MA Financial Group
Annual Report 2023

Plain-text annual report

20 2323 We respectfully acknowledge the Traditional Owners of lands across Australia and pay our respects to their Elders, past, present and emerging. Our head office is located on Gadigal land. MA FINANCIAL GROUP LIMITED Registered office Principal place of business Level 27, Brookfield Place 10 Carrington Street Sydney NSW 2000 Tel: + 61 2 8288 5555 MAFinancial.com KEY CONTACT: Jane Clapcott jane.clapcott@mafinancial.com MA Financial Group | 2023 Annual Report 2 01 ABOUT FY23 at a glance About MA Financial Independent Chair’s letter Joint Chief Executive Officers’ letter Year in review Sustainability report 02 SUSTAINABILITY REPORT 03 DIRECTORS’ REPORT Remuneration report Directors’ report Auditor’s independence declaration 04 FINANCIAL REPORT Statement of financial position Statement of profit or loss and other comprehensive income Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report 05 ADDITIONAL INFORMATION Investor information Glossary Corporate directory 4 7 9 11 13 23 35 46 66 71 72 73 74 75 148 149 156 158 160 MA Financial Group | 2023 Annual Report 3 MA Financial Group | 2023 Annual ReportFY23 at a glance ↗↗ $9.2b Assets under Management 18% increase from FY22 ↔↔ 20.0¢ Full year dividend per share fully franked (¢) in line with FY22 ↘ ↘ $269.9m Underlying revenue1 11% decrease from FY22 ↗↗ $1.9b ↗↗ $123.1m ↘ ↘ $81.6m Record Asset Management gross fund inflows 27% increase from FY22 Cash and undrawn facilities2 11% increase from FY22 Underlying EBITDA1 24% decrease from FY22 ↗↗ $178m Underlying recurring revenue 23% increase from FY22 ↗↗ $110b Finsure Managed Loans 21% increase on FY22 FY23 acquisition Rebranded as ↘ ↘ $41.6m Underlying NPAT1 32% decrease from FY22 ↘ ↘ 26.0¢ Underlying earnings per share1 32% decrease from FY22 ↗↗ $829m MA Money loan book 244% increase on FY22 ↗↗ $8.1m MA Foundation donations since establishment in 2018 ↘ ↘ 10.6% Underlying Return on Equity1, 3 33% decrease on FY22 1. Underlying revenue, Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA), Net Profit After Tax (NPAT), Return on Equity (ROE), Earnings Per Share (EPS) and other measures of Underlying performance are not prepared in accordance with International Financial Reporting Standards (IFRS) and are not audited. Detailed reconciliations between the Underlying and statutory measures are set out in note 3 of the 2023 Financial Report and in the Group’s FY23 Investor presentation. 2. Represents Operating balance sheet cash plus undrawn amount of working capital facility. 3. Underlying ROE is Underlying NPAT divided by average equity for the year. 4 MA Financial Group | 2023 Annual ReportFinancial Review Property Summit Gold PartnerSTAGE 600mmPlatinum PartnerPresenting PartnerSupporting PartnersAbout MA Financial We invest. We lend. We advise. ASSET MANAGEMENT $9.2b AUM 18% increase on FY22 MA Financial Group is a global alternative asset manager specialising in private credit, real estate, and hospitality. We lend to the property, corporate, and specialty finance sectors, in addition to providing corporate advice. We invest in and manage $9.2 billion on behalf of our clients, oversee more than $110 billion in Managed Loans, and have advised on over $120 billion in advisory and equity capital market transactions since 2009. Today we employ more than 600 professionals across Australia, China, Hong Kong, New Zealand, Singapore, and the United States. Our vision and purpose Our vision is to create an environment of enterprise, optimism, and partnership. To place the interests of our clients above all else, and work together as co- creators of long-term value. Our purpose is to create sustainable, long-term value for our clients. We believe in unlimited potential At MA Financial, unlimited potential is more than just a perspective. It is an unwavering belief in the potential of our people and our clients. We aim to harness the best in contemporary financial thinking to deliver innovative approaches to unlock value. Asset Management We are a global alternative asset manager specialising in private credit, real estate, hospitality, unique operating assets and private equity and venture capital. We also manage traditional asset classes including equities, bonds, and cash. We offer solutions for wholesale, retail and institutional investors who entrust us to manage $9.2 billion on their behalf. Our investment teams have diverse skill sets and experience across a range of strategies and market conditions and are focused on delivering long-term growth. We seek opportunities based on sound market fundamentals, investing with discipline and rigour. As active managers, we directly handle our real estate and hospitality assets, as well as manage loans in our Credit funds. We firmly believe that hands-on management and in-house expertise lead to improved risk management and stronger long-term asset performance for our clients. 7 MA Financial Group | 2023 Annual ReportAbout MA Financial LENDING & TECHNOLOGY CORPORATE ADVISORY & EQUITIES $110b $3.5b Finsure Managed Loans for FY23 Transactions for FY23 Lending & Technology Our Lending & Technology division leverages our combined expertise in credit advisory and credit investment. This division includes a technology advanced Residential Lending Marketplace and a range of lending solutions for individuals and businesses in Australia and worldwide. Our global lending ecosystem encompasses a substantial $110 billion in loans. Residential Lending Marketplace Founded in 2022 through the acquisition of Finsure, our Residential Lending Marketplace oversees $110 billion in loans for 400,000 borrowers. Integrating seamlessly with our residential lender MA Money and Middle, a digital tool aiding brokers in gathering verified financial data for loan applications, the Marketplace is instrumental in achieving our goal of becoming a significant player in Australia’s $2 trillion residential mortgage market. Corporate Advisory & Equities In partnership with global investment bank Moelis & Company, we provide financial advice for clients across mergers and acquisitions and strategic advisory, equity and debt capital markets, capital structure advisory, equities research and trading. Our specialised sector capabilities include real estate, credit and restructuring, resources technology and small to mid-cap industrial companies. We maintain a strong strategic alliance with Moelis & Company, a global investment bank listed on the NYSE, holding 13.2% of our Group’s issued capital. This partnership proves mutually advantageous as it provides clients access to a worldwide network of advisory executives, fostering collaboration on cross- border or industry-specific mandates. 8 MA Financial Group | 2023 Annual ReportIndependent Chair’s letter Jeffrey Browne Independent Chair and Non-Executive Director I am extremely pleased with how MA Financial Group has weathered a challenging year, characterised by rising interest rates, increased geopolitical tensions and volatile investment markets. Our business demonstrated its resilience and the benefits of a deliberate strategy to diversify our revenue streams. MA Financial is a financial services business, founded in 2009. It operates a diverse range of activities. These can be simply described as: • Asset Management. Specialist in alternative assets with a total of $9.2 billion of AUM; • Lending & Technology. Focusing on residential mortgages and specialty finance sectors. These streams have grown to encompass in excess of $110 billion of loans; and • Corporate Advisory & Equities. We operate actively in our domestic market and in close association with global investment bank Moelis & Company. Record inflows into our Asset Management funds, accelerating growth in MA Money’s loan book, and the continued growth of Finsure’s mortgage aggregation platform highlights that we are on track to deliver on our medium- term growth ambitions. Group earnings per share (EPS) in 2023 were down on the previous year. However, lower revenue, and its impact on EPS, can be attributed to a number of industry wide factors such as depressed Corporate Advisory activity and weak investment markets materially reducing performance fees relative to 2022. These two factors underline the market related, and less predictable nature of such revenues, relative to our more predictable and growing annuity style revenues. Revenues that we consider to be recurring in nature increased 23% year-on-year, driven by record inflows into our managed funds. In 2023, 66% of the Group’s revenue was derived from sources that we consider recurring in nature versus 48% in 2022, thus significantly improving the quality of our earnings. On the cost side of the EPS equation our deliberate investment in growth initiatives impacted EPS by approximately 5 cents. However, this spending is strategic and very much planned, and we firmly believe in the value of investing today to reap rewards in the future. This investment spending related to MA Money, our US credit investment platform, opening offices in Singapore and New Zealand and on growing our marketing, brand and distribution capability. In particular, we see growing our brand as a critically important task as we deepen our distribution capability and breadth, alongside innovating the nature and number of our investment funds and lending products. We continued to invest in the build out of our Residential Lending Marketplace, harnessing the opportunity to scale into Australia’s $2 trillion mortgage market by leveraging the strategic strengths of the MA platform. Our investment in residential mortgage lender MA Money, represents a near-term earnings drag to the business but offers a significant opportunity to deliver highly scalable earnings growth over time. MA Money’s loan book accelerated over the year and is now at $829 million. The business remains on track to deliver an anticipated net profit after tax of $15 million to $20 million in 2026. 9 MA Financial Group | 2023 Annual ReportWe have also continued to grow Middle, an exciting digital experience for mortgage brokers and borrowers, which we have developed in house and believe will transform the efficiency in which mortgage brokers do business. Middle makes the process of securing a home loan easier and faster for both the consumer and their broker. This platform began gaining momentum in the second half of 2023, and in January 2024 over $500 million worth of loan applications were received through its digital platform. We can see Middle rapidly heading toward processing $1 billion in residential loan applications monthly. As with all technology platforms achieving user acceptance and scale in user volume is a process that takes time and money to achieve. However, we are very pleased and excited by the growth in volume and our investment in the platform. Middle has also been an important tool in achieving improved user experience to mortgage brokers subscribing to our Finsure aggregation platform, thus assisting Finsure to grow the number of brokers using its market leading technology and services. We are constantly balancing the need to invest for growth whilst delivering returns to shareholders in the near term. The Group is building several highly scalable business platforms in deep markets in Australia and offshore that we believe will deliver significant growth over the medium term. We have a track record that demonstrates our ability to deliver on these investments. In 2017 and 2018 the Group began to strategically invest in its Private Credit fund platform and domestic distribution capabilities to diversify the Group’s investment product and sources of funds. Fast forward to 2023 and our Private Credit funds received a record $1.7 billion of gross inflows during the year and 57% of the Group’s gross fund inflows were received from domestic sources. We will continue to invest to scale and diversify our business for medium and long-term growth. The Board’s confidence in the outlook for the business is reflected in its declaration of a fully franked final dividend of 14 cents per share taking our full year’s dividend to 20 cents per share, fully franked. The growth of our Private Credit funds continues to bolster recurring revenue, driving record flows into the Group’s Asset Management funds in 2023. Assets under Management grew 18% to $9.2 billion over the year and up from $1.1 billion when we listed back in 2017. There is a global trend towards investment in unlisted alternative asset classes and the attractive, consistent yield-based returns they can provide. This shift is being driven by increased savings pools, the wish for reliable income streams and lower investment volatility. We identified these dynamics several years ago when we began building an Asset Management business to focus on direct investment in Credit, Hospitality and Real Estate. MA Financial is well positioned as a global manager of alternative assets to continue to take advantage of these investment trends. In October, we announced a significant milestone in the evolution of MA Financial Group unveiling a new strong, clear and more recognisable logo, and a re-branding of our website and intranet. We believe this refresh is important as we expand into new markets and strive to become a trusted household name in the delivery of financial services. Since our inception in 2009, we have always embraced change, seizing new opportunities for growth and adjusting to market dynamics. Evolving our ‘look and feel’ is a natural progression in our journey, and we believe this investment in our brand will play a crucial role in positioning us for future success. Our mantra, ‘We invest. We lend. We advise,’ succinctly describes our multifaceted, but complimentary activities, providing clarity to our clients about the breadth of our services. The quality of our people remains the real key to our ongoing success. We’ve invested in the retention and development of our key personnel and talent during a challenging year. Acknowledging that attracting, developing and retaining the best people is essential to the Group’s long-term success. We continue to refine our remuneration structures to provide appropriate incentivisation for senior staff that aligns with positive shareholder outcomes. As MA Financial’s activities grow and diversify, the Board continues to enhance its focus on sustainability. Our third annual Sustainability report reflects our maturity in environmental, social, and governance practices. In 2023, we developed a Climate Change Action Plan, taking steps that will enable us to advance our emissions reduction targets in 2024. Simultaneously, we made significant investments in cybersecurity and other risk controls, corporate governance, and training. After adding three independent directors to our Board in recent years, I am delighted with the performance of the Board during 2023. Our independent directors bring a diverse range of skills, greatly contributing to the governance and oversight of MA Financial Group. I am extremely pleased with the blend of skills, contribution and the rhythm and harmony between all of our Directors and I believe we are positioned very well as a Board, to oversee the growth of the business. I extend my gratitude to our Board, senior executives, and all employees for their continued hard work and dedication in 2023. Jeffrey Browne Independent Chair and Non-Executive Director 10 MA Financial Group | 2023 Annual ReportJoint Chief Executive Officers’ letter Christopher Wyke & Julian Biggins Joint Chief Executive Officers Our financial results for 2023 underscore the success of our diversified and resilient business strategy, enabling us to invest and expand while delivering strong returns for our shareholders. MA Financial Group delivered an Underlying net profit of $41.6 million, equivalent to 26 cents per share. This was down 32% on the 2022 result as difficult markets impacted transactional and performance fees, coupled with planned strategic investment into growth areas such as MA Money, Middle technology, our US credit platform, brand and our distribution platform. This investment represented an impact on our EPS of 5 cents per share. However, from the day we founded MA Financial in 2009 we have believed in investing today, for tomorrow. Importantly, the Group’s recurring revenue increased 23% in 2023 driven by record inflows into our Asset Management funds and the ongoing growth of the Finsure mortgage aggregation platform. The ongoing growth in recurring revenue is delivering a high-quality profile for this business with 66% of Underlying revenue in 2023 from sources that we consider recurring in nature versus 48% in the year prior. Our Asset Management division is the major contributor to Group earnings delivering 80% of the Group’s Underlying EBITDA in 2023. Record gross inflows of $1.9 billion, an increase of 27% on the previous year, were driven by strong growth in our two key Private Credit strategies, both of which surpassed $1 billion funds under management in the year, and investor demand for the MA Marina Fund, a new alternative asset class for the Group. At our IPO in 2017 we had a total of $1.1 billion of Assets under Management and revenue of $107 million, yet just six years later we delivered $270 million in revenue and had $9.2 billion of Assets under Management. Asset Management inflows in 2023 materially exceeded our total AUM at listing. It is very satisfying to us that our dual focus on achieving attractive earnings whilst innovating and investing for long-term growth is working. The development of our Residential Lending Marketplace within the Lending & Technology division continued at pace in 2023. Finsure grew its managed loans by 21% on the previous year to $110 billion and the number of mortgage brokers on its award-winning platform increased to 3,129, up 19% on the previous year. Middle, our proprietary technology platform that materially improves the digital data collection process for mortgage brokers and borrowers began to gain traction in second half of 2023. In January 2024 over $500 million of loan applications were received on our digital platform and we anticipate this will increase to $1 billion monthly by the end of first half 2024. The Group’s new residential mortgage lender, MA Money, grew its loan book by 244% to $829 million at 31 December 2023, as it built momentum over the year. We will continue to invest in MA Money’s product and platform, which is a near-term drag on earnings but represents a significant opportunity to scale into Australia’s $2 trillion residential mortgage market. We see MA Money as becoming run-rate breakeven in the second half of 2024, and in future years becoming a strong contributor to our earnings. 11 MA Financial Group | 2023 Annual ReportJoint Chief Executive Officers’ letter MA MONEY MA MONEY $500m RMBS securitisation Record for a first time Australian issuer $829m 244% increase on FY22 Our Corporate Advisory & Equities division demonstrated resilience in the face of challenging market conditions that impacted transaction timelines and equity capital market activity levels. Despite these challenges, we successfully advised on a range of transactions totalling $3.5 billion. Notably, in 2023, the division strategically expanded by hiring senior metals and mining expertise, positioning itself to meet the increasing client demand for natural resources advisory and execution. This investment in executive talent during FY23, notwithstanding the challenging corporate advisory environment, reflects our ongoing confidence in the Corporate Advisory and Equities business. Looking forward, we anticipate an improving transactional landscape as evidenced by strengthened transaction pipelines. New horizons – an investment in growth Identifying new territories and client segments for growth, MA Financial successfully expanded into three new international markets in 2023. The acquisition of the US-based credit asset manager, Blue Elephant Capital Management, and the launch of the MA Global Private Credit Fund, has enhanced our credit investment platform. The development allows us to offer proprietary lending opportunities in the US credit markets to our domestic and international clients, while providing us with scalable entry to the estimated US$5 trillion specialty finance market. Simultaneously, we expanded our presence in Asia, opening an office in Singapore to cater to our growing asset management client base. Further, Finsure recognised an opportunity to offer a comprehensive mortgage aggregator model in New Zealand. This, in turn, led to the establishment of an office in Auckland, marking a phenomenal year of growth. The year also saw us establish a digital distribution platform in Japan, securing licensing in December 2023. This strategic initiative opens the door to a multi- billion-dollar market opportunity. Our goal is to redirect Japanese investors away from conventional cash and deposit products toward higher-yielding investment alternatives. The Group’s global expansion and the growth of its consumer-facing businesses this year provided the opportune moment for us to unveil a new logo and brand identity, and we’re delighted with the result. As outlined by the Chair, as we expand into new geographies and client segments, the investment in our brand will enable us to increase awareness among a broader client base, and strategically position the firm for future growth. Everything accomplished in 2023 was made possible by the commitment and hard work of our team, for which we express our gratitude. Additionally, we extend our appreciation to our shareholders for their continued trust and support and we look forward to keeping you informed of our progress throughout 2024. Christopher Wyke & Julian Biggins Joint Chief Executive Officers 12 MA Financial Group | 2023 Annual ReportYear in review Overview For the year ended 31 December 2023, the Group recorded total comprehensive income attributable to the ordinary equity holders of $19.0 million (2022: $45.8 million) and profit after income tax to the ordinary equity holders of $28.5 million (2022: $44.9 million). Basic earnings per share was 17.8 cents, a decrease of 36% on the prior year. Statutory results Total income Profit before tax Profit after income tax Profit after income tax attributable to ordinary equity holders Total comprehensive income attributable to ordinary equity holders Underlying results Revenue EBITDA Net profit after income tax Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 31 Dec 2023 $’000 31 Dec 2022 $’000 Movement % 392,770 43,479 31,079 28,517 18,997 334,998 60,969 44,855 44,855 45,754 17% (29%) (31%) (36%) (58%) 31 Dec 2023 $’000 31 Dec 2022 $’000 Movement % 269,876 81,565 41,599 301,799 106,720 61,436 (11%) (24%) (32%) 31 Dec 2023 cents 31 Dec 2022 cents Movement % Statutory Underlying Statutory Underlying Statutory Underlying 17.8 26.0 28.0 38.3 (36%) (32%) 17.3 25.2 26.9 36.9 (36%) (32%) Full year dividend (cents per share) 20.0 20.0 - Non-IFRS Underlying results1 The Group also utilises non-IFRS Underlying financial information in its assessment and presentation of Group performance. When reading the Group’s results, we note there are some Underlying adjustments that a reader may find useful to understand in more detail. For further information on adjustments between statutory and Underlying results, please refer to the detailed reconciliation provided in note 3 of the 2023 Financial Report and to the explanation in the Directors’ report as to why the Directors believe that, when read in conjunction with the statutory results, the Underlying measures are useful to the reader. Underlying revenue was down 11% from FY22 driven by a reduction in performance fees versus an exceptionally stronger FY22 and difficult macroeconomic conditions for corporate advisory activity, making deal execution and timing uncertain. Recurring revenue made up 66% of the FY23 Underlying revenue compared to 48% in FY22, resulting in a stronger earnings composition. Expenses were down 3% on FY22 despite material investment in strategic growth initiatives and an inflationary operating environment. 1. Non-IFRS financial information is not prepared in accordance with Australian Accounting Standards and IFRS and is not audited. 13 MA Financial Group | 2023 Annual ReportYear in review (continued) Our business The Group experienced robust inflows across Asset Management funds, reaching $1.9 billion, a 27% increase on FY22. Additionally, Lending & Technology saw substantial growth, with Finsure Managed Loans up by 21% to $110 billion, and MA Money’s loan book surged by 244% on FY22 to $829 million. Strategic investments included a brand refresh for MA Financial, expansion of Private Credit capabilities into the US, establishment of new distribution channels in Singapore and Japan, and continued investment into lending platforms and technology. While these investments impacted FY23 results, they position the Group for significant growth opportunities in the future. Corporate Advisory & Equities faced challenges in a tough market environment, resulting in subdued performance for the year. The Group’s Underlying divisional measures directly align with the segment measures required by AASB 8 Operating Segments. Further information and reconciliations are provided in note 3 of the 2023 Financial Report. The table below shows the divisions’ respective contributions to Group Underlying EBITDA and NPAT. Unallocated costs associated with the central executives and corporate support functions are shown separately as Corporate Services. 