HUB24
Annual Report 2022

Plain-text annual report

‘22 ANNUAL REPORT for the year ended 30 June 2022 1 CONTENTS 3 4 5 12 25 26 47 48 49 Appendix 4E – Year Ended 30 June 2022 Financial Highlights FY22 Chairman and Managing Director’s report 50 51 52 Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Directors’ report 109 Glossary Auditor’s independence declaration 110 Directors’ declaration Remuneration report Financial statements 111 Independent auditor’s report 115 Additional information Consolidated statement of profit or loss and other comprehensive income 117 Corporate information Consolidated statement of financial position CORPORATE GOVERNANCE The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, HUB24 Limited and its Controlled entities (‘the Group’) have adopted the fourth edition of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate Governance Council on 27 February 2019, effective for the financial years beginning on or after 1 January 2020. The Group’s Corporate Governance Statement for the financial year ending 30 June 2022 is dated as at 30 June 2022 and was approved by the Board on 23 August 2022. The Corporate Governance Statement is available on HUB24 Limited’s website at www.hub24.com.au/corporate-governance-statement. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20222 HUB24 has delivered strong growth during FY22 whilst remaining focussed on enhancing value for our customers and delivering on our strategic objectives and our purpose to empower better financial futures together. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 3 APPENDIX 4E – YEAR ENDED 30 JUNE 2022 UNDER ASX LISTING RULE 4.3A RESULTS FOR ANNOUNCEMENT TO THE MARKET Current period Prior corresponding period KEY INFORMATION Income from ordinary activities Net profit/(loss) after tax for the period attributable to equity holders Basic earnings per share Diluted earnings per share DIVIDENDS Interim dividend (per share) Final dividend (per share) 1 July 2021 to 30 June 2022 1 July 2020 to 30 June 2021 Year ended 30 June 2022 $’000 192,525 14,662 Cents 20.18 19.53 Year ended 30 June 2021 $’000 110,853 9,769 Cents 14.83 14.28 % change 74% 50% 36% 37% Amount per security (cents) 7.50 12.50 Franked per security (%) 100 100 Subsequent to year ended 30 June 2022 the directors have determined a fully franked final dividend of 12.5 cents per share (a fully franked 5.5 cents per share final dividend was paid following the year ended June 2021). Dates for the dividend are as follows: Ex-date Record date Dividend payment date EXPLANATION OF RESULTS Refer to the attached Directors’ Report and review of operations for further explanation. Net tangible assets (per fully paid ordinary share)1 12 September 2022 13 September 2022 14 October 2022 Year ended 30 June 2022 $0.33 Year ended 30 June 2021 $1.13 1 Net tangible assets (NTA) used for the calculation of NTA per fully paid ordinary share are inclusive of both right of use asset and lease liabilities. ENTITIES OVER WHICH CONTROL HAS BEEN GAINED OR LOST DURING THE PERIOD HUB24 Limited completed the acquisition of Class Limited and its wholly owned subsidiaries effective 16 February 2022. Please refer to note 6.2 for more information AUDIT0R REVIEW The Report is based on the consolidated year end report that has been audited by the Group’s auditors, Deloitte Touche Tohmatsu. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20224 FINANCIAL HIGHLIGHTS FY22 GROUP TOTAL REVENUE $192.5m £76% UNDERLYING EBITDA1 $70.4m £94% UNDERLYING NPAT2 $35.9m £133% COST TO INCOME RATIO 63.4% FY21: 66.3% FULLY FRANKED FINAL DIVIDEND 12.5 cents per share Interim dividend was 7.5 cents per share, taking the total FY22 dividend to 20 cents per share FY21 DIVIDEND: 5.5 CENTS PER SHARE £127% DILUTED EARNINGS PER SHARE 19.5 cents £37% PLATFORM KEY METRICS PLATFORM NET INFLOWS $49.7b £20%3 PLATFORM FUA OF $11.7b Ÿ32%3 PARS FUA OF $15.9b 8%4 NUMBER OF ADVISORS NUMBER OF PARS ACCOUNTS PLATFORM SEGMENT REVENUE 3,486 £14% CLASS NUMBER OF ACCOUNTS5 198,397 8,341 £11% TECH SOLUTIONS KEY METRICS CLASS DOCUMENT ORDERS6 171,309 $160.5m £59% COMPANIES ON CLASS CORPORATE MESSENGER7 597,989 All percentage changes shown above are relative to FY21. 1. Group Underlying EBITDA from continuing operations up 92% to $70.4 million (FY21: $36.7 million). Refer to Note 2.1 for more information. 2. Refer to Directors Report for more information on Group Underlying NPAT. 3. Custodial FUA Administration Services. 4. Non-custodial FUA as Portfolio Administration and Reporting Services (PARS). 5. Number of Class accounts consists of Class Super, Class Portfolio and Class Trust licenses. 6. Documents paid for by PAYG and subscription customers. 7. Number of active companies. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 5 CHAIRMAN AND MANAGING DIRECTOR’S REPORT HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 6 1. INTRODUCTION Dear Shareholders, On behalf of the Board, we are pleased to present you with this Annual Report for HUB24. HUB24 has delivered strong growth during FY22 whilst remaining focussed on enhancing value for our customers and delivering on our strategic objectives and our purpose to empower better financial futures together. Our customers, team and community have experienced challenges throughout the year with the ongoing impacts of the COVID-19 pandemic, as well as market volatility and macroeconomic events. While continuing to support our customers throughout these ongoing challenges, HUB24 has achieved record platform net inflows, a significant increase in revenue and profitability, and further consolidated our market- leadership position. As market dynamics continue to transform the wealth management industry, HUB24’s strong market leadership position, together with continued focus on innovation and customer service excellence has ensured our position as a financial services and product provider of choice. This has resulted in strong organic growth which is reflected in our key financial metrics. Given these strong financial results the Company announced a fully franked full year dividend of KEY FINANCIAL METRICS Total Group Revenue $192.5 million up 76% on FY21 Group Underlying EBITDA $70.4 million up 92% on FY21 Total FUA $65.6 billion Platform FUA up 20% to $49.7 billion including record net inflows of $11.7 billion PARS FUA $15.9 billion, down 8% on FY21 due to negative market movements 12.5 cents, this brings the full year dividend to 20 cents, an increase of 100% on the prior year. HUB24’s business footprint has continued to evolve with the acquisition of Class Limited (Class), a leading SMSF administration software provider which was completed in February 2022. The acquisition provided further opportunities to leverage collective capabilities across the HUB24 Group to deliver products and solutions that enhance value for existing and new customers whilst increasing market share and growing the SMSF market. Following a full quarter of ownership, the Class business unit’s key statistics are reported as part of this Annual Report. HUB24’s financial report begins on page 47. At our inaugural investor day held in June 2022, HUB24 announced the first joint product development initiative with HUB24, Class and NowInfinity. The new SMSF product solution will enable advisers to access new customer segments and is designed to meet the needs of clients who are keen to access the benefits of a cost- effective SMSF solution. The pilot will launch during the first half of FY23. HUB24 continues to be recognised by advisers and the industry for delivering market-leading products and services. During FY22 the HUB24 platform was awarded: • No. 1 for Value for Money1 • No. 1 Platform Managed Accounts functionality for the 6th year running2 • No. 1 Product Offer2 • Best Platform, Best Investment Options and Best Adviser Experience3 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20227 PLATFORM FUA AND UNDERLYING EBITDA TRENDS SHARE PRICE AND DIVIDEND TRENDS FUA ($b) UEBITDA ($m) Cents per share Share price ($) Platform FUA 4 year CAGR 56% 70 60 50 40 30 20 10 0 80 70 60 50 40 30 20 10 0 20 15 5 0 COVID-19 market impact 10.0 5.5 4.5 7.0 3.5 3.5 3.5 4.6 2.6 2.0 20.0 12.5 7.5 30 25 20 15 10 5 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 Platform FUA (LHS) UEBITDA (RHS) Final dividend Interim dividend Share price ($) Underpinned by our strong market leadership position, focus on customer service excellence, and continued investment in innovation, HUB24 remains well placed to continue to grow market share. Our acquisition of Xplore Wealth (in FY21) and now Class will also provide further opportunities to expand into new customer segments and broaden our existing capabilities. As the wealth management industry continues to transform and large financial institutions divest or re-evaluate their strategies, specialist platforms (such as HUB24), have continued to grow, now representing 14% of the Australian investment platform market and accounting for over $30 billion in annual net inflows. In addition, specialist platforms have grown at a CAGR of 41% over the last ten years).⁴ During FY22 the HUB24 platform experienced net inflows at a level not seen in the industry for many years, and as a recognised market-leader in the platform space with continued focus on delivering innovative solutions that enhance outcomes for clients, HUB24 is well- positioned to continue to benefit from the trend towards specialist platforms. The growing trend for advisers to leverage managed portfolios to deliver value for their clients and efficiencies in their business has continued during FY22 as adoption rates continue to accelerate with 53% of advisers now using them to manage client portfolios and funds under management in managed portfolios in Australia have grown to more than $131 billion.6,8 HUB24 continues to lead the market in this growing segment having been awarded Best Platform Managed Accounts solution for the 6th year running.2 The financial adviser landscape is dominated by advisers who are part of privately owned and self- licensed businesses, representing 61% of the adviser market and a cohort who are increasingly embracing the use of specialist platforms. HUB24 has built strong relationships in this segment and continues to work with large national licensees who are keen to collaborate with platform, data and technology providers on solutions that solve key challenges in advice delivery.⁵ Managing increasing regulatory obligations has continued to be a challenge for advisers and licensees. During FY22 new Design and Distribution and Advice Fee Consent regulatory obligations came into force. In this environment, HUB24’s approach to supporting advisers with enhanced product disclosure and flexible, digital solutions to manage regulatory requirements was well-received by advisers has delivered a key competitive advantage. As for consumers, the demand for financial advice continues to grow with 29% of unadvised Australians looking to seek help from an adviser. However, cost remains the main barrier to accessibility, with the median advice fee per client at $3,529.⁵ Collaborating with licensees and advisers to solve key industry challenges and enable the delivery of cost-effective advice remains a priority. Over the reporting period, we continued to work with licensee ‘Think Tank’ participants to develop and deliver solutions that reduce friction in the advice delivery process. This included leveraging machine learning and artificial intelligence to create solutions that support licensees with their compliance obligations and improve efficiencies in their advice practices. During FY22 HUB24 continued to advocate on behalf of our customers to help shape the future of the advice HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20228 industry, including contributing to the FSC’s submission for the Quality of Advice Review and also making an independent submission outlining key areas for consideration, including the need for the government, the regulators and the industry to work together to create a blueprint for a sustainable financial advice industry. To raise awareness of this key issue, in June 2022 HUB24 co-produced a documentary with XY Adviser, ‘Solving Wealth’s Greatest Challenge’ which featured industry leaders discussing their views on potential go-forward solutions to ensure more Australian’s get access to professional advice. 2. FINANCIAL PERFORMANCE The Group’s preferred measure of profitability, which is Underlying Earnings Before Interest, Tax, Depreciation, Amortisation and Notable items (Underlying EBITDA), increased 92% to $70.4 million for FY22 ($36.2 million in FY21), with Underlying Net profit After Tax (Underlying NPAT) up 144% to $37.5 million for FY22 ($15.0 million in FY21). The key drivers of the HUB24’s financial performance for FY22 were: • Platform FUA increased from $41.4 billion as at 30 June 2021 to $49.7 billion as at 30 June 2022, an increase of 20% with record net inflows of $11.7 billion achieved during FY22 ($8.9 billion in FY21⁷ • Platform Revenue increased by 59% to $160.5 million for FY22 ($101.1 million for FY21) while platform expenses grew by 55% to $98.2 million ($63.2 million in FY21) • Platform underlying EBITDA increased by 64% to $62.3 million Tech Solutions segment performance (with Class consolidated for four and half months of FY22) • Technology Solutions revenue increased by 339% to $29.0m ($6.6m in FY21), benefitting from the acquisition of Class. Class contributed $23.9 million of revenue in FY22 • Tech Solutions expenses grew by 259% to $17.6 million with Class adding 211 FTE at 30 June 2022 and $14.4 million of expenses in FY22 • Tech Solutions underlying EBITDA increased by 671% to $11.4 million, with Class contributing $9.5 million of the uplift Group performance GROWTH • Total Group Revenue increased by 76% to $192.5 million which includes the Platform, Tech Solutions and Corporate segments. • Expenses increased by 69% to $122.1 million with total headcount increasing 78% to 697 (391 in FY21) from the acquisition of Class and further investment in distribution, technology, and operations staff to support growth in FUA, expand our reach, and continue product and technology innovation • The Group’s underlying EBITDA margin improved from 33.7% FY21 to 36.6% in FY22 reflecting strong revenue growth from the increasing platform scale, partially offset by investment costs and investment in people • The Group’s UNPAT, being the NPAT before notable items, forms the basis of HUB24’s dividend determination. UNPAT increased by 133% to $35.9 million in FY22 • Statutory NPAT of $14.7 million was recorded in FY22 following $21.2 million of notable items post tax ($5.6 million in FY21) Platform segment performance • Total Funds Under Administration (FUA) increased from $58.6 billion at 30 June 2021 to $65.6 billion as at30 June 2022, an increase of 12% During FY22, the Company delivered significant growth achieving record platform net inflows of $11.7 billion up 32% and overall platform FUA of $49.7 billion up 20% . According to the latest available market share data, HUB24 maintained second place for annual net inflows, increasing market share to 5.1%, and is ranked in 7th place up from 8th place at the same time last year. HUB24 was the fastest growing platform in percentage terms year on year.⁴ HUB24 has delivered a compound annual growth rate of 56% in platform FUA over the last four years and this record organic FUA growth is a result of our increased distribution footprint, product innovation and customer service excellence. The composition of platform FUA in FY22 has remained the same as FY21 with 81% in Retail, 16% Institutional and 3% in Xplore Super Admin, the outsourced super administration business which will be discontinued with customers moving to alternative solutions during FY23. In FY22, 112 new distribution agreements were signed and the total number of advisers using the platform at the end of the reporting period was 3,486 up 14%. From a Portfolio, Administration and Reporting Services (PARS) perspective, FUA of $15.9 billion was down 8%, impacted by negative market movements. The total number of PARS accounts increased to 8,341 (7,538 in FY21). HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20229 Following a full quarter of ownership of Class (acquired in February 2022) the business delivered its strongest June quarter since 2019, with growth in total net accounts across Class Super, Class Portfolio and Class Trust products. As we continue to integrate the business and leverage the combined capabilities of Class and HUB24, we expect this growth momentum to continue in FY23. HUB24 Group’s market-leadership and flexible approach to supporting our customers to create efficiencies in their businesses continues to result in a strong pipeline of new opportunities across all customer segments. This includes large licensee clients, brokers, boutique advice practices, self-licensed advisers and accountants. Overall, market conditions for the Group’s value proposition continue to present significant opportunity for growth, as a result we will continue to invest appropriately to take advantage of these opportunities. 3. OPERATIONS Throughout FY22 we continued to invest in capability, provide advisers and their clients with choice and flexibility and enable advisers to deliver advice more efficiently. This included the development of a market-leading digital reporting feature, HUB24 Present, which enables advisers to customise client presentations in real time and deliver engaging and efficient client reviews. Advisers who took part in the pilot program during the reporting period, cited a reduction in time spent consolidating data and increased client engagement. Since the end of the reporting period, the solution has been launched on the HUB24 platform and is now available to all users. HUB24 is committed to ensuring advisers and their clients have access to a broad range of investment options and during Q4 FY22 a range of ETFs and listed managed funds available on CBOE Australia (formerly Chi-X) were also added as investment options on HUB24 Invest, and an additional international markets trade processing window was implemented providing advisers with more flexibility in accessing US and European markets. HUB24 is committed to supporting licensees and advisers through ongoing regulatory change and during the year we launched a digital advice fee consent tool on our platform. This provided advisers with choice and flexibility to create, renew or revise client consents online, enabling them to meet their compliance obligations efficiently. The acquisition of Class was completed in February 2022, Class now operates as a business unit under HUB24’s corporate governance structure. In Q4 FY22 a new operating model was finalised for Class with business lines now aligned to client propositions, and the responsibility for supporting HUBconnect offers in market also now transitioning into the Class business unit, centralising the Group’s software and data solutions. The Class technology, marketing, HR, legal and finance teams now report into the relevant HUB24 Group Executives. Throughout the year, the integration of Xplore Wealth (acquired FY21) has progressed with the first product migration from Xplore Wealth to HUB24 completed on 1 July 2022. Future product migrations and successor fund transfers are expected to continue over FY23. Continuing to collaborate with licensees to develop solutions that reduce friction in the advice process remains a priority for HUB24. By leveraging the Group’s data and technology expertise to access and structure large sets of data, HUBconnect Licensee has been developed, which supports licensees to proactively monitor their compliance obligations and delivers real-time alerts and insights to a consolidated dashboard for reporting. The solution is now being rolled out to licensees. Overall, our combined Group capabilities, market- leadership position and customer focus have ensured HUB24 is well-positioned to continue to leverage market dynamics and emerging opportunities for continued growth. By realigning our capabilities and leveraging scale and expertise across the HUB24 Group, we expect to enhance our customer propositions, improve customer engagement, and increase market share. 4. PEOPLE Investment in attracting, retaining and developing talented people continued to be a focus during FY22 through initiatives aimed at leadership and career development, supporting a diverse and inclusive workplace and enhancing our client focussed culture. During FY22, HUB24 continued to develop our ‘future- fit’ workplace to support future growth and ensure the wellbeing of our people. This included the establishment of a dedicated team to design and implement our future workplace initiatives which are focused on improving the employee experience, while maintaining business continuity. With the acquisition of Class there are now approximately 700 employees across the HUB24 Group. In line with the Group’s growth and expansion into new customer segments, four strategic appointments were made to the HUB24 Executive team. In August 2021, Mr Darren Stevens joined as Chief Product Officer to lead HUB24’s product development functions. In March 2022, Ms Deborah Latimer was appointed as Chief Risk Officer to lead the risk and compliance function, while Ms Chesne Stafford was HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202210 appointed as Chief Growth Officer (joined July 2022) to lead the Company’s distribution and marketing functions. Following the acquisition of Class, the appointment of Mr Tim Steele as Chief Executive Officer of Class was announced (joined August 2022). All four Executives report to the Group’s Chief Executive Officer and Managing Director, Andrew Alcock. Their skillsets and experience will add significant value to our leadership team and position the Group well for future growth. Recruitment is currently underway for a Chief People Officer. 5. CORPORATE SUSTAINABILITY HUB24 recognises the importance of ESG for the long- term prosperity of our customers, people, shareholders and the broader community. Throughout FY22 we have supported advisers with ESG education and the availability of over 150 ESG investment options on the HUB24 platform to support client ESG preferences. HUB24 is committed to reducing our environmental impact by ensuring a digital first approach to customer engagement and communications. As part of our community and philanthropy initiatives, the HUB24 Group provided support for the Pro Bono Financial Advice Network, Save a Child’s Heart, the Red Cross, the Cancer Council, Jawun Cape York and Solar Buddy. To further support the delivery of the Group strategy, HUB24 engaged KPMG to undertake an ESG materiality assessment during the year and HUB24’s inaugural Sustainability Report is being developed, which will reflect material social, environmental and governance opportunities, and align to HUB24’s purpose of ‘empowering better financial futures, together’. The project is well advanced, and the report will be released prior to our Annual General Meeting held in November 2022. As part of the assessment process HUB24 have outlined seven ESG key focus areas. Climate risks and opportunities Business ethics and integrity Customer experience ESG KEY FOCUS AREAS Community contribution and investment Employee engagement Diversity and inclusion Data privacy and security HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20226. CORPORATE GOVERNANCE Throughout FY22, HUB24’s Board of Directors and Management remained committed to the ongoing review and improvement of corporate governance practices and processes. During the year we undertook a HUB24 Group Culture and Conduct Survey which seeks direct feedback from staff to the Board regarding their experiences working with the HUB24 Group, and formally seeking input regarding the day-to-day conduct and culture of our business. Under its Charter, the Audit, Risk & Compliance Committee is required to review the Group Risk Management Framework at least annually to seek assurance that it is both sound and effective. Management undertook a review of the Group Risk Management Framework during FY22 and confirmed that it is operating effectively with due regard to the Risk Appetite Statement set by the Board. The HUB24 Group Risk Management Framework was reviewed in FY22 and adjusted to align risk management with the HUB24 FY22–23 strategy. During July 2021 Ms Catherine Kovacs joined the Board as Non-Executive Director, bringing a broad skillset and experience to expand and complement the other Board members. 7. OUTLOOK HUB24 is proud to have delivered solid FY22 results, achieving record levels of platform net inflows and FUA growth as well as the completion of the strategic acquisition of Class. We continue to be recognised as a market leader in both the platform and managed portfolios space by our customers and the industry. The Group’s strong financial and operating performance has delivered further value to our shareholders with increased profits allowing us to determine our highest dividend to date. This has been achieved in a year where advisers and their clients have experienced ongoing market volatility and advisers have been challenged with further regulatory obligations. These results are underpinned by the continued investment in innovation, the strength of our product offer and the expertise and commitment of our team to continue to deliver outcomes for our customers and shareholders. 11 of solutions that support financial professionals to implement strategic, investment and tax advice. The business remains focussed on our key strategic pillars to deliver on our purpose to continue to lead the wealth industry as the best provider of integrated platform, technology and data solutions by developing innovative products and solutions that enhance customer value, deliver opportunities for growth, and executing our vision for the platform of the future. As the wealth industry continues to transform HUB24 is committed to collaborating with the government, the regulators and other industry participants to build a blueprint for a sustainable financial advice industry and enable the delivery of cost-effective financial advice. Moving forward we expect ongoing strong net inflows to the platform and increasing profitability. We have revised our Platform FUA target range to $80–$89 billion by 30 June 2024 due to the impacts of negative market movements experienced during the year. We look forward to speaking with shareholders at the Annual General Meeting and on behalf of the Directors wish to thank our customers for their support as well as our talented and focussed team for their ongoing commitment to both our customers and HUB24. Yours sincerely, Bruce Higgins Chairman Andrew Alcock Managing Director 1. Investment Trends Adviser Technology Needs Report 2022. 2. Investment Trends Platform Competitive Analysis and Benchmarking Report 2021. 3. Adviser Ratings Financial Advice Landscape Report 2022. 4. Strategic Insights analysis of Wrap, Platform and Master Trust Managed Funds at March 2022. 5. Adviser Ratings Musical Chairs Report Q1 2022. 6. IMAP Milliman FUM Census Dec 2021. The acquisition of Class has brought together two highly complementary businesses focussed on the delivery 7. Platform FUA refers to custodial administration services. 8. Investment Trends Managed Accounts Report 2022. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 12 DIRECTORS’ REPORT HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022Your Directors present their report together with the financials statements, on the Consolidated Group (referred to hereafter as “the Group” or “HUB24”) consisting of HUB24 Limited (referred to hereafter as “the Company”) and the entities it controlled for the full year ended 30 June 2022 (“FY22”) and the Auditor’s Report thereon. 