 2018, the Group implemented it’s transition to AASB 9 Financial Instrument. Assessment of intangible assets’ carrying values Refer to note 15 - $20m The Consolidated statement of financial position includes intangible assets relating to portfolios of financial advice clients and goodwill arising from acquisitions made by the financial planning business of the Group. At each year end, the Group considers whether there are any indicators that the carrying value of client portfolios might be impaired. It also performs an annual impairment test for goodwill. This was a key audit matter due to the size of the intangible assets balance, the volatility in observed multiples in the Financial Planning industry and therefore the judgement involved in determining the multiples used for the Group’s impairment assessment. Given the observed volatility in multiples in the Financial Planning industry, Group has also assessed an alternative valuation model as a method of stress testing. documentation  obtaining confirmations from all financial planners  agreeing details of collateral/security arrangements to loan contracts and Personal Property Security Registers for a sample of the loans  evaluating the Group’s assessment and opening adjustment on adoption of AASB 9 Our procedures included:  updating our understanding of prevailing market conditions and factors that could materially affect the fair value and usage of the relevant assets, and considering whether these could represent indicators of impairment  evaluating key assumptions used by the Group in the calculation of the recoverable amount of acquired client portfolios and goodwill, such as the multiple applied to associated revenues when estimating fair value, and comparing market multiples to independent sources and stress testing multiples applied  our work on an alternative impairment model included:  testing the mathematical accuracy of the calculations in the discounted cash flow models used in the impairment assessment (the models)  evaluating the cash flow forecasts used in the models, the process by which they were developed, including back testing the forecasts against historical results and ensuring appropriate challenge through Management review and approval comparing the key assumptions, including discount rates where our valuation experts were consulted, with market information and stress testing these assumptions  T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 3 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Other information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's report. T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 4 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 16 to 22 of the directors’ report for the year ended 30 June 2019. In our opinion, the remuneration report of Fiducian Group Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities 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. PricewaterhouseCoopers Darren Ross Partner Sydney 15 August 2019 T R O P E R S ’ R O T I D U A T N E D N E P E D N I 7 5 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Shareholder Information A. Distribution of equity security holders by size of holding Analysis of number of equity security holders by size of holding, as at 31 July 2019: Distribution 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total holders Option holders Ordinary Share Holder - - - - 1 1 297 544 177 202 22 1,242 There were 20 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 31 July 2019, are listed below: Name INDYSHRI SINGH PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED LONDON CITY EQUITIES LIMITED SHRIND INVESTMENTS PTY LTD (INDYSHRI SUPER FUND A/C) MR VICTOR JOHN PLUMMER CITICORP NOMINEES PTY LIMITED HUNTER PLACE SERVICES PTY LTD MR IVAN TANNER + MRS FELICITY TANNER (THE SUPERNATURAL S/F A/C) 1 2 3 4 5 6 7 8 9 10 D R SMITH HOLDINGS PTY LTD 11 BNP PARIBAS NOMINEES PTY LTD (DRP) 12 GARRETT SMYTHE LTD 13 NORCAD INVESTMENTS PTY LTD 14 BNP PARIBAS NOMS (NZ) LTD (DRP) 15 HFR PTY LTD (THE F & M KHOURI S/FUND A/C) 16 MR IAN HAROLD HOLLAND 17 GREENWICH STUD PTY LTD 18 BOND STREET CUSTODIANS LIMITED (SALTER - D64848 A/C) 19 SORTIE PTY LIMITED (SORTIE SUPER FUND A/C) 20 MRS JENNIFER MARGARET LEESON Number Held Issued Shares Percentage of 8,795,933 2,423,613 2,100,696 2,012,214 1,927,918 850,000 700,060 583,000 524,400 500,000 421,650 339,000 320,000 220,900 216,137 165,000 157,400 154,694 142,198 138,847 27.97 7.71 6.68 6.40 6.13 2.70 2.23 1.85 1.67 1.59 1.34 1.08 1.02 0.70 0.69 0.52 0.50 0.49 0.45 0.44 22,693,660 72.16 I N O T A M R O F N I R E D L O H E R A H S 7 6 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Shareholder Information (Continued) Unquoted equity securities As at 31 July 2019 Type of Security Options - Executive Chairman C. Substantial shareholders Number on Issue Number of Holders 35,000 1 Substantial shareholders and associates as at 31 July 2019 (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 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED LONDON CITY EQUITIES LIMITED Number Held Percentage 10,723,851 2,423,613 2,100,696 2,012,214 34.10 7.71 6.68 6.40 D. Voting rights The voting rights attaching 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 I N O T A M R O F N I R E D L O H E R A H S 7 7 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Corporate Directory Directors I Singh BTech, MComm (Bus), ASIA, ASFA, DipFP, CFP Executive Chairman R Bucknell FCA F Khouri B Bus, FCPA, CTA S Hallab B Ec (Accnt & Law), CA, GAICD, FAIST Company secretary I Singh BTech, MComm (Bus), ASIA, ASFA, DipFP, CFP 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 17 October 2019 Y R O T C E R I D E T A R O P R O C 7 8 Principal registered office in Australia Auditor Level 4 1 York Street Sydney NSW 2000 (02) 8298 4600 PricewaterhouseCoopers Chartered Accountants One International Towers Watermans Quay, Barangaroo Sydney NSW 2000 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 Bankers ANZ Banking Group 388 Collins Street Melbourne VIC 3000 National Australia Bank Limited 500 Bourke Street Melbourne VIC 3000 Share registrar Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000 Australian Securities Exchange Listing Fiducian Group Limited (ASX:FID) Website address www.fiducian.com.au 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 Financial Planner Office Locations Australian Capital Territory Canberra New South Wales Bathurst Bondi Macarthur Maitland Bondi Junction Newcastle Caves Beach Nowra Coffs Coast Randwick Gosford Hunter Southern Highlands Sydney CBD Tamworth Taren Point Windsor Wollongong Wynyard Queensland Bayside Buderim Caboolture Caloundra Tasmania Devonport Hobart Launceston Victoria Colac Geelong Ivanhoe Noosa Hinterland Sunshine Coast Toowoomba Sale St Kilda Sunbury Mt Waverley Surrey Hills Ringwood Western Australia Kelmscott South Perth I S N O T A C O L E C I F F O 7 9 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610 THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY 8 0 2019 Annual Report – Fiducian Group Ltd ABN 41 602 423 610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 

Continue reading text version or see original annual report in PDF format above