31 Dec 2023 $’000 31 Dec 2022 $’000 Asset Management 82,223 103,477 Lending & Technology 14,054 15,611 Corporate Advisory & Equities 6,853 13,982 Corporate Services (21,565) (26,350) Underlying EBITDA 81,565 106,720 Depreciation and amortisation (12,954) (11,121) Interest expense (9,184) (7,834) Income tax expense (17,828) (26,329) Underlying NPAT 41,599 61,436 MA Financial Group | 2023 Annual Report 14 Year in review (continued) ASSET MANAGEMENT $1.9b Record gross fund inflows a 27% increase on FY22 The Asset Management division reported record gross inflows of $1.9 million driven by stronger demand for credit products and the launch of the MA Marina Fund. Assets under Management (AUM) grew by 18% over the year to $9.2 billion at 31 December 2023. Asset Management contributed 80% of FY23 Group Underlying EBITDA before Corporate Services. Underlying EBITDA of $82.2 million was down 21% from $103.5 million in FY22 due to exceptionally strong prior period performance fees. Gross inflows from domestic clients continued to build momentum, up 81% to $1.1 billion from $609 million in FY22. This is reflective of the Group’s significant investment in its domestic distribution platform and strong client interest in credit and alternative asset classes. Gross inflows from non-migration international High Net Worth (HNW) clients were up 27% to $647 million from $509 million in FY22. Flows from international migration HNW applicants were subdued, contributing only 1% of the total gross inflows. Ongoing investment in the development of an institutional distribution channel saw gross inflows of $173 million, up 23% from $141 million in FY22. Asset Management $9.2b 0.4 0.6 1.9 2.3 4.0 $7.8b 0.3 0.7 1.8 2.5 2.5 $6.9b 0.3 0.9 1.6 2.5 1.6 $5.4b 0.3 0.5 1.3 2.2 1.1 FY20 FY21 FY22 FY23 Credit Core Real Estate Alternative Real Estate Equities PE/VC 15 MA Financial Group | 2023 Annual ReportYear in review (continued) The key highlight for the investment strategies was the impressive performance of the Private Credit and Fixed Income investing division. The asset class and fixed income nature of the product suite resonated with investors due to the rising interest rate environment with 90% of Group net flows going into Credit related strategies. AUM from Credit related strategies grew to $4.0 billion at 31 December 2023, up 60% from $2.5 billion at 31 December 2022. During the year, the MA Global Private Credit Fund was launched following the acquisition of Blue Elephant Capital Management and the MA Credit Income Fund was launched as a single access point fund for all MA credit strategies. The Group’s Core Real Estate asset class comprises retail and diversified real estate AUM of $2.3 billion at 31 December 2023, was down from $2.5 billion on the prior year due to the sale of Warrnambool shopping centre and minor valuation adjustments as the sector worked through an increasing interest rate cycle. The divestment of the Warrnambool shopping centre for $71 million delivered 10.8% return to investors over a 10-year hold period. The Alternative Real Estate asset class comprises Hospitality and Marina assets, with a combined AUM of $1.9 billion at 31 December 2023. During the year, the MA Marina Fund was launched as a new scalable alternative real estate strategy, initially acquiring the D’Albora marina portfolio. The new MA Accommodation Hotel Fund was also launched and seeded with the Vibe Docklands hotel acquisition post balance date. Continuing demand for hospitality assets saw the Redcape Group contracted to sell eight hotels for approximately $205 million, each at a premium to book value. The Private Equity and Venture Capital asset class saw the launch of the growth credit focused MA Sustainable Future Fund in the second half of 2023 with strong investor demand, growing its AUM to $66 million by 31 December 2023. The Equities investment division was impacted by the uncertainty and volatility that was widespread in the global equity markets throughout 2023. AUM growth translated into strong fee revenue growth, with recurring revenue up 22% to $153.4 million, driven by a 65% increase in Credit Fund’s income to $42.4m and a 13% increase in base management fees to $104.2 million. Credit Funds’ income includes non-base fee recurring revenue contributions from the Group’s two key Credit Fund strategies, the Priority Income Fund and Real Estate Credit. Transaction and performance-based revenue decreased 66% to $20.7 million, as a result of an uncertain macroeconomic environment that impacted transaction based activity during the year and the exceptionally strong performance fees in FY22. The realised gains on the Group’s equity investments delivered a $2.0 million gain relative to a $10.9 million gain in 2022. The prior year saw a slight reduction in the Group’s investment in Redcape Hotel Group, however the co-investment holding remains just under 12%. Expenses of $93.9 million were flat on 2022 despite the opening of new offices in New York and Singapore, reflecting strong cost management and scalability of the distribution platform. 16 MA Financial Group | 2023 Annual ReportYear in review (continued) Lending & Technology The Lending & Technology business was the focus of major investment in the year as the Group continued to build a tech-enabled highly scalable Lending ecosystem through Finsure, Middle, Specialist Finance and MA Money. Underlying revenue for the Lending & Technology division grew 9% on FY22 to $44.7 million largely due to the continued growth of Finsure’s mortgage aggregation platform. Underlying EBITDA was down 10% to $14.1 million as the Group invested in the build out of its Residential Lending Marketplace, via residential mortgage lender MA Money and its new digital mortgage broker software Middle. Financial Technology, comprising Finsure and Middle, delivered exceptionally strong performance in the year, growing broker numbers by 19% and increasing its Managed Loans by 21%, from $91 billion to $110 billion. Financial Technology delivered FY23 Underlying revenue of $37.3 million underpinned by recurring subscription fees, trail commissions (including positive movements in the net present value of future net trail commissions) and activity-based upfront commissions and other fees. This resulted in Underlying EBITDA of $19.6 million, reflecting a margin of 52.5%. The Lending platforms of MA Money and Specialist Finance grew the total loan portfolio by 150% to $983 million at 31 December 2023. The division’s underlying income reduced by 33% to $7.4 million as the Group’s balance sheet successfully exited a credit asset in 2022. The significant investment in the MA Money business across people, platform and technology has been a drag on its contribution and returns in 2023. This is expected to continue into the first half of 2024 as the business scales and positions itself to take advantage of the substantial opportunity for long-term growth in the residential mortgage market. MA Money is expected to reach a break-even earnings run rate in the second half of 2024. MA Financial Group | 2023 Annual Report 17 Corporate Advisory & Equities Year in review (continued) The Corporate Advisory & Equities (CA&E) division was down on earnings performance in 2023, declining 21% on the prior year largely due to challenging equity capital market (ECM) activities and Equities revenue impacted by softer market volumes and team rebuilding. Corporate Advisory fees were down 24% as challenging market conditions made deal timing and execution highly uncertain. Revenue per executive of $0.8 million, was below the Group’s target productivity range of $1.1 to $1.3 million. Activity was broadly spread across the division’s core capabilities of real estate, technology and mid-cap industrials. Expenses were down 13% on 2022 as average Advisory headcount fell from 58 to 53 staff. The expense reduction was less than the decline in revenue as the business focused on protecting staff during a challenging year in anticipation of future growth. The Group will continue to develop and grow the division but will remain selective in its approach to hiring, always paying regard to the maintenance of its revenue per head target range, discipline in the cost base and the consistency of earnings productivity in the business over the long-term. In the second half of 2023 the division expanded its capability into the natural resources sector with the hiring of two key experienced executives. MA Financial Group | 2023 Annual Report 18 Year in review (continued) Financial position Statutory total assets amounted to $3,573.9 million (2022: $2,246.2 million) with net assets of $461.2 million (2022: $409.6 million) at the year ended 31 December 2023. The statutory consolidated statement of financial position includes the consolidation of residential mortgage-backed securitisation trusts, Specialty Lending trusts and Credit Funds in the Priority Income Fund strategies that the Group manages. These special purpose funding vehicles contain liabilities which are secured only by the assets of these entities with no further recourse to the Group. Management utilises an Operating balance sheet which predominantly excludes the special purpose funding vehicles when reviewing the Group financial position. The Operating balance sheet presents a simplified view of the total economic exposure of the Group and the capital available to management to allocate. A reconciliation of the Operating balance sheet to the statutory consolidated statement of financial position can be found in the Group’s FY23 results presentation. 31 Dec 2023 Statutory $’000 31 Dec 2022 Statutory $’000 31 Dec 2023 Operating $’000 31 Dec 2022 Operating $’000 Assets Cash Loans receivable Investments Net trail book assets Goodwill and other intangibles Right-of-use assets Other assets Total assets Liabilities Borrowings Lease liabilities Other liabilities Total liabilities Net assets Non-controlling interests Net assets attributable to owners of the Company Net tangible assets 180,319 2,079,716 237,710 705,285 195,940 65,983 108,911 144,589 855,482 287,898 607,232 185,018 61,773 104,242 3,573,864 2,246,234 2,153,496 71,510 887,698 3,112,704 461,160 (63,624) 397,536 219,453 940,089 64,952 831,606 1,836,647 409,587 - 409,587 240,108 43,108 6,175 203,622 44,128 195,939 65,983 105,113 664,068 95,030 71,510 99,992 266,532 397,536 - 397,536 219,453 98,803 8,959 210,549 35,866 185,018 61,773 73,660 674,628 95,030 64,952 105,059 265,041 409,587 - 409,587 240,108 Notable movements in the Group’s Operating balance sheet were centred on the deployment of cash. Group cash reduced in the year as capital was allocated to the Group’s investment in consolidated Credit Funds and the acquisition of Blue Elephant. Net tangible assets decreased during the year as a result of the utilisation of cash to fund the acquisition of Blue Elephant and the recognition of the related intangible assets upon acquisition. The year saw a high level of rotation of both short- term growth investments and long-term strategic investments. This dynamism underpins the ability of the Group to support future growth and is reflected in the recycling of over $100.0 million of prior investments and the reinvestment of a similar amount to support new and existing fund growth and strategic initiatives. 19 MA Financial Group | 2023 Annual ReportYear in review (continued) Financial position The Group’s investments, including strategic and co-investment positions, are shown in the table below Lending (MA Money & Specialty Invested Capital) Co-investments Private Credit funds Redcape Hotel Group (RDC) Other equity investments Total investments 31 Dec 2023 Operating $’000 17,038 51,385 87,635 49,295 4,444 209,797 31 Dec 2022 Operating $’000 8,167 66,730 84,118 57,086 3,407 219,508 Key movements in the Group’s investments relate to: • Lending Invested Capital increase reflects growth of MA Money • Redcape change driven by a net increase in ownership, offset by statutory movements and distributions received • Redcape investment valued at $76 million based on 31 December 2023 unit price of $1.4951. 20 MA Financial Group | 2023 Annual ReportYear in review (continued) Financial position Capital management The Group manages its capital with the aim of ensuring that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity capital balances. Fundamental to this is maintaining a strong balance sheet, which supports the business through economic shock but also facilitates attractive investment opportunities. During the year the Group declared an interim dividend of 6 cents per ordinary share (2022: 6 cents). Subsequent to year end, the Directors have resolved to pay a final dividend of 14 cents per share for the FY23 year (2022: 14 cents), consistent to full year dividends paid in FY22. In December 2023, the Group successfully increased the size of its revolving working capital facility from $40.0 million to $80.0 million. The facility upsize will provide the Group with additional liquidity and flexibility. As of 31 December 2023, the facility was undrawn. Furthermore, the Group is currently in the process of refinancing its existing MACI note ($30.0 million) and MA IV note ($40.0 million), which are set to mature in May 2024 and September 2024 respectively. The Group recognises that debt is an important component of a balanced capital structure. Whilst the Group utilises both recourse and non-recourse debt to fund its growth objectives, we will continue to adopt a prudent approach to the use of debt capital. This approach to debt in conjunction with the strong level of average cash holding throughout the year is indicative of a consistent approach in managing the Group for the long-term and we will remain patient and prudent when deploying capital. Fundamental to this is maintaining a strong balance sheet, which not only stands us in good stead through economic uncertainty but can also facilitate attractive investment or business opportunities. Risk management The Group faces a range of risks to achieving its financial objectives, the most material of which are summarised below. This summary is not a comprehensive outline of every risk associated with the Group’s financial prospects, and other risks may emerge. The Group’s overall risk management framework is summarised in its Corporate Governance Statement, available on its website. As noted there, the framework is supported by a strong risk culture with an emphasis on accountability and diversity of thought. 21 MA Financial Group | 2023 Annual ReportYear in review (continued) Financial position Cyber risk The Group depends on a range of information systems which carry a risk of unauthorised use or external compromise. This could result in the loss or disclosure of confidential information, disruption to operations, poor client service, regulatory sanctions, reputational damage and financial loss. The volume and sophistication of cyber threats facing businesses in Australia continues to grow. The Group maintains an experienced corporate technology team which manages its core technology infrastructure and supports business operations, including by assessing proposed new systems and software. The team continually improves the maturity of the Group’s cybersecurity controls, which includes penetration testing by third-party experts and continual threat monitoring. The team’s work is supported by documented policies and procedures, and training for staff on related risks. A comprehensive IT Disaster Recovery Plan is in place to promote effective incident response, and the Group has direct access to a leading Sydney-based cyber incident response advisor to help it mitigate and recover from any incident it fails to prevent. Regulatory change The Group is subject to regulatory obligations related to its activities, including those that affect sectors in which it invests. Along with the inherent risk of breaching requirements, there is a general risk that new or changed regulations could require significant spending on compliance, contribute to a higher risk of non-compliance or impact on the profitability of certain lines of business. The Group maintains an experienced, well-resourced team of legal and compliance professionals who work directly with the managers of the Group’s businesses to help ensure these compliance requirements are met and who report on legal and regulatory risk to the Boards of our licenced entities and to the Group’s governance structures. This team also keeps a watching brief for regulatory change in the jurisdictions where it operates, supported by third party advisors. Investment risk The Group’s Asset Management division oversees institutional, wholesale and retail investments across a range of asset classes. This exposes the Group to associated operational and market risks, which can result in investment returns that compare poorly to expectations, benchmarks and peers. In turn, a poor investment track record may affect the Group’s ability to attract and retain clients, which can reduce overall assets under management and materially affect long- term revenues and earnings. The Group manages this risk through the careful selection of investment strategies, and clearly defined, effective processes for due diligence, investment review and decision making, and portfolio management. Client reporting puts investment returns in context and explains the outlook. Volatility in levels of business activity Some of the Group’s lines of business are inherently subject to more revenue volatility. In particular, the level of activity in our Corporate Advisory & Equities division reflects clients’ appetites to raise finance, take part in mergers and acquisitions, and engage in equities sales and trading, which is influenced by a range of factors including economic conditions and sentiment. Overall, the Group has diversified sources of income and has limited dependency on inherently volatile revenues. Treasury risk and debt management The Group must manage the funding needs of its overall corporate activities, its distinct businesses and also the liquidity needs of the investment funds it manages. Failure to adequately project these funding requirements and to manage working capital and debt facilities could impact business growth, performance and reputation. Conversely, effective management of this risk can produce considerable savings and enable business growth. To control the treasury risk it faces and ensure effective debt management, the Group has built systems and processes to give appropriate visibility and oversight of funding needs and financial management across the Group. Operational risk The Group defines operational risk as that resulting from inadequate or failed internal processes, people and systems or from external events. Broad operational risk is present in all of the Group’s activities and is managed in the first instance through the controls built into the Group’s systems and processes and by the active oversight and management of business executives, supported by the Group’s risk function. The Group recognises that operational risk, in its many forms, is an inherent feature of its business profile and is committed to managing it in line with its Risk Appetite Statement. 22 MA Financial Group | 2023 Annual ReportNext Generation Women in Finance Sustainability report We recognise integrating Environmental, Social and Governance (ESG) factors into our operations, investment decision-making and asset ownership is key to our purpose, which is to create sustainable, long-term value for our clients. While there is no single correct approach to ESG integration, we believe doing the right thing for our clients, our people and our communities leads to better results for all stakeholders. ESG considerations can provide a greater understanding of the investment risks and opportunities that contribute to evaluating long-term value for our clients. We also recognise that ESG issues evolve and mature and are committed to understanding the interests and expectations of all our stakeholders. We try to take a practical approach to our sustainability initiatives, which recognise our scale and our growth aspirations. In 2023, we progressed our sustainability framework and reporting, and refreshed our assessment of the most material aspects of sustainability to our business and our stakeholders. Materiality Matrix This report provides insight into our sustainability procedures and practices, progress made in 2023 and outlines focus areas for future development. The Group reports with reference to the Global Reporting Initiative (GRI) Standards to create the framework and define its approach to sustainability. Materiality assessment We last undertook an ESG Materiality Assessment in 2021, to identify the ESG issues which most influence decision-making about our Group and so prioritise these issues for management and reporting. We recently refreshed the Materiality Assessment which involved a survey of internal stakeholders and a forward-looking consideration of the issues most significant to our Group strategy. As our businesses scale and the Group evolves, the material issues are likely to change. We expect to reassess materiality every two to three years. l r e d o h e k a t s o t e c n a c i f i n g S i l a i r e t a m t s o M l a i r e t a M t n a t r o p m I t n a t r o p m I s s e L Diversity and inclusion Customer data protection Stakeholder engagement and community giving Cyber security and privacy Risk mitigation Anti-corruption Compliance Indigenous engagement, rights and reconciliations Waste recycling and pollution Climate risk Energy and air quality Product responsibility Wellbeing, health and safety Responsible marketing Anti-bullying and workplace harrassment Board skills and composition Values, purpose and accountability Forced and child labour Ethical AI Public policy Intellectual property Fair trading Supplier environmental performance Grievance and remedy Water Nature and biodiversity Supplier social performance Less Important Important Material Most material Forward looking strategic significance Governance and business model Social Environmental 25 MA Financial Group | 2023 Annual Report Sustainability report Stakeholder engagement As a diversified Group, our stakeholders are wide ranging and have a distinctive set of interests and priorities. They include shareholders, financers, employees, fund investors, clients, governments and regulators, and industry groups. We engage with key stakeholders through a range of channels. Critical to ensuring our stakeholder engagement is relevant and impactful is understanding the objectives and areas of focus for each stakeholder group. As a diversified Group involved in investing, lending and advising, we understand that trust, transparency and responsible behaviour are critical to building and maintaining relationships. As our business evolves, we will ensure our forms and channels of stakeholder engagement continue to facilitate relevant insights and transparency on our approach to sustainability. Last year we shared an assessment of the key focus areas for our stakeholders. We will continue to assess and refine these areas of focus. Sustainability framework Our sustainability framework contains six pillars and illustrates our approach to sustainability. These were set in 2021 and we consider them to remain appropriate and relevant today and in the future. TALENT DEVELOPMENT AND WELLBEING STRONG GOVERNANCE AND ETHICAL BEHAVIOUR SUSTAINABLE BUSINESS MODEL • Attracting, retaining, motivating, engaging and developing our workforce • Supporting the health, safety and well-being of our people • Creating sustainable value • through effective governance, strong ethical practices and accountability • Overseeing internal and external compliance • Embedding systemic and active risk management in our financial services Incorporating sustainability factors into our businesses, operations, products and financial services offerings DIVERSITY AND INCLUSION ENVIRONMENTAL IMPACT SOCIALLY RESPONSIBLE BEHAVIOUR • Promoting and maintaining a • Understanding the impact diverse and inclusive workplace of climate change • Safeguarding the privacy and security of our customers • Minimising our environmental • Protecting human rights in footprint focusing on energy and emissions, waste, and water management our value chain • Contributing to our community We are pleased to provide an update on our approach to each of these six pillars. 26 MA Financial Group | 2023 Annual ReportTALENT DEVELOPMENT AND WELLBEING Our people Our people are our business. A combination of insight, attitude and integrity is our unique formula for success. By focusing on what matters, we stay inspired, challenged and driven to co-create sustainable, long- term value with each other and our clients. During 2023, we reflected on our values and selected the following four drivers that motivate our decisions and actions. OUR FOUR KEY DRIVERS CHARACTER MATTERS We’re powered by good people with the right attitude and values. BETTER WAY? We’re contemporary thinkers who challenge norms, but respect experience. EDGE HAS A FORMULA Our edge comes from hard, dedicated, diligent work and experience. CO-CREATORS OF VALUE Success isn’t a perfect process – we’re there for the ups and downs, and when our clients win – we win We have an unwavering belief in the potential of our more than 600 people. We are committed to providing a work environment where employees feel recognised, motivated, and have a strong sense of belonging. In our experience, open and respectful behaviour between colleagues is critical to everyone achieving their potential. We aim to bring an optimistic mindset which always strives to deliver excellence. We seek to recognise the hard work and commitment of our people and provide fair and practical initiatives and benefits to support our employees. The range of benefits include: • 24/7 access to health advice via Sonder Wellbeing and an Employee Assistance Program • Paid parental leave • Access to community sports and cultural events • 2 X Wellbeing days each year • Comprehensive health checks for executives • Annual flu vaccines • Coffee and after-hours meal service Developing our employees In 2023 we built on the MA Academy programme and refined the curriculum, focusing on our emerging leaders. We remain committed to fostering strong links with the student community. Our work experience, internship and graduate placements provide rewarding opportunities for high school and university students from a range of backgrounds and faculties. Supplementary to the MA Academy, select employees1 completed an average of 10 hours of individual training in 2023 on topics including financial services, cyber security and data protection, and key policies. Division specific learning is also provided. Select senior executives underwent 20 hours of training. Regular performance reviews and career development discussions ensure employees have opportunities to progress, upgrade skills and pursue their interests within the Group. 