13 The Directors’ Report has been prepared in accordance with requirements of the Corporations Act 2001, the information below forms part of this Directors’ Report: • Directors interest in shares of the Company on page 43 • Remuneration Report on pages 26 to 46 • Auditor’s Independence Declaration on page 25. DIRECTORS The following persons were Directors of the Company, from the beginning of the financial year and up to the date of this report, unless otherwise stated: Mr Bruce Higgins (Chairman) Mr Andrew Alcock (Managing Director) Mr Anthony McDonald Mr Paul Rogan Ms Ruth Stringer Ms Catherine Kovacs (appointed 19 July 2021) JOINT COMPANY SECRETARIES Ms Kitrina Shanahan Mr Andrew Brown HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202214 14 BRUCE HIGGINS MIEAust CPEng, MBA, FAICD ANDREW ALCOCK B Bus, GAICD CHAIRMAN AND INDEPENDENT NON-EXECUTIVE DIRECTOR MANAGING DIRECTOR EXECUTIVE DIRECTOR Skills, Experience & Qualifications Skills, Experience & Qualifications Bruce has more than 20 years’ experience as a senior executive or CEO, with companies such as Honeywell, Raytheon and listed technology companies. He is a specialist in rapid growth entrepreneurial companies, financial and software services companies, M&A and corporate governance and has also served on ASX boards as a Non-Executive Director or Chairman for more than 15 years. Bruce was awarded the Ernst & Young Entrepreneur of the Year award in Southern California in 2005 and has a Bachelor Degree in Electronic Engineering and an MBA in Technology Management. He is a Chartered Professional Engineer and Fellow of the Australian Institute of Company Directors. Term Bruce was appointed as Chairman of the Board on 19 October 2012. Listed Company Directorships (within the last 3 years) Andrew has more than 25 years’ experience across wealth management encompassing advice, platforms, industry superannuation, insurance and information technology. He holds a Bachelor of Business, Accounting from the University of Technology, Sydney. After a successful career as a senior executive in information technology , Andrew held various executive roles within the Wealth Management sector including with Genesys Wealth Advisers, Tyndall and Asteron. In these roles Andrew worked closely with financial advisers, including holding board director roles for over 20 advice practices, and was responsible for the design and delivery of financial products for the wealth market. He was also the CEO of Australian Administration Services, a subsidiary of Link Market Services, providing superannuation administration and technology services for some of Australia’s largest superannuation funds. • Legend Corporation Limited (resigned 30 August 2019) Term Board Committee Memberships • Member of the Audit, Risk and Compliance Committee • Member of the Remuneration and Nomination Committee Andrew was appointed to the HUB24 Board on 29 August 2014 as Managing Director. Listed Company Directorships (within the last 3 years) • Nil Board Committee Membership • Nil HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202215 RUTH STRINGER B Sc, LLM, GAICD ANTHONY MCDONALD B Comm LLB INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR Skills, Experience & Qualifications Skills, Experience & Qualifications Ruth is an experienced financial services lawyer with particular expertise in funds management, superannuation, life insurance and financial planning. Her diverse career has included working in significant national and international law firms, as well as serving as in-house counsel with various financial institutions and as a superannuation specialist with ASIC. Ruth will join MinterEllison as a partner in September. Ruth has served on a number of boards and committees during her career, including the Board of Taxation’s Advisory Panel and the Steering Committee of the International Pension and Employee Benefit Lawyers Association. Ruth’s passion for improving the superannuation system resulted in her appointment to the CIPR (Comprehensive Income Products for Retirement) Framework Advisory Group, formed to advise Treasury on aspects of the legislative framework for new retirement income products. Anthony (Tony) McDonald co-founded financial planning firm Snowball Group Limited in 2000, which merged with Shadforth in 2011 to become ASX-listed SFG Australia Limited. Tony is a director of Diverger Limited (formerly Easton Investments Limited). He is also a former Director of The Investment Funds Association of Australia (now Financial Services Council) and currently Chairman of a leading not-for-profit organisation and a private RegTech company, Fourth Line Pty Ltd. As a financial services executive, Tony worked in a variety of senior roles with the Snowball Group, SFG, Jardine Fleming Holdings Limited (Hong Kong), and Pacific Mutual Australia Limited. Prior to entering the financial services industry, Tony worked as a solicitor with two global law firms. He holds a Bachelor of Laws (LLB) and a Bachelor of Commerce (Marketing) from the University of NSW. Term Term Ruth was appointed to the HUB24 Board on 1 February 2020. Anthony was appointed to the HUB24 Board on 1 September 2015. Listed Company Directorships (within the last 3 years) Listed Company Directorships (within the last 3 years) • Nil Board Committee Membership • Member of the Audit, Risk and Compliance Committee • 8IP Emerging Companies Limited (appointed 24 September 2015, resigned 1 April 2021) • URB Investments Limited (appointed 13 October 2016, resigned 23 December 2019) • Diverger Limited (formerly Easton Investments Ltd) (appointed 1 February 2021). Board Committee Membership • Chair of the Remuneration and Nomination Committee HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202216 PAUL ROGAN FAICD, FCPA, B Bus CATHERINE KOVACS B.Comm , MAppFin, GAICD INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR Skills, Experience & Qualifications Paul is a senior financial services professional with qualifications and experience in accounting and finance. Paul has a proven track record for delivering results in different regions and markets. In his executive career he successfully drove businesses through rapid growth phases including with Challenger, NAB, and MLC. His experience spans diverse executive roles including as CFO of an ASX 200 company, CEO of UK subsidiaries of MLC/NAB, CEO of a building society as well as leading both the capital, risk and strategy, and distribution, product and marketing functions at Challenger. Paul has more than 27 years’ experience serving on entity boards and industry groups, including 13 years in the not-for-profit sector. Term Paul was appointed to the HUB24 Board on 20 December 2017. Listed Company Directorships (within the last 3 years) • Nil Board Committee Memberships Catherine is an experienced Non-Executive Director, serving on the Board of OFX Group Limited (ASX listed), Universities Admission Centre, and Grapple Holding Pty Ltd. Catherine has over 30 years’ experience in the financial services industry, having held senior executive leadership roles at Westpac Banking Group, Ellerston Capital, Macquarie Group and BT Financial Group. Catherine’s most recent executive role was as Group Head of Business Development at Westpac until March 2019, where she was responsible for advising the Westpac Executive Committee and Board on business disruption and the future of banking and wealth strategy, as well as managing strategic partnerships. Prior to that Catherine held executive roles at BT Financial Group as Head of Equities where her responsibilities included product development and distribution of equity products to licensees, advisers and retail investors; Ellerston Capital where she was Head of Investor Relations, Sales & Marketing; and Macquarie Group as Divisions Director, Equity Markets Group. Catherine is a Graduate of the Australian Institute of Company Directors and a Member of the Association of Superannuation Funds of Australia. She holds a Bachelor of Commerce (University of NSW) and a Master of Applied Finance (Macquarie University). • Chair of the Audit, Risk and Compliance Committee Term • Member of the Remuneration and Nomination Catherine was appointed to the Board on 19 July 2021. Committee Listed Company Directorships (within the last 3 years) • OFX Group Limited (appointed 22 February 2021) Board Committee Membership • Member of the Audit, Risk and Compliance Committee HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202217 JOINT COMPANY SECRETARIES The name and details of the Company Secretaries in office during the 2022 financial year and at the date of this report are as follows: KITRINA SHANAHAN CIMA, CPA, AGSM MBA ANDREW BROWN Diploma in Law, FCG, MAICD COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER COMPANY SECRETARY Kitrina has over 20 years of experience in finance, governance and risk. Prior to HUB24, Kitrina was Chief Financial Officer Insurance at Westpac. She has also held roles across BTFG as Deputy Chief Financial Officer and as Group Financial Controller at Westpac. With deep experience in platforms, advice and broader financial services, Kitrina has executive leadership experience delivering large strategic transformation projects. Kitrina was appointed Company Secretary and Chief Financial Officer on 7 September 2020. Andrew has extensive experience in the financial services industry and was appointed to the position of Company Secretary on 30 April 2021. Prior to joining the Company, Andrew held senior governance and compliance management positions at Challenger Limited. Andrew was appointed Company Secretary on 30 April 2021. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202218 OPERATING AND FINANCIAL REVIEW GROUP OVERVIEW HUB24 Limited (HUB24, the Group or the Company) is a financial services company that was established in 2007 and is a leading provider of integrated platform, technology and data solutions to the Australian wealth industry. HUB24 is listed on the Australian Securities Exchange (ASX) under the code ‘HUB’ and includes the award-winning HUB24 platform, the Xplore platform, the newly acquired Class business, and HUBconnect. As at 19 August 2022, HUB24’s market capitalisation was approximately $2.0 billion. HUB24’s purpose is to empower better financial futures, together. To fulfil this purpose, HUB24 delivers platform and technology solutions that empower financial professionals to deliver better financial futures for their clients. HUB24’s head office is based in Sydney and it provides its products and services across all Australian states and territories. The Group employed 697 people on a full- time equivalent (FTE) basis as at 30 June 2022. PRINCIPAL ACTIVITIES HUB24 operates two core revenue generating segments and a Corporate segment as shown in the diagram below: HUB24 Limited (ASX: HUB) Platform Tech Solutions Corporate Class HUBconnect Group support functions Strategic investments Treasury HUB24 platform Xplore platform Portfolio Administration & Reporting Services (PARS) PLATFORM The Platform segment comprises the HUB24 investment and superannuation platform (HUB24 platform), the Xplore Wealth investment and superannuation platform (Xplore Wealth platform) and Portfolio Administration & Reporting Services (PARS). The HUB24 and Xplore platforms are used by financial professionals to efficiently administer their clients’ investments held through a superannuation and investment product under custodial arrangements. As one of the fastest growing platform providers in the market, the HUB24 platform is recognised for providing choice and innovative product solutions. It offers financial professionals and their clients a comprehensive range of investment options, including market-leading managed portfolio solutions, and enhanced transaction and reporting functionality. The Xplore platform provides complementary capabilities including managed accounts, superannuation services and PARS capability. Xplore’s products and services are used by financial advisers, boutique financial advice businesses, stockbrokers, and institutional clients to look after their clients’ investment needs. In addition, HUB24 also offers PARS, a non-custody portfolio service which provides administration, corporate action management and tax reporting services for financial professionals and their clients. TECH SOLUTIONS The Tech Solutions segment comprises Class and HUBconnect. Class Class is a pioneer in cloud-based wealth accounting and is recognised as one of Australia’s most innovative technology companies. Class delivers trust accounting, portfolio management, legal documentation, corporate compliance and SMSF administration solutions to over 7,000 customers1 across Australia who depend on Class to drive business automation, increase profitability and deliver better client service. Class’s core offer is self-managed superannuation fund (SMSF) administration software. Its solutions have gained industry recognition for product innovation and customer service excellence. Class currently holds a 30% share of the addressable market2. Customers using the Class Super, Class Portfolio and Class Trust solutions represented over 198,000 portfolios and accounts as at 30 June 2022. 1 Class customer base represents practices of accountants, administrators and advisers as at 30 June 2022. 2 Class SMSF market share as at 31 March 2022. Based on latest confirmed ATO figures for March 2022, raw SMSF fund numbers, total members of SMSFs and total Australian and overseas assets. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202219 Class also operates in the document and corporate compliance segment through the service offerings provided under the NowInfinity brand.3 NowInfinity is a leading cloud-based entity management and corporate compliance solution. In the Investment Trends 2022 SMSF Adviser & Accountant Report, NowInfinity was recognised as the most used legal document provider for SMSF related legal compliance. HUBconnect HUBconnect provides technology and data services to the wealth industry, delivering innovative solutions to enable financial professionals to efficiently run their businesses and service their clients. HUBconnect leverages data and technology capability to provide solutions that solve common challenges faced by stockbrokers, licensees and professional advisers in the delivery of financial advice. Through innovative technology such as machine learning, artificial intelligence, and natural language processing HUBconnect integrates, refines, stores and supplies structured and unstructured data. Through integrated data feeds, automated reporting and analytics, HUBconnect delivers efficiencies for some of the time-consuming and costly processes that increase the cost of delivering advice. HUBconnect serves a growing number of respected and high-profile financial services companies and their clients. HUBconnect Broker (formerly known as Agility Applications) has a long history of working with stockbrokers to deliver innovative business reporting and support tools. HUBconnect Broker streamlines and integrates client data and connects to a range of broking business reporting and back-office support tools that provide key insights and enable the efficient delivery of stockbroking operations. These HUBconnect Broker relationships are of strategic importance as HUB24 seeks to expands its share of the PARS market. HUB24 is a strategic shareholder in Diverger Limited (Diverger), which is a diversified financial services business servicing the needs of financial professionals and their clients. Under a Technology Partnership and Distribution agreement Diverger is a cornerstone client for HUBconnect’s data and technology services. REVIEW AND RESULTS OF OPERATIONS The key items regarding the Group’s performance for FY22 were: FUNDS UNDER ADMINISTRATION4 • Total Funds Under Administration (FUA) increased by 12% to $65.6 billion (FY21: $58.6 billion). • Platform5 FUA increased by 20% to $49.7 billion (FY21: $41.4 billion). • PARS6 FUA decreased by 8% to $15.9 billion (FY21: $17.2 billion). REVENUE • Group operating revenue increased by 76% to $192.5 million (FY21: $109.1 million). • Platform segment revenue increased by 59% to $160.5 million (FY21: $101.1 million). EBITDA • The Group’s preferred measure of profitability is Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) before Notable items (refer to note 2.1), increased by 94% to $70.4 million (FY21: $36.2 million). • Underlying EBITDA performance included Group expenses increased by 62% to $141.1 million (FY21: $86.8 million). UNDERLYING NET PROFIT AFTER TAX • Underlying Net Profit After Tax represents NPAT before Notable Items. Underlying NPAT increased by 133% to $35.9 million (FY21: $15.4 million). • Strategic transactions and project costs7 of $17.9 million have been recognised in FY22 (FY21: $8.1 million). This includes strategic transaction, due diligence and implementation costs related to the Class transaction of $11.0 million, Xplore and Ord Minnett implementation related costs of $5.0 million and $1.9 million for other projects (including regulatory change and one-off client transition projects). 3 NowInfinity is a wholly owned subsidiary of Class. 4 Non-IFRS measure. 5 Platform FUA refers to the custodial portfolio. 6 PARS FUA refers to the non-custodial portfolio. 7 Includes administrative and resourcing costs related to strategic transactions and project costs. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202220 Reconciliation of Underlying NPAT to Statutory NPAT Underlying NPAT Strategic transactions and project costs Acquisition Amortisation Tax effect on notable items Fair value gain on contingent consideration Agility consideration share based payment expense Gain on Sale of Investment Statutory NPAT Year ended 30 June 2022 $ million Year ended 30 June 2021 $ million 35.9 (17.9) (12.3) 9.0 - - 14.7 15.4 (8.1) (0.6) 1.6 1.6 (1.5) 1.4 9.8 STATUTORY NPAT • Statutory Net Profit After Tax (NPAT) increased by 50% to $14.7 million (FY21: $9.8 million). CASH FLOWS • The Group generated strong operating cashflows of $36.9 million ($53.7 million before strategic transaction costs), 92% up from $19.2 million ($26.4 million before strategic transaction costs). STRATEGIC TRANSACTIONS AND INTEGRATION UPDATE Class In October 2021, HUB24 announced it had entered into an agreement to acquire Class, a leading SMSF administration software provider. The acquisition of Class was completed in February 2022. Class provides HUB24 with an opportunity to accelerate its platform of the future strategy and data services market leadership strategy. In June 2022 the Class operating model was finalised with business lines now aligned to Class and NowInfinity client propositions, and responsibility for distribution of HUBconnect offers transitioning into the Class business unit, centralising the Group’s software and data solutions. The Class technology, marketing, HR, legal and finance teams now report into the relevant HUB24 Group Executives. The new structure is expected to deliver greater focus on customer propositions, enhance engagement and leverage scale and expertise across HUB24 Group, to enable us to better deliver on our growth strategy. As announced as part of the acquisition, Class will continue to operate as a business unit within the HUB24 Group with its own brand and leadership team. Class has been incorporated into HUB24 Group financial results for four and half months of FY22. Since completion, HUB24 and Class have been working together to create strategies that leverage the combined capabilities of the Group to provide compelling, efficient, and valuable solutions for new and existing customers and deliver enhanced growth for HUB24 shareholders. Work on the delivery of a combined HUB24 and Class product initiative is well underway with a new SMSF service expected to be piloted in Q1 FY23.This service will bring together SMSF establishment, administration and investment administration leveraging the combined capabilities of HUB24, Class and NowInfinity. The service is designed for clients who are keen to access the benefits of a cost-effective SMSF solution. The solution provides advised clients with a cost- effective, fully integrated end-to-end service bringing together SMSF establishment, administration and investment administration. The service is designed to act as an incubator and will facilitate the transition to traditional SMSF services when appropriate, and provides financial professionals with a new solution for their superannuation clients and enable them to service new customer segments. Furthermore, a preliminary review of Class’s extensive data capabilities has been undertaken and plans are progressing to integrate Class and HUB24’s data capabilities to further extend the Group’s data-as-a- service capabilities. Xplore The Xplore integration is well progressed with the successful migration of the Xplore Wrap product to the HUB24 platform in July 2022. The remaining successor fund transfers and migrations from the Xplore platform to the HUB24 platform are scheduled throughout FY23. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202221 Consistent with our strategy, the superannuation administration services provided through DIY Master Pty Ltd (acquired through the Xplore acquisition) will be discontinued with customers moving to alternative solutions during FY23. This represents 3% of Platform FUA as of 30 June 2022 and does not impact the achievement of the previously disclosed synergies arising from the Xplore acquisition. Financial Impacts of the Strategic Transactions The purchase price accounting (PPA) for the Xplore portfolio was completed in 1HFY22 with the $58.4 million consideration paid representing the fair value of the separately identifiable assets and liabilities of the transaction. The Class PPA will be completed in FY23, within twelve months of the acquisition date. For FY22 provisional fair value balances have been recognised on the balance sheet for the Class acquisition (refer to the HUB24 Annual Report for the year ended 30 June 2022 for further details). Total implementation costs, including the Class acquisition, to be incurred between FY23 and FY24 are forecast to be $6–11 million, with annual synergies expected to be approximately $12–14 million by FY24 onwards. CAPITAL MANAGEMENT The Class acquisition completed 16 February 2022 and was funded through a combination of HUB24 shares ($268 million) and cash ($16 million). Post the completion of the acquisition, the Class assets and liabilities have been consolidated into the HUB24 balance sheet. This included $30 million of bank borrowings as outlined in the Financial Statements. • 271,870 shares were issued for options exercised by staff and executives in the financial year ended 30 June 2022 (FY21: 531,519) • 19,570 shares were issued for performance award rights exercised by staff and executives in the financial year ended 30 June 2022 (FY21: 65,296) • No share options were issued to staff and executives in the financial year ended 30 June 2022 (FY21: 91,384). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Apart from the Class strategic transaction mentioned previously, there have been no other significant changes in the nature or state of affairs of the consolidated group. DIVIDENDS Subsequent to 30 June 2022, the Directors have determined a final dividend of 12.5 cents per share fully franked to be paid on 14 October 2022. Together with the fully franked interim dividend of 7.5 cents per share, the fully franked full year dividend of 20.0 cents per share represents a 100% increase in dividends for shareholders (FY21: 10.0 cents per share) and a payout ratio of 45% of Underlying NPAT (FY21: 44%). The Board’s dividend policy targets a payout ratio between 40% and 60% of the Group’s annual underlying net profit after tax over the medium term subject to prevailing market conditions and alternate uses of capital. SIGNIFICANT EVENTS OCCURRING AFTER BALANCE SHEET DATE The Group has access to a $5 million working capital facility, which remained undrawn during the year. As disclosed above, subsequent to year end, the following items have occurred: During FY22, the Group purchased $10 million of treasury shares on market to service the Group’s Employee Share Plans. OPTIONS AND PERFORMANCE RIGHTS The following options, performance rights and shares were issued in accordance with schemes approved by shareholders. These schemes contain ambitious targets, including Group FUA targets of greater than $100 billion by FY24, in order to incentivise and align key staff towards HUB24 achieving its strategic objectives: • 207,894 performance rights were issued to staff, and executives in the financial year ended 30 June 2022 (FY21: 1,130,667) • Directors have determined a fully franked final dividend of 12.5 cents per share (a fully franked dividend of 5.5 cents per share final dividend was determined in FY21). No other significant matter or circumstance has arisen since 30 June 2022 that has notably affected, or may notably affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS With the continued growth in FUA onto the HUB24 investment and superannuation platform and continuing success of its supporting businesses, the Group expects its financial results to continue improving with scale. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202222 The strategic acquisition of Class is expected to accelerate HUB24’s platform of the future strategy, consolidating the Group’s position as a leading provider of integrated platforms, technology and data solutions for financial advisers, accountants, private banks, licensees, stockbrokers and their clients. The combined business will provide a compelling and unique competitive advantage and diversification of revenue. GLOBAL ECONOMIC AND PEOPLE AND CULTURE IMPACTS The Directors continue to assess potential financial and other impacts of the coronavirus (COVID-19) outbreak and the geopolitical impacts on the economy and workforce. The current high-level of uncertainty regarding the global economy has impacted investment outcomes and increased volatility in investment performance during the period. At the date of signing, the future impacts of these risks on global and domestic economies and investment market indices, and their resulting impact on the Group are uncertain. The Directors and management will continue to monitor this situation. Further to this, the current geopolitical events have also had a global market impact and uncertainty exists as to their implications. Such disruptions can adversely affect the assets, performance and liquidity. Recognising the rising Russia/Ukraine conflict as well as Australia’s broadening of its existing autonomous sanctions, the Directors and management continue to remain abreast of developments in this area and monitor the potential impacts across the Group. RISK MANAGEMENT HUB24 has adopted the ASX Corporate Governance Principles and Recommendations (4th Edition) and is committed to recognising and managing risk. We recognise risk as the effect of uncertainty, both positive and negative, on our objectives and we manage risk to create and sustain value for shareholders and other stakeholders. We foster a risk aware culture with consideration of risk supporting our formulation of strategy and informing business decision-making. Our Board-approved Risk Appetite Statement and Risk Management Framework considers the full scope of risks we face, including emerging risks. These have been organised into the following seven risk categories with a description of the risk and the assessment of the risk exposures assessed. This is not intended to be a comprehensive or exhaustive list of all risks the business is exposed to and investors should form their own assessment and conclusions. Risk Category Risk Summary De-scription Key risk exposures assessed Reputational, brand, & conduct risk Strategic & Product Risk The risk of erosion or other damage to our brand or reputation resulting from inappropriate or failed actions, partnerships, or other behaviours. The risk of failure to achieve strategic objectives and/or respond to changes in our competitive landscape with competitive products. • ESG • Conduct and culture of workforce • Fraud • Impacts of the RBA cash rate • Other economic and market developments • Geopolitical risk including the war in Ukraine • Government commitments and policies on climate and carbon emissions • Future/changing regulatory environment • Competitive environment • Changes in consumer and customer preferences including online purchasing trends • Technological changes and innovation HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202223 Risk Category Operational risk Distribution risk Technology & Cyber risk Risk Summary De-scription Key risk exposures assessed The risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. The risk of loss resulting from inappropriate or failed sales and distribution strategies, channels, and customer relationships. • People: workforce including COVID 19 conditions and restrictions, use of flexible/virtual working arrangements, availability of skilled staff and expertise • Process: third party arrangements, project portfolio, change management, business continuity • Systems: data security and management, technology vulnerabilities • Attraction/retention of key clients • Advice licensee oversight The risk of loss or other damage resulting from our failure to appropriately respond to our technology, physical security, or cybersecurity being compromised. • Platform vulnerabilities • Data security and access • Data management and control Regulatory, legal & Compliance risk The risk of legal or regulatory sanctions or loss resulting from failure to comply with laws, regulations, licensing, or contractual requirements. • Privacy • Legislative and regulatory changes • Changing regulatory footprint of our business operations • Data and privacy • Financial crime compliance Financial performance, governance, and market risk The risk of loss resulting from our failure to meet financial obligations and/or the impact of movements in the value of equity and other investments correlated with our financial performance. • Financial performance, profit margins, capital and liquidity management • Financial performance and the impacts of the economic environment • Financial benefits of strategic transactions ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s operations are not subject to significant environmental regulations under either Commonwealth or State legislation and the Directors are not aware of any material non compliance with environmental regulations pertaining to the operations or activities during the period covered by this report. NON-AUDIT SERVICES During the year Deloitte Touche Tohmatsu (Deloitte), the Group’s auditor (Auditor) provided other services in addition to their statutory duties. In accordance with advice received from the Audit, Risk and Compliance Committee, the Directors are satisfied that the provision of non-audit services during FY22 by the Auditor is compatible with and did not compromise the general standard of auditor independence requirements of the Corporations Act 2001 for the following reasons: impact the integrity and objectivity of the Auditor and are of the view that they do not impact the integrity and objectivity of Deloitte; and • the fact that none of the non-audit services provided by Deloitte during the financial year had the characteristics of acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Details of the amounts paid to the Auditor, which includes amounts paid for non-audit services and other assurance services, are set out in note 8.3 to the Financial Statements. A copy of the Auditor’s Independence Declaration, as required under Section 307C of the Corporations Act 2001, is included at the end of the Directors’ Report. OFFICERS OF THE GROUP WHO ARE FORMER DIRECTORS OF DELOITTE TOUCHE TOHMATSU • The Audit, Risk and Compliance Committee reviewed the non-audit services to ensure that they do not There are no officers of the Company who are former Directors of Deloitte Touche Tohmatsu. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202224 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. ROUNDING OF AMOUNTS In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, amounts have been rounded off in the Directors’ Report and the Interim Financial Report to the nearest thousand dollars or, in certain cases, to dollars where indicated. wilful breach of duty, of a nature that is required to be disclosed under section 300(8) of the Corporations Act 2001. In accordance with commercial practice, the amount of the premium and the nature of the liabilities covered by the insurance policy has not been disclosed. The Group has indemnified officers and directors to the extent permitted by law against any liability that arises as a result of actions as an officer or director and has not otherwise, during or since the end of FY22, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor. MEETING OF DIRECTORS DIRECTORS’, OFFICERS’, AND AUDITORS’ INDEMNITY During FY22 the Group paid a premium in respect of insuring all directors and officers against liability, except The numbers of meetings of the Group’s Board of Directors and of each Board Committee held during the year ended 30 June 2022, and the numbers of meetings attended by each Director were as per the table below: Board meetings Audit, Risk & Compliance Committee meetings Remuneration & Nomination Committee meetings (Chairman Mr Bruce Higgins) (Chairman Mr Paul Rogan) (Chairman Mr Anthony McDonald) Director Attended Held Attended Held Attended Held Mr Bruce Higgins (Chairman) Mr Andrew Alcock (Managing Director) Mr Anthony McDonald Mr Paul Rogan Ms Ruth Stringer Ms Catherine Kovacs 12 12 12 12 12 12 12 12 12 12 12 12 7 * * 7 7 7 7 * * 7 7 7 6 * 6 6 * 5* 6 * 6 6 * 6 *Not a member of committee. All Non-Executive Directors have standing invitations to all committee meetings. This report is made in accordance with a resolution of Directors. Mr Bruce Higgins (Chairman) Director Sydney 23 August 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202225 AUDITOR’S INDEPENDENCE DECLARATION Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Board of Directors HUB24 Limited Level 2, 7 Macquarie Place Sydney NSW 2000 23 August 2022 Board of Directors Dear Board Members, HUB24 Limited Level 2, 7 Macquarie Place Auditor’s Independence Declaration to HUB24 Limited Sydney NSW 2000 In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of HUB24 Limited. 