1. Refers to eligible employees from core business divisions Asset Management, Lending & Technology, and Corporate Advisory & Equities. 27 MA Financial Group | 2023 Annual ReportSustainability reportSTRONG GOVERNANCE AND ETHICAL BEHAVIOUR The Group is focused on delivering long-term value to our clients and partners, our people and our shareholders. As set out in our Corporate Governance Statement, the Board is responsible for overseeing the management of the Group, promoting the long-term interests of the Group and its shareholders, and setting the required standards of culture and conduct. The Board is comprised of six Non-Executive Directors and three Executive Directors. Four of the six Non- Executive Directors are independent; two are not so considered due to their association and employment by Moelis & Company Group LP which is a major shareholder of MA Financial. Governance of ESG and risk management The Nomination and Remuneration Committee assists the Board to achieve the optimal mix of skill and experience to ensure effective decision making and stewardship. The other permanent standing committee is the Audit and Risk Committee (ARC) which is focused on the integrity of financial statements, the Group’s financial controls and its risk management framework. Each Committee is chaired by an Independent Non-Executive Director and comprises of only Non-Executive Directors, the majority of which are Independent Non-Executive Directors. MA Financial Group Limited Board Oversees the management of ESG risks and opportunities Impact Oversees the management of the company, including environmental and social impact Policy Approves policies, including ESG and risk management policies Risk Management Annually reviews ARC recommendation on soundness of risk management framework, including ESG risks Disclosure Approves the Sustainability Report incorporated in annual reporting The Board and the Board’s two permanent standing Committees engage on ESG topics relevant to their charters. Audit and Risk Committee Nomination and Remuneration Committee Executive Responsible for assessing ESG risks and opportunities, maintaining and building further a sustainable business model, managing each of the identified material topics, and reporting to the Board as appropriate The Board approves ESG-related policies and oversees the performance of the executive in terms of identifying and managing ESG risks and opportunities. There is a specific ESG Steering Committee in our Asset Management business, reflecting its scale and distinct and elevated ESG profile. Similarly, risk management is a fundamental aspect of good governance and a regulatory responsibility. The Board is responsible for ensuring the Group maintains a risk management framework which identifies all areas of potential risk. It reviews the balance between realising business opportunities and remaining within the risk tolerances set out in its Risk Appetite Statement, which includes sustainability risks. The Board is supported by the ARC which provides an annual review assessing the adequacy of the risk management framework. 28 MA Financial Group | 2023 Annual ReportSustainability reportOur people confirm periodically their compliance with the Code of Conduct and are expected to abide by the highest standard of ethical conduct in their relationships with each other, investors, competitors, suppliers, and the public. We expect senior leaders to model and positively reinforce our values. A comprehensive framework of additional policies that supplement and support the Code of Conduct can be found on our website. MA Financial’s Business Leaders have executive responsibility for risk management supported by our core principle that risk management is the responsibility of everyone. The Chief Operating Officer and Risk Director are responsible for coordinating the risk management framework, for promoting an effective risk culture, and for developing awareness of risk management across the Group. The Senior Executive Risk Committee meets to discuss key risk themes and promotes a positive risk culture. Code of Conduct The Code of Conduct helps support effective governance, including ESG and risk management responsibilities. It applies to all Directors, officers and employees of the Group and sets out expectations for how we act in the ordinary course of our business activities. 2023 was the first full year of the MA Sustainable Future Fund. It provides wholesale investors with exposure to a diversified portfolio of secured loans to established, growth-stage companies which support a more sustainable future through products and services aligned to the UN Sustainable Development Goals. The Fund funded a number of businesses in 2023 including: • a provider of electric vehicle ownership plans to rideshare drivers • a metre solar PV systems operator, and • an in-home/telehealth after-hours medical care consultations provider MA Financial Group | 2023 Annual Report 29 Sustainability reportSUSTAINABLE BUSINESS MODEL As we continue to invest, lend and provide corporate advice, maintaining a sustainable business model will help enable our success. to be considered in pre-screening, and to ensure a consistent approach when presenting investment opportunities for review and decision. We believe our diversification provides us with a more stable platform from which we can generate value for our stakeholders. It also equips us better to think and act responsibly and for the long term. This diversification also means we need to assess our businesses individually, and as a portfolio, to gain greater visibility of how risks affecting one business could impact on the Group’s wider reputation and resources. Operating a sustainable business model involves resilience, it requires incorporating ESG factors into our decision-making to ensure we minimise the related risks and take advantage of the opportunities. This challenge is especially relevant in our Asset Management division where we specialise in private credit, real estate, hospitality, unique operating assets, private equity and venture capital. We have operational and financial control of many of our real assets and we directly originate and manage many of the loans we hold in our Credit Funds. We often take a ‘hands-on’ approach to managing these assets. This gives us a strong position to exercise responsible stewardship by minimising environmental impacts, promoting strong governance arrangements and ethical conduct towards customers, suppliers and the communities in which these assets are based. We believe this is fundamental to unlocking the true value of our investments. In 2023, we introduced new Responsible Investment policies for each of the asset classes into which we invest, bringing more definition to the ESG factors The integration of ESG into Asset Management activities is overseen by an ESG Steering Committee whose members meet quarterly. The main initiatives planned for 2024, or already underway, include responding to new mandatory climate reporting requirements, improving reporting from the supply chain on modern slavery risks, and implementing a sustainability roadmap for the Real Estate asset class. Our Asset Management division is a signatory to the UN Principles for Responsible Investment and recently completed its first assessment exercise, providing another framework against which to assess our progress with ESG integration. Our 2023 investment in marinas was an example of the importance of integrating ESG considerations into our investment decisions. The diligence considered climate impacts on the business model, assessed environmental risks from operations and the organisation’s practices to mitigate and manage environmental risks. Supplier Code of Conduct MA Financial is dedicated to treating our suppliers fairly and transparently. We value the crucial role they play in promoting sustainable business practices. Our Code ensures compliance with laws and regulations, requiring suppliers and their contractors to address key risks such as health and safety, cybersecurity, privacy, labour laws and human rights. MA Financial Group | 2023 Annual Report 30 Sustainability reportDIVERSITY AND INCLUSION Diversity at MA Financial involves creating a work environment which allows all our people to meet their potential and is underpinned by respecting and valuing a wide range of differences including gender, ethnicity, disability, age, religion, sexual orientation, and educational and work experience. Our Diversity Policy (available on our website) outlines our diversity principles, commitment to diversity objectives and provides a framework for advancing our diversity goals. Our diversity principles On an annual basis, management monitors and reports to the Board on our advancement against these objectives with the Board assessing our progress against targets. Table 2 illustrates our year-on-year movements on gender diversity at different levels of the organisation. • Recruit, retain and develop an appropriately diverse and skilled workforce and Board to facilitate achieving or exceeding business objectives • Leadership team proactively demonstrating a commitment to diversity through modelling inclusive behaviour • Providing a work environment that values and fully utilises the perspectives and experiences of all employees and directors. Table 1 – Diversity objectives Objective/Quantitative targets Baseline (2021) 2023 Achieve and retain a 30% female representation at Board level 25% female/75% male 33% female/67% male Achieve and retain a 50% female representation in the business 48% female/52% male 47% female/53% male Achieve and retain a 30% female representation in senior executive positions1 23% female/77% male 34% female/66% male Achieve a Culturally and Linguistically Diverse (CALD) status of 40% CALD = 35% CALD = 52%2 Table 2 – Gender diversity across organisation Level Gender 2020 Workforce Female Male Senior executives Female Board Male Female Male 33% 67% 24% 76% 29% 71% 2021 48% 52% 25% 75% 25% 75% 2022 2023 YOY change 48% 52% 28% 72% 33% 67% 47% 53% 34% 66% 33% 67% ↘↘ 1% ↗↗ 1% ↗↗ 6% ↘↘ 6% ↔↔ 0% ↔↔ 0% 1. Senior executives include all employees with a title of Vice-President, Executive Director, Managing Director or functional equivalent. 2. Information provided by employees when onboarding or through self service in our HR Information System 31 MA Financial Group | 2023 Annual ReportSustainability reportMA Financial encourages improved gender diversity and inclusive leadership practices across the sector. In 2023, MA Financial hosted a networking event ‘Next Gen Women in Finance’ inviting over 120 young female professionals to engage in discussions about inclusive culture and driving change. This followed a highly successful inaugural event in 2022. We are committed to fair and equitable remuneration. Our annual remuneration review and discretionary bonus setting process includes an analysis and elimination of any identified gender pay gaps for comparable roles. The process assesses the occurrence of unusual gaps which are not accounted for by factors such as experience, skills, performance, and others and removes them as applicable. ENVIRONMENTAL IMPACT Minimising the impact our firm has on the environment is important to us, especially the impact from our direct operations. Climate impact In 2023, the Group completed, for the first time, a measurement of the environmental emissions for which we were directly responsible in 2022. We also committed to two targets: to deliver net zero emissions by 2050 for our direct operations and reduce Scope 1 and 2 emissions intensity per employee by 50 percent by 2030. To help achieve these targets, we completed in 2023 a Climate Change Action Plan (CCAP). This exercise identified office energy use as a significant source of emissions and recommended transitioning to lower or zero-carbon energy supplies. We achieved this before the end of the year for both of our main Sydney and Melbourne offices. This change alone puts us on track to achieving our 2030 target, but its timing means the positive results accrue mostly from 2024. As a result of this dynamic, plus an increase in business air travel, the overall emissions figure for our direct operations in Australia was 2,724 t CO2-e. Our Scope 1 and 2 intensity per Australia-based employee was 0.7 t CO2-e.1 Health and safety The Group aims to create and maintain a safe and healthy workplace, and ensure all activities undertaken protect the health and safety of our employees, suppliers, visitors and clients as applicable. Our Work Health and Safety (WHS) Policy sets the fundamental principles that govern our approach to WHS management. In 2022, we established a Work Health and Safety Committee with a mandate to promote safety and health and to consult on issues relevant to health, safety, and the welfare of workers. MA Financial tracks Lost Time Due to Injury and had two reportable incidents in 2023. The increase in emissions is largely as a result of increased air travel, noting that the baseline year was artificially low due to ongoing COVID impacts and that in 2023 MA Financial has pursued numerous growth initiatives overseas. Notwithstanding the increase in emissions, we remain confident in reduced emissions intensity in 2024 owing to the initiatives described above. The Group will continue to refine and act on its CCAP, in conjunction with its responsibilities under Australia’s emerging regime for mandatory climate reporting. Mandatory climate reporting MA Financial has monitored the development in Australia, through 2023, of draft new mandatory reporting standards on climate-related disclosures. We plan to advance in 2024 a set of workstreams which will enable compliance both for our direct operations and in respect of investment funds in scope of the standards. To a large extent, this focuses on measurement of Scope 3 emissions. 1. Fuller details of the methodology and assumptions will be available in an updated version of our Emissions Disclosure. 32 MA Financial Group | 2023 Annual ReportSustainability reportSOCIALLY RESPONSIBLE BEHAVIOUR MA Financial recognises the impact we have on the communities we operate in and other external parties. Measuring our ESG impact helps us continue to increase our positive impacts and maintain consistently responsible business practices. Our vision is to create an environment of enterprise, optimism, and partnership. To place the interests of our clients above all else, and work together as co-creators of long-term value. We know that to achieve this vision we need to be trustworthy in our conduct and decision making. We need to be consistent, responsible and responsive to stakeholder feedback. Whilst we believe this is core to our culture and daily behaviours, we call out some specific key areas of focus below. Privacy The Group respects data privacy and recognises how critical our actions in handling data are in building and maintaining trust with current and prospective stakeholders. We are committed to measures which protect the security of personal data and confidential information that is collected, stored, processed, or disseminated. The Group’s ‘Technology and Data Handling Policy’ established specific requirements for the use of all computing and network resources within the business in a responsible, ethical, and compliant manner. This, along with the Group’s Privacy Policy, also covers the key principles of data privacy, compliance requirements, privacy and personal rights and technology use guidelines within the Group. They are reviewed for relevance and accuracy annually. We invested significantly in uplifting cyber practices and increasing employee cyber awareness during 2023. This remains an area where we have further planned initiatives in 2024 and will remain an area of focus for management and the Board. Human rights MA Financial conducts its businesses to high levels of ethical and professional standards in accordance with relevant laws in the countries that we operate. It has no tolerance for any form of modern slavery within its business and supply chain. The Group’s approach to modern slavery is set out in its Modern Slavery Policy and the Modern Slavery Statement (dated June 2023), available on the Group’s website. Tier 1 risk assessments of the Group’s supply chain were conducted in 2023 and have not identified any instance of modern slavery or areas of significant concern. All other objectives set out for 2023 in the Modern Slavery Statement have been met. MA Financial is the principal partner of the Sydney Contemporary Art Fair, Australasia’s premier art fair. This year marked the inception of the MA Art Prize, an acquisitive award valued at $10,000. The prize is granted to an emerging artist whose work is showcased at Sydney Contemporary, and we extend our congratulations to Corban Clause Williams, the deserving winner. As the principal partner of Sydney Contemporary, we’re proud of the role we play in providing this platform for emerging and established artists. MA Financial Group | 2023 Annual Report 33 Sustainability reportMA Financial is a proud partner of the Ocean Lovers Festival – an annual celebration of ideas, art, music, and impactful actions, showcasing the latest innovations and technology dedicated to maintaining a healthy ocean. Our investments in marina assets underscore our commitment to ocean health and sustainability, aligning seamlessly with the festival’s mission to engage communities and showcase innovative solutions. Community investment At MA Financial, fairness and generosity are fundamental to our ethos. In 2018, we established the MA Foundation with a clear mission: to champion community initiatives that resonate with the values and interests shared across our Group. Our Foundation’s vision, impactful partnerships, robust staff engagement, and a steadfast commitment to the broader ESG agenda, guides our community investment approach. To date, the Foundation has donated over $8.1 million to more than 35 charities. The Foundation has three Community Partners: GO Foundation, Backtrack and Mirabel Foundation. Through the collaborative efforts of our MA Foundation Committee and matched giving programs, we channel our resources towards causes that hold significant importance to our staff members. Responsible Conduct We operate a wide range of businesses where we recognise duties to act responsibly, including those noted here. Consumer credit: MA Financial is committed to responsible lending practices. For example, MA Money will only make home loans which are suitable for borrowers, having reference to their requirements and objectives and their ability to repay. Our Specialty Lending business is involved in making legal disbursement loans, where it enforces distribution conditions and restrictions to help ensure loans are made only to suitable customers. Global Credit Solutions (ex-consumer credit): The GCS team considers a set of ESG factors when initially screening potential loan counterparties and also when carrying out a fuller assessment of the lending opportunity. This helps avoid funding projects with harmful environmental or social impacts. In addition, the team has zero appetite for predatory lending which seeks to create or take undue advantage of financial hardship. Hospitality: Our Hospitality platform, MA Hotel Management, manages several hospitality funds including Redcape Hotel Group, and recognises its obligation to ensure customers experience safe and sociable venues, and responsibly enjoy the beverage and entertainment offerings. MA Hotel Management’s approach to the service of alcohol, problem gaming and harm minimisation is articulated in its Responsible Service Policy, available on the Redcape website. Redcape also supports local communities and their initiatives through its ‘Publinc Communities Programme’ which has an objective of enriching local communities through lasting impact. Looking forward We are proud of the progress we have made in 2023, and our continued focus on the six key pillars of our Sustainability Framework. The development of our practices and procedures within these pillars, and our disclosure around them, will continue to expand over time. We look forward to sharing our sustainability progress with our key stakeholders over future periods. 34 MA Financial Group | 2023 Annual ReportSustainability reportSydney Contemporary Art Fair Directors’ report The Directors of MA Financial Group Limited (Company) submit their report together with the consolidated Financial Report of the Company and its subsidiaries (Group) for the year ended 31 December 2023. The names and details of the Directors of the Company during the financial year ended 31 December 2023 and as at the date of this report are listed below. Directors were in office for the entire year, unless otherwise stated. Jeffrey Browne Andrew Pridham Alexandra Goodfellow Simon Kelly Nikki Warburton Kenneth Moelis Kate Pilcher Ciafone Julian Biggins Christopher Wyke Independent Chair and Non-Executive Director Group Vice Chair Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Non-Executive Director Non-Executive Director Joint Chief Executive Officer Joint Chief Executive Officer Jeffrey Browne Independent Chair and Non-Executive Director Appointed 27 February 2017 Andrew Pridham Group Vice Chair Appointed 25 May 2010 Experience and expertise Jeffrey was a senior executive at Nine Network Australia from 2006 to 2013, including Managing Director from 2010 to 2013. He was previously Chair of Carsales.com. Jeffrey holds a Degree in Arts from La Trobe University, and a Degree in Law from Monash University, Melbourne. Experience and expertise Andrew has served as a Director since the formation of MA Financial Group Limited. He was Chief Executive Officer from 2009 to February 2020 and has 30 years’ of experience in investment banking. Andrew was one of the founders of the Company in 2009. Other directorships and appointments Chair of Premoso Pty Ltd (owner of the business of Walkinshaw Automotive Group) President of Collingwood Football Club Special responsibilities Chair of the Board (appointed February 2017) Member of the Audit and Risk Committee (appointed February 2017) Member of the Nomination and Remuneration Committee (appointed February 2017) Interests in the Company Shares: 150,000 Other directorships and appointments Chair of Sydney Swans Limited Adjunct Professor at University of South Australia Special responsibilities Focused on the development and implementation of MA Financials Group’s strategy and promotion of the Company Director of MA Foundation (appointed November 2017) Interests in the Company Shares: Andrew holds 39,285 shares as well as a beneficial equity interest in 17,930,390 shares as a result of his holdings in the Existing Staff Trusts. As a result of Andrew’s ownership of the Trustee of one of the Existing Staff Trusts, Andrew has a deemed relevant interest in 19,865,799 shares. Restricted and Loan Funded shares: 611,026 37 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Alexandra Goodfellow Independent Non-Executive Director Appointed 19 August 2020 Kenneth Moelis Non-Executive Director Appointed 7 July 2010 Experience and expertise Alexandra is Vice Chair of Korn Ferry Australasia and has 35 years’ experience in executive search and human capital consulting. Advising clients at Board, CEO and C-suite level, assisting with organisational strategy, assessment and succession, executive search and leadership development. Other directorships and appointments Vice Chair of Korn Ferry Australasia Non-Executive Director of Sydney Swans Limited Special responsibilities Chair of the Nomination and Remuneration Committee (appointed August 2020) Member of the Audit and Risk Committee (appointed December 2022) Interests in the Company Shares: 32,371 Experience and expertise Ken is Chair and Chief Executive Officer of Moelis & Company and has 40 years’ experience as a banker and executive. Prior to founding Moelis & Company, Ken was President of UBS Investment Bank and previously, Head of Corporate Finance at Donaldson, Lufkin & Jenrette. Ken began his investment banking career at Drexel Burnham Lambert. Ken holds a Bachelor of Science in Economics and an MBA from the Wharton School at the University of Pennsylvania. Other directorships and appointments Chair and CEO of Moelis & Company Group LP (Moelis & Company) Non-Executive Chair of the Board of Directors, Moelis Asset Management Member, Wharton Board of Advisors Member, Ronald Reagan UCLA Medical Center Board of Advisors Member, Business Roundtable Member, The Business Council Member, WSJ CEO Council Special responsibilities None Interests in the Company Ken has no deemed relevant interest in all shares held by Moelis & Company. Moelis & Company presently holds 23,500,000 ordinary shares in the Group. 38 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Kate Pilcher Ciafone Non-Executive Director Appointed 19 August 2020 Simon Kelly Independent Non-Executive Director Appointed 21 April 2021 Experience and expertise Kate is the Chief Operating Officer and a founding member of Moelis & Company. Kate has over 20 years’ experience as a banker and operating executive in investment banking. She commenced her career with UBS before joining Moelis & Company in 2007. Kate holds a B.S. in Commerce with distinction from the McIntire School of Commerce at the University of Virginia. Other directorships and appointments None Special responsibilities Member of the Nomination and Remuneration Committee (appointed August 2021) Interests in the Company None Experience and expertise Simon has over 30 years’ experience in strategic, financial and general management in Australian listed and unlisted consumer businesses. He is Chief Executive Officer of technology start-up NoahFace and has previously held C-suite level roles at Ardent Leisure, Virgin Australia, Nine Entertainment Co., Aristocrat Leisure and Goodman Fielder. Simon holds a Bachelor of Economics and Accounting with Honours, is a Member of Chartered Accountants Australia & New Zealand and Fellow of the Institute of Chartered Accountants in England and Wales. Other directorships and appointments Non-Executive Director of Altium Limited (resigned 18 September 2023) Special responsibilities Chair of the Audit and Risk Committee (appointed April 2021) Interests in the Company Shares: 95,161 Nikki Warburton Independent Non-Executive Director Appointed 23 December 2022 Julian Biggins Executive Director and Joint Chief Executive Officer Appointed 2 February 2017 Experience and expertise Nikki has 30 years’ experience as a senior marketing executive and a board director in automotive, sport, and media sectors. She is on the Board of Directors for Greater Western Sydney Giants Football Club, Car Expert and Cloudwerx, and is a Mentor for The Marketing Academy. Other directorships and appointments Non-Executive Director of Greater Western Sydney Giants Football Club. Non-Executive Director of Car Expert Non-Executive Director of Cloudwerx Experience and expertise Julian was appointed Joint Chief Executive Officer in February 2020 and was one of the founders of the company in 2009. He has 20 years’ of investment banking experience in the real estate sector including senior roles within J.P. Morgan’s Investment Bank and UBS’ Equities Research division. He holds a Bachelor of Business (Real Estate) and a Bachelor of Business (Banking and Finance) from the University of South Australia. Other directorships and appointments Director of MA Foundation (appointed June 2023) Special responsibilities None Interests in the Company Shares: 10,000 Special responsibilities None Interests in the Company Shares: Julian holds a beneficial equity interest in 5,328,170 shares as a result of his holding in the Existing Staff Trusts. Restricted and Loan Funded Shares: 1,618,703 39 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Company secretaries’ qualifications and experience Janna Robertson Joint Company Secretary Appointed September 2019 Janna has over 25 years’ experience in financial services, business operations and transformation. Prior to joining the Group she was a partner at Deloitte. Janna holds a Bachelor of Business from the University of Technology Sydney, is a Member of the Institute of Chartered Accountants in Australia and New Zealand and is a graduate of the Australian Institute of Company Directors. Rebecca Ong Joint Company Secretary Appointed February 2020 Rebecca has over 15 years’ experience as a lawyer in the financial services industry, and prior to joining the Group was Regional Counsel at UBS, advising its Asset Management business across Asia Pacific. Rebecca holds a Bachelor of Commerce (Finance)/Bachelor of Laws from the University of New South Wales. Christopher Wyke Executive Director and Joint Chief Executive Officer Appointed 2 March 2020 Experience and expertise Chris was appointed Joint Chief Executive Officer in February 2020 and was one of the founders of the company in 2009. He has 20 years’ investment banking experience specialising in restructuring, M&A, equity and debt capital markets transactions. Chris has worked at J.P. Morgan and UBS in London, Singapore and Sydney. He holds a Bachelor of Economics with Honours from University College London. Other directorships and appointments Director of MA Foundation (appointed November 2017, resigned June 2023) Special responsibilities None Interests in the Company Shares: Chris holds a beneficial equity interest in 5,028,170 shares as a result of his holding in the Existing Staff Trusts. As a result of Chris’ ownership of the Trustee of one of the Existing Staff Trusts, Chris has deemed relevant interest in 14,850,000 shares. Restricted and Loan Funded Shares: 1,641,855 Directors’ meetings The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year: Board meeting Audit and Risk Committee Nomination and Remuneration Committee Jeffrey Browne Andrew Pridham Alexandra Goodfellow Simon Kelly Nikki Warburton Kenneth Moelis Kate Pilcher Ciafone Julian Biggins Christopher Wyke A 5 6 5 6 6 2 6 6 6 B 6 6 6 6 6 6 6 6 6 A 7 # 7 8 # # # # # B 8 # 8 8 # # # # # A 4 # 4 # # # 4 # # A = Number of meetings attended. B = Number of meetings held during the time the Director held office during the year. # = Not a member of committee B 4 # 4 # # # 4 # # 40 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Principal activities The Group is a global alternative asset manager specialising in private credit, real estate and hospitality. The Group lends to property, corporate and specialty finance sectors and provides corporate advice. During the year, the Group expanded its Asset Management segment by acquiring Blue Elephant Capital Management LLC, Blue Elephant Partner LLC and Blue Elephant Financing LLC (collectively Blue Elephant), a SEC-regulated specialty credit asset manager based in New York. In the opinion of the Directors, there were no other significant changes to the principal activities of the Group during the financial year under review that are not otherwise disclosed in this report. Results The Financial Report and results for the years ended 31 December 2023 and 31 December 2022 have been prepared in accordance with Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS). Total comprehensive income attributable to ordinary equity holders of the Group for the year ended 31 December 2023 was $19.0 million (2022: $45.8 million) and the profit after tax to ordinary equity holders of the Group for the year ended 31 December 2023 was $28.5 million (2022: $44.9 million). Dividends Subsequent to the year ended 31 December 2023, the Directors have resolved to pay a final dividend of 14 cents per share, fully franked, for the year ended 31 December 2023. The dividend is payable on 20 March 2024. On 20 September 2023, the Company paid an interim dividend of $10.6 million (6.0 cents per share), fully franked, for the financial year ended 31 December 2023. On 22 March 2023, the Company paid a final dividend of $24.3 million (14.0 cents per share), fully franked, for the financial year ended 31 December 2022. State of affairs There were no other significant changes in the state of affairs of the Group that occurred during the financial year under review that are not otherwise disclosed in this report. Operating and Financial Review Please refer to the Year in review section of this Annual Report for the following in respect of the Group: • a review of operations during the year and the results of those operations; • likely developments in the operations in future financial years and the expected results of those operations; • comments on the financial position; • comments on business strategies and prospects for future financial years; and • summary of material risks the Group faces in achieving its financial objectives, such as cyber risk, regulatory change, investment risk, volatility in levels of business activity, treasury risk and debt management and operational risk. Non-IFRS Underlying Results The Group also utilises non-IFRS “Underlying” financial information in its assessment and presentation of the Group’s performance. In particular, the Group references Underlying revenue, Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), Underlying Earnings Per Share (EPS), Underlying Net Profit After Tax (NPAT), and Underlying Return on Equity (ROE). Underlying EBITDA and Underlying NPAT achieved for the year ended 31 December 2023 was $81.6 million (2022: $106.7 million) and $41.6 million (2022: $61.4 million) respectively. The Directors place great importance and value on the IFRS measures. As such, the Directors believe that, when read in conjunction with the IFRS measures, the Underlying measures are useful to the reader as: • The Underlying measures reveal the underlying run rate business economics of the Group; • The Underlying measures are used by management to allocate resources and make financial, strategic and operating decisions. Further, all budgeting and forecasting is based on Underlying measures. This provides insight into management decision making; and • Unless otherwise disclosed, the Underlying adjustments have been consistently applied in all reporting periods, regardless of their impact on the Underlying result. 40 41 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023The Underlying financial information is not prepared in accordance with Australian Accounting Standards and IFRS and is not audited. Adjustments to the IFRS information align with the principles by which the Group views and manages itself internally and consist of both differences in classification and differences in measurement. Differences in classification arise because the Group chooses to classify some IFRS measures in a different manner to that prescribed by IFRS. Differences in measurement principally arise where the Group prefers to use non-IFRS measures to better: • Align with when management has greater certainty of timing of cash flows; • Regulate the variability in the value of key strategic assets; and • Normalise for the impacts of one-off transaction costs. Please refer to note 3 in the Financial Report for a detailed reconciliation between the IFRS and Underlying measures. Likely developments The Group continues to pursue its strategy of focusing on its core operations. In particular, the Group will continue to market its managed funds and launch new managed funds with the aim of growing assets under management. Events subsequent to reporting date There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. Environmental regulation Please refer to the Sustainability Report for details of the Group’s Environmental, Social, and Governance (ESG) framework. The Group has policies and procedures in place, to identify obligations and notify material breaches, where operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory. The Directors have determined that there has not been any material breach of these obligations during the financial year. Non-audit services The Group Audit and Risk Committee has reviewed the details of the amounts paid or payable for non-audit services provided to the Group during the year ended 31 December 2023 by the Company’s auditor, KPMG. The Directors are satisfied that the provision of non-audit services during the year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The Directors are of the opinion that the services as disclosed in note 38 to the financial statements do not compromise the external auditor’s independence, for the following reasons: • all non-audit services were reviewed and approved in accordance with the Auditor Independence Policy, which outlines the approval process that must occur for non-audit services. • none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as advocate for the Group or jointly sharing economic risks and rewards. Indemnification and insurance of Directors’, officers and auditors During the year, the Group paid a premium in respect of a contract insuring the Directors and officers of the Group against liabilities and legal expenses incurred as a result of carrying out their duties as a Director or officer. The Directors have not included details of the nature of the liabilities covered or the amount of premium paid in respect of this insurance, as such disclosure is prohibited under the terms of the contract. The Group has agreed to indemnify all current and former Directors, company secretaries and certain officers of the Group and its controlled entities against all liabilities to persons (other than the Group or a related body corporate) which arise out of the performance of their normal duties as a Director, company secretary or officer to the extent permitted by law and unless the liability relates to conduct involving wilful misconduct, bad faith or conduct known to be in breach of law. This indemnity extends in the same fashion to individuals who serve at the specific direction or request of the Group in an equivalent position in certain investment portfolio vehicles. 42 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Group or any related body corporate against a liability incurred as such an officer or auditor. Proceedings on behalf of the Company No person has applied to the Court under s.237 of the Act 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 The amounts in the Directors’ Report and the Financial Report have been rounded to the nearest thousand dollars, unless otherwise stated, under the option available to the Group under Australian Securities and Investments Commission (ASIC) Corporations Instrument 2016/191. Auditor’s independence declaration The auditor’s independence declaration is included at the end of this report and forms part of the Directors’ Report for the financial year ended 31 December 2023. Authorisation Signed in accordance with a resolution of the Directors of MA Financial Group Limited: Jeffrey Browne Independent Chair and Non-Executive Director Julian Biggins Director and Joint Chief Executive Officer Sydney 22 February 2024 Sydney 22 February 2024 42 43 Directors’ report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Letter from the Chair of the Nomination and Remuneration Committee Dear Shareholders, As Chair of the Nomination and Remuneration Committee, I am pleased to present the Remuneration report for the year ended 31 December 2023. Each year, the Board reviews the Group’s executive remuneration practices to ensure they remain appropriately aligned to our short-term and long-term strategic objectives and are appropriate in the context of the wider market. We are focused on ensuring that MA Financial attracts, retains and motivates high calibre executives who can be effective in balancing growth and risk management. Remuneration Philosophy and Framework Our remuneration philosophy remains consistent with prior years, aiming to fairly reward and retain the people who drive our achievement of our long- term objectives. The remuneration structure has been designed to include significant deferred and share based components which vest progressively over five years. The framework and the choice of LTI instrument (Loan Funded Shares) are intentional in seeking incentivising sustainable long-term growth and business building. As part of its periodic review of the remuneration structure and in response to stakeholder feedback, the Board has amended the LTI terms. The LTI Performance Period has changed from five years to four years and now the grant of the LTI aligns more closely with the start of the Performance Period. Previously, the Performance Period began approximately 15 months before the LTI equity grant, creating a misalignment between the performance measure and the associated share price appreciation. Four years continues to be at the longer end of peer comparable terms for LTI and meets the Board’s objectives of Executive incentivisation to deliver sustained long-term growth. The Performance Condition which applies is unchanged. More detail is set out in section 2.3. Remuneration Outcomes FY23 was another year of investment and growth at MA Financial and has delivered strong earnings quality with growth in recurring revenues. Following the FY22 result, which included significant one-off performance fees, it was pleasing to see that in FY23 recurring revenue increased by 23% and Asset Management delivered record gross funds inflows (up 27% on FY22). In FY23 significant investment in future growth occurred through the MA Money investment, Singapore office opening, launch of new asset management products, acquisition of Blue Elephant and the investment in Middle. With challenged market conditions, not all parts of the business enjoyed equal growth. Corporate Advisory & Equities experienced a softer M&A market and subdued client demand for capital raisings. Having set challenging targets for FY23, the EPS and ROE objectives applicable to STI have not been met which is reflected in the STI award. Whilst several of the factors impacting the result were macro and market condition related and therefore outside of the management team’s control, it was pleasing to see the efforts taken to respond to market conditions and actively manage the cost base. Where the corporate objectives have not been met, the Board determines an appropriate award for that KPI measure between 0–100%. In determining an award for FY23 Corporate objectives, the Board had regard to the degree of stretch in the target which was set, the quality and composition of revenue growth and of the earnings delivered, the impact of strategic and long-term investments on the reported result, the effectiveness of cost and operational initiatives management implemented, the wider economic context within which the result was delivered and performance against market consensus. On this assessment, the Board determined to award 40% of each of the Corporate Objectives. This represents an award to the Joint CEOs which is 69% of the FY22 STI award. The Group is making significant investment (as set out above) and has set clear medium term targets which reflect the benefit of these investments being realised in the medium term. The Group is looking to deliver sustained growth and the Board continues to exercise judgement in balancing STI and LTI awards in aligning Executives to delivering long-term value creation. 44 MA Financial Group | 2023 Annual ReportLetter from the Chair of the Nomination and Remuneration Committee (continued) Director Remuneration As indicated in our FY22 Remuneration report, in late FY22 we reviewed the appropriateness of Director remuneration and determined that whilst Chair and Director base fees were appropriate, the Board committee Chair remuneration for each subcommittee would be increased by $25,000 per annum, reflecting the increased work load carried out at the committee level. This is detailed in section 7 of the Remuneration report. People and Culture MA Financial’s vision is to be co-creators of long-term value for our clients and for the benefit of shareholders. A combination of insight, attitude and integrity, together with clarity of purpose and a focus on what matters is MA Financial’s unique culture formula. The MA Financial team is highly regarded and driven to succeed. Our responsibility to all employees is to maintain a great culture and nurture the right balance of opportunity, talent development and competitive compensation, to help each person thrive. Concluding Remarks On behalf of our Board, we thank our shareholders for your investment in MA Financial. We also wish to acknowledge the continued innovation and contribution of all our employees. The Board continues to place a high priority on having meaningful dialogue with our shareholders and other stakeholders regarding our remuneration practices to understand their perspectives and ensure we remain abreast of local and global market best practices. Alexandra Goodfellow Chair of the Nomination and Remuneration Committee 44 45 MA Financial Group | 2023 Annual ReportRemuneration report 1. Remuneration report overview The Directors of MA Financial are pleased to present the Remuneration report (Report) for the Group for the year ended 31 December 2023. The Report forms part of the Directors’ Report and has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth) (the Act). The Report details the remuneration arrangements for the Group’s key management personnel (KMP) including: KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of the Group. • • the Non-Executive Directors (NEDs) the Chief Executive Officers (Joint CEOs) and senior executives (collectively the Executive). The table below outlines the KMP of the Group and their movements during the year ended 31 December 2023 (FY23). Name Position Term as KMP Non-Executive KMP Jeffrey Browne Independent Non-Executive Chair Full financial year Alexandra Goodfellow Independent Non-Executive Director Full financial year Simon Kelly Independent Non-Executive Director Full financial year Nikki Warburton Independent Non-Executive Director Full financial year Kenneth Moelis Non-Executive Director Kate Pilcher Ciafone Non-Executive Director Full financial year Full financial year Executive KMP Julian Biggins Executive Director and Joint CEO Full financial year Christopher Wyke Executive Director and Joint CEO Full financial year Andrew Pridham Group Vice Chair Janna Robertson Chief Operating Officer Full financial year Full financial year Graham Lello Giles Boddy Chief Financial Officer Resigned 6 March 2023 Chief Financial Officer Appointed 6 March 2023 46 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20232. How remuneration is governed Joint CEO Structure 2.1 MA Financial established a Joint CEO structure in March 2020 following the appointments of Julian Biggins and Christopher Wyke as Joint CEOs. The Board considers the Joint CEO structure to be appropriate for MA Financial in this current phase of its growth due to the following: • Christopher Wyke and Julian Biggins are founding members of the Group. The Group operates a breadth of businesses across three divisions (Asset Management, Lending & Technology, Corporate Advisory & Equities), has operations across Australia, Singapore, USA, China and Hong Kong, over 600 employees, and has $9.2 billion of assets under management. We are an active manager of alternative assets. Our investment expertise spans Real Estate, Private Credit, Equities and Private Equity investments including Venture Capital • Each CEO brings specific skills and capabilities to allow them to focus on managing and growing different parts of our diversified businesses, which we believe facilitate stronger and more sustainable growth • Julian is responsible for the Group’s finance, investor relations and communications functions, and leading the strategy and scaling of all our Real Estate investment activities and operating businesses associated with real estate. He also leads our Equities and Capital Markets capabilities • Christopher has responsibility for our Advisory, Lending & Technology and Credit investing activities. He also takes responsibility for our risk, legal and compliance functions • The Joint CEOs share equal responsibility for Asset Management and distribution capability and the Group’s culture, people and strategy, including acquisitions • Together, the Joint CEOs are also jointly responsible for determining and driving the growth ambition of the Group. The Board is responsible for periodically assessing the appropriateness of the Joint CEO structure to ensure its effectiveness by assessing the joint performance of the CEOs in delivering strong shareholder outcomes. Remuneration decision-making 2.2 The Board established the Nomination and Remuneration Committee (the Committee), which operates under the delegated authority of the Board. The Committee has primary carriage of the Group’s remuneration strategy, framework and principles. The Board, Committee and the Executive work together to apply the remuneration governance framework. The remuneration governance framework is designed to support our purpose, principles, strategy, and long- term approach to creating sustainable value for our shareholders, clients and the community. The members of the Committee are listed below. Members were in office for the entire year, unless otherwise stated. • Alexandra Goodfellow – Independent Non- Executive Committee Chair • Jeffrey Browne – Independent Non-Executive Committee Member • Kate Pilcher Ciafone – Non-Independent Non- Executive Committee Member. Compensation practices were restructured in FY21. The approach was refined in FY22 and in response to stakeholder feedback, we have made further refinements to short-term incentives (STI) and long-term incentives (LTI) in FY23 to ensure remuneration policies and practices remain appropriate and competitive. The Committee has oversight of remuneration practices and, where required, will access specialist external advice about remuneration structure and levels and is utilised periodically to support the remuneration decision-making process. The Committee Charter can be found on the Corporate Governance page of the Group’s website at www.mafinancial.com. 2.3 Remuneration principles and links to business strategy and performance The Board recognises the important role people play in achieving the Group’s long-term objectives and as a key source of competitive advantage. To grow and be successful, the Group must be able to attract, develop, motivate and retain the highest calibre individuals. The Group’s purpose is to deliver sustainable, long-term value to our clients. The key objectives underpinning our purpose are embedded in the Group’s remuneration principles, as summarised in the following diagram. 