23 August 2022 As lead audit partner for the audit of the financial report of HUB24 Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: Dear Board Members, • the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and Auditor’s Independence Declaration to HUB24 Limited • any applicable code of professional conduct in relation to the audit. In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration Yours faithfully of independence to the directors of HUB24 Limited. As lead audit partner for the audit of the financial report of HUB24 Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: DELOITTE TOUCHE TOHMATSU • the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • any applicable code of professional conduct in relation to the audit. Yours faithfully SSttuuaarrtt AAlleexxaannddeerr Partner Chartered Accountants DELOITTE TOUCHE TOHMATSU SSttuuaarrtt AAlleexxaannddeerr Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 26 REMUNERATION REPORT HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202227 CONTENTS OF THE REMUNERATION REPORT 1 2 3 4 5 6 7 8 9 Key Management Personnel (KMP) Remuneration snapshot Business performance in FY22 Executive KMP remuneration outcomes 31 31 33 34 Executive KMP remuneration structure 39 KMP service agreements NED remuneration Remuneration governance Other statutory disclosures 41 41 43 44 This Remuneration Report (on pages 28 to 46) sets out HUB24’s remuneration framework and details of remuneration outcomes for key management personnel (KMP) for the year ended 30 June 2022 (FY22). Accounting Standards define KMP as those executives and non-executive directors with the authority and responsibility for planning, directing and controlling the activities of HUB24, either directly or indirectly, being the Non- Executive Directors (NEDs), Managing Director and Chief Executive Officer (MD), Chief Financial Officer (CFO), Director, Strategic Development and the Chief Operating Officer (COO). The FY22 Remuneration Report has been prepared and audited in accordance with the disclosure requirements of the Corporations Act 2001. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202228 REMUNERATION REPORT TO OUR SHAREHOLDERS On behalf of the Board and its Remuneration and Nomination Committee, I am pleased to present HUB24’s FY22 Remuneration Report. We have built on the enhanced Remuneration Report structure introduced in FY21 to improve overall disclosure and to ensure shareholders can clearly evaluate the links between performance and remuneration outcomes for our KMPs across a mix of financial, strategic, operational and personal performance objectives. HUB24’s remuneration approach continues to focus on aligning challenging, personalised individual targets to our Company’s strategic objectives, to align executives to deliver strong performance and deliver short, medium and longer-term outcomes. We remain committed to providing market competitive remuneration to attract and retain high calibre talent who are critical to HUB24’s continued success, and consistently review appropriate benchmark data to ensure that our knowledge of trends in remuneration structures, pay mix and market relativities are current. RESPONDING TO EVOLVING MARKET CONDITIONS HUB24 has continued to undertake rapid organic growth in FY22, alongside strategic M&A activity. This approach continues to deliver enhanced shareholder returns and create a strong foundation for future growth and diversification. Throughout FY22 HUB24 has continued to support our customers to manage the ongoing challenges of the pandemic, market volatility and macroeconomic events, as well as providing advisers with solutions to manage increasing compliance obligations. In this environment HUB24 delivered record annual net inflows, net profits and dividends and continued to deliver on our strategic objectives, including developing innovative product solutions and building the platform of the future, whilst also leveraging emerging opportunities for growth through strategic acquisitions and developing customer propositions for new segments. “During FY22 the HUB24 Group has grown significantly both organically and through strategic acquisition. Now with a talented team including Class of 700 people, we are continuing to invest to support further growth and to deliver increasing returns for our shareholders.” HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202229 INVESTING IN OUR PEOPLE The COVID-19 pandemic continued to impact our team, our customers and the broader community during FY22. In the post-lockdown environment HUB24 has continued to support flexible work arrangements which has been highly valued by the HUB24 team who ranked HUB24’s support for wellbeing and flexibility highly in recent staff engagement surveys. HUB24 recognises our people are critical to delivering on our strategy and growing our business. As part of our focus on attracting, retaining and developing talent HUB24 has invested in leadership & development initiatives whilst continuing to support a diverse and inclusive workplace and creating a strong client-focused culture. PERFORMANCE DURING FY22 HUB24 delivered another year of growth in FY22, achieving record platform net inflows of $11.7 billion and finishing the year with total FUA of $65.6 billion consisting of $49.7 billion of platform FUA and $15.9 billion of PARS FUA. Our performance has translated to strong outcomes for our shareholders, delivering full year dividends of $0.20 up 100% on FY21. Our underlying profit after tax was $35.9 million (up 133%). In February 2022 the acquisition of Class was completed bringing together two highly complementary businesses focussed on the delivery of solutions that support financial professionals to implement strategic, investment and tax advice. The acquisition has provided further opportunities to leverage collective capabilities across the HUB24 Group to enhance value for current customers, provide growth opportunities across both businesses and continue to lead transformation in financial services. Additionally, HUB24 continues to be recognised by advisers and the industry as a market-leader in terms of innovative product solutions, customer service excellence and value.1 Looking ahead to FY23, the business remains committed to achieving sustainable growth for our shareholders by focussing on our key strategic pillars to deliver on our purpose to continue to lead the wealth industry as the best provider of integrated platform, technology and data solutions and empower better financial futures, together. During FY22 the Board engaged external advisers to undertake a benchmark review of key executive remuneration, in the context of the ongoing growth and the increasing demands on executives based on the scale and complexity of HUB24. Benchmark data was assessed across both financial services and fintech industry sectors to ensure a rigorous approach to this aspect of managing key person risk. Remuneration changes for KMP were awarded in September 2021 to ensure that HUB24’s remuneration remained competitive and supported the ongoing retention of key executives. Short Term Incentive (STI) targets for the year were designed to foster operational excellence, financial performance, customer outcomes and the strategic development of HUB24 in order to maximise shareholder value. Specific FY22 STI performance measures included a range of financial, strategy and growth, cultural leadership and operational and measures, based on the key metrics used to assess HUB24’s success over the short-term. For the Managing Director, all base targets were largely met in FY22, with significant stretch target achievement in particular across the areas of strategy and growth, customer and service delivery, people, compliance and business operations. KMP performance outcomes against scorecard deliverables ranged from 81% to 89%, reflecting a very strong performance year. The outcomes of the 2019 Long Term Incentive (LTI) grants offered to Executive KMP (outlined on page 39) and other key senior leaders reflected our strong business performance, critical retention priorities and recognition of unique functional expertise or knowledge. This LTI grant was offered to Executive KMP as a mix of options (40%) and performance rights (60%) with a 3-year performance period. An LTI grant was offered to the Managing Director, KMPs, and other key employees following approval by shareholders at the 2021 Annual General Meeting. The offer was for performance rights only and had a three year vesting period with performance conditions based on FUA and Absolute Total Shareholder Return (ATSR). BOARD AND EXECUTIVE KMP CHANGES 1 Best platform managed accounts functionality and Best Product Offer (Investment Trends Platform Competitive Analysis and Benchmarking Report 2021). Best platform, Best Investment Options, Best Adviser Experience (Adviser Ratings Financial Advice Landscape Report 2022) No.1 Value (Investment Trends Adviser Technological Needs Report 2022) Effective 19 July 2021, HUB24 welcomed the appointment of Catherine Kovacs to HUB24’s Board. Catherine has brought a deep understanding of financial services having significant relevant executive experience HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202230 and furthers our aspiration to increase female representation on the Board. There have been no other changes to the composition of KMP for the year ended 30 June 2022. LOOKING AHEAD TO FY23 philosophy, framework, and alignment with outcomes. We remain committed to continuous evolution in our reward structure and our communication to shareholders as the financial services industry continues to undergo significant change and remuneration practices evolve. The Board continues to consider external information around current trends in remuneration practices, particularly with regard to ongoing evolution of the regulatory landscape in the financial services sector, to ensure that HUB24’s executive remuneration framework remains relevant and effective in attracting and retaining talented leaders for our business as it continues to grow. The FY22 Remuneration Report is intended to assist shareholders to clearly understand our remuneration Regards, Anthony (Tony) McDonald Chair, Remuneration and Nomination Committee 23 August 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 31 1. KEY MANAGEMENT PERSONNEL The KMP for FY22 were: Name Role in FY22 Term as KMP in FY22 Independent Non-executive Directors (NEDs) Bruce Higgins Independent Non-Executive Director, Chairman Anthony McDonald Independent Non-Executive Director Paul Rogan Independent Non-Executive Director Ruth Stringer Independent Non-Executive Director Full year Full year Full year Full year Catherine Kovacs Independent Non-Executive Director Commenced 19 July 2021 Executive KMP Andrew Alcock Managing Director Jason Entwistle Director, Strategic Development Craig Lawrenson Chief Operating Officer Kitrina Shanahan Chief Financial Officer and Joint Company Secretary Full year Full year Full year Full year 2. REMUNERATION SNAPSHOT Our remuneration framework is designed to support HUB24’s objectives by engaging exceptional people to deliver strong customer value and growth in an innovative and collaborative manner. Our remuneration principles outlined below continue to shape our remuneration framework. OUR REMUNERATION PRINCIPLES Remuneration Principles Provide competitive and reasonable rewards to attract, motivate and retain high calibre individuals to drive the success of HUB24 Ensure our people are rewarded via market competitive remuneration structures and practices Our incentive schemes are designed to reward achievement of targets aligned to HUB24’s strategy Ensure key people are aligned to shareholder interest via appropriate long-term equity incentives Align incentives to cultural and compliance outcomes, subject to deductions for significant non- compliance HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202232 EXECUTIVE KMP REMUNERATION FRAMEWORK HUB24’s Executive KMP Remuneration Framework is made up of three components that when combined create the total remuneration opportunity for Executive KMP and senior leadership team members. Fixed Remuneration (FR) Short Term Incentive (STI) Long Term Incentive (LTI) FR consists of Base Salary, Superannuation and Benefits. FR is set to attract and retain Executive KMP with the right capability and experience. FR is reviewed annually, and the process consists of a review of company-wide, functional portfolio and individual performance, relevant comparative remuneration in the market, and where appropriate, external advice on practices and market comparisons. STI is paid in three equal instalments, with one third paid at the end of the performance year, one third after 6 months and the remaining third, 12 months after the end of the performance period. STI rewards Executive KMP based on structured qualitative and quantitative scorecard measures being achieved as determined by the Board. The scorecard measures include ‘target’ and ‘stretch’ Key Performance Indicators (KPIs). Executive KMP are kept accountable through deferral periods that act as malus and clawback mechanisms intended to protect shareholder interests. LTI has historically been delivered in a mixture of Options and/or Performance Award Rights (PARS), recently switching to 100% PARS awards that are performance-tested over a 3 or 5 year period. LTI rewards Executive KMP for long-term performance, encourages shareholding and delivers long-term value creation for shareholders based on: • Compound Annual Growth Rate (CAGR) in FUA; and • Absolute Total Shareholder Return (ATSR) performance. Special awards of PARS under different terms & conditions may be granted to Executives in limited circumstances to recognise their additional contribution in the growth of HUB24. FY22 EXECUTIVE KMP REMUNERATION MIX The weighting of each remuneration component of an executive’s total remuneration opportunity is aligned to the executive remuneration framework outlined in section 5. The following diagrams set out the weighting of each remuneration component for the Managing Director and other Executive KMP based on their maximum potential STI and LTI opportunities and does not represent actual remuneration received for FY22. Base salary, superannuation and other benefits Assessed over a 1-year performance period against a mixture of financial, strategic and individual performance metrics FR STI LTI 33% STI is paid in 3 equal instalments, with one third paid at the end of the performance year, one third after 6 months and the remaining third 12 months after the end of the reporting period. 50% of the total STI can be delivered in Shares 33% 33% Delivered in Options and/or Performance Award Rights (PARS) and assessed against: • Funds Under Administration Compound Annual Growth Rate (50% weighting) • Absolute Total Shareholder Return (50% weighting) 12 month disposal restriction applies to any Shares acquired from the exercise of vested Options and vested PARS FY22 FY23 FY24 FY25 FY26 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202233 Managing Director Pay Mix at Maximum for FY22 Other Executive KMP Pay Mix at Maximum for FY22 (average) FR 33.33% LTI 33.33% STI 33.33% 3. BUSINESS PERFORMANCE IN FY22 FR 42.02% LTI 26.47% STI 31.51% £ $65.6b Total FUA £ $11.7b Net Flows £ $70.4m Underlying EBITDA £ $35.9m Underlying NPAT £ 20% 3 Year Total Shareholder Return The graph below shows HUB24’s Underlying EBITDA outcomes over the last five years compared to the Managing Director’s STI outcomes over the same period. The graph shows that STI outcomes have been fair in comparison to Company performance against one of our key financial metrics. Underlying EBITDA v Managing Director’s STI outcome ) m $ ( A D T I B E U 75 65 55 45 35 25 15 5 -5 100% 75% 50% 25% 0 m e R d e x i F f o % s a s e m o c t u o I T S FY18 FY19 FY20 FY21 FY22 Maximum STI (%) (RHS) Awarded STI (%) (RHS) UEBITDA ($m) The Managing Director’s maximum STI opportunity was increased from 75% to 100% of fixed remuneration in FY22 following a remuneration review, for details please refer to page 38. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 34 The table below details HUB24’s performance against key financial and operational metrics for the five-year period ended 30 June 2022. PARS FUA ($b) Platform FUA ($b) Revenue ($m) Underlying EBITDA ($m) Underlying Profit/(Loss) after income tax ($m) Earnings per share (statutory basic) ($) Dividends per share (cents per share $) Total dividends paid and payable ($m) Share price at financial year end ($) TSR in the financial year1 FY22 15.9 49.7 192.5 70.4 35.9 20.18 0.20 16.0 20.27 -29% FY21 17.2 41.4 110.9 36.2 15.4 14.83 0.10 6.8 28.51 208% FY20 FY19 FY18 0.2 17.2 82.5 24.7 9.8 13.13 0.07 4.4 9.30 -21% - 13.1 98.7 15.4 6.5 11.54 0.046 2.9 11.88 3% - 8.3 87.0 11.4 5.4 12.27 0.035 2.2 11.55 86% 1 TSR is calculated using the closing and opening share price and dividends for the financial year. 4. EXECUTIVE KMP REMUNERATION OUTCOMES Executives delivered strong results against their KPIs for FY22. Our Company performance and the resulting shareholder value creation over the longer-term leads us to expect that the LTI issued in 2019 will vest at 100% once tested on 17 October 2022 using the 40 day volume weighted average price (VWAP) following our financial reporting. FIXED REMUNERATION To ensure fixed remuneration continues to be both appropriate and aligned with shareholder interests in the face of an increasingly competitive market, the Board sought advice from external advisers and benchmarked Executive KMP remuneration against a financial services, and fintech company comparator group with similar scale, revenue and market capitalisation, recognising that start-up fintech experience is a sought after skill set. A secondary comparator group of wealth management businesses within larger institutions was also considered. This detailed market data ensured that we were able to adjust fixed remuneration against comparable market conditions relative to our current size and scale, to continue to attract and retain the highest calibre of Executive KMP. In September 2021 the Board made fixed remuneration adjustments to Executive KMP of between 4.5% and 28.9%, with higher increases awarded to the Managing Director and Director, Strategic Development to align their total remuneration position to the market reflecting HUB24’s growth. The range for other KMP increases was from 4.5% to 8.2% based on their respective roles and responsibilities relative to external market benchmarks obtained in August 2021. These FY22 fixed remuneration adjustments ensured that the executive remuneration framework continues to support the achievement of our strategy and the future needs of our business by attracting and retaining key executive talent. Adjustments to fixed remuneration were effective from the standard date of 1 September 2021, after a 3 month deferral was made the previous year due to market condition uncertainty around COVID-19. Name A. Alcock – Managing Director J. Entwistle – Director, Strategic Development K. Shanahan – Chief Financial Officer and Joint Company Secretary C. Lawrenson – Chief Operating Officer Fixed Remuneration (including superannuation) effective 1 December 2020 Fixed Remuneration (including superannuation) effective 1 September 2021 $520,000 $425,000 $425,000 $402,000 $670,000 $525,000 $460,000 $420,000 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202235 STI OUTCOMES – LINK TO PERFORMANCE Following the market benchmark review of remuneration completed in August 2021, STI opportunity levels were reviewed and adjusted for the Managing Director, Director, Strategic Development and Chief Financial Officer. These changes aligned the Executives to a more competitive remuneration package across fixed and variable elements. The STI opportunity for the Managing Director and Director, Strategic Development were increased from 75% to 100% of fixed remuneration, and the Chief Financial Officer from 40% to 60%. At the same time, the remuneration mix for the Chief Operating Officer was adjusted with the STI opportunity reduced from 70% to 65% offset by a larger LTI opportunity. The Managing Director’s FY22 scorecard capturing corporate and individual goals, their weighting and the performance level achieved are summarised below. Further detail on the STI structure is provided in section 5. FY22 STI Measure FY22 outcome Commentary Financial Performance – 33% weighting Result – 28.38% Profitability Group profitability • Group underlying EBITDA up $34.2 million (94%) year on year. Base Platform profitability • Platform underlying EBTDA up $24.4 million (64%) year on year Stretch Platform profitability measure partially met. • The base Platform profitability measure was met, with the stretch Cost to income ratio • Cost to Income ratio of 63.4%. Operating Cashflow • Positive operating cashflow outcome of $53.7million (excluding strategic transaction costs). Strategy & Growth – 35% weighting Result – 31.25% Platform net inflows • Record platform annual net flows of $11.7 billion up 32% on FY21. Xplore integration and non-custody development Mergers & Acquisitions • Integration of Xplore Wealth into HUB24 is continuing to progress with foundational integration complete and first product migration completed. • Acquisition synergies are on track to plan with additional revenue synergies achieved. • Separation of Ord Minnett PARS is in final stages albeit later than originally planned. • PARS growth to 8,341 account. • Completed strategic transaction acquiring Class Limited to create additional strategic opportunities for HUB24 and diversified revenue. • Initial joint HUB24/Class product development well progressed. • Achievement of planned synergies exceeded with additional opportunities identified. • Integration well progressed with go-forward Class operating model and leadership team in place. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 36 FY22 STI Measure Current and future growth initiatives FY22 outcome Commentary • Signed distribution agreements with pipeline clients with expected FUA net inflows over the following 3 years. • Development of strategies and alliances to create significant future growth opportunities. • Continued evolution of Tech Solutions business including ongoing development and adoption of HUBConnect proposition, commercialisation of new products, new client opportunities and enhanced client proposition. Customer and Service Delivery – 17% weighting Result – 14.88% Delivery and governance of strategic and operational work programs Customer experience and market leadership Product and service development Industry innovation and market leadership Ongoing delivery of enterprise project portfolio across: • Regulatory change projects • Product and service enhancements • Operational efficiency • Technology scale and security • Client migrations • Customer satisfaction: High satisfaction rate maintained. • Various awards and industry recognition including: – 1st place for client advocacy from Adviser Ratings; • Best Overall Product, Best Managed Accounts and 2nd place for overall functionality from Investment Trends; and • Equal 2nd place for overall adviser satisfaction from Wealth Insights. • Average HUB24 platform usage across advisers and licensees increased year-on-year, with industry leading FUA retention rate. • Expansion of our product and service offerings including: – • Launch of new market leading real-time dynamic reporting capability to support adviser and client engagement. • Increased investment choice and execution flexibility providing advice efficiency tools, functionality to support client preferences, additional security exchanges and flexibility for access to international markets. • Development of industry leading SMSF offer utilising Class and HUB24 capabilities to provide additional solution for advisers aiming to grow the SMSF and platform market. • Progress on market leading data services that support the adviser market including HUBconnect and integrations with third party wealth management providers. • Increasing collaboration with industry participants aiming to build foundations for the future of wealth management and financial advice. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202237 FY22 STI Measure FY22 outcome Commentary People, Compliance and Business Operations – 15% weighting People and Culture Result – 14.50% • Favourable employee engagement evidenced by employee survey conducted by third party expert and staff retention measures. • Positive and open culture with strong measures for integrity, company values alignment, Board and leadership effectiveness as measured by third party culture survey conducted on behalf of the Board of Directors. • Strong focus on employee development, leadership development, talent recognition and succession planning. Risk & Compliance • Appointment of Chief Risk Officer appropriate for enterprise scale Group Operating Model evolution and future growth aspirations. • Effective operation of risk and compliance framework with continuing maturation of people, system, processes and culture to support robust risk and compliance outcomes. Risk focus supported by internal and external auditors. • Responded effectively to the changing COVID-19 risk continuing to deliver high quality service to our clients, employee welfare support and establishment of a flexible hybrid working model. • Maintained HUB24 ISO 27001 accreditation. • Continued investment in cyber resilience aiming to protect all stakeholders and respond to the evolving environment and emerging threats. • Significant investment in executive leadership team to support future growth aspiration including the appointment of Chief Growth Officer, Chief Risk Officer, Class Chief Executive Officer. • Progressing with recruitment of Chief People Officer to support future talent acquisition, organisational development and ‘employer of choice’ aspirations. • Significant investment in systems and processes to ensure operational continuity, scalability and provide foundations for future growth. • Ongoing core system architecture and performance improvements creating operational efficiencies and improved customer service outcomes. Total Overall Outcome – 89% Outcome Base and stretch targets apply Base target only Stretch target only HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202238 The STI outcomes for Executive KMP against their maximum opportunities are disclosed below. Name A. Alcock – Managing Director J. Entwistle – Director, Strategic Development K. Shanahan – Chief Financial Officer and Joint Company Secretary C. Lawrenson – Chief Operating Officer STI maximum opportunity % of maximum STI earned %of maximum STI forfeited $670,000 $525,000 $276,000 $273,000 89% 88% 89% 81% 11% 12% 11% 19% LTI OUTCOMES – LINK TO PERFORMANCE The FY19 LTI is tested over a 3-year period from 1 July 2019 to 30 June 2022, with the ATSR hurdle tested using the 40 day VWAP following the FY22 full year results announcement (being 17 October 2022). Executive KMP have achieved the FUA hurdle (which is 50% of the performance measures). The remaining 50% of Options and PARS that relates to the ATSR hurdle requires final performance testing on 17 October 2022. If tested as at the date of this report the ATSR stretch target would have been achieved. The following graphs also show TSR and FUA performance over the FY19 LTI performance period. The FY18 Special PARS are tested over a 4-year period from 1 July 2018 to 20 June 2022, with 100 per cent of PARS vesting based on the FUA performance over the period. The following graph shows the FUA performance over the FY18 Special PARS performance period. HUB24 v S&P/ASX200 3-year TSR HUB24 FUA 200% 150% 100% 50% 0% -50% 3 year FUA growth: 260% CAGR: 53% p.a. Minimum vesting level – 2019 Options and Rights Minimum vesting level – Special LTI 3 year TSR: 73% CAGR: 20% p.a. 3 year TSR: 10% CAGR: 3% p.a. ) b $ ( A U F l a t o T 50 45 40 35 30 25 20 15 10 5 0 Jun 2019 Jun 2020 Jun 2021 Jun 2022 FY19 FY20 FY21 FY22 HUB24 S&P/ASX200 Custodial FUA Non-custodial FUA *TSR data sourced from Thomson Reuters’ Eikon Refinitiv platform HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 FY19 LTI GRANT PERFORMANCE CONDITIONS Measure Weighting Vesting criteria ATSR 50% The CAGR in the ATSR over the three-year period until 17 October 2022 is assessed as follows: • Threshold: 12.5% ATSR CAGR – 25% vesting; and • Stretch: 17.5% ATSR CAGR – 100% vesting. Straight-line vesting will occur between threshold and stretch. 39 Result (% vested) To be tested 17 October 2022 Growth in FUA 50% The growth in FUA over the three-year period until 30 June 2022 is assessed as follows: 100% • Zero vesting if the FUA did not exceed $27 billion by 30 June 2022; • 25% vesting if the FUA reached $27 billion by 30 June 2022; • 80% vesting if the FUA reached $29 billion by 30 June 2022; • 100% vesting if the FUA reached $32 billion by 30 June 2022; • Straight-line vesting will occur between $29 billion and $32 billion (for between 80% and 100% vesting). 5. EXECUTIVE KMP REMUNERATION STRUCTURE STI The objective of the STI is to reward Executive KMP for delivery against tailored KPI’s aligned to key strategic goals and creation of shareholder value. Below we have set out the key terms of the STI for FY22: Element Opportunity Delivery Description Managing Director: 100% of Fixed Remuneration at maximum. Other Executive KMP: 60–100% of Fixed Remuneration at maximum. STI is paid in three equal instalments, with one third paid at the end of the performance year, one third after 6 months and the remaining third 12 months after the end of the performance period. These deferral periods are intended to enhance malus and clawback mechanisms and mitigate risk. STI is offered in cash, however, at the election of Executive KMP, 50% of the total STI earned can be delivered in Shares. Performance period 1 year (i.e. 1 July to 30 June). Performance measures HUB24’s STI strategy aims to focus Executive KMPs on a balance of financial, operational and strategic targets. This ensures Executive KMPs are rewarded for achieving objectives that are fundamental to the success of HUB24. The weightings for each category in the Managing Director’s FY22 scorecard are outlined below. Financial Performance – 33% weighting Strategy & Growth – 35% weighting Customer & Service Delivery – 17% weighting People, Compliance & Business Operations – 15% weighting • The financial measures were chosen as they represent key drivers of HUB24’s financial performance Underlying EBITDA, Operating Cashflow and Cost to Income aimed at protecting revenue margins and profitability from the impact of price cutting), while also providing a framework for delivering shareholder returns. • Growth and strategic measures were chosen as they represent HUB24’s go-forward strategy and assess progress against new initiatives that ensure HUB24’s longevity and success. This may involve (not intended to be exhaustive) assessments against any mergers and acquisitions which occur, customer acquisitions and development of new target markets. • Customer & Service Delivery measures represent key metrics related to HUB24’s interactions with customers (service and experience), rollout of new products and new product offerings, the progress of strategic innovation and the delivery of strategic projects. • People, Compliance & Business Operations measures focus on critical objectives related to improvements to our risk framework, our regulatory compliance and our progress in building HUB24’s sustainable scalability and growth. Most importantly it drives our cultural framework and employee engagement. The Board determines the relative weighting and mix of performance measures for Executive KMP in order to deliver long-term sustainable shareholder value. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202240 LTI The objective of the LTI Plan is to reward Executive KMP for delivering sustained growth in shareholder value and to provide HUB24 with the ability to attract, motivate and retain high calibre senior leaders in a competitive market. Below we have set out the key terms of the LTI issued in FY22: Element Opportunity Description Managing Director: 100% of Fixed Remuneration. Other Executive KMP: 40–100% of Fixed Remuneration. Delivery PARS (100%). Performance period 3 years. A further 12-month disposal restriction applies to Shares issued upon the exercise of vested PARS. Exercise price Expiry period No exercise price will be payable in respect of the exercise of vested Performance Rights. PARS: 15 years from the date of issue. Performance measures 50% of the Performance Rights will be subject to and will vest based on a calculated score (Score) that measures the achievement of a funds under administration (FUA) target that has been set for the three years ending on 30 June 2024. The Score will have regard to the relative growth in Platform (Custody) FUA and Portfolio Administration and Reporting Services (Non-Custody) FUA as well as the relative financial contribution of Custody FUA and Non-Custody FUA to HUB24’s financial results. The PC1 hurdle has been set at a Score of between 88.5 and 100 which represents a three year CAGR of FUA between 19.5% and 24.8% p.a., and a FUA growth of between 70.6% and 94.5%, over three years to 30 June 2024. Based on data at 30 June 2021 this would equate to total FUA of $100-$114bn by 30 June 2024. 50% of the Performance Rights will be subject to, and will vest on, the achievement of a hurdle measuring the absolute total Shareholder return (ATSR) of 10% to 15% per annum over the next three years. The vesting is calibrated as follows: • 25% vesting of PC2 =Performance Rights occurs when a threshold vesting of 10% ATSR compounded annually is achieved; • 100% vesting of PC2 Performance Rights occurs when a threshold vesting of 15% ATSR compounded annually is achieved; and • vesting between 10% and 15% ATSR will be on a straight-line basis between these two levels GENERAL TERMS APPLYING TO VARIABLE AWARDS The occurrence of particular events may affect the grant and vesting of the STI and LTI. The table below outlines how these awards may be treated, noting that the Board retains absolute discretion with respect to the incentive plans. Element STI LTI Treatment on cessation of employment Change of Control The Board has discretion to determine how to treat an executive’s STI in the case of cessation of employment, taking into account the circumstances of the executive’s departure. This applies to in-year STI as well as deferred STI. Unless the Board exercises its discretion, vested Options and PARS will remain on-foot and unvested Options and PARS will remain on-foot to be tested in the ordinary course. The Board has discretion to determine how STI will be treated in the event of a change of control (CoC) event, depending on the circumstances of the transaction. Upon a change of control (CoC) event, LTI grants will vest on a pro rata “period of time” basis unless the Board exercises discretion to allow the grant to vest in full, dependent upon circumstances. Clawback and Malus The Board has the discretion to reduce, cancel or recover any and all awards in ‘for cause’ circumstances including serious misconduct. Board discretion Awards under the STI and LTI are subject to Board discretion at all times. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202241 6. KMP SERVICE AGREEMENTS Remuneration and other terms of employment for Executive KMP are formalised in employment agreements. All Executive KMP have ongoing employment agreements. HUB24 may terminate the employment agreement by providing 12 months written notice or providing payment in lieu of the notice period (based on the fixed component of the relevant KMPs remuneration). The major provisions of the Executive KMP agreements relating to remuneration are set out below. Salaries set out below are for FY22 and are subject to review by the Remuneration and Nomination Committee. Name A. Alcock – Managing Director J. Entwistle – Director, Strategic Development K. Shanahan – Chief Financial Officer and Joint Company Secretary C. Lawrenson – Chief Operating Officer Fixed Remuneration (including superannuation) Notice period – either party Contractual Termination payments $670,000 $525,000 $460,000 $420,000 12 months 12 months 12 months 12 months Nil Nil Nil Nil KMP have no entitlement to termination payments in the event of termination for misconduct. 7. NED REMUNERATION On appointment to the Board, all Non-Executive Directors enter into an agreement with HUB24 in the form of a letter of appointment. The letter summarises the Board’s policies and terms, including compensation relevant to the office of Non-Executive Director. REMUNERATION POLICY AND ARRANGEMENTS The objective of HUB24’s policy regarding NED fees is below: • to set aggregate remuneration at a level which provides HUB24 with the ability to attract, motivate and retain NEDs of the highest calibre whilst incurring a cost which is acceptable to shareholders; and • the Remuneration and Nomination Committee may from time to time receive advice from independent remuneration consultants or utilise market base comparative data to ensure NED fees and payments are appropriate and in line with the market. NED fees (including superannuation) are limited to a maximum aggregate amount approved by shareholders. The current limit of $900,000 per financial year was approved by HUB24 shareholders at the 2020 AGM. NED remuneration comprises Board fees, Committee fees and superannuation contributions at the statutory superannuation guarantee contribution rate. The payment of additional fees for serving on a Committee recognises the additional time commitment required by NEDs who serve on a Committee. HUB24 also requires Non-Executive Directors to be shareholders in the Company. NEDs must hold either directly or indirectly at least 1,000 HUB24 shares as soon as practical and permissible following their appointment or election. As a result of COVID-19, the Board determined to freeze NED fees at the October 2019 level until October 2021. During FY22 the Board engaged an external adviser to undertake an independent benchmarking review of market rates for NED fees taking into account the increased scale, complexity and time commitment required of HUB24 NEDs so as to ensure we remain competitive in attracting and retaining NEDs with the right skills and experience. For FY22, the Board made the decision to increase the NED Board and Committee fees effective 1 October 2021 based on this market review. HUB24’s current Board and Committee fees are as per the table below (inclusive of superannuation). HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202242 The Chairman of the Board receives a higher fee to reflect the additional time commitment and responsibilities of the role and does not receive any additional fees for participation in Board Committees. Paul Rogan receives a Special Fee of $10,000 for the additional work he undertakes in considering growth opportunities with the Chairman and management. Board and Committee Fees (inclusive of superannuation) Chairman Member Fee Member Fee (Anthony McDonald Only) Committee Chair Fee Board Fee $257,500 $220,000 $100,000 $85,000 $100,000 $75,000 Year 2022 2021 2022 2021 2022 2021 2022 2021 ADDITIONAL FEES AND RETIREMENT ALLOWANCES Audit Risk and Compliance Committee Remuneration and Nomination Committee Special Fee $15,000 $10,000 $30,000 $20,000 $15,000 $10,000 $10,000 $Nil $30,000 $20,000 No additional amounts are paid to each NED other than reimbursements for reasonable travel, accommodation and other expenses incurred as a consequence of their attendance at Board meetings and otherwise in the execution of their duties as Directors. NEDs do not participate in any short-term or long term incentive arrangements and are not entitled to any retirement schemes or retirement benefits other than statutory superannuation benefits. NED STATUTORY REMUNERATION The remuneration of NEDs for the year ended 30 June 2022 and 30 June 2021 is detailed below. Non- Executive Directors B. Higgins FY22 FY21 A .McDonald FY22 P. Rogan R. Stringer C. Kovacs2 I. Litster3 Total FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Cash Salary and fees $ 225,568 107,033 110,228 56,489 131,818 82,192 100,033 86,758 96,125 - - 23,028 663,772 355,500 Short-term benefits Non- monetary benefits $ Bonus $ Post Employment Benefits Super- annuation1 $ End of service Long Service Leave $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - 22,557 106,537 11,023 42,696 13,182 30,270 10,003 8,242 9,612 - - 36,334 66,377 224,079 - - - - - - - - - - - - - - Share-based payments Total remuneration Shares $ Options & PARS $ - - - - - - - - - - - - - - - - 89,587 - - - - - - - - - 89,587 Total $ 248,125 213,570 121,251 188,772 145,000 112,462 110,036 95,000 105,737 - - 59,362 730,149 669,166 1 During FY21, the Company revised its assessment of the obligation to pay Superannuation Guarantee Charges (SGC) to NEDs. Following the review, SGC for the period from 2013 to 2020 was paid in FY2021. Additionally, in FY2021 all relevant NED’s received a reduction in their current year fee. The cumulative NED fees and SGC to date represents the fees agreed. 2 Appointed 19 July 2021. 3 Resigned 5 March 2021. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202243 NED SHAREHOLDINGS The number of shares in HUB24 held during the financial year by each NED, including their personally related parties, is set out below. Ordinary Shares Balance at the beginning of the financial year Other changes during the year Balance at the end of the financial year B. Higgins A. McDonald P. Rogan R. Stringer C. Kovacs 8. REMUNERATION GOVERNANCE 808,311 18,874 40,000 3,070 0 (269,700) 22,770 5,000 2,500 3,750 538,611 41,644 45,000 5,570 3,750 HUB24’s remuneration governance structure provides oversight over HUB24’s remuneration practices and policies. Activities of the Remuneration and Nomination Committee are governed by its Charter, which is available on HUB24’s website at www.HUB24.com.au The following diagram illustrates HUB24’s remuneration governance framework. The Board has the ultimate responsibility for the oversight of the executive remuneration framework including variable pay outcomes, policies and processes, informed by the Remuneration & Nomination Committee’s recommendations. HUB24 Board The Remuneration and Nomination Committee The Remuneration and Nomination Committee is delegated responsibility by the Board for reviewing and making recommendations on remuneration policies for HUB24, including policies governing the remuneration of executives and NEDs. The Remuneration and Nomination Committee assists the Board in its oversight of: • remuneration policy for Executive KMP; • • HUB24’s compliance with applicable legal and regulatory requirements in the remuneration framework for Executive KMP, including STI and LTI plans; respect of remuneration matters; and • approval of the allocation of shares and incentives under HUB24’s schemes. Management Management provides relevant information to the Remuneration and Nomination Committee to assist with its decision-making and advises the Remuneration and Nomination Committee of statutory requirements. Management may also seek advice from external advisors as required. The Managing Director is responsible for reviewing the performance of HUB24’s Executive KMP and the Remuneration and Nomination Committee reviews the Managing Director’s performance. External advisors External advisors may be engaged directly by the Remuneration and Nomination Committee to provide advice or information relating to KMP that is free from the influence of management. During FY22, the Committee sought advice from KPMG, Deloitte Touche Tohmatsu and Aon Hewitt and Egan Associates. The Egan Associates engagement was the only engagement that involved providing remuneration recommendations as defined by the Corporations Act 2001. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202244 SECURITIES DEALING POLICY All staff are required to comply with HUB24’s Securities Dealing Policy (Group Securities Trading Policy) at all times and in respect of all HUB24 shares held. Trading is subject to pre-clearance and is not permitted during designated blackout periods unless there are exceptional circumstances. LOANS AND TRANSACTIONS HUB24 has not provided any loans or entered into transactions with any KMP and/or related parties in FY22. 9. OTHER STATUTORY DISCLOSURES Statutory remuneration disclosures are prepared in accordance with Australian Accounting Standards and include share- based payments expensed during the financial year, calculated in accordance with AASB 2 Share-based Payments. EXECUTIVE KMP REMUNERATION The following table includes statutory remuneration disclosures for FY22 and FY21. Cash Salary and fees1 $ Short-term benefits Non- monetary benefits $ Bonus $ Post Employment Benefits Super- annuation1 $ End of service Long Service Leave $ Share-based payments Total remuneration Shares $ Options & PARS $ Performance related % Total $ AUD Executive KMP A. Alcock J. Entwistle FY22 FY21 FY22 FY21 621,744 336,987 506,116 370,481 485,078 276,208 3,290 4,955 5,226 23,568 34,345 - 2,490,348 3,510,282 21,694 10,077 25,862 886,619 1,825,804 23,568 25,160 1,000 2,492,747 3,308,987 380,956 302,813 - 21,694 8,118 1,000 759,396 1,473,977 C. Lawrenson FY22 381,102 227,855 5,578 FY21 363,427 237,783 K. Shanahan2 FY22 430,911 104,947 D. Last3 FY21 FY22 FY21 360,009 207,420 - 284,477 - - - - - - - 23,568 21,694 23,568 17,773 - - - 1,000 726,474 1,365,577 1,000 280,165 904,069 - 1,000 687,884 1,248,310 - - - - - - 39,264 624,466 - - - 284,477 Total FY22 1,918,835 945,997 14.094 94,272 59,505 3,000 6,397,453 9,433,156 FY21 1,894,985 1,118,497 4,955 82,855 18,195 27,862 1,965,444 5,112,793 1 Includes movements in annual leave balances. 2 K. Shanahan received $50,000 signing bonus during FY21. 3 Resigned 6 September 2020. 5% 20% 8% 21% 17% 26% 8% 25% - - HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202245 KMPS’ INTERESTS IN OPTIONS AND PARS We have detailed beneficial interests in Options and PARS granted as at 30 June 2022 in the table below. We discuss the service and performance criteria for the equity awards vesting in FY22 in section 4. Name Type Balance at 1 July 2021 Granted Exercised Lapsed/ Forfeited Other transactions Balance at 30 June 2022 Non-Executive Directors A. McDonald PARS 20,000 Nil 20,000 Executive KMP A. Alcock Options 324,049 Nil 184,541 PARS 486,147 35,901 Nil J. Entwistle Options 263,552 Nil 87,329 PARS 434,184 28,132 19,570 C. Lawrenson Options 39,170 Nil K. Shanahan PARS 119,309 9,002 Options PARS 10,974 Nil 75,261 29,574 Nil Nil Nil Nil Total Options 637,745 Nil 271,870 PARS 1,134,901 102,609 39,570 KMP OPTIONS KMP hold the following Options: Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil - 139,508 522,048 176,223 442,746 39,170 128,311 10,974 104,835 Nil 365,875 Nil 1,197,940 Financial year of grant Financial year in which Options may vest Number of Options granted Value of Options at grant $ Number of Options vested during the year Number of Options lapsed/ forfeited during the year 2021 2020 2019 2021 2020 2019 2018 2021 2020 2019 2021 2024 2023 2022 2024 2023 2022 2021 2024 2023 2022 2024 33,558 54,764 51,186 27,435 44,848 40,000 63,940 10,380 13,438 15,352 10,974 371,990 208,083 215,994 304,117 170,406 142,880 191,580 115,062 51,059 54,808 121,647 Nil Nil 51,186 Nil Nil 40,000 Nil Nil Nil 15,352 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Name Executive KMP A. Alcock J. Entwistle C. Lawrenson K. Shanahan The assessed fair value at grant date of the Options granted to individuals is allocated over the period from grant date to expected vesting date and the amount is included in the remuneration tables in this section of this Remuneration Report. Fair values at grant date are independently determined using the Black Scholes and the Hoadleys 1 Hybrid ESO model that takes into account the exercise price, term of the Option, share price at grant date, expected price volatility of the underlying share price and the risk free rate for the term of the Option. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202246 KMP PARS KMP hold the following PARS: Name Executive KMP A. Alcock J. Entwistle C. Lawrenson K. Shanahan Financial year of grant Financial year in which PARS may vest Number of PARS granted Value of PARS at grant $ Number of PARS vested during the year Number of PARS lapsed/forfeited during the year 2022 2021 2020 2019 2019 2018 2017 2022 2021 2020 2019 2019 2018 2017 2022 2021 2020 2019 2019 2018 2022 2021 2025 2024 2023 2023 2022 2021 2020 2025 2024 2023 2023 2022 2021 2020 2025 2024 2023 2023 2022 2021 2025 2024 35,901 800,882 301,395 21,932 90,000 14,072 23,897 34,851 6,078,887 206,507 1,142,224 157,034 166,129 113,475 28,132 658,538 295,653 17,961 90,000 11,000 19,570 28,587 5,978,919 169,117 1,142,224 117,852 107,966 93,079 9,002 210,732 74,706 5,382 35,000 4,221 11,211 29,574 75,261 1,500,831 50,676 444,198 45,219 71,212 804,450 1,510,494 Nil Nil Nil Nil 14,072 Nil Nil Nil Nil Nil Nil 11,000 Nil Nil Nil Nil Nil Nil 4,221 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil The assessed fair value at grant date of the PARS granted to individuals is allocated over the period from grant date to expected vesting date and the amount is included in the remuneration tables in this section of this Remuneration Report. Fair values at grant date are independently determined using the Black Scholes and the Hoadleys 1 Hybrid ESO model that takes into account the term of the PAR, share price at grant date, probability of service condition being met, expected volatility of the underlying share price and risk free rate. PARS granted carry no dividend or voting rights. EXECUTIVE KMP SHAREHOLDINGS The number of shares held in HUB24 during the financial year by each Executive KMP, including their personally related parties, is set out below. Ordinary Shares A. Alcock J. Entwistle C. Lawrenson K. Shanahan Balance at the start of the year Received due to tax exempt share plan issue Other changes during the year Balance at the end of the year 1,061,383 820,897 66,321 - - 34 34 34 20,641 1,082,024 (142,209) 678,722 (8,802) 57,553 - 34 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202247 FINANCIAL STATEMENTS HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 48 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Income Revenue Fair value gain on contingent consideration Interest and other income Share of profit from associates Total income Expenses1 Platform and custody fees1 Employee related expenses Depreciation and amortisation expense Administrative expenses1 Share based payments expense Interest expense – lease liability Interest expense – other Total expenses Profit/(loss) before income tax from continuing operations Profit/(loss) before income tax from discontinued operations Income tax expense Profit after income tax for the year Total comprehensive income for the year attributable to ordinary equity holders of HUB24 Limited 2.3 6.4 2.4 2.4 2.4 7.1 3.4.2 6.1 5.1 Notes 2022 $’000 2.1, 2.2 189,508 - 1,895 1,122 2021 $’000 107,957 1,568 856 472 192,525 110,853 (21,408) (80,348) (19,831) (38,246) (10,783) (254) (524) (171,394) 21,131 - (6,469) 14,662 14,662 (14,057) (47,096) (6,957) (19,345) (7,747) (303) - (95,505) 15,348 823 (6,402) 9,769 9,769 Earnings per share, attributable to ordinary equity holders of HUB24 Limited Basic earnings per share Diluted earnings per share 2.5 2.5 20.18 19.53 Earnings per share from continuing operations, attributable to ordinary equity holders of HUB24 Limited Basic earnings per share – continuing operations Diluted earnings per share – continuing operations 2.5 2.5 20.18 19.53 14.83 14.28 13.58 13.07 Cents Cents 1. Prior period comparatives have been reclassified for presentation and consistency purposes with the current period disclosures between platform and custody fees and administrative expenses, employee related expenses, share based payments expense, interest expense on lease liability, and property and occupancy costs. The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Other current assets Total current assets Non-Current assets Investment in associates Intangible assets Loans Right of use assets Deferred tax assets (net of deferred tax liabilities) Property, plant and equipment Total non-current assets Total assets Liabilities Current liabilities Provisions Trade and other payables Borrowings Lease liabilities Deferred tax liabilities (net of deferred tax assets) Other current liabilities Total current liabilities Non-current liabilities Lease liabilities Provisions Borrowings Deferred income Other non-current liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Profit reserve Reserves Retained earnings Total equity 49 Notes 2022 $’000 2021 $’000 3.1 6.4 3.5 4.2 3.4.1 5.2 3.6 3.3 3.2 4.1 3.4.2 5.2 3.4.2 3.3 4.1 4.3.1 4.3.3 4.3.2 43,454 26,306 5,283 75,043 15,167 429,372 15,655 9,525 - 2,956 472,675 547,718 23,858 13,945 10,059 3,253 725 283 52,123 6,931 3,252 29,236 492 24 39,935 92,058 455,660 460,447 50,231 19,975 (74,993) 455,660 63,461 16,633 2,570 82,664 14,519 103,976 7,550 6,093 12,761 1,455 146,354 229,018 16,118 9,095 3,125 2,204 - 316 30,858 4,550 2,348 9,375 776 41 17,090 47,948 181,070 199,214 45,342 11,507 (74,993) 181,070 The consolidated statement of financial position should be read in conjunction with the accompanying notes. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 50 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Consolidated 2022 $’000 Notes Issued capital Reserves Profit reserves Retained earnings Total Opening balance as at 1 July 2021 199,214 11,507 45,342 (74,993) 181,070 Total comprehensive income for the year Transfer to profit reserves Transactions with owners in their capacity as owners: Dividends paid on ordinary shares Shares issued transaction costs Shares issued Xplore settlement consideration adjustment Options and rights exercised Options and rights granted – employees Class settlement consideration Treasury shares purchased on-market 4.3.1 6.2 4.3.1 - - - (162) 1,418 (1,503) 3,489 - 268,003 (10,012) - - - - - - (2,056) 10,524 - - - 14,662 14,662 14,662 (14,662) - (9,773) - - - - - - - - - - - - - - - (9,773) (162) 1,418 (1,503) 1,433 10,524 268,003 (10,012) Balance as at 30 June 2022 460,447 19,975 50,231 (74,993) 455,660 Consolidated 2021 $’000 Notes Issued capital Reserves Profit reserves Retained earnings Opening balance as at 1 July 2020 100,146 8,823 40,848 (74,993) Total comprehensive income for the year Transfer to profit reserves Transactions with owners in their capacity as owners: Dividends paid on ordinary shares Capital raising costs Options and rights exercised 4.3.1 Options and rights granted – employees Share based payments – Agility Capital raise Xplore settlement Treasury shares purchased on-market Issue of treasury shares to employees 4.3.1 4.3.2 - - - (1,315) 3,820 - 1,568 70,000 29,753 (4,986) 228 - - - - (1,604) 4,516 - - - - (228) - 9,769 9,769 (9,769) (5,275) - - - - - - - - - - - - - - - - - Total 74,824 9,769 - (5,275) (1,315) 2,216 4,516 1,568 70,000 29,753 (4,986) - Balance as at 30 June 2021 199,214 11,507 45,342 (74,993) 181,070 The consolidated statement of changes in equity should be read in conjunction with the accompanying notes. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202251 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid on lease liability Short-term lease payments Strategic transactions and project costs Income tax payment Net cash inflow from operating activities Cash flows from investing activities Payments for acquisitions net of cash acquired Payments for office equipment Payments for intangible assets Proceeds from disposal of controlled entities, net of cash disposed Dividends received from investment in associate Net cash outflow from investing activities Cash flows from financing activities ORFR loan facility advance Payments for capital raising costs Proceeds from capital raising Proceeds from issues of shares and other equity securities Proceeds from borrowings Repayment of borrowings Payments for treasury share buy-backs Principal elements of lease payments Dividends paid Net cash (outflow) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Notes 2022 $’000 2021 $’000 182,193 (121,959) 1,618 (254) (310) (16,822) (7,535) 36,931 (12,452) (591) (12,000) - 474 129,176 (101,034) 850 (211) (187) (7,167) (2,262) 19,165 (47,730) (588) (5,458) (1,332) - (24,569) (55,108) (8,105) (232) - 2,552 - (4,125) (10,012) (2,674) (9,773) (32,369) (20,007) 63,461 43,454 (7,550) (1,315) 70,000 3,635 13,200 - (5,012) (2,088) (5,275) 65,595 29,652 33,809 63,461 3.4.2 3.4.2 4.6 6.2 4.6 4.3.1 4.6 The consolidated statement of cash flows should be read in conjunction with the accompanying notes. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 52 CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS 53 53 53 55 56 56 58 59 59 60 61 61 61 62 63 67 70 72 73 74 74 76 1. OVERVIEW 1.1 Corporate information 1.2 Basis of preparation 1.3 Critical accounting judgements and estimates 2. GROUP PERFORMANCE 2.1 Operating segments 2.2 Revenue from continuing operations 2.3 Other income 2.4 Expenses from continuing operations 2.5 Earnings per share 3. FINANCIAL POSITION 3.1 Trade and other receivables 3.2 Trade and other payables 3.3 Provisions 3.4 Right of use assets and lease liabilities 3.5 Intangible assets 3.6 Property, plant and equipment 4. CAPITAL STRUCTURE AND FINANCING 4.1 Borrowings 4.2 Loans 4.3 Contributed Equity & reserves 4.4 Dividends 77 80 81 82 82 83 85 86 86 87 89 91 91 93 93 107 108 108 108 108 4.5 Financial instruments 4.6 Reconciliation of cash flows 4.7 Commmitments and contingencies 5. INCOME TAX 5.1 Reconciliation of prima facie tax to income tax expense 5.2 Deferred taxes 5.3 Other taxes 6. GROUP STRUCTURE 6.1 Discontinued operations 6.2 Business combinations 6.3 Controlled entities 6.4 Associated entities 6.5 Parent entity financial information 7. EMPLOYEE REMUNERATION 7.1 Share based payments 7.2 Key management personnel 8. OTHER INFORMATION 8.1 New and amended accounting standards adoption by the Group 8.2 Significant events after the reporting date 8.3 Remuneration of auditors HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202253 1. OVERVIEW 1.1 CORPORATE INFORMATION The Annual Report of HUB24 Limited and its controlled entities (‘the Group or HUB24’) for the year ended 30 June 2022 was authorised for issue in accordance with a resolution of the Board of Directors on 22 August 2022 and covers the company as an individual entity as well as the Group consisting of the company and its subsidiaries as required by the Corporations Act 2001. HUB24 is a public company limited by shares. It was incorporated and is domiciled in Australia. Its shares are publicly traded on the Australian Securities Exchange (ASX:HUB). The nature of the operations and principal activities of the Group are described in the Directors’ report. 1.2 BASIS OF PREPARATION This general purpose consolidated financial report for the year ended 30 June 2022 has been prepared in accordance with Australian Accounting Standards (AAS) as issued by the Australian Accounting Standards Board and the Corporations Act 2001, as appropriate for profit orientated companies. The financial statements have also been prepared under the historical cost convention, except for, where applicable, the revaluation of certain classes of assets and liabilities. The Report includes the four primary statements, namely the consolidated statement of profit and loss, consolidated statement of financial position, consolidated statement of changes in equity and consolidated statement of cash flows as well as associated notes which the directors believe is required to understand the financial statements and is material and relevant to the performance and results of the Group. Disclosures have been grouped into the following categories in order to assist users in their understanding of the financial statements: 1. Overview contains information that impacts the Annual Report as a whole; 2. Group Performance brings together the results and operating segment disclosures relevant to the Group’s activities; 3. Financial Position provides disclosure on the Group’s assets and liabilities; 4. Capital structure and financing provides information about the debt and equity components of the Group’s capital, and commentary on the Group’s exposure to various financial and capital risks, including the potential impact on the results and how the Group manages these risks; 5. Income Tax includes disclosures relating to the Group’s tax expense and balances; 6. Group structure includes disclosures in relation to transactions impacting the Group structure; 7. Employee remuneration provides commentary on the Group’s share based payment expenses; 8. Other includes additional disclosures required to comply with AAS. Where applicable within each note, disclosures are further analysed as follows: • Overview provides some context to assist users in understanding the disclosures • Disclosures (both numbers and commentary) provide analysis of balances as required by AAS • Accounting policies summarises the accounting policies relevant to an understanding of the numbers • Critical accounting judgements and estimates explains the key estimates and judgements applied by HUB24 in determining the numbers. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 6.5. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202254 Compliance with IFRS The financial report complies with AAS and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. New and amended Accounting Standards and Interpretations New and amended Accounting Standards and Interpretations issued by the AASB that are now effective are detailed in note 8.1. These Accounting Standards and Interpretations did not have any notable impact on the financial performance or position of the Group. The Group has not adopted any Accounting Standards and Interpretations that have been issued or amended but are not yet effective. Rounding The group is of a kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Group has elected to round off amounts in the Annual Report (and subsequent reports) for the current period and prior comparative period to the nearest thousand dollars or, in certain cases, to dollars in accordance with that instrument. Going concern The financial report has been prepared on a going concern basis. The directors have, at the time of approving the financial statements, a reasonable expectation that the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Principles of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: • Has the power over the investee • • Has the ability to use its power to affect its returns Is exposed, or has rights, to variable returns from its involvement with the investee Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company. When the Group loses control of a subsidiary, the gain or loss on disposal recognised in profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as required/permitted by applicable Accounting Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 9 when applicable, or the cost on initial recognition of an investment in an associate or a joint venture. Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars ($), which is HUB24 Limited’s functional and presentation currency. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202255 Comparatives Where required by the Accounting Standards and/or for improved presentation purposes, certain comparative figures have been adjusted to conform to changes in presentation for the current year. 1.3 CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management regularly evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The Directors continue to assess the potential financial and other impacts of the coronavirus (“COVID-19”) outbreak to the Group. The current high-level of uncertainty regarding the severity and length of COVID-19 on investment markets has impacted investment outcomes and increased volatility in investment performance during the year. At the date of signing, the future impacts of COVID-19 on global and domestic economies and investment market indices, and their resulting impact on the Group are uncertain. The Directors and management will continue to monitor this situation. Further to this, the current geopolitical events and global inflation concerns have also had a global market impact and uncertainty exists as to their implications. Such disruptions can adversely affect the assets, performance and liquidity. Recognising the Russia/Ukraine conflict as well as Australia’s broadening of its existing autonomous sanctions, the Directors and management continue to remain abreast of developments in this area and monitor the potential impacts across the Group. Market volatility may impact Funds Under Administration (FUA) and trading based fees, and any movement in the RBA Official Cash Rate may impact cash account fee income. Net inflows have proven to be resilient, our new business pipeline remains strong and assisted FUA transitions are continuing. HUB24’s priority has been, and remains, ensuring the health and safety of the team whilst continuing to operate our business to meet the needs of licensees, advisers and their clients as well as other key stakeholders. Our estimates and assumptions have been prepared based upon conditions existing at the date of this report. The key areas in which critical estimates and judgements are applied are as follows: • recognition of intangible assets and impairment testing (note 3.5.2). • recoverability of deferred tax assets (note 5.2); and • valuation of share based payments (note 7.1). • valuation and impairment testing of investment in associates (note 6.4) HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202256 2. GROUP PERFORMANCE OVERVIEW This section provides analysis and commentary on the Group’s operating activities. The HUB24 and Xplore Wealth platforms are used by financial advisers to efficiently administer their clients’ investments held through a custodial agreement, and PARS is a non-custody portfolio service which provides administration, corporate action management and tax reporting services for stockbrokers and financial advisers. HUB24 provides technology and data services to the wealth industry, bringing innovative solutions to support licensees, advisers and stockbrokers to deliver services to their clients, these services are provided through HUBconnect Pty Ltd (HUBconnect) and Agility Applications Pty Ltd (Agility). On 16 February 2022, HUB24 acquired 100 per cent of the issued share capital of Class Limited (Class), obtaining control of Class Limited and it’s wholly owned subsidiaries (Class). Class is a market-leading SMSF administration software provider. Their customers include Accountants, SMSF Administrators, Investment Advisors, Financial Planners and Lawyers. Class’s revenue comprises both subscription and recurring PAYG transactional revenue. 2.1. OPERATING SEGMENTS OVERVIEW Information is provided by operating segment to assist the understanding of the Group’s performance. The operating segments are consistent with the basis on which information is provided to the Group Executive (identified as the Chief Operating Decision Maker (“CODM”)) for measuring performance, being the basis upon which the Group’s operating activities are managed within the various markets in which HUB24 operates. The Board and Group Executive reviews segment revenues and profits (Underlying EBITDA) on a monthly basis. No single customer contributed 10 per cent or more to the Group’s income in either 2022 or 2021. This note presents the results of continuing operations only. The results of discontinued operations are presented in note 6.1. The Group’s operating segments are as follows: Platform Platform operating segment comprises the Platform and PARS businesses. The segment provides development of investment and superannuation platform services to financial advisers, stockbrokers, accountants and their clients. This segment includes both custody and non-custody products, and as noted above, incorporates the HUB24, Xplore and PARS businesses. Tech Solutions Tech Solutions segment comprises Class, HUBconnect and Agility. Class provides cloud-based wealth accounting and corporate compliance services to its clients. Fees are generated via licensing, subscription and PAYG fees. HUBconnect and Agility provide application and technology products for the financial services sector. Fees are generated from license and consulting services relating to data management, software and infrastructure. Corporate Provision of support services to the two operating segments which includes property, strategy, finance, risk and compliance, legal, human resources, and other corporate services. Investments in associates are also recognised within this segment. Prior period comparative segment impacts The sale of Paragem Pty Ltd (Paragem) has led to the discontinuation of the Licensee segment, with the transfer of control of Paragem to Diverger occurring on 1 February 2021. The results of Paragem are disclosed in note 6.1. The changes to operating segments in the prior period reflect Paragem as a discontinued business. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022Year ended 30 June 2022 ($’000) Sales to external customers Share of profit from associates Interest and other income Total income Expenses Underlying EBITDA Share based payment expense Strategic transactions and project costs1 Depreciation and amortisation Interest expense Profit/(loss) before income tax Income tax expense Profit/(loss) after income tax Reconciliation of income from ordinary activities Sales to external customers Interest and other income Share of profit from associates Income from ordinary activities Platform 160,466 - Tech Solutions 29,042 - 160,466 (98,211) 62,255 - (6,485) (15,240) (199) 40,331 - 40,331 29,042 (17,662) 11,380 - (11,249) (4,591) (340) (4,800) - (4,800) Corporate - 1,122 1,895 3,017 (6,277) (3,260) (10,783) (118) - (239) (14,400) (6,469) (20,869) 57 Total 189,508 1,122 1,895 192,525 (122,150) 70,375 (10,783) (17,852) (19,831) (778) 21,131 (6,469) 14,662 189,508 1,895 1,122 192,525 1. Strategic transactions and project costs of $17.9 million. Costs related to the Class transaction of $11.0 million, Xplore and Ord Minnett implementation related costs of $5.0 million and $1.9 million for other projects (including regulatory change and one-off client transition projects). Refer to page 19 within the Directors’ report for more information. Year ended 30 June 2021 ($’000) Platform 101,149 2 101,151 (63,210) 37,941 174 - Sales to external customers Share of profit from associates Interest and other income Total income Expenses Underlying EBITDA Non-recurring revenue Fair value gain – contingent consideration Agility consideration share based payments expense - Share based payments Strategic transactions and project costs1 (8,129) (6,703) Depreciation and amortisation (210) Interest expense 23,073 Profit/(loss) before income tax - Profit before income tax on discontinued operations - Income tax expense Profit/(loss) after income tax 23,073 Reconciliation of income from ordinary activities from continuing operations Sales to external customers Interest and other income Share of profit from associates Non-recurring revenue Fair value gain – contingent consideration Income from ordinary activities from continuing operations Tech Solutions 6,634 - 6,634 (4,845) 1,789 - - - - (254) (1) 1,534 - - 1,534 Corporate - 472 854 1,326 (4,314) (2,988) - 1,568 (1,568) (6,179) - - (92) (9,259) 823 (6,402) (14,838) Total 107,783 472 856 109,111 (72,369) 36,742 174 1,568 (1,568) (6,179) (8,129) (6,957) (303) 15,348 823 (6,402) 9,769 107,783 856 472 174 1,568 110,853 1. Strategic transaction due diligence and implementation costs of $7.5 million and $0.6 million in relation to the implementation of Private Label capability for both ClearView and IOOF and finalising the transfer of the Group’s management portfolio into a Management Investment Scheme (MIS). Refer to page 19 within the Directors’ report for more information. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202258 2.2. REVENUE FROM CONTINUING OPERATIONS OVERVIEW Platform revenue comprises fees (both FUA and transaction fees) charged for providing custodial and non-custodial wealth management services to customers. Such services include: • Custodial platform services via superannuation, MIS, and IDPS products; • Managed Discretionary Account solutions that incorporate specific requirements of advisory firms, wealth managers and stockbrokers into a private label service; • Superannuation administration services through DIY Master Pty Ltd; and • Non-custodial portfolio administration and reporting services. Tech Solutions revenue comprises fees (license and transaction fees) and commissions from services that include: • Class develops and distributes cloud-based accounting, investment reporting, document and corporate compliance and administration solutions. • HUBconnect and Agility – Provision of application and technology products for the financial services sector. Fees are generated from license and consulting services relating to data management, software and infrastructure as well as fees charged for the provision and maintenance of existing licenses. Platform fees License fees Transaction fees Commissions Tech Solutions fees Total ACCOUNTING POLICIES 2022 $’000 160,466 24,377 3,667 998 29,042 189,508 2021 $’000 101,323 6,118 516 - 6,634 107,957 Revenue is measured by reviewing each revenue contract and its respective services to customers to determine its performance obligation while allocating the transaction price to each performance obligation either over time or at a point in time. Platform fees • FUA fee revenue is recognised over time which include tiered administration fees and fees on client funds held as cash. FUA fees are accrued daily, paid monthly in arrears for the ongoing provision for agreed services. • Transaction fees are recognised at a point in time when platform trading for equities, managed funds and insurance occurs. Tech Solutions fees Class • License fee revenue is recognised over time over the duration of the agreement or for as long as the customer has been provided access, the fee is fixed or determinable and collectability is probable. • Transaction revenue is recognised at a point in time when the documents are sold to customers on a pay per use basis (PAYG). • Commissions revenue is recognised commission and partner fees at the point in time of sale of a third party’s products to customers which provides these customers with a right to access such products. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202259 HUBconnect and Agility • Licence fee revenue is recognised over time in accordance with the performance delivery of agreed services, within a period of 1–6 months. • Consulting and transaction fee revenue is recognised at a point in time when advice provided to clients on a time and materials basis. 2.3. OTHER INCOME Interest Income Other Income ACCOUNTING POLICIES 2022 $’000 1,472 423 1,895 2021 $’000 856 - 856 Interest revenue is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that discounts the estimated future cash receipt thorough the expected life of the financial asset to that asset’s net carrying amount on initial recognition. 2.4. EXPENSES FROM CONTINUING OPERATIONS (a) Employee benefits expenses Wages and salaries (including superannuation and payroll tax) Other employee benefits expenses Travel and entertainment (b) Depreciation and amortisation Depreciation of right-of-use assets Depreciation of office equipment Amortisation of intangible assets (c) Administrative expenses Corporate fees Professional and consultancy fees Information services and communication Property and occupancy costs Strategic transactions and project costs2 Other administrative expenses 1 Prior comparatives have been reclassified for presentation purposes and consistency with the current period. 2 Includes administrative and resourcing costs related to strategic transactions and project costs. 2022 $’000 20211 $’000 59,490 19,991 867 80,348 2,671 1,428 15,732 19,831 2,770 4,994 9,630 631 17,962 2,259 38,246 34,450 12,030 616 47,096 2,057 793 4,107 6,957 1,958 3,079 4,754 311 8,129 1,114 19,345 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202260 2.5. EARNINGS PER SHARE OVERVIEW Earnings per share (EPS) is the amount of profit or loss after income tax attributable to each share. Diluted EPS adjusts the EPS for the impact of shares that are not yet issued but which may be in the future, such as shares potentially issuable from rights, options and employee share-based payments plans. 2022 Cents 2021 Cents Earnings per share, attributable to ordinary equity holders of HUB24 Limited Basic earnings per share Diluted earnings per share 20.18 19.53 Earnings per share from continuing operations, attributable to ordinary equity holders of HUB24 Limited Basic earnings per share from continuing operations Diluted earnings per share from continuing operations 20.18 19.53 14.83 14.28 13.58 13.07 2.5.1 Reconciliation of earnings used for earnings per share measures Earnings per share is based on profit or loss after income tax attributable to ordinary equity holders of the Company, as follows: Profit after income tax attributable to the owners of HUB24 Ltd used in calculating basic and diluted earnings per share from continuing operations Profit after tax from continuing operations 2.5.2 Reconciliation of weighted average number of ordinary shares 2022 $’000 14,662 14,662 2021 $’000 9,769 9,769 2022 Number 2021 Number Weighted average number of ordinary shares used in calculating basic earnings per share 72,674,651 65,865,008 Weighted average number of ordinary shares used in calculating diluted earnings per share 75,087,748 68,433,859 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202261 3. FINANCIAL POSITION 3.1 TRADE AND OTHER RECEIVABLES OVERVIEW Trade and other receivables are principally amounts owed to HUB24 by Platform or Tech Solutions customers. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables. Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Trade receivables1 Other receivables 1 Net of a provision of doubtful debts of $237 thousand (FY21: $38 thousand). ACCOUNTING POLICIES 2022 $’000 23,688 2,618 26,306 2021 $’000 14,877 1,756 16,633 Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. The Group’s impairment model calculates expected credit losses on trade receivables using a provision matrix. Under the model, historic provision rates with current and forward looking estimates are used. The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (ECL). The ECL on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. 3.2 TRADE AND OTHER PAYABLES OVERVIEW Trade payables, deferred consideration and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade payables Other payables1 Total trade and other payables 1 Other payables includes accruals, deferred revenue and other payables due. ACCOUNTING POLICIES 2022 $’000 3,889 10,056 13,945 2021 $’000 685 8,410 9,095 Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202262 3.3 PROVISIONS OVERVIEW Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Employee benefits Short and long-term benefits Liabilities for wages and salaries, short term incentives, including non-monetary benefits and annual leave expected to be settled within 12 months (short term) and long service leave after 12 months (long term) of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Deferred short term incentive The provision represents the deferred portion of STI bonus of senior staff members relating to the financial year. 2022 deferred short term incentive is payable September 2023 (FY21: Payable September 2022). Lease make good The provision represents the present value of estimated costs of improvements to the leased premises of the Group at the end of the respective lease term. Third party claims The estimate of ongoing claims made by third parties in respect of Platform services. Restructuring Provision The Group has recognised $649 thousand in FY22 for redundancy and retention obligations primarily related to the Class acquisition. (FY21: $725 thousand related to the review of Xplore products and compliance obligations). Current Liabilities Employee benefits – annual leave Employee benefits – other Tax provision Restructuring provision Third party claims Lease make good provision Current Liabilities Non-current Liabilities Employee benefits – long service leave Employee benefits – deferred short term incentive Lease make good provision Non-current liabilities Total Provisions 2022 $’000 5,976 13,277 2,694 649 704 558 2021 $’000 3,772 6,012 5,241 725 317 51 23,858 16,118 2,342 440 470 3,252 27,110 1,882 401 65 2,348 18,466 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202263 Movements in each class of provision during the financial year, other than employee benefits, are set out below: Consolidated $’000 2022 Carrying amount at the start of the year Additional provisions recognised/(released) Carrying amount at the end of the year 2021 Carrying amount at the start of the year Additional provisions recognised/(released) Additional provisions recognised Carrying amount at the end of the year ACCOUNTING POLICIES Tax provision Third party claims Restructuring provision Lease make good provision 5,241 (2,547) 2,694 - 5,241 - 5,241 317 387 704 300 17 - 317 725 (76) 649 - 725 725 51 507 558 25 26 - 51 Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When the effect of the time value of money is material, provision is discounted using the current pre-tax rate that reflects the risks specific to the liability. 3.4 RIGHT OF USE ASSETS AND LEASE LIABILITIES OVERVIEW The Group leases various property and equipment. Lease agreements are negotiated on an individual basis with bespoke terms and conditions and are typically made for fixed periods of 2 years to 7 years. Under AASB 16 Leases, the Group will recognise for all leases with a term of more than 12 months except for those leases where the underlying asset is deemed to be of a low-value: • a right-of-use asset representing its right to use the underlying asset; and • a lease liability. 3.4.1 Right of use assets Total right-of-use assets 2022 $’000 9,525 2021 $’000 6,093 The additions to right of use assets during FY22 were $6.1 million (FY21 $2.66 million). These relate to the following: • Acquisition of the Class business; • An extension of a three year property lease was signed in November 2021, while related lease incentives began in December 2021; • An extension of a one year property lease was signed in February 2022; and • A new three year property lease was signed by Class in April 2022. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202264 Right of Use Cost Accumulated Depreciation Net Book amount Reconciliations of the carrying amounts at the beginning and end of the year: Opening net book Additions Disposals Depreciation charge Closing net book amount 3.4.2 Lease liabilities Current Non-current Reconciliations of the carrying amounts at the beginning and end of the year: 2022 $’000 15,464 (5,939) 9,525 6,093 6,103 - (2,671) 9,525 2022 $’000 3,253 6,931 10,184 6,754 6,075 (2,899) 254 10,184 2021 $’000 9,838 (3,745) 6,093 5,437 2,713 - (2,057) 6,093 2021 $’000 2,204 4.550 6,754 6,056 2,695 (2,300) 303 6,754 Opening net book amount Additions Lease payments Interest payments Closing net book amount 30 June 2022 ($’000) Within 1 year After 1 year and less than 5 years More than 5 years Total 30 June 2021 ($’000) Within 1 year After 1 year and less than 5 years More than 5 years Total Future value of minimum lease payments 3,487 7,198 - 10,685 Future value of minimum lease payments 2,383 4,715 - 7,098 Interest (234) (267) - (501) Interest (179) (165) - (344) Present value of minimum lease payments 3,253 6,931 - 10,184 Present value of minimum lease payments 2,204 4,550 - 6,754 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 65 ACCOUNTING POLICIES Under AASB 16, as a lessee the Group recognises a right-of-use asset, representing its right to use the underlying asset, and a lease liability, for all leases with a term of more than 12 months, exempting those leases where the underlying asset is deemed to be of a low-value. The Group recognises a right-of-use asset and a lease liability at the lease commencement date, i.e. when the underlying asset is first available for use. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate, being the rate that the lessee would pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether purchase; renewal or termination options are reasonably certain to be exercised. The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that includes purchase, renewal, or termination options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which affects the value of lease liabilities and right-of-use assets recognised. The Consolidated statement of profit or loss and the related Notes to the Financial Statements show the following amounts relating to leases: Depreciation charge on right-of-use assets Interest expense on lease liabilities Expenses relating to short-term leases 2022 $’000 2,671 254 310 3,235 2021 $’000 2,057 303 187 2,547 The total cash outflow for leases in the year ended 30 June 2022 was $2.9 million (FY21: $2.3 million). 3.5 INTANGIBLE ASSETS OVERVIEW Intangible assets are assets with no physical substance. The most significant classes of intangible assets of the Group by cash generating unit are detailed below: Platforms Segment Technology Solutions Segment Investment Platform CGU PARS CGU HUB Connect CGU Class CGU Investment Platform (Software) PARS customer relationships Agility connect software Software Customer Relationship Software Goodwill on acquisitions Agility customer relationship Customer Relationship HUBconnect software Brand Goodwill on acquisitions Goodwill on acquisitions HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202266 Consolidated Year ended 30 June 2022 Computer Software $’000 Customer Relationship $’000 Brand $’000 Goodwill $’000 Other1 $’000 Total $’000 At cost 129,662 103,102 8,761 221,630 Accumulated amortisation and impairment Net carrying amount (27,861) 101,801 (5,922) 97,180 - - 8,761 221,630 Reconciliations of the carrying amount at the beginning and end of the financial year: Opening carrying amount Other additions2 Addition through acquisition3,4 Amortisation from acquisition Amortisation and impairment5 28,651 12,000 72,845 (8,360) (3,335) Closing carrying amount 101,801 11,557 - 89,660 (3,952) (85) 97,180 - - 63,768 - 8,761 157,862 - - - - 8,761 221,630 - - - - - - - - 463,155 (33,783) 429,372 103,976 12,000 329,128 (12,312) (3,420) 429,372 1 Other is comprised of Paragem intangibles. 2 Other additions relate to internally generated software across the platform and tech solutions segments. 3 Addition through acquisition relates to finalisation of the Purchase Price Accounting (PPA) for the Xplore businesses acquired (1HFY22 $21.2 million decrease in goodwill | Final goodwill balance $27.3 million). 4 Addition through acquisition relates to the provisional PPA for the Class businesses acquired. (Provisional goodwill balance $178 miilion). 5 No impairment was recognised in the year. Consolidated Year ended 30 June 2021 Computer Software $’000 Customer Relationship $’000 Brand $’000 Goodwill $’000 Other1 $’000 Total $’000 At cost 44,818 13,441 Accumulated amortisation and impairment Net carrying amount (16,166) 28,652 (1,885) 11,556 - - - 63,768 - 63,768 Reconciliations of the carrying amount at the beginning and end of the financial year: Opening carrying amount Other additions2 Addition through acquisition3 Disposals through business sale Amortisation and impairment from acquisition Amortisation and impairment Closing carrying amount 22,998 5,693 3,042 - (255) (2,826) 28,652 384 - 12,157 - (900) (85) 11,556 - - - - - - - 16,325 - 47,443 - - - 63,768 122,027 (18,051) 103,976 39,963 5,693 62,642 (216) (1,155) (2,951) 103,976 - 256 - - (216) - (40) - 1 Other is comprised of Paragem intangibles. 2 Other additions relate to internally generated software across the platform and tech solutions segments. 3 Addition through acquisition relates to the Provisional Purchase Price Accounting (PPA) for the Xplore businesses acquired. The classes of asset used in the disclosure have been enhanced from the prior year to improve the users understanding of the various categories of Intangible assets held. For FY21, this includes the following reclassifications: • $736 million movement from ‘Other’ to ‘Software’. This relates to Xplore and Agility related software intangibles. • $1.1 million movement from ‘Other’ to Customer relationships. This relates to Xplore customer relationship intangibles. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202267 ACCOUNTING POLICIES Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units. When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. Intangibles Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Refer to note below, Investment Platform estimate of useful life, for detailed information. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash- generating unit level consistent with the methodology outlined for goodwill above, such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. The Group has acquired a new indefinite life intangible asset through the Class acquisition in FY22 (FY21: nil). HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202268 3.5.2 Impairment testing of intangible assets OVERVIEW An intangible asset’s recoverable value is the greater of its value in use and its fair value less cost to sell. For intangible assets with a finite life, if there are indicators that the intangible asset’s recoverable value has fallen below its carrying value (e.g. due to changing market conditions), an impairment test is performed and a loss is recognised for the amount by which the carrying value exceeds the asset’s recoverable value. Intangible assets that have an indefinite useful life, such as goodwill, are tested annually for impairment or more frequently where there is an indication that the carrying amount may not be recoverable. Goodwill is allocated to operating segments and are expected to benefit from synergies arising from the acquisition giving rise to the goodwill. Operating segments reflect the level at which goodwill is monitored for impairment by management. As the Group acquires or disposes of operations, or reorganises the way that operations are managed, reporting structures may change, giving rise to a reassessment of operating segments and the allocation of goodwill to those operating segments. ACCOUNTING POLICIES Impairment testing of goodwill and intangible assets The recoverable amount of goodwill and other intangible assets with an indefinite useful life have been determined based on a value-in-use calculation derived from cash flow forecasts for each group of CGU’s, which make up the HUB24 operating segments. Cash flow forecasts are based on a combination of extrapolated performance to date and management’s expectations of future performance based on prevailing and anticipated market factors. Cash flows beyond the forecasting period are extrapolated using a terminal value. The cash flows are then used to calculate the Net Present Value and compared to the carrying value. Key assumptions by each operating segment are detailed below: Investment Platform Cash generated by the Investment Platform segment has been used to assess the recoverable amount for all intangible assets associated with the Investment Platforms. Assumptions 1. Growth in FUA on the platform – Growth in the number of client accounts and consequently FUA. Management have estimated future FUA on the platform at a 5 year CAGR of 20% (FY21: 22%) with reference to current client transition rates, industry data and pipeline monitoring. 2. Post-tax discount rate – 10.5% (FY21: 10%) which approximates the weighted average cost of capital of the Investment Platform 3. Terminal growth rate – 2.5% (FY21: 2.5%). 4. Capital expenditure has been held consistent with current expenditure across the 5 years that have been modelled. 5. Tax rate (effective) – 31% There were no other key assumptions used for the investment platform intangible value in use calculation. Based on the above assessment there was no impairment of the investment platform intangible in FY22 (FY21: nil). Sensitivities of assumptions If the post- tax discount rate was 24.5% higher (35% instead of 10.5%), there would be nil headroom. If there were a 110% decrease in the terminal growth rate (-107.5% instead of +2.5%) there would be nil headroom. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202269 CGU PARS Customer Relationships The PARS Customer Relationship CGU forms part of the Investment Platform segment. No impairment indicators were identified for the PARS Customer relationship. Technology Solutions Segment (HUBconnect and Class CGUs) Assumptions 1. Growth in revenue. Management have estimated revenue growth of the Tech Solutions segment as a 7 year CAGR of 10% with reference to current client rates, industry data and pipeline monitoring. 1a. Growth in HUBconnect CGU customer base – Growth in licensees, practice groups, advisors and vendors. Management have estimated future 7 year CAGR of 40%. 1b. Growth in Class CGU customer base – Growth in the number of accounts, customers and documents ordered. Management have estimated future 7 year CAGR of 8%. 2. Post-tax discount rate – 12% (FY21: 12%). This has been determined based on the weighted average cost of capital for the Tech Solutions segment. 3. Terminal growth rate – 2.5%. (FY21: 1.5%, HUBconnect only). 4. Period over which cashflows have been discounted – 7 years. 5. Tax rates: 5a. HUBconnect CGU tax rate (effective) – 31% 5b. Class CGU tax rate adopted – 30% Based on the above assessment there was no impairment of the Technology Solutions segment intangibles in FY22 (FY21:nil). Sensitivities of assumptions If the post-tax discount rate was 1.8% higher (13.8% instead of 12.0%), there would be nil headroom. If there were a 3% decrease in the terminal growth rate (-0.7% instead of +2.5%) there would be nil headroom. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES Estimate of useful life Management have assessed the remaining useful life of the investment platform and applications based upon the separate platform components. The four components useful lives are: • Core database with a useful life of 20 years; • Applications with a useful life of 10 years; • User Interface with a useful life of 5 years. • Product Development with a useful life of 3 years. The assessment of useful life is a key management judgement and the useful life adopted could change significantly as a result of technical innovations or some other event. The amortisation charge will increase where the useful lives are deemed shorter than previously estimated, or technically obsolete or non-strategic assets that have been abandoned or sold will be written down or off. Goodwill and other indefinite life intangible assets The carrying value of intangible assets with an indefinite life (including goodwill) are tested annually for impairment. Other intangible assets with a finite life are assessed for indicators of impairment and tested in accordance with AASB136 should indicators arise. The recoverable amounts of cash generating units and segments have been determined based on value-in-use calculations. These calculations require the use of assumptions including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Details of these assumptions and the potential impact of changes to these assumptions can be found above this note. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202270 Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Capitalisation of development costs The Group capitalises project development costs eligible for capitalisation in relation to the Platform and Tech Solutions. The capitalised costs are all directly attributable costs necessary to create, produce, and prepare assets to be capable of operating in the manner intended and are amortised over the asset’s useful life. 3.6 PROPERTY, PLANT AND EQUIPMENT OVERVIEW Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the office equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in profit or loss as incurred. Computer equipment $’000 Office furniture and fittings $’000 Year ended 30 June 2022 Cost or fair value Accumulated depreciation Net book amount Reconciliations of the carrying amounts at the beginning and end of the financial year: Opening net book amount Acquisitions through business combinations Other Additions Disposals Depreciation charge Closing net book amount 721 1,012 718 (12) (646) 1,793 6,099 (4,306) 1,793 4,117 (2,954) 1,163 734 414 801 (4) (782) 1,163 Computer equipment $’000 Office furniture and fittings $’000 Year ended 30 June 2021 Cost or fair value Accumulated depreciation Net book amount Reconciliations of the carrying amounts at the beginning and end of the financial year: Opening net book amount Acquisitions through business combinations Additions Disposals Depreciation charge Closing net book amount 499 - (405) 721 2,837 (2,116) 721 2,086 (1,352) 734 627 1,026 1,653 96 - (388) 734 595 - (793) 1,455 Total $’000 10,216 (7,260) 2,956 1,455 1,426 1,519 (16) (1,428) 2,956 Total $’000 4,923 (3,468) 1,455 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202271 ACCOUNTING POLICIES Property, plant and equipment is carried at cost less, any accumulated depreciation and impairment losses. The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each reporting date. Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows: • Office furniture and fittings – over 2.5 to 5 years • Computer equipment – 3 years. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in profit or loss in the period in which they arise. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202272 4. CAPITAL STRUCTURE AND FINANCING OVERVIEW Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees and consultants understand their roles and obligations. The Audit, Risk and Compliance Committee (ARCC) oversees how management monitors compliance with the Group’s risk management policies, procedures and reviews the adequacy of the risk management framework in relation to risks faced. The ARCC is assisted by external professional advisors from time to time. Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises from the financial assets of the Group, which comprise cash and cash equivalents and principally, trade and loan receivables. Exposure at reporting date is addressed at each particular note. The Group does not hold any credit derivatives to offset its credit exposure. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit worthiness, financial position, past experience and industry reputation. In addition, credit risk exposures and receivable balances are monitored on an ongoing basis with the objective that the Group’s exposure to bad debts is not significant. Management has assessed the expected credit losses on trade receivables and have used a provision matrix to measure the Group’s impairment losses. The Group also has credit risk in respect of its debtors. In the case of most transactions, revenue is generally earned over a period of several months due to the complexity and size of the work involved. The Group manages this risk by entering into contractual agreements with its counterparties, obtaining external legal advice where necessary, at the start of each transaction. The Group provides financial guarantees to wholly-owned subsidiaries and has provided a guarantee to ANZ with regards to the borrowing facilities in operation during the financial year. Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always maintain banking/credit facilities and typically ensures that it has sufficient cash on demand, or access to banking facilities (e.g. overdrafts) to meet operational expenses for a period of 90 days, excluding the potential impact of extreme circumstances that cannot be reasonably predicted. Group forecasts and actual cash flows are continuously monitored, matching the maturity of assets and liabilities, to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Market Risk Market risk is the risk that changes in market prices will affect the Group’s income and include price risk. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202273 Capital Management It is noted that the Group, through its licensed subsidiaries, fully complied with the minimum regulatory capital requirements for IDPS Operators and providers of custodial services for the year ended 30 June 2022 so as to ensure ongoing capital adequacy. Refer to note 4.2 for information on the Group’s ORFR requirements. As part of broader capital management plans, the Group has a $39 million amortising bank loan facility (refer to note 4.1) and a $5 million overdraft facility which remained undrawn during the year. There were no other changes in the Group’s approach to capital management during the year. Interest Rate Risk Interest rate risk is the risk that RBA Offical Cash Rate changes potentially affecting the Group’s income and includes price risk. Foreign Exchange Risk Foreign currency exchange rate risk is the risk that the fair value or future cash flow of an exposure will fluctuate because of a change in foreign currency rates. The Group’s exposure to the risk of a change in foreign currency relate primarily to the Group’s operating activities (when revenue and expenses are denominated in a foreign currency). 4.1 BORROWINGS OVERVIEW The Group has in place loan facilities with both The Australia and New Zealand Banking Group Ltd (ANZ) and Westpac Banking Corporation (Westpac). A $5 million overdraft facility is available to the Group to assist with working capital requirements. Amortising Loan Facility HUB24 – Current Class – Current Total Current HUB24 – Non-current Class – Non-current Total Non-current Total Group Borrowings Overdraft facility HUB24 2022 $’000 3,125 6,934 10,059 6,250 22,986 29,236 39,295 2021 $’000 3,125 - 3,125 9,375 - 9,375 12,500 The overdraft facility was undrawn throughout the year. The Group incurs a commitment fee of 0.60% per annum to maintain the overdraft facility with an interest rate of 1 month BBSY + 1.25% applied to any drawn balances and paid quarterly. The loan facility and overdraft facility have common and referrable security charges with each facility. Refer to note 4.5 for debt maturity profile. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202274 4.2 LOANS RECEIVABLE ORFR Loan Other Loans Non-current 2022 $’000 15,405 250 15,655 2021 $’000 7,550 7,550 The Group advanced a loan to HTFS Holdings Pty Ltd, a wholly owned subsidiary of EQT Holdings Limited, who used the proceeds to subscribe for capital in HTFS Holdings Nominees Pty Ltd, another wholly owned subsidiary of EQT Holdings Limited (ASX:EQT), which is the Trustee for the HUB24 Super Fund (“the Fund”). The loan agreement is entered into on an arm’s length basis and on commercial terms at an interest rate of 10% per annum. Repayment of the loan is subject to the Trustee continuing to meet its obligations to the Fund, including making good any losses from operational risk events. The capital received by the Trustee is reserved for the purpose of meeting the Operational Risk Financial Requirement (ORFR) for the Fund in accordance with APRA Prudential Standard SPS114. The Group advanced a $250,000 loan to a FinTech who used the proceeds solely for the purpose of development of advice production and advice delivery tools. The loan agreement is entered into on an arm’s length basis and on commercial terms at an interest rate of 4% per annum from the date the loan is advanced up to and including the date on which the amount of the loan is either repaid in full or exchanged for Convertible Notes. ACCOUNTING POLICIES Loans receivable are financial assets initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments are adjusted against the fair value of the financial assets on initial recognition. Financial assets are measured at Amortised Costs. Fair value measurement assumes an orderly transaction between market participants at the measurement date under current market conditions. 4.3 CONTRIBUTED EQUITY AND RESERVES OVERVIEW Ordinary shares in the Company rank after all creditors, have no par value and entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. During the current year, the Group issued share capital and purchased shares on market (treasury shares) for the purposes of settling employee share scheme options and performance rights, utilising a share based payments reserve for this purpose. The Group has discretion in settling employee share scheme options and performance rights via the issuance of treasury shares or via issuance of new ordinary shares. Incremental costs directly attributable to the issue of new equity instruments are shown in equity as a deduction, net of GST from the proceeds. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202275 Issued and paid-up capital Ordinary shares, fully paid Treasury shares 2022 Number 2021 Number 2022 $’000 2021 $’000 80,058,178 68,333,179 468,018 204,227 (312,632) (212,158) (7,571) (5,013) Total issued and paid up capital 79,745,546 68,121,021 460,447 199,214 Movements in issued and paid up capital Beginning of the financial year Shares issued Xplore settlement consideration adjustment Options and rights exercised Class settlement consideration Additional paid up capital Treasury shares issued from Trust1 Total shares Shares issued transaction costs Capital raising costs End of the financial year Movement in Treasury shares Beginning of the financial year Employee share issue1 Treasury shares purchased on-market End of the financial year 68,333,179 62,846,130 204,227 291,440 4,988,495 - - - 498,554 11,433,559 - - - - - 1,418 (1,503) 3,489 268,003 - (7,454) 100,173 103,319 - 1,604 - 447 - 80,058,178 68,333,179 468,180 205,542 - - - - (162) - - (1,315) 80,058,178 68,333,179 468,018 204,227 212,158 (269,833) 370,307 312,632 39,636 (40,439) 212,961 212,158 5,013 (7,454) 10,012 7,571 27 (26) 5,012 5,013 1 Number of treasury shares transferred from trust to satisfy options and rights exercised was 269,833 in FY22 (40,439 FY21), Fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares – for the year ended 30 June 2022 On 30 August 2021, the Group issued 184,541 ordinary shares for options exercised by employees of the Group for consideration of $1,028,395.37. On 1 October 2021, the Group issued 106,899 ordinary shares for options and PARS exercised by employees of the Group for consideration of $389,487.34. On 16 February 2022, the Group issued 11,433,559 ordinary shares as HUB24 Limited scrip consideration for the purchase of Class. Ordinary shares – for the year ended 30 June 2021 On 30 September 2020, the Group issued 68,847 ordinary shares for options exercised by employees of the Group for consideration of $343,322. On 15 October 2020, the Group issued 120,000 ordinary shares for options exercised by employees of the Group for consideration of $295,200. On 26 October 2020, the Group issued 109,752 ordinary shares relating to the purchase of Agility Applications Pty Ltd. These shares are restricted for 12 months for 50% of the shares and 24 months for the remaining 50%. Holders of the shares are entitled to rights and benefits in line with other ordinary shareholders. On 5 November 2020, the Group issued 2,500,000 ordinary shares under a share purchase plan for consideration of $50,000,000. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202276 On 30 November 2020, the Group issued 999,999 ordinary shares under a share purchase plan for consideration of $19,999,980. On 30 November 2020, the Group issued 309,707 ordinary shares for options and PARS exercised by employees of the Group for consideration of $1,358,055. On 2 March 2021, the Group issued 1,378,744 ordinary shares as HUB24 Limited scrip consideration for the purchase of Xplore. ACCOUNTING POLICIES Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new equity instruments are shown in equity as a deduction, net of GST from the proceeds. 4.3.2 Share based payment reserves Share based payments share reserve Movement in reserve Opening balance Reserve reclassified to share capital through exercised options and rights Employee share based payment expense Shares issued through HUB24 Share Ownership Trust For accounting policy refer to note 7.1. 4.3.3 Profit reserves OVERVIEW 2022 $’000 2021 $’000 19,975 11,507 11,507 (2,056) 10,524 - 19,975 8,823 (1,604) 4,516 (228) 11,507 To the extent possible under the Corporations Act 2001 and applicable tax laws, the profits reserve is preserved for future dividend payments. Opening balance Transfer to profit reserves Dividends paid on ordinary shares 4.4 DIVIDENDS OVERVIEW 2022 $’000 45,342 14,662 (9,773) 50,231 2021 $’000 40,848 9,769 (5.275) 45,342 The Group’s dividend policy is a target payout ratio of 40% - 60% of the Group’s Underlying Net Profit After Tax. Our dividend policy is designed to ensure we reward shareholders relative to underlying net profit after tax and maintain sufficient capital for future investment and growth of the business, subject to market conditions. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202277 Dividend cents per share Franking percentage Dividend payout ($’000) Payout ratio1 Payment Date 2022 Final 12.5 100 10,008 46% 2022 Interim 7.5 100 6,004 42% 2021 Final 5.5 100 3,769 47% 2021 Interim 4.5 100 3,075 40% 14 October 2022 18 April 2022 15 October 2021 19 April 2021 1 The 2022 Interim dividend payout ratio includes Class shareholders as part of the scheme of arrangement terms. The Board has elected to determine a dividend of 12.5 cents per share franked at 100%. Franking credits Franking credits available as at 30 June 2022 to shareholders of the Company amount to $8.7 million (2021: $30 thousand) at the 30 percent corporate tax rate. 4.5 FINANCIAL INSTRUMENTS Key accounting policies Interest rate risk The Group is not materially exposed to movements in short-term variable interest rates on cash and cash equivalents and borrowings. All other financial assets and liabilities are non-interest bearing. The Directors believe a 0.5% decrease is a reasonable sensitivity given current market conditions. A 0.5% increase and a 0.5% decrease in interest rates would increase/decrease profit and loss in the consolidated entity and the company by: Consolidated Cash and cash equivalents at end of period Loans receivable Borrowings Financial Instruments subject to interest rate risk at the end of period Cash and cash equivalents at end of period 0.5% increase in interest rate 0.5% decrease in interest rate Borrowings 0.5% increase in interest rate 0.5% decrease in interest rate Net impact on profit after tax Profit for the year 0.5% increase in interest rate 0.5% decrease in interest rate Credit risk 2022 $’000 43,454 15,655 2021 $’000 63,461 7,550 (39,295) (12,500) 19,814 43,454 217 (217) 58,511 63,461 317 (317) (39,295) (12,500) (196) 196 14,662 14,683 14,642 (63) 63 9,769 10,024 9,514 Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group’s objective in managing credit risk is to minimise the credit losses incurred, mainly on trade and other receivables and loans. There is no significant credit risk exposure on fair value through profit and loss (FVTPL) financial assets and held to maturity investments. Credit risk is managed through maintaining procedures ensuring, to the extent possible, that customers and counterparties to transactions are of sound credit worthiness and the monitoring of the financial stability of significant HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202278 customers and counterparties. Such monitoring is used in assessing receivables for impairment. Credit terms are generally 30 days from the date of invoice. For fees with longer settlements, terms are specified in the individual client contracts. In the case of loans advanced, the terms are specific to each loan. Credit risk exposures The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period is equivalent to the carrying value and classification of those financial assets as presented in the statement of financial position. The Group advanced a loan to HTFS Holdings Pty Ltd, who used the proceeds to subscribe for capital in HTFS Holdings Nominees Pty Ltd, a wholly owned subsidiary of EQT Holdings Limited (ASX:EQT), which is the Trustee for the HUB24 Super Fund (the Fund). The loan agreement is entered into on an arm’s length basis and on commercial terms at a fixed interest rate of 10% per annum. The capital received by the Trustee is reserved for the purpose of meeting the Operational Risk Financial Requirement (ORFR) for the Fund in accordance with APRA Prudential Standard SPS114. The credit risk on this facility is low. The Group advanced a loan to a FinTech who used the proceeds solely for the purpose of development of advice production and advice delivery tools . The loan agreement is entered into on an arm’s length basis and on commercial terms at an interest rate of 4% per annum. The credit risk on this facility is low. Liquidity risk Financing arrangements and capital management The Group had access to the following borrowing facilities during the reporting period: Consolidated HUB24 Financial Instruments Floating rate – Expiring within one year (bank overdraft facility) Floating rate – 3 year term (loan facility) Drawn at balance date Class Financial Instruments Fixed rate – 3.5 year term (loan facility) Floating rate – 3 year term (loan facility) Floating rate – 3 year term (loan facility) Floating rate – 3 year term (loan facility) Drawn at balance date HUB24 2022 $’000 2021 $’000 5,000 12,500 9,375 7,000 1,820 9,100 12,000 29,920 5,000 12,500 12,500 - - - - - The $5 million bank overdraft facility may be drawn at any time, and may be cancelled by giving the bank 10 business days notice. During the year ended and as at 30 June 2022, the overdraft facility was not drawn down. The bank loan facilities are subject to annual review. The Group incurs a line fee of 0.60% per annum to maintain the bank overdraft facility with a further rate of BBSY + 1.25% applied to any drawn balances. The 3 year amortising ANZ bank loan facility was secured specifically for the strategic transactions. The loan has been fully drawn down on 18 February 2021 with principal repayments of $3.125m payable every calendar year in February. The bank loan facility may not be redrawn once it has been repaid. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202279 The Group incurs a commitment fee of 0.40% per annum to maintain the loan facility with an interest rate of 1 month BBSY + 1.95% applied to any drawn balances and paid quarterly. Both the overdraft and loan facility are guaranteed by HUB24 Limited and its operating subsidiaries: Agility Applications Pty Ltd; HUB24 Management Services Pty Ltd; HUB24 Administration Pty Ltd; HUB24 Custodial Services Ltd; HUB24 Services Pty Ltd; HUBconnect Pty Ltd. The Group’s regulatory capital requirements have been ring-fenced from the ANZ security arrangements. Class A bank loan facility with a principal balance of $7 million outstanding. The facility is subject to a fixed rate of 2.97% per annum plus total quarterly principal repayments of $2 million due in the next 12 months with a bullet repayment for the amount outstanding on expiry of the loan term being 19 August 2023. A bank loan facility with a principal balance of $1.82 million outstanding. The facility is subject to a variable rate of 1.93% plus BBSY per annum plus total quarterly principal repayments of $0.91 million due in the next 12 months with a bullet repayment for the amount outstanding on expiry of the loan term being 19 August 2023. A bank loan facility with a principal balance of $9.1 million outstanding. The facility is subject to a variable rate of 1.93% plus BBSY per annum plus total quarterly principal repayments of $2.024 million due in the next 12 months with a bullet repayment for the amount outstanding on expiry of the loan term being 29 February 2024. During the financial year Class obtained an additional bank loan facility with a principal balance of $12 million. The facility is subject to a variable rate of 1.93% plus BBSY per annum plus total quarterly principal repayments of $2 million due in the next 12 months with a bullet repayment for the amount outstanding on expiry of the loan term being 31 August 2024. The facilities are secured by fixed and floating charges over the assets of Class Technology Reporter Pty Ltd, Class Investment Reporter Pty Ltd, Nowinfinity Pty Ltd, Nowinfinity 3505 Pty Ltd, Assuriti Pty Ltd, Company Dynamics Pty Ltd, Accounting & Legal Dynamics Pty Ltd. Maturity analysis of financial assets and liabilities The risk implied from the values shown in the table below is based on best estimates and reflect a balanced view of cash inflows and outflows, excluding the Groups future cashflow generated from operations. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as office equipment, platform development and investments in working capital e.g. receivables. These assets are considered in the Group’s overall liquidity risk. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202280 Consolidated 30 June 2022 Consolidated financial assets: Cash and cash equivalents Trade and other receivables Consolidated financial liabilities: Trade and other payables Borrowings Lease Liability Net Maturity 30 June 2021 Consolidated financial assets: Cash and cash equivalents Trade and other receivables Consolidated financial liabilities: 0–1 month $’000 1–3 months $’000 4–12 months $’000 1–5 years $’000 Total $’000 42,339 22,845 65,184 70 2,772 2,842 8,959 3,989 - 278 - 552 9,237 4,540 1,025 687 1,712 997 10,059 2,424 13,480 20 2 22 - 29,236 6,930 36,166 55,946 (1,698) (11,768) (36,144) 43,454 26,306 69,760 13,945 39,295 10,184 63,423 6,336 63,461 16,633 80,094 9,095 12,500 6,754 28,350 51,744 Trade and other payables 6,610 1,841 Borrowings Lease Liability Net Maturity - 213 6,823 67,473 - 374 2,215 1,659 62,366 11,930 74,296 70 3,804 3,874 1,025 899 1,924 644 3,125 1,633 5,402 - - - - 9,375 4,534 13,909 (3,478) (13,909) The Group monitors rolling forecasts of liquidity reserves on the basis of expected cash flow and aims to maintain a minimum cash contingency above regulatory requirements to be freely available equal to a minimum one-month average operational cashflow (on a rolling 12-month average basis). Market risk The Group balance sheet is not materially exposed to movements in market prices. The net fair value of financial assets and liabilities approximates their carrying values and the methods for estimating fair values are outlined in the relevant notes to the financial statements. Foreign exchange risk The Group balance sheet is not materially exposed to movements in exchange rates. Fair value measurement No other financial instruments for the year ended 30 June 2022 required fair value assessment (FY21: nil). 4.6 RECONCILIATION OF CASH FLOWS Key accounting policies Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202281 which are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within borrowings current liabilities in the balance sheet. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Consolidated (a) Reconciliation of the net profit/(loss) after tax to cash flow from operations Net profit/(loss) after tax for the year Non-cash items: Depreciation and amortisation Share based payment expense – Employee Share of profit from associates Fair value (gains)/losses Deferred (revenue)/expenses Gain on sale of Paragem Changes in operating assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in deferred tax assets (Increase)/decrease in other assets Increase/(decrease) in trade and other payables Increase/(decrease) in provisions Net cash flow from operating activities (b) Reconciliation of cash and cash equivalents Cash and cash equivalents comprises: Cash on hand and at bank (c) Terms and conditions 2022 $’000 2021 $’000 14,662 9,769 19,831 10,783 (1,122) - - - (6,665) (6,010) (649) (4,093) 10,194 36,931 6,971 6,312 - (1,568) 579 (1,389) (7,250) 1,161 (6,447) 2,868 8,159 19,165 43,454 63,461 For the purposes of the Statement of cash flows, cash and cash equivalents includes cash on hand and at bank, deposits held at call with fi-nancial institutions, other short term, highly liquid investments with 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 and bank overdrafts. 4.7 COMMITMENTS AND CONTINGENCIES The Group had no commitments or contingencies as at 30 June 2022 (FY21 nil). HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202282 5. INCOME TAX OVERVIEW Income tax expense or credit is the accounting tax outcome for the period and is calculated as the tax payable on the current period taxable income based on the applicable income tax rate for each jurisdiction, adjusted for changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses. The relationship between accounting profit or loss and income tax expense or credit is provided in the reconciliation of prima facie tax to income tax expense or benefit (refer to note 5.1). Income tax expense does not equate to the amount of tax actually paid to tax authorities, as it is based upon the accrual accounting concept. Accounting income and expenses do not always have the same recognition pattern as taxable income and expenses, creating a timing difference as to when a tax expense or benefit can be recognised. These differences usually reverse over time but, until they do, a deferred tax asset or liability is recognised on the balance sheet. Note 5.2 details the composition and movements in deferred tax balances and the key management assumptions applied in recognising tax losses. 5.1 RECONCILIATION OF PRIMA FACIE TAX TO INCOME TAX EXPENSE (a) Income tax expense Current tax expense Decrease/(increase) in deferred tax assets Prior period deferred tax under/(over) provision (Decrease)/Increase in deferred tax liabilities Tax – debited directly to equity Income Tax Expense/(Benefit) (b) Reconciliation of income tax expense to pre-tax accounting profit Profit from continuing operations before income tax expense Prima facie income tax at 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible expenses Non-assessable income Tax credits (carry forward losses, franking credits and R&D tax credits) Prior period deferred tax under/(over) provision Tax on discounted operations Income tax expense ACCOUNTING POLICIES 2022 $’000 2021 $’000 10,214 6,891 (2,619) (8,017) - 6,469 21,132 6,340 3,017 (127) (142) (2,619) - 6,469 5,241 1,303 (148) (542) 548 6,402 15,348 4,605 4,590 (662) (1,825) (148) (158) 6,402 Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current year’s taxable income. The tax rates and legislation used to compute the amount are those that are enacted or substantively enacted by the reporting date. Tax consolidation Members of the tax consolidated entity and the tax sharing arrangement The Group and its 100% owned Australian resident subsidiaries have formed a tax consolidated entity. HUB24 Limited is the head entity of the tax consolidated entity. Members of the Group have entered into a tax sharing agreement. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202283 Tax effect accounting by members of the tax consolidated Group The head entity and the controlled entities in the tax consolidated Group continue to account for their own current and deferred tax amounts as per UIG 1052 Tax Consolidation Accounting. The consolidated Group has applied the consolidated Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated Group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets and liabilities arising from unused tax losses and unused tax credits (if any) assumed from controlled entities in the tax consolidated Group. 5.2 DEFERRED TAXES (a) Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Intangibles Accrued expenses Provisions Depreciable assets Blackhole expenses Carry forward tax losses Employee Share Costs Lease liabilities Closing Balance Movements: Opening balance Additions acquired through acquisition Capital raising costs in Equity Prior period deferred tax provision Regonised in the Statement of profit or loss Closing balance (b) Deferred tax liability Temporary differences attributable to: Intangibles Prepayment Expense Investments Depreciable assets Closing balance Movements: Opening balance Xplore PPA impacts Additions acquired through acquisition Recognised in the Statement of profit or loss Closing balance Net deferred tax asset/(Net deferred tax liability) 2022 $’000 2021 $’000 - 583 7,396 - 2,060 5,505 1,843 198 1,673 243 3,660 384 - 5,965 - 836 17,584 12,761 12,761 12,349 - (636) (6,891) 17,584 17,971 1 74 263 18,309 6,923 8,421 (548) - (2,035) 12,761 - - - - - - 1,822 3,494 23,880 (9,065) 18,309 (725) - - (1,822) - 12,761 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202284 CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: • When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • When the temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. • Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • When the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Recovery of deferred tax assets Deferred tax assets are recognised for prior periods income tax losses, research and development tax offsets and deductible temporary differences to the extent that Directors consider that it is probable that future taxable profits will be available to offset these amounts. The deferred tax asset continues to be recognised based on the following management judgements: • The Group continues to generate consistent profitable growth, with improving margins and profit line trends; • For the year ended 30 June 2022, the Group increased profits and is expected to remain profitable. Research and development expenditure The income tax calculation is based upon a number of estimates. A material item relates to the estimate of Research and Development (R&D) expenditure. Remuneration expenses of the development team are the largest component of the R&D expenditure, which, comprise 73% of the total estimated R & D claim for the year ended 30 June 2022. This percentage allocation is broadly consistent with the actual R & D claim for the year ended 30 June 2021. The Group assumes and will continue to monitor that there will be ongoing compliance with relevant tax legislation. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202285 5.3 OTHER TAXES Revenues, expenses and assets are recognised net of the amount of GST except: • When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; • Receivables and payables, which are stated with the amount of GST included (UIG 1031.8). The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position; and • Cash flows are included in the statement of cash flow on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202286 6. GROUP STRUCTURE 6.1 DISCONTINUED OPERATIONS In the financial year ended 30 June 2021, the licensee business Paragem Pty Ltd was classified as a discontinued operation and was disposed on 1 February 2021. The sale included a capital return of $3.2 million, and an accounting gain of $1.4 million was recorded in the financial accounts to 30 June 2021. The operating loss before income tax from discontinued operations was $0.4 million. Summarised information relating to the year ended 30 June 2022 shown below: Consolidated Statement of profit or loss Revenue Expenses Loss before income tax from discontinued operations Income tax benefit Loss after income tax from discontinued operations Details of Paragem assets and liabilities which were disposed of in FY21 Assets Cash and cash equivalents Trade and other receivables Intangibles Other current assets Office equipment Total assets Liabilities Provisions Trade and other payables Total liabilities Net assets Consideration received (net of costs and working capital transferred) Gain on disposal Reconciliation of cash proceeds from disposal Cash proceeds received Less: Cash deconsolidated Net cash flow from operating activities 2022 $’000 2021 $’000 - - - - - - - - - - - - - - - - - - - - 17,569 (18,135) (566) 158 (408) 1,332 52 212 116 7 1,719 (133) (332) (465) 1,254 2,643 1,389 - (1,332) (1,332) HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202287 6.2 BUSINESS COMBINATIONS Acquisition of Subsidiaries Class Limited On 16 February 2022, the Group acquired 100 per cent of the issued share capital of Class Limited, obtaining control of Class Limited. Class Limited is a market-leading SMSF administration software provider. Their customers include Accountants, SMSF Administrators, Investment Advisors, Financial Planners and Lawyers. Class’s revenue comprises both subscription and recurring PAYG transactional revenue. Class qualifies as a business as defined in AASB 3. Class Limited was acquired primarily for the following reasons: • The combined business will benefit from increased scale, capabilities, product offering, distribution reach and technology resources; • Aligns to HUB24 purpose to empower better financial futures together, accelerates our platform of the future and data services market leadership strategy; • Delivers growth opportunities by leveraging combined capabilities to increase value & efficiency for existing customers and new customers; • Delivers Shareholder value through diversification of revenue, opportunities for growth and a compelling and unique competitive advantage; and • Combines market leading businesses and teams with a track record of innovation and capacity for ongoing investment. Purchase consideration Cash paid – at completion Equity instruments (11,433,559 ordinary shares of the Company) Total purchase consideration Net cash outflow arising on acquisition Cash consideration Less: cash and cash equivalent balances acquired Net cash outflow arising on acquisition $’000 15,733 268,003 283,735 $’000 15,733 (8,183) 7,550 The purchase price allocation (PPA) assessment is expected to be finalised during FY23. The fair valuation of assets acquired, liabilities assumed and intangible assets identified have been measured provisionally, pending finalisation of the Group’s valuation of Class are set out in the table below. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202288 The provisional fair values of the acquisition are as follows: Cash & Cash Equivalents Security Deposits Trade receivables Prepayments Other current assets Inventory PP&E ROU assets Deferred tax assets/(liabilities) Total Identifiable assets Trade & Other payables Other payables & accruals Borrowings Lease Liability Provisions Total Liabilities assumed Brand name acquired Customer relationships acquired Software Platform acquired Intangibles identified Total identifiable assets acquired and liabilities assumed Goodwill Deferred tax on intangible assets identified Total purchase consideration Fair value $’000 8,183 114 2,866 2,017 27 46 1,426 5,067 2,963 14,526 (5,550) (1,529) (35,825) (5,067) 823 (47,148) 8,761 78,667 61,664 149,093 124,654 178,040 (18,959) 283,735 If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised. The fair value of the financial assets includes receivables (Net trade debtors & other receivables) with a fair value of $2.9 million and a gross contractual value of $3 million. The goodwill of $178 million represents the profitability of the acquired business and the synergistic opportunities that will arise from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The fair value of the 11,433,559 ordinary shares issued as part of the consideration paid for Class Limited ($268 million) was determined on the basis of the Hub24 Closing Price of $23.44 on acquisition date. Acquisition related costs (included in administrative expenses) amount to $11 million. If the acquisition of Class Limited had been completed on the first day of the financial year, Group revenues for the year would have been $63 million. An additional $4.9m of adviser and transaction related costs were paid by HUB24 on behalf of Class prior to acquisition. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202289 Xplore On 2 March 2021 HUB24 Limited completed the acquisition of investment platform provider Xplore Wealth Limited (Xplore). Xplore brings highly complementary expertise and scale to HUB24 for both high-net worth customers as well as portfolio administration and reporting services (PARS). The transaction, which includes the acquisition of an experienced team of 81 employees, software and related intellectual property, was completed for an upfront cash consideration of $29.8 million and issuance of 1.4 million ordinary shares to Xplore shareholders plus additional upfront cash consideration of $0.4 million to Xplore Option holders. A PPA assessment has been completed with the outcomes included in the financial year ended 30 June 2022. Purchase consideration Cash paid – at completion Cash settlement for Xplore options HUB24 shares issued (scrip issue) Total purchase consideration The completed fair values of the acquisition are as follows: Cash balances acquired Net operating assets acquired Computer software Customer relationships acquired Net identifiable assets acquired Goodwill Deferred tax on intangible assets identified Net assets acquired 6.3 CONTROLLED ENTITIES $’000 29,764 412 28,251 58,427 Fair value $’000 3,175 5,092 14,223 12,388 34,878 27,266 (3,717) 58,427 HUB24 subsidiaries are entities which it controls and consolidates as it is exposed to, or has rights to, variable returns from the entity, and can affect those returns through its power over the entity. When the Group ceases to control a subsidiary, any retained interest in the entity is remeasured to fair value, with any resulting gain or loss recognised in the income statement. Changes in the Group’s ownership interest in a subsidiary which do not result in a loss of control are accounted for as transactions with equity holders in their capacity as equity holders. In the Parent Entity’s financial statements, investments in subsidiaries are initially recorded at cost and are subsequently held at the lower of cost and recoverable amount. When the group acquires a subsidiary, the fair value of the consideration transferred and valuation of assets acquired and liabilities assumed are measured on a provisional basis. All transactions between Group entities are eliminated on consolidation. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202290 Operating Entities HUB24 Custodial Services Ltd HUB24 Share Ownership Trust HUB24 Management Services Pty Ltd HUB24 Administration Pty Ltd HUB24 Services Pty Ltd Firstfunds Pty Ltd (formerly Firstfunds Limited) HUBconnect Pty Ltd Marketsplus Australia Pty Ltd Agility Applications Pty Ltd Xplore Wealth Pty Ltd Xplore Business Services Pty Ltd Investment Administration Services Pty Limited Margaret Street Financial Holdings Pty Ltd Margaret Street Administration Services Pty Ltd Margaret Street Promoter Services Pty Ltd Aracon Superannuation Pty Ltd DIY Master Pty Ltd HUB24 Limited Employee Share Trust Class Limited Class Technology Pty Ltd Class Investment Reporter Pty Ltd Nowinfinity Pty Ltd Non-operating Entities HUB24 International Nominees Pty Ltd HUB24 Nominees Pty Ltd Investorfirst Securities Ltd1 Captain Starlight Nominees Pty Ltd1 ACN 075 059 246 Pty Ltd Planner Holdings Limited PHL Securities Pty Ltd Margaret Street Nominees Pty Ltd Xplore Equity Finance Pty Ltd Margaret Street Attorney Services Pty Ltd Margaret Street Investment Consulting Services Pty Ltd Nowinfinity 3505 Pty Ltd Assuriti Pty Ltd Topdocs Pty Ltd Topdocs Edge Pty Ltd Accounting & Legal Dynamics Pty Ltd Company Dynamics Pty Ltd 1. As at 30 June 2022 a voluntary deregistration application lodged with ASIC. % Equity Interest as at 30 June 2022 as at 30 June 2021 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - - - 100 100 100 100 100 100 100 100 100 100 100 - - - - - - HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 20226.4 ASSOCIATED ENTITIES The Group has a 31.5% investment in Diverger Limited. Consolidated Investment in Diverger Reconciliation Opening investment in Diverger Add: Share of associate profits Less: Dividend Received Closing investment in Diverger ACCOUNTING POLICIES 91 2022 $’000 2021 $’000 14,519 14,225 1,122 (474) 472 (178) 15,167 14,519 Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies. The Group accounts for associates using the equity method. The investments are initially recognised at cost (except where recognised at fair value due to a loss of control of a subsidiary), and increased (or decreased) each year by the Group’s share of the associate’s profit or loss. Dividends received from the associate reduce the investment in associate. The carrying value of the investment in associate, is assessed for indicators of impairment annually. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The key judgement relates to the carrying value of the investment in associate, which is assessed for impairment annually. Whilst Diverger is listed and hence the share price is one indicator of value, other factors need to be considered including trading volumes and the strategic value of the investment to HUB24. In accordance with AASB 128 Investment in Associates and Joint Ventures, an assessment has been performed, which confirmed in the Director’s opinion, currently there are no indicators of a prolonged decline in the value of the investment. The Director’s continue to monitor Diverger’s performance against its strategic objectives. 6.5 PARENT ENTITY FINANCIAL INFORMATION Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group except for investments in subsidiaries which are accounted for at cost, less any impairment, in the parent entity. Summary financial information Set out below is the supplementary information about the parent entity. Consolidated Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total assets Total liabilities Net assets 2022 $’000 1,461 1,461 2021 $’000 8,972 8,972 468,124 (23,589) 211,483 (29,819) 444,535 181,664 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202292 Contingent liabilities The parent entity did not have any contingent liabilities as at 30 June 2022 or 30 June 2021. Capital commitments The parent entity had no capital commitments as at 30 June 2022 or 30 June 2021. Deferred tax asset In addition to its own current and deferred tax amounts, the parent entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits (if any) assumed from controlled entities in the Group. Refer to Note 5 for further details.  HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202293 7. EMPLOYEE REMUNERATION 7.1 SHARE BASED PAYMENTS OVERVIEW Share-based payments are equity-based compensation schemes provided to employees, executives, and directors. There are currently three plans in place to provide these benefits, collectively known as the Plans: • The Employee Share Option Plan (ESOP); • The Performance Rights (PARS); and • The Employee Share Plan (ESP). The Group can either issue shares from time to time, or meet any obligation via treasury shares acquired on-market. Any full-time or part-time employee of the Group or any equally-owned joint venture who is offered shares or options is eligible to participate in the Plans. 7.1.1 Recognised share-based payment expense During the year ended 30 June 2022, the consolidated statement of profit and loss recognised $10.8 million of equity- settled share-based payment transactions (FY21: $7.7 million). ACCOUNTING POLICIES The cost of share based payments is recognised by expensing the fair value of options or rights granted, over the period during which the employees become unconditionally entitled to these benefits. Where the plan will be settled by issuing equity, the corresponding entry is an increase in the share based payment reserve. At each subsequent reporting date until vesting, the vesting probability is assessed and upon board approval, the cumulative charge will be reflected to the statement of profit or loss and other comprehensive income and share based payment reserve. This takes into account factors such as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES Calculating the fair value of share based payments can be complex. Independent consultants use Black-Scholes or similar option pricing models to value options and rights. This calculation includes any market performance conditions and the impact of any non-vesting conditions. Once the fair value has been determined at grant date, it is not revised. The impact of any service and non-market vesting conditions is excluded from the fair value. Instead, this is included in assumptions about the number of options that are expected to vest. These assumptions are revised at the end of each reporting period. The impact of any revision to original estimates is recognised as an expense in the Consolidated Statement of profit and loss, with a corresponding adjustment to equity. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202294 7.1.2 Types of share-based payment plans 1. Share based payment plans issued during the year ended 30 June 2022 Tax Exempt Share Plan – Employees Number of Shares Issued 8,806 Issue Date Issue Price 4 February 2022 $30.12 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares Voting Dividends Specific Terms Rights Shareholders are entitled to vote. The shares provide entitlement to dividends or other distributions paid to ordinary shareholders The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise en-cumbered, on or before the 3rd anniversary of the date employees acquired the Shares or the date they cease to be employed, whichever occurs first PARS (Rights) Issue Date Number of Options Issued MD 14 December 2021 KMP (excluding MD) 22 November 2021 Employees Vesting Terms Expiry Date 22 November 2021 15 years after date of issue Expected Vesting Period 3 years Exercise Price Nil 35,901 49,458 101,306 Vesting Conditions I. Service II. FUA [I] Must be an employee at date of issue II] Performance condition (a) 50% of the Performance Rights will be subject to, and will vest based on a calculated score (Score) that measures the achievement of a funds under administration (FUA) target that has been set for the three years ending on 30 June 2024. The Score will have regard to the relative growth in Platform (Custody) FUA and Portfolio Administration and Reporting Services (Non-Custody) FUA as well as the relative financial contribution of Custody FUA and Non-Custody FUA to HUB24’s financial results. The Score is calculated as: Score = ((PR-PVC)/PFUA) x PFUA + CFUA ((CR-CVC)/CFUA) Where: • CFUA = Custodial FUA (divided by 1 billion) • PFUA = Non-custodial FUA (divided by 1 billion) • CR = Custodial Revenue • PR = Non-custodial Revenue • CVC = Custodial specified variable costs • PVC = Non-custodial specified variable costs The vesting is calibrated as follows: zero vesting will occur where the achievement is below a minimum score of 88.5 (a FUA increase of 70.6% over three years); 50% vesting will occur where the achievement reaches a score of 88.5 (an increase of 70.6% over three years); 100% vesting will occur where the achievement reaches a score of 100 (an increase of 94.5% over three years); and vesting between a score of 88.5 and 100 (for between 50% and 100% vesting) will be on a straight-line basis between these two levels. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202295 III. Market [III] Performance condition (b) 50% of the Performance Rights will be subject to, and will vest on, the achievement of a hurdle measuring the Absolute Total Shareholder return (ATSR) of 10% to 15% per annum over the next three years. The vesting is calibrated as follows: 25% vesting occurs when a threshold vesting of 10% ATSR compounded annually is achieved; 100% vesting occurs when a threshold vesting of 15% ATSR compounded annually is achieved; and vesting between 10% and 15% ATSR will be on a straight-line basis between these two levels. Thresholds The determination of the ATSR thresholds will be based upon the 40 trading day VWAP for Shares spanning the full year results announcement on 24 August 2021 (20 days prior to and 20 days post results announcement). The 40 trading day VWAP for Shares on that basis (i.e. 27 July 2021 to 20 September 2021 was $27.92, therefore (in the absence of any dividends) the 10% threshold is $37.16 and the 15% threshold is $42.46, or $40.87 and $48.83 respectively when tested over a four year period. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Rights – General Counsel & Head of Compliance PARS (Rights) Issue Date 22 November 2021 Number of Options Issued 3,979 Expiry Date 21 November 2036 Expected Vesting Period 3 years Exercise Price nil Vesting Conditions I. Service II. Growth III. Performance conditions Disposal Restrictions [I] Must be an employee at date of issue [II] Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities [III] Performance condition (b) Effective protection of the business in relation to key legal, risk and compliance matters across the HUB24 group. Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Rights – Chief Financial Officer PARS (Rights) Issue Date 22 November 2021 Number issued 17,250 Expiry date 21 November 2036 Expected Vesting Period 15 years Exercise Price - Vesting Conditions I. Service II. FUA [I] Must be an employee at date of issue [II] 100% of the Performance Rights will be subject to, and will vest on, the achievement of a hurdle measuring Platform (Custody) funds under administration (FUA) over the next two years. The vesting is calibrated as follows: zero vesting will occur if Custody FUA is below a minimum level of $63 billion by 30 June 2023); 50% vesting will occur if Custody FUA reaches $63 billion by 30 June 2023); 100% vesting will occur if Custody FUA reaches $70 billion by 30 June 2023); and vesting between $63 billion and $70 billion (between 50% and 100% vesting) will be on a straight-line basis between these two levels. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202296 2. Share based payment plans issued during the year ended 30 June 2021. Tax Exempt Share Plan – Employees Number of Shares Issued 13,224 Issue Date Issue Price 21 October 2020 $17.16 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares Voting Dividends Specific Terms Shareholders are entitled to vote. The shares provide entitlement to dividends or other distributions paid to ordinary shareholders The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise en-cumbered, on or before the 3rd anniversary of the date employees acquired the Shares or the date they cease to be employed, whichever occurs first Tax Exempt Share Plan – Employees Number of Shares Issued 696 Issue Date Issue Price 17 December 2020 $17.16 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares Voting Dividends Specific Terms Shareholders are entitled to vote The shares provide entitlement to dividends or other distributions paid to ordinary shareholders The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise en-cumbered, on or before the 3rd anniversary of the date employees acquired the Shares or the date they cease to be employed, whichever occurs first Options & Rights – Key Management Personnel (excluding MD) Issue Date Options 4 Feb 2021 Number of Options Issued 57,826 Expiry Date 4 February 2026 Expected Vesting Period Exercise Price Vesting Conditions 3 years $14.29 Rights 4 Feb 2021 54,071 4 February 2036 3 years - I. Service II. Market III. FUA [I] Must be an employee at date of issue [II] 50% of the options and 50% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the Absolute Total Shareholder Return (ATSR) of 11.5% to 16.5% over the next three years. The vesting is calibrated as follows: 25% vesting occurs when a threshold of 11.5% ASTR compounded annually is achieved; 100% vesting occurs when a threshold of 16.5% ASTR compounded annually is achieved; and vesting between 25% and 100% will be on a straight- line basis between the two levels. Thresholds Determination of the TSR thresholds was $14.29, therefore the 11.5% threshold is $19.81 and the 16.5% threshold is $22.59, or $22.09 and $26.32 respectively when tested over a four year periods. [II] 100% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the compound annual growth (CAGR) in FUA over the next three years. The vesting is calibrated as follows: zero vesting will occur if the FUA is below a minimum level of 26.8% (an increase of 103.9% over three years representing approximately $35 billion by 30 June 2023); 50% vesting will occur if the FUA reaches 26.8% per annum; 100% vesting will occur if the FUA reaches 35.7% per annum (an increase of 150% over three years representing approximately $43 billion by 30 June 2023); and vesting for between 26.8% and 35.7% per annum (for between 50% and 100% vesting) will be on a straight-line basis between the two levels. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202297 Options & Rights – MD Options Issue Date 24 December 2020 Number of Options Issued 33,558 Expiry Date 24 December 2025 Expected Vesting Period 3 years Exercise Price $14.29 Rights 24 December 2020 31,395 24 December 2035 3 years - Vesting Conditions I. Service II. Market III. FUA [I] Must be an employee at date of issue [II] 50% of the options and 50% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the Absolute Total Shareholder Return (ATSR) of 11.5% to 16.5% over the next three years. The vesting is calibrated as follows: 25% vesting occurs when a threshold of 11.5% ASTR compounded annually is achieved; 100% vesting occurs when a threshold of 16.5% ASTR compounded annually is achieved; and vesting between 25% and 100% will be on a straight- line basis between the two levels. Thresholds Determination of the TSR thresholds was $14.29, therefore the 11.5% threshold is $19.81 and the 16.5% threshold is $22.59, or $22.09 and $26.32 respectively when tested over a four year periods. [II] 100% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the compound annual growth (CAGR) in FUA over the next three years. The vesting is calibrated as follows: zero vesting will occur if the FUA is below a minimum level of 26.8% (an increase of 103.9% over three years representing approximately $35 billion by 30 June 2023); 50% vesting will occur if the FUA reaches 26.8% per annum; 100% vesting will occur if the FUA reaches 35.7% per annum (an increase of 150% over three years representing approximately $43 billion by 30 June 2023); and vesting for between 26.8% and 35.7% per annum (for between 50% and 100% vesting) will be on a straight-line basis between the two levels. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Rights – Employees Issue Date 4 February 2021 Number issued 82,700 Expiry date 4 February 2036 Expected Vesting Period 3 years Exercise Price - I. Service II. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] 100% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the compound annual growth (CAGR) in FUA over the next three years. The vesting is calibrated as follows: zero vesting will occur if the FUA is below a minimum level of 26.8% (an increase of 103.9% over three years representing approximately $35 billion by 30 June 2023); 50% vesting will occur if the FUA reaches 26.8% per annum; 100% vesting will occur if the FUA reaches 35.7% per annum (an increase of 150% over three years representing approximately $43 billion by 30 June 2023); and vesting for between 26.8% and 35.7% per annum (for between 50% and 100% vesting) will be on a straight-line basis between the two levels. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202298 Special 5 Year LTI Performance Rights – Employees Special LTI – Tranche 1 Special LTI – Tranche 2 Issue Date 2 March 2021 Number issued 565,000 Expiry Date 30 June 2025 Expected Vesting Period 5 years Exercise Price - 127,500 - Performance Period 1 July 2020 to 30 June 2025 1 July 2020 to 30 June 2025 Performance Conditions1 Zero vesting will occur if the CAGR in FUA is below a minimum level of 23.8% per annum (an increase of 191% over five years representing approximately $50 billion by 30 June 2025). 50% vesting will occur if the CAGR in FUA reaches 23.8% per annum. 100% vesting will occur if the CAGR in FUA reaches 28.4% per annum; and vesting between 23.8% and 28.4% (representing approximately $60 billion by 30 June 2025) per annual CAGR in FUA will be on a straight-line basis between these two levels Zero vesting will occur if the CAGR in FUA is below a minimum level of 32.4% per annum (an increase of 307% over five years representing approximately $70 billion by 30 June 2025). 100% vesting will occur if the CAGR in FUA reaches 32.4% per annum. 1 In measuring the achievement of performance and FUA targets, the Board reserves the right to vary the percentage of options and ordinary performance rights which may vest as well as the FUA dollar thresholds to account for acquisitions of businesses, assets, companies or other entities which may be undertaken by the Group during the performance period and adjust for non-custodial FUA on a proportionality basis. Special 5 Year LTI Performance Rights – MD Special LTI – Tranche 1 Special LTI – Tranche 2 Issue Date 24 December 2020 Number issued 220,000 Expiry Date 30 June 2025 Expected Vesting Period 5 years Exercise Price - 50,000 - Performance Period 1 July 2020 to 30 June 2025 1 July 2020 to 30 June 2025 Performance Conditions1 Zero vesting will occur if the CAGR in FUA is below a minimum level of 23.8% per annum (an increase of 191% over five years representing approximately $50 billion by 30 June 2025). 50% vesting will occur if the CAGR in FUA reaches 23.8% per annum. 100% vesting will occur if the CAGR in FUA reaches 28.4% per annum; and vesting between 23.8% and 28.4% (representing approximately $60 billion by 30 June 2025) per annual CAGR in FUA will be on a straight- line basis between these two levels Zero vesting will occur if the CAGR in FUA is below a minimum level of 32.4% per annum (an increase of 307% over five years representing approximately $70 billion by 30 June 2025). 100% vesting will occur if the CAGR in FUA reaches 32.4% per annum. 1 In measuring the achievement of performance and FUA targets, the Board reserves the right to vary the percentage of options and ordinary performance rights which may vest as well as the FUA dollar thresholds to account for acquisitions of businesses, assets, companies or other entities which may be undertaken by the Group during the performance period and adjust for non-custodial FUA on a proportionality basis. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 202299 3. Share based payment plans issued during the year ended 30 June 2020. Tax Exempt Share Plan – Employees Number of Shares Issued 16,960 Issue Date Issue Price 10 October 2019 $12.50 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares. Voting Dividends Specific Terms Shareholders are entitled to vote. The shares provide entitlement to dividends or other distributions paid to ordinary shareholders. The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary of the date employees acquired the Shares or the date they cease to be employed, whichever occurs first. Options and Rights – Employees Share Ownership Plan Issue Date 25 Nov 2019 Number of Options Issued 323,151 PARS (Rights) 25 Nov 2019 129,404 Expiry Date 25 November 2024 25 November 2034 Expected Vesting Period 3 years Exercise Price $12.36 Vesting Conditions 3 years nil I. Service II. Market III. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] 50% of the options and performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the Absolute Total Shareholder Return (ATSR) of 12.5% to 17.5% over the next three years. The vesting is calibrated as follows: 25% vesting occurs when a threshold of 12.5% ASTR compounded annually is achieved; 100% vesting occurs when a threshold of 17.5% ASTR compounded annually is achieved; and vesting between 25% and 100% will be on a straight line basis between the two levels. [III] 50% of the options and 50% of the performance rights will be subject to, and will vest on, the achievement of a hurdle measuring the compound annual growth (CAGR) in FUA over the next three years. The vesting is calibrated as follows: zero vesting will occur if the FUA does not exceed $27 billion by 30 June 2022; 25% vesting will occur if the FUA reaches $27 billion by 30 June 2022; 80% vesting will occur if the FUA reaches $29 billion by 30 June 2022; 100% vesting will occur if the FUA reaches $32 billion by 30 June 2022. vesting for between $27 billion and $29 billion (for between 25% and 80%) will be on a straight line basis between the two levels; and vesting for between $29 billion and $32 billion (for between 80% and 100%) will be on a straight line basis between the two levels; Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022100 Options and Rights – Employees Share Ownership Plan Issue Date 25 Nov 2019 Number of Options Issued 8,181 PARS (Rights) 25 Nov 2019 3,276 Expiry Date 25 November 2024 25 November 2034 Expected Vesting Period 3 years Exercise Price $12.36 3 years nil Vesting Conditions I. Service II. Leadership III. Strategy [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] Effective leadership of the Group’s Legal and Compliance functions together with the development of enhancements to these functions. [III] Effective leadership and management of key legal and compliance matters across the Group such that the contribution of the Legal & Compliance team through its management of these matters supports the Group in achieving is strategic outcomes and priorities. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. 4. Share based payment plans issued during the year ended 30 June 2019. Tax Exempt Share Plan – Employees 14,193 Number of Shares Issued 7 September 2018 Issue Date $12.04 Issue Price Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that Vesting Conditions for needs to be satisfied in order to acquire the shares. All Shares Shareholders are entitled to vote. Voting The shares provide entitlement to dividends or other distributions paid to ordinary shareholders. Dividends The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise Specific Terms encumbered, on or before the 3rd anniversary of the date employees acquired the Shares or the date they cease to be employed, whichever occurs first. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022101 Options and Rights – Employees Share Ownership Plan PARS (Rights) Share Ownership Plan – Paragem PARS (Rights) – Paragem Share Ownership Plan PARS (Rights) Issue Date 7 Sep 2018 7 Sep 2018 7 Sep 2018 7 Sep 2018 7 Sep 2018 7 Sep 2018 Number of Options Issued 257,852 70,888 12,000 4,000 30,000 10,000 Expiry Date 7 Sep 2023 7 Sep 2033 7 Sep 2023 7 Sep 2033 7 Sep 2023 7 Sep 2033 Expected Vesting Period 3 years 3 years Exercise Price $12.04 nil 2 years $12.04 2 years nil 2 years $11.73 2 years nil Vesting Conditions I. Service II. Market III. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] 50% vesting on the achievement of Performance condition 2. Absolute Total Shareholder Return (ATSR) CAGR in excess of 17.5% over three years, proportional vesting between 12.5% and 17.5%. [III] 50% vesting on the achievement of Performance condition 1. Growth in FUA CAGR in excess of 115.8% over three years, proportional vesting between 29.23% and 40.23% p.a. [III] 0% vesting if the CAGR in FUA was below a minimum level of 25.88% p.a (99.5% over three years). 50% vesting will occur if the CAGR in FUA reaches 29.58% p.a (117.6% over three years). 100% vesting will occur if the CAGR in FUA reaches 33.09% p.a (135.7% over three years) [III] 0% vesting if the CAGR in FUA was below a minimum level of 25.88% p.a (99.5% over three years). 50% vesting will occur if the CAGR in FUA reaches 29.58% p.a (117.6% over three years). 100% vesting will occur if the CAGR in FUA reaches 33.09% p.a (135.7%over three years) Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Options and Rights – Employees Share Ownership Plan – MD PARS (Rights) – MD Share Ownership Plan – CFO PARS (Rights) - CFO Issue Date 12 Dec 2018 12 Dec 2018 12 Dec 2018 12 Dec 2018 Number of Options Issued 51,186 14,072 24,667 6,981 Expiry Date 12 Dec 2023 12 Dec 2033 12 Dec 2023 12 Dec 2033 Expected Vesting Period 3 years Exercise Price $12.04 Vesting Conditions 3 years nil 3 years $13.44 3 years nil I. Service II. Market III. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] 50% vesting on the achievement of Performance condition 2. Absolute Total Shareholder Return (ATSR) CAGR in excess of 17.5% over three years, proportional vesting between 12.5% and 17.5%. [III] 50% vesting on the achievement of Performance condition 1. Growth in FUA CAGR in excess of 115.8% over three years, proportional vesting between 29.23% and 40.23% p.a. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022102 Options and Rights – Employees PARS (Rights) – Director Issue Date 12 Dec 2018 Number of Options Issued 20,000 Expiry Date 12 Dec 2033 Expected Vesting Period 3 years Exercise Price nil Vesting Conditions I. Service II. Market III. Growth [I] Must be a director from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] Performance condition (a) stipulates that the director must provide support to the HUB24 Managing Director and KMPs in relation to the securing and maintenance of key accounts over the period from 1 July 2018 to 30 June 2021. [III] Performance condition (b) stipulates that the director must directly liaise with key accounts to facilitate growth and customer satisfaction as measured by the improvement in the company’s customer satisfaction service levels over the period from 1 July 2018 to 30 June 2021 Options and Rights – Employees PARS (Rights) – Head of Legal & Compliance Issue Date 12 Dec 2018 Number of Options Issued 20,000 Expiry Date 12 Dec 2033 Expected Vesting Period 4 years Exercise Price nil Vesting Conditions I. Service II. Market III. Growth [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] Performance condition (a) stipulates that the employee must display effective leadership of the development and operation of the Group’s risk and compliance framework and policies over the Performance Period. [III] Performance condition (b) stipulates that the employee must display effective leadership and management of key legal, risk and compliance matters across the HUB24 Group. Options and Rights – Employees PARS (Rights) – Special LTI Issue Date 12 Dec 2018 Number of Options Issued 425,000 Expiry Date 12 Dec 2033 Expected Vesting Period 4 years Exercise Price nil Vesting Conditions I. FUA [I] Applying to 425,000 performance rights, 100% vesting will occur if the 4 year CAGR in FUA reaches 33% per annum. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022103 5. Share based payment plans issued prior to 1 July 2018. Tax Exempt Share Plan – Employees Number of Shares Issued 24,160 Issue Date Issue Price 1 September 2017 $6.25 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares. Voting Dividends Specific Terms Shareholders are entitled to vote. The shares provide entitlement to dividends or other distributions paid to ordinary shareholders. The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary of the date employees acquired the shares or the date they cease to be employed, whichever occurs first. Options and Rights – Employees Share Ownership Plan PARS (Rights) Share Ownership Plan PARS (Rights) Share Ownership Plan – MD PARS (Rights) – MD Issue Date 11 Oct 2017 11 Oct 2017 21 Aug 2017 21 Aug 2017 11 Dec 2017 11 Dec 2017 Number of Options Issued 401,686 122,942 34,247 11,211 78,077 23,897 Expiry Date 11 Oct 2022 11 Oct 2032 21 Aug 2022 21 Aug 2032 11 Dec 2022 11 Dec 2032 Expected Vesting Period 3 years 3 years Exercise Price $7.09 nil 3 years $6.25 3 years nil 3 years $7.09 3 years nil Vesting Conditions I. Service II. Market III. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days). [II] 50% vesting on the achievement of Performance condition 2. Absolute Total Shareholder Return (ATSR) CAGR in excess of 17.5% over three years, proportional vesting between 12.5% and 17.5%. [III] 50% vesting on the achievement of Performance condition 1. Growth in FUA CAGR in excess of 117.6% over three years, proportional vesting between 25.88% and 33.09% p.a. [III] 50% vesting on the achievement of Performance condition 1. Growth in FUA CAGR in excess of 109.7% over three years, proportional vesting between 28% and 45% p.a. [III] 50% vesting on the achievement of Performance condition 1. Growth in FUA CAGR in excess of 117.6% over three years, proportional vesting between 25.88% and 33.09% p.a. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. 6. Share based payment plans issued prior to 1 July 2017. Tax Exempt Share Plan – Employees Number of Shares Issued 14,112 Issue Date Issue Price 1 September 2016 $4.46 Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or requirement that needs to be satisfied in order to acquire the shares. Voting Dividends Specific Terms Shareholders are entitled to vote. The shares provide entitlement to dividends or other distributions paid to ordinary shareholders. The shares must not be sold, transferred or otherwise disposed of, or mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary of the date employees acquired the shares or the date they cease to be employed, whichever occurs first. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022104 Options and Rights – Employees FY 2017 Issue Date 29 Nov 2016 Number of Options Issued 418,639 Expiry Date 29 Nov 2021 Expected Vesting Period 3 years Exercise Price $4.46 Vesting Conditions Share Ownership Plan PARS (Rights) Share Ownership Plan 29 Nov 2016 137,043 29 Nov 2031 3 years nil 29 Nov 2016 50,000 29 Nov 2021 3 years $5.17 I. Service II. Market III. FUA [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] 50% vesting on the achievement of Performance condition 1. Absolute Total Shareholder Return (ATSR) CAGR in excess of 17.5% over three years, proportional vesting between 12.5% and 17.5%. [II] Achieve share price hurdle of 52% greater than exercise price for 20 consecutive days in the period between 36 months from the issue date and expiry of options. [III] 50% vesting on the achievement of Performance condition 2. Growth in FUA CAGR in excess of 45% over three years, proportional vesting between 28% and 45%. N/A Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Options and Rights – Employees Share Ownership Plan PARS (Rights) – MD Share Ownership Plan FY 2016 Issue Date 14 Oct 2015 Number of Options Issued 620,000 Expiry Date 14 Oct 2020 Expected Vesting Period 3 years Exercise Price $2.46 Vesting Conditions 7 Dec 2015 150,000 7 Dec 2030 3 years $2.46 30 Mar 2016 50,000 30 Mar 2021 3 years $3.98 I. Service II. Market [I] Must be an employee from date of issue until options are exercised, unless considered a good leaver (in which case must exercise within 30 days) [II] Achieve share price hurdle of greater than 52% of exercise price for 20 consecutive days in the period between 36 months from the issue date and expiry of options. Disposal Restrictions Restriction on sale of shares for 12 months from exercise, except to fund options exercised for associated tax liabilities. Summary of options and rights granted The following table illustrates the number, weighted average exercise prices (WAEP) and weighted average share prices (WASP) of, and movements in, share options issued during the year: Summaries of options granted Outstanding at the beginning of the financial year 1,161,128 30 June 2022 Number Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year WAEP WASP - - - - - 30 June 2021 Number 1,633,095 WAEP WASP - - - - 91,384 $14.29 (72,029) - - (28,412) (437,528) $6.38 $30.02 (491,322) $4.53 $21.34 - 695,188 251,028 - - - - - - - 1,161,128 426,876 - - - - - - HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 105 Summaries of rights granted 30 June 2022 Number WAEP WASP Outstanding at the beginning of the year 1,908,236 Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year 7.1.3 Option pricing model 207,893 (9,358) (88,052) - 2,018,719 135,688 - - - - - - - - - - - 30 June 2021 Number 864,936 1,130,667 (23,481) (63,886) - 1,908,236 131,798 WAEP WASP - - - - - - - - - - - The fair value of all equity-settled options issued is estimated at the grant date using the Hoadley’s 1 Hybrid ESO model (monte carlo simulation method). The following table lists the inputs to the models used: 1. Share based payment plans issued during the year ended 30 June 2022. Options & Rights Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Average Share price at Measurement Date ($) Rights – KMP & Employees Rights – MD 0.23% 46.5% 1.38% 30.17 0.23% 46.5% 1.38% 29.24 Model used Hoadleys/Black Scholes Hoadleys/Black Scholes 2. Share based payment plans issued during the year ended 30 June 2021 and modified during the period ended 30 June 2022. Options & Rights Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Expected Life of Options (Months) Average Share price at Measurement Date ($) Model used Options & Rights – Employee 0.34% 58.8% 0.35% 60 25.37 Hoadleys/Black Scholes HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 106 3. Share based payment plans issued prior to 1 July 2021. 2 Mar 2021 PRP (Rights) – Special LTI 0.34 59 0.35 36 Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Expected Life of Options (Months) Option Exercise Price ($) N/A N/A 20.83 20.83 4 Feb 2021 PRP (Rights) 25 Nov 2019 SOP 25 Nov 2019 PRP (Rights) 0.34 59 0.35 60 0.39 44 0.82 36 0.39 47 0.82 36 12.36 11.83 N/A 11.83 7 Sep 2018 SOP 0.54 41 2.17 36 12.04 12.44 7 Sep 2018 PRP (Rights) 7 Sep 2018 SOP – Paragem 7 Sep 2018 PRP (Rights) – Paragem 0.54 41 2.17 36 0.54 41 2.17 24 0.54 41 2.17 24 N/A 12.44 12.04 12.44 N/A 12.44 7 Sep 2018 SOP 0.54 41 2.17 24 11.73 12.44 7 Sep 2018 PRP (Rights) 0.54 41 2.17 24 N/A 12.44 Average Share Price at Measurement Date ($) Model Used Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Expected Life of Options (Months) Option Exercise Price ($) Average Share Price at Measurement Date ($) Model Used Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Expected Life of Options (Months) Option Exercise Price ($) Average Share Price at Measurement Date ($) Model Used Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes 12 Dec 2018 SOP – MD 12 Dec 2018 PRP (Rights) – MD 12 Dec 2018 SOP – CFO 12 Dec 2018 PRP (Rights) – CFO 12 Dec 2018 PRP (Rights) – Director 12 Dec 2018 PRP (Rights) – Special LTI 0.54 45 2.12 36 12.04 12.97 0.54 45 2.12 36 N/A 12.97 0.54 45 2.12 36 13.44 12.97 0.54 45 2.12 36 N/A 12.97 0.54 45 2.12 36 N/A 12.97 0.54 45 2.12 36 N/A 12.97 Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes 11 Oct 2017 SOP 11 Oct 2017 PRP (Rights) 21 Aug 2017 SOP 21 Aug 2017 PRP (Rights) 11 Dec 2017 SOP 11 Dec 2017 PRP (Rights) - 45 2.38 36 7.09 8.18 - 45 2.38 36 N/A 8.18 - 45 2.37 36 6.25 8.18 - 45 2.37 36 N/A 8.18 - 45 2.37 36 7.09 9.68 - 45 2.37 36 N/A 9.68 Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes Hoadleys/ Black Scholes HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022107 Dividend Yield (%) Expected Volatility (%) Risk-free Interest Rate (%) Expected Life of Options (Months) Option Exercise Price ($) Average Share Price at Measurement Date ($) Model Used 17 Oct 2014 SOP 4 Dec 2014 SOP CEO 4 Dec 2014 SOP Paragem 14 Oct 2015 SOP 7 Dec 2015 SOP CEO 30 Mar 2016 SOP 29 Nov 2016 SOP 29 Nov 2016 SOP - 35 2.5 36 0.98 0.89 - 35 2.5 36 0.98 0.89 - 33 2.5 12-36 1.156 0.89 - 48 1.8 36 2.46 2.69 - 48 1.8 36 2.46 3.52 - 50 2.09 36 3.98 4.06 - 45 2.16 36 4.46 5.79 - 45 2.16 36 5.17 5.79 29 Nov 2016 PRP (Rights) - 45 2.16 36 N/A 5.79 Black Scholes Black Scholes Black Scholes Hoadleys Hoadleys Hoadleys Hoadleys/ Black Scholes Hoadleys Hoadleys/ Black Scholes 7.2 KEY MANAGEMENT PERSONNEL Key management personnel compensation Consolidated Short term employment benefits Post employment benefits Share based payments 2022 $’000 3,543 220 6,400 10,163 2021 $’000 3,374 325 2,083 5,782 Key management personnel (KMP) are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of HUB24. The KMPs are outlined in the Remuneration Report on page 31. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022108 8. OTHER INFORMATION 8.1 NEW AND AMENDED ACCOUNTING STANDARDS ADOPTED BY THE GROUP The Group adopted all of the new, revised, or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. The accounting standards did not have any significant impact on the financial performance or position of the Group. 8.2 SIGNIFICANT EVENTS AFTER REPORT DATE Subsequent to year end, the following items have occurred: • Directors have determined a fully franked final dividend of 12.5 cents per share (a fully franked dividend of 5.5 cents per share was determined in FY21). No other significant matter or circumstance has arisen since 30 June 2022 that has notably affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. 8.3 REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by professional service firms: Consolidated Audit and review of financial statements provided by Deloitte Touche Tohmatsu Other assurance services Tax and other services Total audit and other fees 2022 $’000 667 642 288 1,597 2021 $’000 531 203 258 992 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022109 GLOSSARY EBITDA Earnings before interest, tax, depreciation, amortisation Funds under administration (FUA) The value of customer portfolios invested onto the Platform IDPS MDA MIS Net Tangible Asset per fully paid ordinary share Notable items ORFR PARS FUA Platform FUA PPA SMSF STI/LTI Investor Directed Portfolio Service (description) Managed Discretionary Account (description) Managed Investment Scheme (description) Total Assets less Total Liabilities adjusted for Intangible Assets, divided by the number of outstanding ordinary paid shares Includes administrative and resourcing costs related to strategic transactions and project costs. Amortisation relating to the acquisition of Xplore, Class and Ords. Operational Risk Financial Requirement relates to the HUB24 Superannuation Fund’s requirement to hold adequate reserves against operational losses in accordance with APRA Prudential Standard SPS114. Portfolio And Reporting Services – refers to the non-custodial portfolio Refers to the custodial portfolio The final purchase price accounting for the Xplore and Class acquisitions Self-managed super fund Short term incentive/Long term incentive Underlying EBITDA Refers to EBITDA excluding notable items HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022110 DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2022 IN THE DIRECTORS’ OPINION: c. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and a. the financial statements and notes set out on pages d. this declaration has been made after receiving the 47 to 108 are in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date, and ii. complying with Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001, and other mandatory professional reporting requirements; and b. the financial statements and notes comply with International Financial Reporting Standards as disclosed in Note 1, and declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors. Bruce Higgins Chairman Sydney 23 August 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022111 INDEPENDENT AUDITOR’S REPORT Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney, NSW, 2000 Australia Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu ABN 74 490 121 060 ABN 74 490 121 060 Phone: +61 2 9322 7000 Grosvenor Place Grosvenor Place www.deloitte.com.au 225 George Street 225 George Street Sydney, NSW, 2000 Sydney, NSW, 2000 Deloitte Touche Tohmatsu Australia Australia ABN 74 490 121 060 Deloitte Touche Tohmatsu Grosvenor Place Phone: +61 2 9322 7000 Phone: +61 2 9322 7000 ABN 74 490 121 060 225 George Street www.deloitte.com.au www.deloitte.com.au Grosvenor Place Sydney, NSW, 2000 225 George Street Australia Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Phone: +61 2 9322 7000 www.deloitte.com.au Independent Auditor’s Report to the Members of HUB24 Limited Opinion for the year then ended; and for the year then ended; and for the year then ended; and for the year then ended; and RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Independent Auditor’s Report to the Members of HUB24 Independent Auditor’s Report to the Members of HUB24 Limited Limited We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which Independent Auditor’s Report to the Members of HUB24 RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of Independent Auditor’s Report to the Members of HUB24 profit or loss and other comprehensive income, the consolidated statement of changes in equity and the Limited Opinion Opinion consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a Limited summary of significant accounting policies, and the directors’ declaration. We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, profit or loss and other comprehensive income, the consolidated statement of changes in equity and the profit or loss and other comprehensive income, the consolidated statement of changes in equity and the Opinion including: consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a Opinion summary of significant accounting policies, and the directors’ declaration. We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which summary of significant accounting policies, and the directors’ declaration. • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which profit or loss and other comprehensive income, the consolidated statement of changes in equity and the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, • complying with Australian Accounting Standards and the Corporations Regulations 2001. consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a including: profit or loss and other comprehensive income, the consolidated statement of changes in equity and the including: Basis for Opinion summary of significant accounting policies, and the directors’ declaration. consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance summary of significant accounting policies, and the directors’ declaration. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of • complying with Australian Accounting Standards and the Corporations Regulations 2001. • complying with Australian Accounting Standards and the Corporations Regulations 2001. including: In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, our report. We are independent of the Group in accordance with the auditor independence requirements of the Basis for Opinion including: Basis for Opinion Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in • complying with Australian Accounting Standards and the Corporations Regulations 2001. standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of accordance with the Code. our report. We are independent of the Group in accordance with the auditor independence requirements of the • complying with Australian Accounting Standards and the Corporations Regulations 2001. our report. We are independent of the Group in accordance with the auditor independence requirements of the Basis for Opinion Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s We confirm that the independence declaration required by the Corporations Act 2001, which has been given to Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in report. relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those our report. We are independent of the Group in accordance with the auditor independence requirements of the accordance with the Code. accordance with the Code. standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s our report. We are independent of the Group in accordance with the auditor independence requirements of the We confirm that the independence declaration required by the Corporations Act 2001, which has been given to opinion. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are report. Key Audit Matters report. accordance with the Code. relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to opinion. opinion. the financial report for the current period. These matters were addressed in the context of our audit of the the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s We confirm that the independence declaration required by the Corporations Act 2001, which has been given to financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on report. the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s Key Audit Matters Key Audit Matters these matters. report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our the financial report for the current period. These matters were addressed in the context of our audit of the the financial report for the current period. These matters were addressed in the context of our audit of the opinion. financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on Key Audit Matters these matters. these matters. 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. These matters were addressed in the context of our audit of the Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of Liability limited by a scheme approved under Professional Standards Legislation. financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the financial report for the current period. These matters were addressed in the context of our audit of the Member of Deloitte Asia Pacific Limited and the Deloitte organisation. these matters. financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. for the year then ended; and Liability limited by a scheme approved under Professional Standards Legislation. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 112 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr AAccqquuiissiittiioonn ooff CCllaassss LLiimmiitteedd ((““CCllaassss””)) Refer to: • Note 6.2 Business combinations • Note 3.5 Intangible assets During the year ended 30 June 2022, the Group acquired Class by way of a scheme of arrangement via a combination of cash and HUB24 shares. Total value of consideration was $284million at date of completion. As a result of the transaction, the provisional purchase price allocation comprising Goodwill ($179million), relationships Customer ($79million), Software ($62million) and Brand name ($9m) intangibles were identified. Accounting for the transaction is complex and includes a number of significant judgements in relation to: • • the purchase price determination of allocation and calculation of goodwill; and initial recognition of deferred tax balances associated with the acquisition. In conjunction with our valuation specialists, our procedures included, but were not limited to: • Obtaining an understanding of the acquired business; • Assessing the design and implementation of relevant controls in place for the acquisition accounting of Class; Assessing the competency and objectivity of management’s external expert and the scope of their work; • • Obtaining and reading management’s external expert’s report the valuation methodology and key assumptions used in determining the fair values, such as: to understand and challenge o Cash flow projections; o Attrition rates; o o Internal rate of return; and Estimated useful economic lives of the intangible assets the appropriateness of valuation Assessing methodology of the intangible assets employed by management’s external expert, and evaluating the key assumptions used in determining the fair values; and Assessing the appropriateness of the allocation of goodwill to the groups of cash generating units. the • • We have also assessed the adequacy of the disclosures in Note 3.5 and Note 6.2 to the financial statements. IInnttaannggiibbllee aasssseettss iinncclluuddiinngg In conjunction with our valuation specialists, our procedures included, but were not limited to: IImmppaaiirrmmeenntt ooff ggooooddwwiillll Refer to: • Note 3.5 Intangible assets As at 30 June 2022 the carrying value of intangible totaling $429 million, assets the following as disclosed in Note 3.5: includes Computer software Customer relationships Brand Goodwill Total $’000 101,801 97,180 8,761 221,630 429,372 the Evaluation of recoverable amount of intangible assets requires significant judgement due to the estimation of future cash flows, discount and terminal growth rates, and the period over which cash flows have been discounted. • • • • Assessing the design and implementation of relevant controls in place associated with the preparation of the value-in-use models; Assessing the reasonableness of key data inputs in the models; • Obtaining and reading management’s to understand and challenge the valuation methodology and key assumptions used in determining the fair values, such as: reports o Revenue and expenses projections used in the forecasted cash flows by comparing them to historical results, and where appropriate, market evidence; Long-term growth rates; and o o Discount rate applied. Testing the mathematical accuracy and integrity of the value-in-use models; Assessing managements’ consideration of the sensitivity to a change in key assumptions that both individually or collectively would be required for assets to be impaired and considered the likelihood of such a movement in those key assumptions. We also assessed the adequacy of the disclosures in Note 3.5 to the financial statements. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 113 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 2022, 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 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, 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 has 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 this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 114 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in Pages 26 to 46 of the Directors’ Report for the year ended 30 June 2022. In our opinion, the Remuneration Report of HUB24 Limited for the year ended 30 June 2022 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. DELOITTE TOUCHE TOHMATSU SSttuuaarrtt AAlleexxaannddeerr Partner Chartered Accountants Sydney, 23 August 2022 HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022 115 ADDITIONAL INFORMATION Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. This information is current as at 1 August 2022. DISTRIBUTION OF EQUITY SECURITIES Ordinary share capital – 80,058,178 fully paid ordinary shares are held by 8,628 individual security holders. All issued ordinary shares carry one vote per share without restriction and carry the rights to dividends. The number of security holders, by size of holding, in each class are: Fully paid ordinary shares – holding ranges 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Number of Shareholders Total Number of Shares % of Total Issued Shares 6,285 1,881 235 190 37 1,947,683 4,130,786 1,644,992 5,217,324 67,117,393 8,628 80,058,178 2.43 5.16 2.05 6.52 83.84 100.00 There were 396 shareholders holding less than a marketable parcel of 21 securities, based on a close price of $24.27 as at 1 August 2022, and they hold 3,134 securities. OPTIONS 695,188 options and 2,018,719 performance rights are held. Options and performance rights do not carry a right to vote. SUBSTANTIAL SHAREHOLDERS As at 1 August 2022 the following substantial shareholdings have been disclosed to the Company via substantial holding notices provided: Substantial Holder Bennelong Funds Management Group Pty Ltd Thorney Opportunities Ltd (and its associated entities) TIGA Trading Pty Ltd (and its associated entities) ECP Asset Management Pty Ltd (and its associated entities) Hyperion Asset Management Limited Pinnacle Investment Management Group (and its associated entities) 1 As at the date of the substantial shareholder’s last notice lodged with the ASX. Number of Ordinary Shares Held % of total shares issued1 6,051,803 5,779,078 5,317,515 5,112,596 4,279,609 4,034,685 8.86% 8.63% 6.64% 6.40% 6.26% 5.90% HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022116 20 LARGEST SHAREHOLDERS AT 01 AUGUST 2022 Citicorp Nominees Pty Ltd HSBC Custody Nominees (Australia) Ltd J P Morgan Nominees Australia Pty Ltd National Nominees Limited UBS Nominees Pty Ltd BNP Paribas Noms Pty Ltd Pacific Custodians Pty Limited BNP Paribas Nominees Pty Ltd BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd Troncell Pty Ltd

Litster & Associates Pty Ltd – C & C Super Fund A/C Mrs Jasmin Zheng-Min Zhao Litster Coscog Pty Ltd Troncell Pty Ltd Netwealth Investments Ltd Firstfunds Pty Limited – HSBC Custody Nominees (Australia) Limited - A/C 2 Mirrabooka Investments Limited Mr Ian James Litster Armelek Pty Ltd Total of Top 20 Holdings CORPORATE GOVERNANCE STATEMENT Number held 17,631,813 12,957,821 10,433,127 5,426,081 4,785,101 4,433,775 1,572,638 1,201,414 848,410 806,449 522,488 516,706 510,000 496,182 423,592 365,827 358,078 352,500 316,293 272,741 %IC 22.04% 16.20% 13.04% 6.78% 5.98% 5.54% 1.97% 1.50% 1.06% 1.01% 0.65% 0.65% 0.64% 0.62% 0.53% 0.46% 0.45% 0.44% 0.40% 0.34% 64,231,036 80.30% The Board is committed to a high standard of corporate governance, and is responsible for establishing, maintaining and monitoring the HUB24 Group corporate governance framework. The Corporate Governance Statement and further details about corporate governance policies, Board and Committee charters may be accessed via the Company’s website: https://www.hub24.com.au/shareholder-centre/corporate-governance HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022117 CORPORATE INFORMATION HUB24 LIMITED ACN 124 891 685 PRINCIPAL REGISTERED OFFICE IN AUSTRALIA Level 2, 7 Macquarie Place Sydney NSW 2000 Australia AUDITOR Deloitte Touche Tohmatsu Grosvenor Place, 225 George Street Sydney NSW 2000 SHARE REGISTRY Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia Telephone: +61 1300 554 474 Outside Australia: +61 2 8767 1000 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au HUB24 Limited shares are listed on the Australian Securities Exchange (ASX: HUB) DIRECTORS Mr Bruce Higgins (Chairman and Independent Non-executive Director) Mr Andrew Alcock (Managing Director) Mr Anthony McDonald (Independent Non-executive Director) Mr Paul Rogan (Independent Non-executive Director) Ms Ruth Stringer (Independent Non-executive Director) Ms Catherine Kovacs (Independent Non-executive Director) COMPANY SECRETARIES Ms Kitrina Shanahan Mr Andrew Brown ELECTRONIC COMMUNICATIONS HUB24 encourages our shareholders to receive investor communications electronically, including the Annual Report. These reports are available on our website at www.HUB24.com.au. To register for electronic investor communications, please go to www.linkmarketservices.com.au and register for online services. WEBSITE hub24.com.au HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022118 NOTES HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2022

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