47 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023 The Board exercises significant oversight and judgement to ensure the appropriate alignment of employees, shareholders and client outcomes. In setting remuneration, the Board seeks to strike a balance between having a transparent, aligned and structured remuneration framework, whilst retaining some discretion and flexibility to alter remuneration arrangements to deliver fair outcomes. As the Executives of the Group continue to build and scale the business, we seek to strike a balance between investing in the future and appropriate reward for the progress achieved to date. The Board recognises the need for a human judgement overlay in determining remuneration outcomes as rigid formulaic approaches can deliver unintended outcomes. OUR CORE BELIEFS • Our purpose is to create sustainable, long-term value for clients • We believe in unlimited potential. It is an unwavering belief in the potential of our people and our clients • Our four drivers motivate our decisions and actions: – Character Matters – Better Way – Edge has a formula – Co-creators of value • We believe that to consistently deliver, we must be active and expert managers of risk REMUNERATION PRINCIPLES Enable the Group to attract, retain and motivate a high performing Executive cohort Align Executives to deliver both short and long-term results and sustainable value creation Alignment to shareholder objectives through an ‘owner’s mentality’ Reinforce active risk management and the upholding of the Group’s values Encourage and drive growth by linking pay and performance and rewarding outperformance Fixed Annual Remuneration (FAR) e s o p r u P e r u t c u r t S h c a o r p p A Set at a comparatively low level relative to industry and a smaller proportion of the total remuneration mix. Base salary, compulsory superannuation and non-monetary benefits. Reviewed periodically considering various factors including our remuneration policy, role responsibility and complexity, market conditions and relevant external remuneration benchmarks. EXECUTIVE KMP REMUNERATION FRAMEWORK At-risk Short-term Incentive Long-term Incentive Rewards for achieving annual objectives that drives execution of our strategy and creates sustainable shareholder wealth, in a manner consistent with our values, drivers and risk culture. Rewards for creating sustainable long- term shareholder value and reinforcing an ownership mindset. • 65% paid as cash • 35% deferred into shares, as follows: – One third for 1 year – One third for 2 years – One third for 3 years. Annual grant of loan funded shares funded by an interest-free limited recourse loan, with vesting subject to a 4-year performance period. Quantum: • Target opportunity range of 275%– 325% of FAR Quantum: • Target opportunity range of 125%– for Joint CEOs • Maximum opportunity of 325% of FAR for Joint CEOs • No maximum opportunity for other KMP who may earn above target range, based on Board discretion. 175% of FAR for Joint CEOs • No maximum opportunity for any KMP (including Joint CEOs) who may earn above target range for outperformance, based on Board discretion. Performance Assessment: • 50% Corporate objectives (Underlying EPS and ROE) • 50% Personal objectives (role-specific). Performance Assessment: • Compound Annual Growth Rate (CAGR) EPS growth on a sliding scale 48 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023To ensure that the remuneration framework remains fit- for-purpose as the Group continues to grow, the Board has continued to refine and enhance the remuneration framework during FY23. After a review which included consultation with stakeholders, the Board has made certain amendments to the remuneration structure introduced in for FY21. The enhancements made relate to LTI are as follows: • The commencement of the Performance Period has been aligned more closely with the grant of the LTI instrument (previously, the Performance Period began approximately 15 months before the LTI equity grant, creating a mis-alignment between the performance measure and the associated share price) • As a consequence of the change, the LTI Performance Period is now four years (previously five years), which continues to be at the longer end of peer comparables and meets the objectives of Executives being incentivised to deliver sustained long-term growth • The performance condition which applies is unchanged. The nature of the changes to LTI mean that there is no interruption to the Executives receiving an annual award of LTI. The elements of the Executive remuneration framework are summarised in the diagram below and detailed in the subsequent sections. Type Structure Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Fixed Annual Remuneration (FAR) Short-term Incentive (at risk) (STI) Long-term Incentive (at risk) (LTI) Paid monthly Base salary, compulsory superannuation and non-monetary benefits At risk, with 65% paid as cash, with 35% deferred into shares vesting over 3 years At risk, with annual grant of loan funded shares funded by an interest-free, limited recourse loan (subject to a 4-year vesting period) Opportunity range is set as a % of base salary (March) Share component deferred with one third in Year 3, one third in Year 4 and one third in Year 5 Subject to a 4-year performance period measured against Underlying EPS CAGR between 7.5% and 12% per annum Legends: Cash payment Equity/Instrument grant Share vesting The above diagram illustrates the phasing of remuneration opportunity. The remuneration structure has been designed to include significant deferred and share based components. This, combined with the LTI instrument (which awards for dividends and share price growth only) aligns the Executive to deliver shareholder outcomes and encourages measured and responsible business building and growth. 49 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023This is illustrated further in the following tables that highlight total remuneration deferral over a five year period. The cumulative award shows the opportunity phasing from 22% in year 1 to 100% in year 5, with a material LTI weighting. Timing of FAR, STI and LTI over 5 years Fixed Annual Remuneration Short-term Incentive Long-term Incentive Timing of FY23 remuneration opportunity1 Total Cumulative Total Y1 100% - - FY22 22% 22% 1. Based on FY23 Joint CEO remuneration award Remuneration mix JOINT CEOs Y2 - 65% - FY23 26% 59% KMP Y3 - 12% - FY24 5% 53% Y4 - 12% - FY25 5% 58% Y5 - 11% 100% FY26 42% 100% 22% 31% 37% 78% At risk 41% 59% At risk 41% 28% Fixed STI LTI Fixed STI LTI The graph above shows the remuneration mix for the Joint CEOs and KMP based on the remuneration outcomes for FY23 as set out in Table 3, 5 and 8. The remuneration mix shows graphically the Board’s focus on maintaining higher at risk components of remuneration, with 59–78% of KMP remuneration opportunity at risk. The approach to each of the components is described below in sections 3.1 to 3.3. 50 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20233. 3.1 Executive remuneration policy and practices Fixed Annual Remuneration (FAR) FAR consists of base salary, compulsory superannuation and non-monetary benefits. FAR levels for the Executive are reviewed periodically by the Committee on behalf of the Board taking into consideration several factors including: • • the scope and complexity of the role, including role accountabilities the criticality of the role to successful execution of the business strategy • skills and experience of the individual • period of service 3.2 Short-term Incentive (STI) plan • scarcity of talent • market pay levels for comparable roles. MA Financial has and will continue to position FAR at relatively low levels compared with total compensation and intends to review FAR based on the Group achieving growth milestones, rather than on an annual basis. We believe that higher at-risk remuneration supports our philosophy of rewarding for long-term performance. There were no increases to FAR applied to KMP in FY23. What is the objective of the STI plan? The purpose of the STI plan is to recognise the Executive for achieving a combination of Board- approved Corporate and Personal objectives that support the execution of the Group’s strategy and create sustainable shareholder value, in a manner consistent with organisational values and risk culture. How is it paid? STI awards for the Executive are paid part in cash (65%) with a portion deferred in shares (35%) according to the extent of achievement of the applicable performance measures. What is the Performance Period? STI awards are assessed over a 12-month Performance Period aligned with the Group’s financial year (1 January 2023 to 31 December 2023). How much can the Executive earn? In FY23, the Joint CEOs had a target STI opportunity of $1,800,000 and a maximum opportunity of $1,950,000. The Vice Chair has no target attached to his KPIs, as certain KPIs (e.g. revenue generation) are not subject to an upper limit. STI award outcomes depend on the extent of achievement of the applicable performance measure. How is performance assessed and what are the performance measures? Performance measures include Corporate and Personal objectives (50% each) that align with the Group’s strategy and core values. The Board, with the assistance of the Committee, sets and assesses the measures applicable to the Joint CEOs. The outcome of the assessment determines the STI amount payable to the Joint CEOs. The Joint CEOs set and assess the individual measures applicable to the KMP. The Committee reviews the outcome of the assessment. The Corporate objectives applicable to the Joint CEOs for FY23, their weightings and link to strategy are listed below. Corporate objective Underlying EPS ROE Weighting (% of STI) Rationale why chosen and link to strategy To incentivise profitability growth as a key driver of sustainable shareholder returns Delivering long-term competitive investment returns for our investors is core to our offering 25% 25% 50% 51 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Is there a deferral mechanism and why? What happens to STI awards when an Executive ceases employment? How are dividends treated during the deferral period? Is there a malus/ clawback provision? Why does the Board consider Board discretion to be appropriate? The remaining 50% of the STI opportunity relates to performance against Personal objectives that are specific to the role and responsibilities of the Executive in the areas they control and influence. Personal objectives are ultimately linked to the overall strategy and success measures of the Group. Refer to section 4.2 for further detail of the Corporate and Personal objectives of the Joint CEOs for FY23, including commentary on performance assessment and outcomes. Yes. 35% of any STI award is deferred into ordinary shares in the Company. The shares vest in equal thirds on the first, second and third anniversaries of the grant date, respectively, subject to the recipient’s continued employment. The number of shares to be allocated is equal to 35% of the STI award divided by the face value of Company shares, calculated as the 5 day volume-weighted average price (VWAP) up to and including 7 March 2024. The deferral mechanism ensures that the impact of decisions and performance in any one year are sustained over the medium–long-term, acts as a retention mechanism, and provides the Board an opportunity to reinforce accountability through remuneration reductions if necessary. Unless the Board determines otherwise or the Executive is a Good Leaver (see below), if the Executive ceases to be an employee of the Group during the deferral period, their deferred STI will be forfeited. Subject to the Board’s discretion to determine otherwise and any applicable laws, an Executive who is a Good Leaver will be entitled to retain a pro rata portion of their deferred STI based on the proportion of the deferral period that has elapsed as at the date on which employment ceases. Any retained deferred STI will continue to be held subject to the rules governing the grant of the deferred STI component and will remain subject to restriction until the end of the relevant deferral period. The balance of the deferred STI will be forfeited. Good Leaver means a participant who ceases employment due to retirement (with agreement of the Board), resignation (with agreement of the Board), ill-health, total and permanent disablement, redundancy, or death, or the sale by the Company of the business in which the participant is employed such that it is no longer a member of the Group, as determined by the Board, or such other circumstances as the Board may at any time determine. Dividends will be paid to holders of the shares during the deferral period. Yes. Where, in the opinion of the Board, a participant has acted fraudulently, dishonestly, made a material misstatement, has engaged in serious misconduct, gross negligence, is responsible for material financial losses, has contributed to material reputational damage, is in material breach of duties, has commenced employment with a direct competitor of the Company, the Board may, deem all or some of any deferred STI to have been forfeited, adjust conditions applicable to the STI, or adjust the participant’s incentive entitlements in respect of any future year. At all times, the Board may exercise discretion on STI awards. The Board acknowledges that selected performance measures and formulaic calculations may not provide the right remuneration outcome in every situation, leading to occasions where the incentive does not reflect true performance and overall contributions of the Executive. It is at this point that discretion becomes necessary, such that the Board can adjust outcomes up or down as warranted. Discretion will only be applied in a manner that aligns the experience of both the Company and shareholders. 52 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20233.3 Long-term Incentive (LTI) plan As discussed in section 2.3 above, we have restructured the LTI to align the Performance Period with the issuance date and as a consequence the Performance Period reduces from 5 to 4 years. The period between the issuance date and time of vesting remains the same as prior grants, as are the performance conditions. The below describes the LTI award which will be issued in March 2024. Why does the Board consider a LTI plan is appropriate? The key objectives of the LTI plan is to: • Align Executive remuneration with the creation of sustainable long-term shareholder value • Reward Executives for share price appreciation and earnings performance over a four- year performance period • Attract and retain key Executives • Encourage an ‘owner’s mentality’ • Provide competitive remuneration aligned with general market practice of ASX-listed entities. Who is eligible? The Executive and other senior executives. How is the award delivered? The LTI award is in the form of Loan Funded Shares. A Loan Funded Share is a share whose acquisition has been fully or partly funded by a limited recourse loan from the Company. The loan is provided for the sole purpose of participants acquiring shares in the Company. Loan Funded Shares granted to eligible participants under the LTI plan carry the same rights and entitlements as other shares on issue, including voting and dividends. The loan is ‘interest free’ in that there is no annual interest charge to the participant on the loan. However, the notional value of this interest is taken into account in the overall structure of the programme. The Loan Funded Shares are subject to risk of forfeiture during the vesting/Performance Periods and while the loan remains outstanding. How often are awards made? LTI awards are granted on an annual basis to eligible participants. The grant date is in March each year. The Board has absolute discretion to determine the frequency and timing of grants under the LTI plan. How much can the Executive earn? The CEO LTI award opportunity has been determined at 167% of fixed remuneration (the maximum award is 175%). What is the quantum of the award and what allocation methodology is used? The number of Loan Funded Shares granted to an Executive is determined by dividing the Executive’s LTI opportunity by the fair value of the Company’s shares. The fair value is calculated as the 5-day VWAP of Company shares up to and including the grant date, multiplied by the binomial pricing model valuation factor. The model inputs for Loan Funded Shares granted during the year included: • Share price at grant • Binomial factor of 30% • LTI award What is the performance period? What are the performance conditions? 4-year performance period of 1 January 2024 to 31 December 2027. Of the total number of Loan Funded Shares granted to an Executive, 100% will be subject to a Performance Condition: the performance condition for the LTI award is based on a CAGR of Underlying EPS. The award is on a sliding scale of 50%–100% award with CAGR Underlying EPS growth of 7.5% to 12%. 53 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Why were the performance conditions selected? The performance conditions were selected by the Board in consideration of the Group’s strategic objectives. Specifically: • Use of Underlying EPS aligns the Executive to drive profitable growth objectives. Underlying EPS growth aligns the Executive to the strategic objectives to build MA Financial as a diversified financial services group in a manner which is measured and can be sustained. This determines the size of the LTI award • Use of the Loan Funded Share instrument aligns the Executive to growth in the share price, because the share price appreciation from issue to vest determines the value of the LTI award • Use of a sliding scale protects against a binary LTI award outcome; and • The LTI is 100% subject to a performance hurdle, with vesting after 4 years. The Board will review the performance conditions annually to determine the appropriate hurdles based on the Group’s strategy and prevailing market practice and conditions. What is Underlying CAGR and how is it measured? The definition of average growth in Underlying CAGR is set out as follows: Compound Annual Growth Rate (CAGR) % =( 27EPS )( 1) – 1 23EPS N Where: 23EPS = Underlying EPS as at 31/12/23 27EPS = Underlying EPS as at 31/12/27 N = number of years (being 4 years in the plan) The level of vesting of this component will be determined according to the following schedule: Underlying CAGR (per annum) Percentage of Loan Funded Shares that vest Less than 7.5% 7.5% to 12% Nil Pro rata between 50% and 100% vest Greater than or equal to 12% 100% vest What are the restrictions applying to Loan Funded Shares? Loan Funded Shares may not be transferred, encumbered, disposed of or otherwise dealt with while they remain subject to the above performance conditions, unless permitted by the LTI plan rules or determined by the Board. Once Loan Funded Shares vest, subject to the Company’s Trading Policy and applicable law, the Executive will generally be able to sell them subject to repaying the loan applicable to those shares (or making arrangements acceptable to the Board regarding repaying of the loan). How are dividends treated during the performance period? Any dividends paid on the shares while the shares are restricted are applied (on a notional after-tax basis) towards repaying the loan. The balance of the dividend is paid directly to the Executives to fund their tax liability on the dividends received. 54 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023What happens to Loan Funded Shares when an Executive ceases employment? What happens in the event of a change of control? Is there a malus/ clawback provision? Unless the Board determines otherwise or the Executive is a Good Leaver (see below), if the Executive ceases to be an employee of the Group during the performance period, their unvested Loan Funded Shares will be forfeited. Subject to the Board’s discretion to determine otherwise and any applicable laws, an Executive who is a Good Leaver will be entitled to retain a pro rata number of their unvested Loan Funded Shares based on the proportion of the performance period that has elapsed as at the date on which employment ceases. Any retained unvested LTI will continue to be held subject to LTI plan rules and relevant performance conditions, and generally the Executive will have six months to settle the loan following vesting. The balance of unvested Loan Funded Shares will be forfeited in satisfaction of the portion of the loan to which the forfeited Loan Funded Shares relate. Good Leaver means a participant who ceases employment due to retirement (with agreement of the Board), resignation (with agreement of the Board), ill-health, total and permanent disablement, redundancy, or death, or the sale by the Company of the business in which the participant is employed such that it is no longer a member of the Group, as determined by the Board, or such other circumstances as the Board may at any time determine. The Board has discretion to make a determination to award, partially award or adjust LTI in the event of a change of control. Yes. Where, in the opinion of the Board, a participant has acted fraudulently, dishonestly, made a material misstatement, has engaged in serious misconduct, gross negligence, is responsible for material financial losses, has contributed to material reputational damage, has breached any term of the Loan Agreement, is in material breach of duties, has commenced employment with a direct competitor of the Group, the Board may, deem all or some of any unvested Loan Funded Shares as forfeited, adjust conditions applicable to the Loan Funded Shares, or adjust the participant’s incentive entitlements in respect of any future year. Why does the Board consider Board discretion to be appropriate? At all times, the Board may exercise discretion on vesting of LTI awards. The Board acknowledges that selected performance measures and formulaic calculations may not provide the right remuneration outcome in every situation, leading to occasions where the incentive does not reflect the true performance and overall contributions of the executive. It is at this point that discretion becomes necessary, such that the Board can adjust outcomes up or down as warranted. Discretion will only be applied in a manner that aligns the experience of both the Company and shareholders. 55 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20234. 4.1 Executive remuneration outcomes Company performance FY23 financial performance The graphs below provide a summary of the Group’s financial performance over the past five financial years (including FY23) in accordance with the requirements of the Act. As remuneration outcomes are measured with reference to Underlying and not statutory results, only the Underlying results are presented in this section 4 of the Remuneration report. A reconciliation of Underlying results to statutory results is set out in note 3 of the Financial Report. Underlying revenue ($m) Underlying Revenue ($’m) Underlying EBITDA ($m) Underlying EBITDA ($m) 155.6 157.1 214.8 301.8 269.9 60.8 57.5 70.9 106.7 81.6 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 Underlying EPS (cents) Underlying EPS (cents) Assets under Management ($b) Assets under Management ($b) 25.3 23.6 38.3 29.6 26.0 9.2 7.8 6.9 4.9 5.4 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 Share price ($)* Share price ($)* Dividend (cents) Dividend (cents) 8.95 20.0 20.0 17.0 5.10 4.75 4.54 5.52* 10.0 10.0 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 * Share price at 31 December 2023 56 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023The Board provides the following commentary regarding the Group’s Underlying financial performance for FY23. Further commentary on performance is set out in the Year in Review section. We note that in setting the STI targets for FY23: • EPS and ROE targets were challenging, particularly in the context of deteriorating market conditions in some businesses; and • A record FY22 level of performance fees was noted as unlikely to recur in FY23. FY23 was another year of growth for the Group and in particular delivered strong earnings quality with growth in recurring revenues. We call out the following key highlights in the FY23 result: • Recurring revenue increased by 23%, with Asset Management delivering record gross funds inflows (up 27% on FY22) • Sound momentum in volume growth in our residential mortgage sector businesses, MA Money and Finsure • Significant investment in future growth through the MA Money investment, Singapore office opening, launch of new asset management products, acquisition of a US private credit platform and the investment in Middle • Resulting in Underlying EBITDA of $81.6m and Underlying EPS of 26 cps • The impact of strategic investments on EPS was 5 cents per share • The share price has increased 98 cents (or 22%) in FY23. Not all parts of the business have enjoyed equal growth, with Corporate Advisory & Equities experiencing challenging market conditions and subdued client demand for capital raisings. Having set challenging Corporate objectives for FY23, without all parts of the business contributing to plan, the Corporate objectives applicable to STI have not been met and this has been reflected in the total STI award. However, our strategy of diversification has enabled the business to continue to grow and invest where opportunities present. While the Group is making significant investment (as set out above) and has set clear medium-term targets which reflect the benefit of these investments being realised in the medium- term. The Group seeks to deliver sustained growth and continues to exercise judgement in balancing STI and LTI awards to align Executives to delivering sustainable growth which leads to long-term value creation. Our LTI instrument provides strong alignment with our shareholders objectives (to deliver share price growth). This, combined with the significant shareholdings of our Executives provides confidence in this team’s focus on future growth and delivering on the investments we have made. 4.2 STI performance and outcomes In accordance with the methodology set out in section 3 of the Remuneration report, an assessment was undertaken of the performance of each eligible Executive against their FY23 objectives. The FY23 STI objectives for the Joint CEOs, with commentary on achievements, are provided in Table 1. The STI award percentages and payments to Executives are presented in Table 2. The Corporate objectives set for Underlying EPS and Underlying ROE objectives were not met. Where the Corporate objectives have not been met, the Board determines an appropriate award for that KPI measure between 0–100%. In determining an award for FY23 Corporate objectives, the Board had regard to: • The degree of stretch in the target which was set • The quality and composition of revenue growth and of the earnings delivered • The impact of strategic and long-term investments on the reported result and measure • The effectiveness of cost and operational initiatives management • The wider economic context within which the result was delivered • Performance against market consensus On this assessment, the Board determined to award 40% of each of the Corporate objectives in determining STI award for FY23. In relation to Personal objectives, KPI measures were assessed in the usual manner and the summary of outcomes is set out in Table 1 below. 57 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Table 1 – Joint CEOs FY23 performance objectives and outcomes Category Measure Commentary on performance Corporate objectives Shareholder Return Underlying EPS attributable to shareholders. Investment Performance Underlying Return on Equity (ROE) Metrics focused on maintenance of a strong and conservative balance sheet position. Underlying EPS of 26 cps which is below the EPS target which we set at >35 cps. Refer to section 4.2. Underlying ROE (adjusted for strategic investment impacts) of 11% was below the target of 15%. Performance against Corporate objectives 40% Personal objectives Strategic and Business Growth initiatives • Metrics focused on driving the Group’s strategic growth initiatives • Julian Biggins has particular metrics relating to Real Estate, operating real estate and hospitality strategies Overall business delivered record AUM growth, made a strategic acquisition in the US and expanded distribution capability with the opening of a Singapore office. A successful brand refresh and website refresh was also delivered. Introduction of new operating real estate funds in relation to Marinas and launch of a Hotel Accommodation strategy during 2023. • Chris Wyke has particular metrics Reset of Hospitality strategy completed. relating to Lending and Technology and Private Credit strategies Strong private credit investor demand and loan book growth and performance, including the strategic acquisition of Blue Elephant capital, a New York based private credit team. Significant momentum in growing the MA Money mortgage business, with strong volume growth and completion of its first $500m RMBS issuance. Above budget volume growth for Finsure, which was acquired in FY22. ESG related initiatives • Metrics relating to leading the ESG initiatives of the firm, including some delineation of responsibilities between Mr Biggins and Mr Wyke • These include risk culture related measures ESG strategies and initiatives developed and presented to the Board. Progress achieved in the integration of ESG considerations into investment decision making. Emissions measurement and Climate Action Plan were progressed and Asset Management operations made further progress in integrating emissions measurement practices into Real Estate operations. Governance and risk framework is included in metrics relating to “G”. Significant investment in cyber security initiatives to achieve improved security posture and incident response capabilities. This has included significant improvements in the effectiveness of cyber and security awareness training and culture. Progressed risk framework maturity, delivering multi year risk framework roadmap. Leadership, Employee and Culture initiatives • Metrics focusing on strong leadership of the business, assessed against employee belonging and alignment to the Group’s culture and values The refresh of values and drivers in FY23 was an important evolution in our cultural expectations and standards. These have been well received and integrated into daily practice, including hiring, onboarding and performance management. Leadership in culture and integration of new employees, including leading MA Academy lecture series and sponsorship of Emerging Leaders Academy programme. Focus on leading and sponsoring the integration of acquired businesses into MA Financial. Other • Measures relating to investor relations Progress in line with Board set expectations and parameters. • Measures relating to innovation Performance against Personal objectives Substantially met 58 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20235. Executive contracts Table 2 – STI opportunity for Executive KMP in FY23 Target STI opportunity1 STI award % of target STI awarded Julian Biggins Christopher Wyke Andrew Pridham2 Janna Robertson Giles Boddy $1,800,000 $1,800,000 N/A $500,000 $500,000 $1,100,000 $1,100,000 N/A $350,000 $350,000 63% 63% N/A 70% 70% 1. The maximum opportunity for each Joint CEOs is $1,950,000. The Joint CEOs were awarded 56% of the maximum award. There is no maximum opportunity for other KMP. 2. Andrew Pridham requested to forego the FY23 STI and in accordance with his request, no STI in respect of FY23 has been accrued for or will be paid to him. Table 3 – LTI awards for Executive KMP Target LTI opportunity (% of FAR) LTI opportunity granted ($) LTI awarded (% of FAR) Julian Biggins Christopher Wyke Andrew Pridham1 Janna Robertson Giles Boddy 125–175% 125–175% N/A Up to 100% Up to 100% $1,000,000 $1,000,000 N/A $250,000 $500,000 167% 167% N/A 50% 100% 1. At the request of Andrew Pridham, no LTI award will be granted to him in March 2024. The LTI outcomes are calculated in accordance with the methodology outlined in section 3.3 of this report. Any equity granted to the Executive Directors will be presented to shareholders for approval in accordance with the requirements of the Act. Remuneration arrangements for Executives are formalised in employment agreements or service contracts (contracts). The following table outlines the key terms of the contracts with Executives. Table 4 – Comparison of Remuneration to prior year Executive STI Outcome LTI Outcome Awarded Total Remuneration FY22 FY23 % FY22 FY23 % FY22 FY23 % Julian Biggins 1,600,000 1,100,000 (31%) 850,000 1,000,000 18% 3,050,000 2,700,000 (11%) Christopher Wyke 1,600,000 1,100,000 (31%) 850,000 1,000,000 18% 3,050,000 2,700,000 (11%) Andrew Pridham1 900,000 N/A - 500,000 N/A - 2,000,000 600,000 (70%) Janna Robertson 425,000 350,000 (18%) 200,000 250,000 25% 1,125,000 1,100,000 (2%) Giles Boddy N/A 350,000 Graham Lello 375,000 N/A - - N/A 500,000 75,000 N/A - - - 1,350,000 950,000 - - - 1. Andrew Pridham requested to forego the FY23 STI and LTI and in accordance with his request, no STI or LTI has been accrued, paid or granted to him. 59 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Table 5 – Executive key contract provisions Name Term of contract Notice period from the company1 Notice period from the executive Treatment of STI and LTI on cessation Julian Biggins Ongoing 9 months 9 months Christopher Wyke Ongoing 9 months Andrew Pridham Ongoing Janna Robertson Ongoing Giles Boddy Ongoing Graham Lello2 Ongoing 3 months 3 months 3 months 6 months 9 months 3 months 3 months 3 months 6 months Refer to section 3 of the Remuneration report for the treatment of STI and LTI on cessation of employment. Refer to section 3 of the Remuneration report for the treatment of STI and LTI on cessation of employment. 1. The Group may make payment in lieu of notice and must pay statutory entitlements together with superannuation benefits. No notice period or payment in lieu of notice applies if termination was due to serious misconduct. 2. Ceased being a KMP on 6 March 2023. Termination payments During the year, the Group paid Graham Lello termination payments to the sum of AUD 198,764 (FY22: Nil). 6. 6.1 Executive remuneration tables Executive cash value of remuneration realised in FY23 The cash value of remuneration realised by the Executive in FY23 is set out below. This information is considered to be relevant as it provides shareholders with a view of the ‘take home pay’ received by the Executive in FY23 and may differ from the disclosure of statutory remuneration in Table 7. Table 6 – Executive value of remuneration in FY23 Executive Fixed remuneration FY23 Annual STI bonus Fixed remuneration Variable remuneration Salary including superannuation $ Cash component $ Deferred equity1 $ Salary including superannuation % Cash bonus % Deferred equity % Julian Biggins 600,000 715,000 385,000 Christopher Wyke 600,000 715,000 385,000 Andrew Pridham 600,000 N/A N/A Janna Robertson 500,000 227,500 122,500 Giles Boddy 413,010 227,500 122,500 Graham Lello 131,323 - - 35% 35% - 59% 54% 100% 42% 42% - 27% 30% - 23% 23% - 14% 16% - 1. Amounts disclosed represent the accounting value of the award that will vest in three annual and equal instalments commencing 2025 and ending in 2027. The maximum value of the award would be the number of restricted shares at the Company’s share price at the time of vesting. 60 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20236.2 Statutory executive remuneration in FY23 The below sets out the statutory executive remuneration disclosures which have been prepared in accordance with the Act and Australian Accounting Standards. Table 7 – Statutory Executive remuneration table Short-term employee benefits Long-term benefits Equity-based benefits Cash salary $ Bonus (cash component)1 $ Allowance $ Annual leave $ Non- monetary $ Total short-term benefits $ Super- annuation $ Long service leave $ Bonus (deferred cash component) $ Total long-term benefits $ Restricted shares $ Options & rights $ Total equity- based benefits $ Total remun- eration $ Performance related remun- eration % 2023 573,654 715,000 750 (89,296) 15,347 1,215,455 26,346 (4,148) 2022 575,570 942,500 - 23,912 12,749 1,554,731 24,430 11,928 2023 573,654 715,000 750 (114,916) 15,486 1,189,974 26,346 (4,079) 2022 575,570 1,040,000 - 37,360 13,106 1,666,036 24,430 11,922 2023 573,654 - 750 (95,586) 14,912 493,730 26,346 (3,931) - - - - - 22,198 497,215 (131,982) 365,234 1,602,887 36,358 606,669 506,509 1,113,178 2,704,267 22,267 536,930 (131,982) 404,949 1,617,190 36,352 664,062 451,001 1,115,063 2,817,451 22,415 24,473 (19,869) 4,603 520,748 2022 556,820 585,000 - 64,375 14,967 1,221,162 24,430 45,851 315,000 385,281 54,829 222,222 277,051 1,883,494 2023 473,654 227,500 1,170 8,499 2022 463,070 269,750 - (1,000) 2023 389,376 227,500 1,170 18,133 2022 - 2023 237,354 - - 2022 463,070 243,750 - - - - 1,826 4,678 - - - - 710,823 26,346 1,431 731,820 24,430 5,642 636,179 23,634 474 - - - 82 239,262 12,646 (69,267) - 711,498 24,430 18,988 2023 2,821,346 1,885,000 4,590 (271,340) 45,827 4,485,423 141,664 (79,520) - - - - - - - 27,777 157,103 56,172 213,275 951,875 30,072 183,066 145,604 328,670 1,090,562 24,108 42,843 - - - - 42,843 703,130 - - (56,621) 145,624 193,956 339,580 522,221 43,418 152,473 112,701 265,174 1,020,090 62,144 1,404,188 (33,705) 1,370,484 5,918,051 2022 2,634,100 3,081,000 - 129,325 40,822 5,885,247 122,150 94,331 315,000 531,481 1,661,099 1,438,036 3,099,137 9,515,864 67% 78% 69% 77% 1% 66% 50% 57% 39% - 83% 51% Executive Julian Biggins Christopher Wyke Andrew Pridham Janna Robertson Giles Boddy Graham Lello2 Total 1. The cash component of bonuses received in respect of FY23 is expected to be paid in March 2024. 2. The Board has exercised its discretion to classify Graham Lello as a Good Leaver. He has retained the entirety of his unvested restricted shares and unvested options at a pro-rata basis. The initial valuation and vesting profile remains unchanged. Equity-based benefits include the accelerated amortisation of the shares and options retained as at termination date. 61 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Non-Executive Director remuneration 7. 7.1 NED remuneration policy and fee structure The Group’s NED remuneration policy is designed to attract and retain suitably skilled Directors who can discharge their roles and responsibilities required in terms of good governance, oversight, independence and objectivity. The Board seeks to attract Directors with different skills, experience, expertise and diversity. Under the Group’s Constitution and the ASX listing rules, the total annual fee pool for NEDs is determined by shareholders. The current maximum aggregate NED fee pool of $1,000,000 per annum was approved by Table 8 – NED fee structure shareholders at the 2020 AGM. Within this aggregate amount, NED fees are reviewed annually by the Committee and set by the Board. The Committee reviews NED fees against comparable companies within the broader general industry and taking into account recommendations from independent remuneration advisors. As indicated in the FY22 Remuneration report, the Board Committee Chair fees were reviewed in late FY22 and were effective from 1 January 2023 and have been reviewed for FY23. The table below summarises the annual Board and committee fees payable to NEDs (inclusive of superannuation). Role FY23 FY22 Role FY23 FY22 Board fees Chair 280,000 280,000 Committee Chair 45,000 20,000 fees NED 120,000 120,000 Member - - The payment of Chair committee fees recognises the additional time commitment required by NEDs who serve in those positions. The Chair of the Board does not receive additional fees for being a member of any Board committee. 7.2 Total fees paid to NEDs Table 9 – Statutory NED remuneration NEDs do not receive share options, other performance- based incentives or retirement benefits. Non-Executive Director Jeffrey Browne Kenneth Moelis Alexandra Goodfellow Kate Pilcher Ciafone Simon Kelly Nikki Warburton Total Short-term employee benefits Cash salary and fees including superannuation FY23 $ FY22 $ 280,000 280,000 - - 165,000 140,000 - 165,000 120,000 730,000 - 140,000 2,959 562,959 62 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023 8. 8.1 Equity instrument reporting Shareholding Policy In FY22 MA Financial introduced a Minimum Shareholding policy. The policy introduced a minimum level of shareholding as follows: • Non-Executive Directors: 100% of base Directors fees • Executive KMP / Senior Executives: 150% of FAR (excluding superannuation) Those subject to the policy have three years from commencement of employment with the Group to achieve the minimum holding. All Non-Executive Directors, Executive KMP and Senior Executives are in compliance with the policy. 8.2 Loan Funded Shares provided to the Executive The following table details Loan Funded Shares that have been issued to the Executive under the LTI plan (refer to section 3). The LTI granted for FY22 was issued in March 2023. Table 10 – Loan Funded Shares – LTI plan Balance at 1 Jan 23 Granted as remuneration Vested Lapsed Julian Biggins 765,900 639,001 Christopher Wyke 765,900 639,001 Andrew Pridham 216,077 375,883 Janna Robertson 594,840 150,353 Giles Boddy - - Graham Lello 494,840 56,382 - - - - - - Balance at 31 Dec 23 1,404,901 1,404,901 591,960 745,193 - - - - - - (120,640) 430,582 62 63 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20238.3 Movements in Executive equity holdings and deferred shares The details of equity holdings and deferred shares in the Company held by executives (including close family members and/or any entity they, or their close family members, control, jointly control or significantly influence) are set out in Table 11 below. There have been no changes to the terms and conditions of these awards since the awards were granted. There are no amounts unpaid on any of the shares exercised and all restricted shares and rights are exercised automatically when vested. Table 11 – Equity holdings of Executive KMP Executive Equity instrument1 Number at start of year Granted during the period2 Vested Acquired Disposed Number at reporting date Ordinary shares 5,328,170 Julian Biggins Share rights 28,866 - - 154,551 (28,866) Restricted shares 221,606 117,881 (125,685) Ordinary shares 5,328,170 Christopher Wyke Share rights 29,236 - - 161,674 (29,236) Restricted shares 239,316 130,076 (132,438) - - - - - - (154,551) 5,328,170 - - - 213,802 (461,674) 5,028,170 - - - 236,954 19,066 - (1,000,000) 17,969,675 Ordinary shares 18,950,609 Restricted shares 38,132 Ordinary shares 92,968 - - - Andrew Pridham Janna Robertson (19,066) 32,678 Restricted shares 66,219 33,739 (32,678) Ordinary shares Giles Boddy Share rights Restricted shares - - - Ordinary shares 275,138 Graham Lello3 - - - - - - - 25,018 Restricted shares 46,788 30,487 (25,018) - - - - - - - - - - - - - - - - 19,066 125,646 67,280 - - - 300,156 52,257 1. Ordinary share holding includes directly held shares and beneficial interests in ordinary shares as a result of holdings in the Existing Staff Trusts (as defined in the Glossary in the Additional Information section of the Annual Report). 2. Restricted shares granted as part of the FY22 short-term incentive award in March 2023. 3. Movements and balance up to and as at termination date. 64 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 20238.4 Movements in Non-Executive Director equity holdings The number of equity instruments in the Company held (directly and nominally) by Non-Executive Directors or their related parties (their close family members and/or any entity they, or their close family members, control, jointly control or significantly influence) are set out below. Table 12 – Equity holdings of Non-Executive Directors Executive Equity instrument Number at start of year Granted during the year Vested Purchased Disposed Number at signing date Jeffrey Browne Ordinary shares 781,250 Kenneth Moelis Ordinary shares - Alexandra Goodfellow Ordinary shares 32,371 Kate Pilcher Ciafone Ordinary shares - Simon Kelly Ordinary shares 65,161 Nikki Warburton Ordinary shares - - - - - - - - - - - - - - - - - 30,000 10,000 (631,250) 150,000 - - - - - - 32,371 - 95,161 10,000 9. Loans to KMP There were no loans to KMP during the year. Loan balances under the limited recourse Loan Funded Share Plan represent a transaction with a KMP that is an in-substance option and not a loan to the KMP. 10. Other transactions and balances with KMP and their related parties Transactions conducted by KMP (and their related parties) during the year with the Company and its subsidiaries, joint ventures and associates of the Group are described below. In 2019 Mr Pridham and Mr Biggins entered into property management service arrangements with the Group on the same terms offered to third-party investors in a property managed by the Group. Total management fees payable by Mr Pridham and Mr Biggins for FY23 amounted to $51,872 and $11,598 respectively. 65 Remuneration report (continued)MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Auditor’s independence declaration 66 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of MA Financial Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of MA Financial Group Limited for the financial year ended 31 December 2023 there have been: i.no contraventions of the auditor independence requirements as set out in theCorporations Act 2001 in relation to the audit; andii.no contraventions of any applicable code of professional conduct in relation to the audit.KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Shaun Kendrigan Partner Sydney 22 February 2024 Small Caps Conference Contents Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows 1 Basis of preparation and material accounting policies 71 72 73 74 75 2 Application of new and revised Australian Accounting Standards 77 3 Segment information 4 Fee and commission income 5 Fee and commission expense 6 7 Interest income Investment income 8 Employee expenses 9 Finance costs 10 Other expenses 11 Income tax 12 Cash and cash equivalents 13 Receivables 14 Loans receivable 15 Loss allowance 16 Contract assets and liabilities 17 Other financial assets and liabilities 18 Property, plant and equipment 19 Right-of-use assets and lease liabilities 20 Investments in associates and joint ventures 21 Intangible assets 78 83 85 86 86 87 87 87 88 91 93 94 95 99 100 102 104 106 110 69 MA Financial Group | 2023 Annual ReportContents (continued) 22 Trade and other payables 23 Borrowings 24 Provisions 25 Financial risk management 26 Fair value of financial assets and financial liabilities 27 Contributed equity 28 Earnings per share 29 Dividends 30 Reserves and non-controlling interests 31 Share-based payments 32 Key management personnel compensation 33 Related party transactions 34 Acquisitions and disposals of subsidiaries 35 Parent entity disclosures 36 Deed of cross guarantee 37 Structured entities 38 Auditor’s remuneration 39 Commitments 40 Events after the reporting date 113 113 116 117 124 127 128 129 130 131 138 138 139 143 144 146 147 147 147 70 MA Financial Group | 2023 Annual ReportStatement of profit or loss and other comprehensive income For the year ended 31 December 2023 Fee and commission income Fee and commission expense Net fee and commission income Share of net profits from associates Interest income Investment income Other income Total income Employee expenses Marketing and business development Information, technology and data Depreciation and amortisation Finance costs Credit loss allowance Other expenses Total expenses Profit before tax Income tax expense Profit after income tax Other comprehensive (loss)/income, net of tax Items that will not be subsequently reclassified to profit or loss: Fair value loss on investments in equity instruments designated at FVTOCI Share of other comprehensive (loss)/income from associates Items that may be subsequently reclassified to profit or loss: Foreign exchange movements on translation Total other comprehensive (loss)/income, net of tax Total comprehensive income Profit attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share From continuing operations Basic (cents per share) Diluted (cents per share) 31 Dec 2023 Consolidated $’000 Note 4 5 20 6 7 8 18,19,21 9 15 10 11 28 28 765,376 (527,031) 238,345 2,086 145,051 6,538 750 392,770 166,174 13,776 10,731 17,714 113,048 851 26,997 349,291 43,479 (12,400) 31,079 (283) (6,300) (6,583) (2,937) (2,937) (9,520) 21,559 28,517 2,562 31,079 18,997 2,562 21,559 17.8 17.3 31 Dec 2022 Consolidated $’000 709,727 (443,509) 266,218 1,389 58,633 6,873 1,885 334,998 167,047 11,454 10,144 17,241 40,694 1,887 25,562 274,029 60,969 (16,114) 44,855 (920) 1,608 688 211 211 899 45,754 44,855 - 44,855 45,754 - 45,754 28.0 26.9 The above Statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. 71 MA Financial Group | 2023 Annual ReportStatement of financial position Assets Cash and cash equivalents Receivables Loans receivable Income tax receivable Other financial assets Contract assets Property, plant and equipment Investments in associates and joint ventures Other assets Restricted cash Right-of-use assets Deferred tax assets Intangible assets Goodwill Total assets Liabilities Trade and other payables Income tax payable Other financial liabilities Borrowings Contract liabilities Provisions Lease liabilities Deferred tax liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Equity attributable to owners of the Company Non-controlling interests Total equity 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 Note 12 13 14 11 17 16 18 20 19 11 21 21 22 11 17 23 16 24 19 11 27 30 30 180,319 86,416 2,079,716 7,192 186,939 705,285 4,263 50,771 9,601 700 65,983 739 54,292 141,648 144,589 88,483 855,482 - 196,312 607,232 5,973 91,586 9,086 700 61,773 - 56,849 128,169 3,573,864 2,246,234 65,089 - 102,415 2,153,496 661,158 40,440 71,510 18,596 77,805 3,849 116,419 940,089 571,365 46,629 64,952 15,539 3,112,704 1,836,647 461,160 409,587 278,737 44,698 74,101 397,536 63,624 461,160 275,087 54,011 80,489 409,587 - 409,587 The above Statement of financial position is to be read in conjunction with the accompanying notes. 72 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Statement of changes in equity Consolidated Attributable to the owners of the Company Contributed equity $’000 Note Reserves $’000 Retained earnings $’000 Total $’000 Non- controlling interests $’000 Balance as at 1 January 2022 254,990 48,491 66,552 370,033 Profit after income tax Other comprehensive income, net of tax Foreign currency translation Total comprehensive income Payment of dividends Issue of ordinary shares Shares vested under deferred shares plan Share buy-back Treasury shares Equity transaction costs Share-based payments - - - - - 44,188 30 29 27 - 44,855 44,855 688 211 - - 688 211 899 44,855 45,754 (30,918) (30,918) - - - - - - 44,188 - (4,104) (22,782) (131) 7,547 2,926 (2,926) (4,104) (22,782) (131) - - - - 7,547 Balance as at 31 December 2022 275,087 54,011 80,489 409,587 Balance as at 1 January 2023 275,087 54,011 80,489 409,587 20,097 4,621 (30,918) (6,200) Profit after income tax Other comprehensive income, net of tax Foreign currency translation Total comprehensive income Payment of dividends Issue of ordinary shares 30 29 27 - - - - - 17,064 - 28,517 28,517 2,562 31,079 (6,583) (2,937) - - (6,583) (2,937) - - (6,583) (2,937) (9,520) 28,517 18,997 2,562 21,559 (34,905) (34,905) Shares vested under deferred shares plan 912 (912) Share buy-back Treasury shares Equity transaction costs Share-based payments Movement in non-controlling interests (1,027) (13,273) (26) - - - - - 1,119 - 17,064 - (1,027) (13,273) (26) 1,119 - - - - - - - - 61,062 61,062 Balance as at 31 December 2023 278,737 44,698 74,101 397,536 63,624 461,160 3,650 207 (34,905) (31,048) 61,062 30,014 The above Statement of changes in equity is to be read in conjunction with the accompanying notes. 73 Total equity $’000 370,033 44,855 688 211 45,754 (30,918) 44,188 - (4,104) (22,782) (131) 7,547 (6,200) 409,587 409,587 - - - - - - - - - - - - - - - - - - - - - - (34,905) 17,064 - (1,027) (13,273) (26) 1,119 - - - - MA Financial Group | 2023 Annual ReportFor the year ended 31 December 202331 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 Note 669,558 571,103 Statement of cash flows Cash flows from operating activities Receipts from customers Payments to suppliers and employees Amounts advanced to third parties Proceeds from warehouse notes and fund preferred units Interest received Interest paid Income taxes paid Net cash inflows from operating activities 12 Cash flows from investing activities Net proceeds/(payments) for the sale and acquisition of investments Distributions received from investments Receipts from employee loans Net proceeds from the sale and acquisition of shares in associates Payments to acquire subsidiaries, net of cash acquired 34 Payments to acquire property, plant and equipment and intangible assets Net cash inflows/(outflows) from investing activities Cash flows from financing activities Net proceeds from the issue of shares Payments for treasury shares Share buy-back Net (payment)/proceeds from exercise of share options Cash transferred from restricted cash accounts Payments of lease liabilities Interest on lease liabilities Net proceeds/(payments) from borrowings Dividends paid to shareholders Payments to non-controlling interests Net cash outflows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effects of exchange rate movements on cash and cash equivalents (668,540) (1,156,406) 1,164,217 136,452 (103,736) (19,361) 22,184 15,420 11,538 495 2,444 (6,496) (4,115) 19,286 - (4,408) (1,027) (1,183) - (7,090) (4,354) 49,190 29 (34,905) (2,562) (6,339) 40,360 144,589 599 Cash and cash equivalents at the end of the year 12 180,319 The above Statement of cash flows is to be read in conjunction with the accompanying notes. (519,161) (336,130) 498,768 54,247 (35,189) (21,249) 212,389 (376) 9,546 35 25,784 (146,910) (12,866) (124,787) 22,928 (9,920) (4,104) 91 1,800 (5,948) (3,513) (162,098) (30,918) - (191,682) (104,080) 247,062 1,607 144,589 74 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements 1 Basis of preparation and material accounting policies MA Financial Group Limited (Company) is a listed public company limited by shares, incorporated and domiciled in Australia. The Financial Report for MA Financial Group and its controlled entities (Group) for the year ended 31 December 2023 was authorised for issue in accordance with a resolution of the Directors on 22 February 2024. Basis of preparation a This is a general purpose financial report which has been prepared in accordance, and complies, with Corporations Act 2001 (Cth) (the Act), Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The Financial Report comprises the consolidated financial statements of the Group and accompanying notes. MA Financial Group Limited is a for-profit company for the purposes of preparing this Financial Report. The Group has prepared the Financial Report on the basis that it will continue to operate as a going concern. The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Where necessary, comparative information has been restated to conform to any changes in presentation made in this Financial Report. Unless otherwise stated, amounts in this Financial Report are presented in Australian dollars and have been prepared on a historical cost basis, except for financial assets that are measured at fair value. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. The assets and liabilities disclosed in the Statement of financial position are grouped by nature and listed in an order that reflects their relative liquidity. In the disclosure notes, the current/non-current split is between items expected to be settled within 12 months (current) and those expected to be settled greater than 12 months (non-current). In accordance with the Act, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 35. The principal accounting policies adopted in the preparation of this Financial Report and that of the previous financial year are set out below and disclosed individually within each of the relevant notes in the Financial Report. These policies have been consistently applied to all the financial years presented and are applicable to both the Group and the Company, unless otherwise stated. Significant accounting judgements, estimates and assumptions The preparation of the Financial Report requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. The key estimates and assumptions that have a significant risk of causing a material adjustment to the recognised amounts are disclosed individually within each of the relevant notes to the Financial Report. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Comparatives b Where necessary, comparative information has been restated to conform to any changes in presentation made in this Financial Report. For clearer presentation, the Group has realigned/reclassified the revenue and expense categories and reclassified foreign exchange movements on translation as an item that may be subsequently reclassified to profit or loss in the Statement of profit or loss and other comprehensive income, reallocated lending trail commission income to at a point in time in note 4 and reclassified cashflow movements in distributions from investments and amounts advanced to third parties from investing activities to operating activities in the Statement of cash flows. There has been no effect on the comparative year results, net assets or equity due to the reclassification. Rounding of amounts c Unless otherwise stated, amounts in the Directors’ Report and the Financial Report have been rounded to the nearest thousand dollars under the option available to the Group under ASIC Corporations Instrument 2016/191. 75 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023 1 Basis of preparation and material accounting policies (continued) Foreign currency d Both the presentation currency and the functional currency of the Company and its controlled Australian entities are Australian dollars. A number of foreign controlled entities have a functional currency other than Australian dollars. Transactions in foreign currency are translated into the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into Australian dollars at the foreign exchange rate at the Statement of financial position date. Non-monetary assets and liabilities that are measured at historical cost in foreign currency are translated using the exchange rate as at the date of the transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated to the functional currency using exchange rates at the date when fair value was determined. Goods and services tax e Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: (i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or (ii) for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. 76 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)2 Application of new and revised Australian Accounting Standards New accounting standards, amendments and interpretations that are effective in the current financial year The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to the Group’s operations and mandatorily effective on or after 1 January 2023, including: • AASB 2021–2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates • AASB 2021–5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction The new and revised Standards and Interpretations adopted during the year do not materially affect the Group’s accounting policies or any of the amounts recognised in the financial statements. Accounting standards and interpretations issued but not yet effective Standard/Interpretation AASB 2022–6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants AASB 2022–5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback AASB 2023–1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections, AASB 2021-7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2024 31 December 2024 1 January 2024 31 December 2024 1 January 2024 31 December 2024 1 January 2025 31 December 2025 77 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)3 Segment information AASB 8 Operating Segments requires the ‘management approach’ to disclose information about the Group’s reportable segments. The financial information is reported on the same basis as used by senior management and the Board of Directors for evaluating operating segment performance and for deciding how to allocate resources to operating segments. The segment note is prepared on the same basis as the Group’s non-IFRS (Underlying) financial measures. Please refer to the Directors’ Report for an explanation of why the Directors believe the Underlying measures are useful. The Board of Directors is considered to be the Chief Operating Decision Maker (CODM). The Group is organised into the following business segments: • Asset Management • Lending & Technology • Corporate Advisory & Equities (CA&E) The Corporate Services segment represents the unallocated costs associated with the central executives and corporate support functions. Items of income and expenses within the Corporate Services segment also include the net result of managing the Group’s liquidity and funding requirements. 3.1 Services from which reportable segments derive their revenues The Asset Management segment incorporates the provision of asset management services, principal co- investment and strategic investments. During the year, the Group expanded its Asset Management segment by acquiring Blue Elephant Capital Management LLC, Blue Elephant Partner LLC and Blue Elephant Financing LLC (collectively Blue Elephant), a SEC- regulated specialty credit asset manager based in New York. The Lending & Technology segment includes lending platforms for the provision of loan funding, residential mortgages and financial technology including mortgage aggregation services. The Corporate Advisory & Equities segment provides corporate advice, underwriting and institutional stockbroking services. The main items of profit or loss and other comprehensive income used by management to assess each business are Underlying revenue, Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and Underlying Net Profit After Tax. Information regarding these segments is presented in section 3.2. The accounting policies of the reportable segments are the same as the Group’s reporting policies, with the exception of adjustments made to the Underlying results. 78 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)3 Segment information (continued) 3.2 Segment results Depreciation, amortisation and net interest expense are not disclosed by segment as they are not provided to the CODM and are only reported on a Group basis. Assets and liabilities are not disclosed as they are not provided to the CODM. The following is an analysis of segment performance: Asset Management $’000 Lending & Technology $’000 CA&E $’000 Corporate Services $’000 Total Underlying segment $’000 Adjustments4 $’000 Statement of comprehensive income $’000 31 December 2023 Revenue1 Staff costs 176,071 44,653 48,279 873 269,876 122,894 392,770 (75,754) (23,198) (34,284) (20,535) (153,771) (12,403) (166,174) Non-staff costs (18,094) (7,401) (7,142) (1,903) (34,540) (17,815) (52,355) EBITDA2 82,223 14,054 6,853 (21,565) 81,565 92,676 174,241 Depreciation and amortisation Interest expense3 Profit before tax Income tax expense Net profit after income tax Other comprehensive income Total comprehensive income 31 December 2022 Revenue1 Staff costs - - - - - - - - - - - - - - - - - - - - - - - - - - - - (12,954) (4,760) (17,714) (9,184) (103,864) (113,048) 59,427 (15,948) 43,479 (17,828) 5,428 (12,400) 41,599 (10,520) - (9,520) 41,599 (20,040) 31,079 (9,520) 21,559 197,790 41,096 61,550 1,363 301,799 33,199 334,998 (74,299) (19,428) (39,987) (22,323) (156,037) (11,010) (167,047) Non-staff costs (20,014) (6,057) (7,581) (5,390) (39,042) (10,005) (49,047) EBITDA2 103,477 15,611 13,982 (26,350) 106,720 12,184 118,904 Depreciation and amortisation Interest expense3 Profit before tax Income tax expense Net profit after income tax Other comprehensive income Total comprehensive income - - - - - - - - - - - - - - - - - - - - - - - - - - - - (11,121) (6,120) (17,241) (7,834) (32,860) (40,694) 87,765 (26,796) (26,329) 10,215 61,436 (16,581) - 899 60,969 (16,114) 44,855 899 61,436 (15,682) 45,754 1. Revenue refers to total income on the Statement of profit or loss and other comprehensive income. 2. Statutory EBITDA is not an IFRS measure but has been presented to provide a comparable measure to the Underlying result. 3. Interest expense is referred to as finance costs in the Statement of profit or loss and other comprehensive income. 4. Refer to the reconciliation of the Underlying segment to statutory measures. 79 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)3 Segment information (continued) 3.2 Segment results (continued) A reconciliation of the Underlying segment measures to the statutory measures is as follows: Note Revenue1 $’000 EBITDA $’000 NPAT $’000 Comprehensive income $’000 Statutory result for the year ended 31 December 2023 392,770 174,241 31,079 21,559 Differences in measurement Business acquisition adjustments Net loss on investments Adjustments relating to associates Software development adjustments Differences in classification Adjustments relating to Lending Trusts2 Credit investments Interest income Expense allocations Tax on adjustments Total adjustments (a) (b) (c) (d) (e) (f) (g) (h) - - 4,024 - 5,544 10,964 - 4,024 4,065 - 4,024 3,522 10,964 2,427 12,838 3,522 (107,759) (103,669) (2,562) (2,562) (851) - (2,640) (2,640) (15,668) - - - - - - (5,428) (122,894) (92,676) 10,520 Underlying results for the year ended 31 December 2023 269,876 81,565 41,599 Statutory result for the year ended 31 December 2022 334,998 118,904 44,855 45,754 Differences in measurement Business acquisition adjustments Net (gain)/loss on investments Adjustments relating to associates Software development adjustments Differences in classification Adjustments relating to Lending Trusts2 Credit investments Interest income Expense reallocations Tax on adjustments Total adjustments (a) (b) (c) (d) (e) (f) (g) (h) - (149) 3,716 (149) 9,836 (149) 14,773 14,773 14,773 - 3,162 3,162 (33,494) (32,183) - (2,255) (353) (353) (1,150) (1,150) (10,924) - - - - - (33,199) (12,184) 16,581 Underlying results for the year ended 31 December 2022 301,799 106,720 61,436 (10,688) (12,155) - - - (7,149) 20,040 41,599 9,836 2,623 12,569 3,162 - (353) - - 15,682 61,436 1. Revenue refers to total income on the Statement of profit or loss and other comprehensive income. 2. Lending Trusts refers to residential mortgage-backed securitisation trusts, Specialty Lending trusts and Credit Funds in the Priority Income Fund strategies that the Group manages and consolidates, excluding amounts attributable to non-controlling interests. 80 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)3 Segment information (continued) 3.2 Segment results (continued) Differences in measurement (a) The Underlying treatment removes one-off Differences in classification (e) The Underlying treatment records the net distributions received from the Lending Trusts in Underlying revenue. As such interest and other expenses are reclassified to interest income to reflect this net position. (f) The Underlying expected credit loss (ECL) expenses are reclassified from Statutory expense to Underlying revenue to be consistent with how management view the movement in the value of investments. (g) Interest income on cash and bank balances of $2.6 million (31 December 2022: $1.2 million) is reclassified to Underlying interest expense. (h) The Underlying adjustment reclassifies revenue against those expenses that have been recovered to reflect the net nil impact to the Group. transaction costs related to the acquisition of subsidiaries. In addition, the Underlying treatment removes earn-out cash and share-based payments to vendors, who are now employees of the Group, that are required to be recognised under IFRS as either salary and wages or share- based payment expenses. During the year $5.5m of expenses (31 December 2022: $3.7 million) related to business acquisitions has been removed from Underlying EBITDA. Underlying NPAT also excludes the non-cash IFRS expenditure relating to the amortisation of intangible assets, recognised in a business combination, of $5.4 million (31 December 2022: $6.1 million). (b) The Underlying treatment only recognises realised gains/losses on disposal of financial investments in Underlying revenue. The Underlying treatment does not include unrealised gains and losses on financial investments, in line with the change in approach announced during 2022. During the year, unrealised gains on financial investments of $0.5 million have been excluded from the Underlying result (31 December 2022: $2.9 million loss). The adjustment also removes the foreign currency translation loss for the Group’s offshore entities of $2.9 million (31 December 2022: $0.2 million gain). (c) The Underlying treatment records dividends and distributions receivable from associates in Underlying revenue as opposed to the IFRS treatment of recording the Group’s share of accounting profit or loss of an associate. Underlying revenue also recognises the realised gains/losses on any disposal of an investment in associate. (d) The Underlying treatment capitalises and amortises certain operational platform and software development costs that are required to be expensed per accounting standards. 81 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)3 Segment information (continued) 3.3 Revenue for major products and services The table below represents a disaggregation of fee and commission income by operating segment: Fee and commission income Management fees Distribution fees Transaction fees Performance fees Expense recoveries Upfront commission income Trail commission income Service fees Corporate advisory services Equity services Total fee and commission income Operating segment Asset Management Asset Management Asset Management Asset Management Asset Management Lending & Technology Lending & Technology Lending & Technology CA&E CA&E 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 98,187 6,415 42,445 10,806 12,051 262,029 264,433 19,715 43,236 6,059 765,376 85,155 5,988 34,466 56,132 8,745 198,072 236,028 14,970 64,462 5,709 709,727 3.4 Geographical information The Group primarily operates in Australia. 3.5 Information about major customers No single customer contributed 10% or more to Group revenue in 2023 (2022: None). 82 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)4 Fee and commission income 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 Timing of revenue recognition At a point in time Success fees Upfront commission income Trail commission income Other commission income Expense recoveries Commission and brokerage income Facilitation and transaction fees Total revenue earned at a point in time Over time Retainer fees Service fees Performance fees Distribution fees Management fees Total revenue earned over time Total fee and commission income Fee and commission income by segment At a point in time Asset Management Lending & Technology Corporate Advisory & Equities Total revenue earned at a point in time Over time Asset Management Lending & Technology Corporate Advisory & Equities Total revenue earned over time Total fee and commission income 37,284 262,029 261,213 3,220 12,173 6,059 42,445 624,423 5,830 19,715 10,806 6,415 98,187 140,953 765,376 54,496 526,462 43,465 624,423 115,408 19,715 5,830 140,953 765,376 58,480 198,072 234,145 1,883 8,975 5,709 34,466 541,730 5,752 14,970 56,132 5,988 85,155 167,997 709,727 43,212 434,100 64,418 541,730 147,275 14,970 5,752 167,997 709,727 Accounting policy Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations. Revenue earned by the Group from its contracts with customers primarily consists of the following categories of fee and commission income: Management fees, performance fees and other fees from providing asset management services The Group earns management fees, performance fees and other fees (such as distribution, facilitation, transaction and arranger fees) for providing asset management services for listed and unlisted funds, 83 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)4 Fee and commission income (continued) Accounting policy (continued) managed accounts and co-investment arrangements. The provision of asset management services is typically a single performance obligation. The Group also earns management fees for providing hotel and retail property management services that are recognised on a straight-line basis throughout the year as the Group considers the performance of such services as a series of distinct services with a similar pattern of transfer. Management and distribution fees are recognised over the life of the contract as asset management services are provided. Performance fees are based on returns in excess of a specified benchmark market return, over the contract period. The Group recognises performance fees only to the extent that it is highly probable that performance hurdles are met, and a significant reversal of cumulative fees to date will not occur. Facilitation, transaction and arranger fees are earned for successful transactions and arrangements relating to assets and funds managed by the Group. Revenue is recognised when the transaction or arrangement is completed in line with the terms within the underlying agreements. Upfront commission, trail commission and service fees The Group provides loan origination services and receives upfront commissions on the settlement of loans. Additionally, the lender normally pays a trail commission over the life of the loan. Upfront commissions are recognised upon the loans being settled and receipt of commission, net of clawbacks. Commissions may be clawed back by lenders in accordance with underlying contracts. These potential clawbacks are estimated based on historical data and recognised at the same time as upfront commissions. The Group receives trail commissions from lenders on settled loans, originated by authorised brokers, over the life of the loan based on the loan balance outstanding. On initial recognition, the Group recognises a contract asset at fair value, being the expected future trail commission receivable, discounted to its net present value in line with the expected value method under AASB 15 Revenue from Contracts with Customers (AASB 15). On subsequent measurement, the contract asset is measured at amortised cost. The Group earns subscription income for providing access to its proprietary loan origination platform, Infynity, and income for providing compliance and administrative services to the brokers. The Group recognises the income from these services over time as performance obligations are satisfied. Success fees on mergers and acquisitions, advisory and underwriting fees The Group earns revenue through its role as advisor on corporate transactions as well as its role as manager and underwriter of equity and debt issuances. The revenue from these arrangements is recognised at a point in time, and when it has been established that the customer has received the benefit of the service and the performance obligations is satisfied. This is typically at the time of closing the transaction. Management of capital raising and underwriting of equity or debt issuances are typically satisfied on the allocation date of the underwritten securities. Where contracts contain rights to invoice upon reaching certain milestones, the Group assesses whether distinct services have been transferred at these milestones and accordingly recognises revenue, otherwise the fee recognition is deferred until such time the performance obligation has been completed. Commission and brokerage income The Group is remunerated for the provision of security trading services in line with customer contracts. The brokerage and commission income related to this service is recognised on trade date and is presented net of any rebates. Key estimates and assumptions Performance fees Determining the amount and timing of performance fees to be recognised involves judgement, the use of estimates and consideration of a number of criteria relating to the fund or managed investment in which the asset(s) are held. Performance fees are recognised when it is highly probable that a significant reversal of the fee will not occur. Factors that are taken into consideration include: • • the proportion of assets already realised returns on assets realised to-date • downside valuation on remaining unrealised assets and reliability of those estimates • nature of unrealised investments and their returns 84 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)4 Fee and commission income (continued) Key estimates and assumptions (continued) Trail commission income On initial recognition, the Group recognises a contract asset at fair value, which represents management’s estimate of the trail commission to be received from lenders on settled loans. The use of the expected value approach of estimating trail commission income requires significant judgement as assumptions are made using a variety of inputs, including the expected loan run-off rate and the discount rate, that are determined by management (refer to note 16). Success fees, advisory and underwriting fees Determining the timing of fees to be recognised from the provision of advisory services involves judgement and consideration of factors, such as: • determination of identifiable performance obligations • any key milestones that were met and not met • historical recognition fee revenue • whether benefits have been passed to the customer and performance obligations have been satisfied Fee and commission expense 5 Lending fee and commission expense Other fee and commission expense Total fee and commission expense 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 (506,739) (20,292) (527,031) (417,305) (26,204) (443,509) Accounting policy The Group remits trail commission payments to authorised brokers based on the loan balance outstanding and in accordance with the individual agreements with the authorised brokers and recognises this as a contract liability. The contract liability is initially measured at fair value, being the net present value of the expected future trail commission payable and subsequently measured at amortised cost. Other fee and commission expense relates to rebates and commissions payable which are recognised and calculated in line with underlying agreements. Key estimates and assumptions Trail commission expense On initial recognition, the Group recognises a contract liability at fair value, which represents management’s estimate of the trail commission to be paid to authorised brokers on settled loans. The use of the expected value approach of estimating trail commission payable requires significant judgement as assumptions are made using a variety of inputs, including the expected loan run-off rate and the discount rate, that are determined by management (refer to note 16). 85 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)6 Interest income Interest income on cash and bank balances Interest income on loans receivable – effective interest method Interest income on loans receivable – held at FVTPL Interest income on leases Total interest income 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 6,891 138,042 102 16 1,808 56,508 270 47 145,051 58,633 Accounting policy Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset. The effective interest rate is the rate that discounts estimated future cash receipts or payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts), excluding expected credit losses, through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset. 7 Investment income Dividends and distributions from investments Realised gains from disposal of investments Net gain/(loss) from financial instruments held at fair value Total investment income 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 2,683 3,030 825 6,538 1,155 6,748 (1,030) 6,873 Accounting policy Investment income includes gains and losses arising from subsequent changes in the fair value of equity and debt investment securities that are classified as fair value through profit or loss (FVTPL) and dividends or distributions on these securities which represent the return on such investments. Dividends or distributions are recognised when the right to receive a dividend or distribution is established, it is probable the economic benefits associated will flow to the Group and it can be measured reliably. 86 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)Employee expenses 8 Salary, superannuation and bonuses Termination benefits Amortisation of share-based payments (refer to note 31) Other employment expenses¹ Total employee expenses 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 139,410 3,043 10,474 13,247 166,174 132,913 1,506 15,722 16,906 167,047 1. Includes recruitment fees, payroll tax, life insurance, workers compensation, fringe benefits tax and leave entitlements. Finance costs 9 Interest on unsecured notes¹ Interest on mortgage trust warehouse notes¹ Fund preferred unit distribution¹ Interest on lease liabilities Other finance costs Total finance costs 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 11,990 27,563 67,995 4,354 1,146 7,766 6,456 22,803 3,513 156 113,048 40,694 1. Refer to note 23 for more detail on the unsecured note program, fund preferred units and mortgage trust notes. 10 Other expenses Professional services Insurance Fund administration and operational costs Charitable donations¹ Occupancy and office expenses Other expenses Total other expenses 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 7,556 3,301 3,234 371 2,956 9,579 10,214 2,704 2,912 453 1,925 7,354 26,997 25,562 1. The charitable donations paid by the Group in 2023 and 2022 were principally made to the MA Foundation, a registered charity, and were made in response to staff elections. 87 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)11 Income tax 11.1 Income tax expense Current tax expense Deferred tax (expense)/benefit Income tax expense (8,302) (4,098) (12,400) 11.2 Reconciliation of income tax expense to prima facie tax payable Profit before income tax Prima facie income tax expense at the Australian corporate tax rate of 30% Tax effect of amounts not assessable/deductible in calculating taxable income: – Effect of income that is subject to/(exempt from) tax – Non-deductible expenses – Prior year over adjustment – Foreign tax – controlled entities – Franking credits – Foreign income tax offset Income tax expense 11.3 Income tax recognised in other comprehensive income Deferred tax expense Fair value remeasurement of investments Share of revaluations in associates Income tax recognised in other comprehensive income 11.4 Current tax assets and liabilities Income tax receivable/(payable) 11.5 Deferred tax balances Offshore entities Deferred tax asset Tax consolidated group Deferred tax asset Deferred tax liability Net deferred tax liability 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 (17,575) 1,461 (16,114) 60,969 (18,291) 1,127 (670) 2,211 (493) - 2 43,479 (13,044) 484 (663) 95 567 56 105 (12,400) (16,114) (793) 2,556 1,763 7,192 7,192 1,583 (1,532) 51 (3,849) (3,849) 739 - 15,837 (34,433) (18,596) 14,994 (30,533) (15,539) 88 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)11 Income tax (continued) 11.5 Deferred tax balances (continued) Opening balance $’000 Opening balance adjustments $’000 Recognised in profit or loss $’000 Recognised in other comprehensive income $’000 Acquisitions/ disposals $’000 Closing balance $’000 31 December 2023 Temporary differences Property, plant and equipment Contract assets and liabilities Financial assets Investments in associates and joint ventures (1,215) - 2,606 (1,716) Deferred revenue (18,429) Provisions Loss allowance Expense accruals 3,844 1,288 5,609 Intangible assets (13,791) Share-based payments Other Total 31 December 2022 Temporary differences Property, plant and equipment Financial assets Investments in associates and joint ventures Deferred revenue Provisions Loss allowance Expense accruals 5,533 732 (15,539) (556) (183) (2,673) (3,252) 2,420 712 1,987 - 850 - - 710 - (189) - - - (111) 1,260 286 1,202 (948) 37 413 (29) 207 Intangible assets (3,485) 1,285 Share-based payments Other Total 2,883 867 (1,280) - (359) 2,094 414 792 (409) 296 (3,595) (394) (668) (2,552) 1,473 (638) (60) (5,341) (945) 4 3,437 (7,559) 547 305 828 1,716 2,650 151 1,134 - - (793) 2,556 - - - - - - - 1,763 - 1,583 (1,532) - - - - - - - - - - - - - - - - - - - - - - (7,655) 464 300 2,587 (801) 1,642 1,404 1,136 (21,314) 3,450 431 3,057 (12,318) 4,895 561 (17,857) (1,215) 2,606 (1,716) (18,429) 3,844 1,288 5,609 (13,307) (13,791) - 73 5,533 732 51 (17,538) (15,539) 89 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)11 Income tax (continued) Accounting policy Tax consolidation The Company, together with eligible Australian resident wholly owned subsidiaries, comprise a tax consolidated group (Tax Group) with the Company as the head entity. As a result, the Company is subject to income tax as the head entity of the Tax Group. Tax effect accounting by members of the tax group The consolidated current and deferred tax amounts for the Tax Group are allocated to the members of the Tax Group using the ‘separate taxpayer within group’ approach, with deferred taxes being allocated by reference to the carrying amounts in financial statements of each member entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits arising from this allocation process are then accounted for as immediately assumed by the head entity, as under Australian taxation law, the head entity has the legal obligation (or right) to those amounts. Entities within the Tax Group have applied funding principles under which the Company and each of the members of the Tax Group agree to pay or receive tax equivalent amounts to or from the head entity based on the current tax liability or current tax asset of the member. Current tax The current tax payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 90 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)11 Income tax (continued) Accounting policy (continued) Current and deferred tax for the year Current and deferred tax are recognised as an expense or income in the profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for business combination. 12 Cash and cash equivalents Cash and bank balances Restricted balances Total cash and cash equivalents Tax governance The Board approved Tax Governance Policy for the Group outlines a tax control framework to provide guidance on how all tax risks are identified, managed and reported. The Tax Governance Policy is supported by tax related procedures and processes, which ensure the Group effectively manages its tax risk. Key estimates and assumptions Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 43,108 137,211 180,319 98,803 45,786 144,589 91 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)12 Cash and cash equivalents (continued) 12.1 Reconciliation of profit for the year to net cash flows from operating activities 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 Profit after income tax Adjustments to profit after income tax: Income tax expense recognised in profit or loss Share-based payments Non-cash interest and investment income Share of profit of associates Net foreign exchange gains Net (gains)/losses from financial instruments held at fair value Realised gains from disposal of investments Gains on disposal of fixed assets Interest expense on leases Intangible amortisation Amortisation of right-of-use assets Depreciation of non-current assets 31,079 44,855 12,400 10,474 (2,168) (2,086) (599) (825) (3,030) 160 4,354 6,272 9,437 1,950 16,114 15,721 (1,155) (1,389) (1,396) 384 (5,938) 38 3,513 7,353 8,073 1,815 Total adjustments to profit after income tax 36,339 43,133 Changes in assets and liabilities: Change in trade and other receivables Change in loans receivable Change in other assets Change in contract assets and contract liabilities Change in borrowings Change in trade and other payables Change in provisions Total changes in assets and liabilities Cash generated from operations Income taxes paid Net cash inflows from operating activities 331 (28,169) (1,155,050) (334,242) (473) (8,260) 1,164,216 (20,448) (6,189) (25,873) 41,545 (19,361) 22,184 6,530 (11,456) 498,768 14,544 (325) 145,650 233,638 (21,249) 212,389 Accounting policy Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The carrying amount of cash and cash equivalents is materially equal to fair value due to the assets being highly liquid. Restricted balances include cash and cash equivalents that are not readily available to meet the Group’s short- term cash commitments. 92 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)Receivables 13 Accounts receivable Performance fees receivable Management fees receivable Transaction fees receivable Commissions receivable Interest receivable Other receivables Loss allowance on receivables (note 15) Total receivables 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 11,100 27,498 10,030 8,011 13,104 9,050 8,254 (631) 86,416 11,461 28,048 9,454 - 31,950 2,176 6,539 (1,145) 88,483 Accounting policy Receivables are initially recognised when they are originated less any allowance for expected credit losses. To measure the expected credit losses, receivables are grouped based on days overdue. Key estimates and assumptions The Group has elected to use the simplified approach and has determined the loss allowance based off the lifetime expected credit loss (ECL). The expected credit losses on these financial assets are estimated based on the Group’s historical credit loss experience, adjusted for factors that are specific to debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including the time value of money where appropriate. Refer to note 15 for further information. Receivables are written-off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group. Any recoveries made are recognised in profit or loss. 93 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)14 Loans receivable Current Commercial loans1 Loss allowance (note 15) Total loans receivable – current Non-current Commercial loans¹ Residential mortgages Loans to employees Loss allowance (note 15) Total loans receivable – non-current Total loans receivable 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 441,659 320,486 (590) 441,069 808,117 833,567 2,383 (5,420) 1,638,647 2,079,716 (684) 319,802 296,451 241,046 2,211 (4,028) 535,680 855,482 1. Commercial loans are provided to corporate entities and special purpose vehicles. The loans have terms of between four months and ten years and are either fully or partially secured against the assets of the borrowers. 14.1 Loans receivable by industry Consolidated 31 December 2023 Financial services Professional services Residential mortgages Other Total 31 December 2022 Financial services Professional services Residential mortgages Other Total Loans receivable $’000 Loss allowance $’000 Total $’000 1,034,631 194,680 833,567 22,848 (3,838) (1,045) (999) (128) 1,030,793 193,635 832,568 22,720 2,085,726 (6,010) 2,079,716 454,652 149,275 241,046 15,221 860,194 (2,379) (1,162) (1,134) (37) (4,712) 452,273 148,113 239,912 15,184 855,482 Accounting policy Loans receivable are initially recognised on settlement date, when cash is advanced to the borrower and are recognised net of any credit loss allowance. A credit loss allowance for expected credit losses on loans receivable is recognised upon inception of a loan. Key estimates and assumptions The Group applies the ECL impairment model. The calculation of ECL requires judgement and the choice of inputs, estimates and assumptions. Refer to note 15 for further information. 94 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)15 Loss allowance For financial assets measured at amortised cost, the Group bears the risk that the future circumstances of customers might change, including their ability to fulfil their contractual cash flow obligations in part or in full. The Group periodically assesses exposures to determine whether the credit risk of a financial asset has increased significantly since initial recognition. At the reporting date, the Group undertook a review of its receivables, loans receivable and ECL. The review considered the macroeconomic outlook, counterparty credit quality, the type of collateral held and exposure at default as at the reporting date. During the year, the Group undertook a recalibration of the modelled collective ECL on its residential mortgages due to the higher proportion of prime loans in the Group’s residential mortgages portfolio. As a result, the modelled collective ECL was updated to reflect the higher credit quality of the loans receivable portfolio. The Group’s loss allowance provisions are a determination of probabilities of default and a determination of losses that may be incurred should a default occur. The table below presents the gross exposure and related ECL allowance for financial assets subject to the impairment requirements of AASB 9 Financial instruments (AASB 9). Consolidated 31 December 2023 Receivables Loans receivable Total 31 December 2022 Receivables Loans receivable Total Gross exposure for asset $’000 Loss allowance $’000 87,047 2,085,726 2,172,773 89,628 860,194 949,822 (631) (6,010) (6,641) (1,145) (4,712) (5,857) 15. 1 Movement in credit loss allowance by asset category Balance as at 1 January 2022 (954) (458) (1,974) Receivables $’000 Loans to associates $’000 Loans receivable $’000 Credit loss allowance recognised in the Statement of profit or loss Additions through business combinations Reclassifications and other movements Balance as at 31 December 2022 Credit loss allowance recognised in the Statement of profit or loss Reclassifications and other movements Balance as at 31 December 2023 (133) - (58) (1,145) 418 96 (631) 91 - 367 - - - - (1,845) (1,000) 107 (4,712) (1,269) (29) (6,010) Total $’000 86,416 2,079,716 2,166,132 88,483 855,482 943,965 Total $’000 (3,386) (1,887) (1,000) 416 (5,857) (851) 67 (6,641) 95 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)15 Loss allowance (continued) 15.2 Movement in credit loss allowance by ECL stage Balance as at 1 January 2022 Net credit impairment charges Additions through business combinations Balance as at 31 December 2022 Net credit impairment charges Reclassifications and other movements Balance as at 31 December 2023 Stage I $’000 (3,386) (1,160) (700) (5,246) (726) 72 (5,900) Lifetime ECL Stage II $’000 Stage III $’000 Total ECL $’000 - (30) (300) (330) (105) 300 (135) - (281) - (281) (20) (305) (606) (3,386) (1,471) (1,000) (5,857) (851) 67 (6,641) Accounting policy The Group applies the ECL model under AASB 9 for the following financial assets measured at amortised cost: • Trade and other receivables; • Loans receivable; • Loan commitments; and • Contract assets. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets. Measurement of ECL The Group collectively assesses and segments its financial assets by the class of financial asset, type of exposure and groups the assets based on shared risk characteristics. The Group applies the following approach for measuring loss allowances: • Modelled collective ECL; • Post-model overlay adjustments; and • Specific provisions. The ECL model is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between cash flows due to the Group in accordance with the contract and cash flows that the Group expects to receive). The ECL model incorporates a range of components. The key model inputs used by the Group in measuring the ECL includes: • Probability of Default (PD): represents the possibility of a default over the next 12 months; • Loss Given Default (LGD): expected loss if a default occurs, taking into consideration the mitigating effect of collateral assets and time value of money; • Exposure at Default (EAD): represents the estimated exposure in the event of a default; and • Post-model overlay adjustments: The Group applies an economic overlay to the modelled ECL to ensure the loss provision is sufficiently responding to changes in credit risk that would not be captured in the above assumptions. Forward-looking information (FLI) is used by the Group which includes economic indicators such as economic forecast and outlook, GDP growth, inflation, unemployment rates and interest rates. The Group measures the loss allowance for a financial asset at an amount equal to the lifetime ECL if the credit risk on that financial asset has had a significant increase in credit risk (SICR) since initial recognition. If the credit risk on a financial asset has not increased significantly since initial recognition, the Group measures the loss allowance for that financial asset at an amount equal to a 12-month ECL. The Group applies the three-stage model based on the change in credit risk since initial recognition to determine the loss allowance of its financial assets. 96 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)15 Loss allowance (continued) Accounting policy (continued) Stage Required provision Provision approach Stage 1: 12-month ECL Performing financial assets less than 30 days past due. Financial assets which are determined to have a low credit risk at reporting date. Losses that arise from a default event in the next 12 months. Modelled collective provision based on the PD, LGD and FLI with post-model overlay adjustments. Stage 2: Lifetime ECL The Group determines that there has been a SICR in the asset since initial recognition but it is not considered to be credit impaired. Loss provision equal to the expected loss over the remaining lifetime of the financial asset. Modelled collective provision based on the PD, LGD and FLI with post-model overlay adjustments. Stage 3: Lifetime ECL – credit impaired The Group determines a financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Lifetime ECL collective provision or individually assessed (specific) provision. Modelled collective provision, specific provisions with post- model overlay adjustments. The Group has provided for loan commitments that are both drawn and undrawn. In assessing whether there has been a SICR, the Group considers the changes in risk of a default occurring on the loan to which the commitment relates. The undrawn commitment is contingent on the counterparty achieving contractual milestones. Once they are achieved, the amount can be drawn upon and expected to be met within 12 months. The Group applies a loss allowance on entire commitments based on the 12-month ECL. For contract assets, the trail commission receivable is mainly from financial institutions with high credit ratings. Even when forward-looking assumptions are considered the ECL would not be material. The Group applies the simplified approach for trade receivables which uses a lifetime ECL. Trade receivables are grouped based on the shared credit risk characteristics and the days past due. The ECL is calculated based on actual credit loss relating to revenue from experience over the past three years adjusted for the Group’s forward looking expectations based off economic indicators. The Group performed the calculation of ECL rates separately for receivables arising from the advisory business and other asset management fees as such fees have historically been received in full. Definition of default The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that receivables that meet either of the following criteria are generally not recoverable. • When repayments are at least 90 days past due; or • When there is a breach of financial covenants by the counterparty; or • Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group). Write-off policy The Group writes-off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. Any recoveries made are recognised in profit or loss. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group. 97 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)15 Loss allowance (continued) Key estimates and assumptions Significant increase in credit risk (SICR): The Group considers quantitative and qualitative factors, based on historical experience and informed credit assessments when assessing exposures to determine whether there has been a SICR. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort. In addition to the above, the Group considers a SICR based on the number of days past due. A non-trade receivable loan is assessed to have a SICR when the number of days past due is over 90 days. In particular, the following information is taken in account when assessing whether credit risk has increased significantly since initial recognition: • existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations; • an actual or expected significant deterioration in the operating results of the debtor; and • an actual or expected significant adverse change in regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations. A financial asset is determined to have low risk if it has a low risk of default, the customer has a strong capacity to meet its contractual cash flow obligations in the short-term, and adverse changes in long-term economic and business conditions will not necessarily reduce the ability of the customer to fulfil its contractual cash flow obligations. The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a SICR and revises them as appropriate to ensure that the criteria are capable of identifying SICR before the amount becomes past due. Probability of Default (PD): An estimate of the likelihood of default over a given time. These are estimated considering the contractual maturities and is based on current conditions, adjusted to consider estimates of future conditions that will impact PD. Loss Given Default (LGD): An estimate of the loss arising on default. It is based on the difference between contractual cash flows due and those that the Group expects to receive, considering cash flow capacity of the customer. Forward-looking information (FLI): The Group considers economic indicators such as economic forecast and outlook, GDP growth, inflation, unemployment rates and interest rates. Post-model overlay adjustments: Management applies an economic overlay to ensure the Group has sufficient coverage for potential credit risk factors that are not captured in the assumptions above. 98 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)16 Contract assets and liabilities Contract assets Trail commission receivable – current Trail commission receivable – non-current Total contract assets Contract liabilities Trail commission payable – current Trail commission payable – non-current Total contract liabilities 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 162,237 543,048 705,285 152,051 509,107 661,158 139,280 467,952 607,232 131,061 440,304 571,365 Accounting policy Through its mortgage aggregation platform, Finsure, the Group receives trail commissions from lenders on loans that have settled and were originated by authorised brokers. The Group also makes trail commission payments to authorised brokers. The Group’s trail commission receivable is recognised at fair value on initial recognition, being the expected future trail commission receivables discounted to their net present value in line with the expected value method under AASB 15. In addition, an associated payable and expense to the relevant brokers is also recognised, initially measured at fair value being the future trail commission payable to relevant brokers discounted to their net present value. Subsequent to initial recognition and measurement both the trail commission asset and trail commission payable are measured at amortised cost. The carrying amount of the trail commission asset and trail commission payable are reassessed at each reporting period, to reflect actual and revised estimated cash flows, by recalculating the carrying amount with reference to the present value of estimated future cash flows at the original effective interest rate. Any resulting adjustment is recognised in profit or loss. Key estimates and assumptions Management uses a variety of inputs including external actuarial analysis of historical information to determine trail commission receivables and its associated payable and expense. Key assumptions underlying the calculation include the expected loan run-off rate and the discount rate. The key assumptions underlying the fair value calculations of trail commission receivable and the corresponding payable to authorised brokers at the reporting date are summarised in the following table: Discount rate Run-off rates¹ 31 Dec 2023 Consolidated 31 Dec 2022 Consolidated 4.75% 4.75% Between 12.0% and 33.0% Between 12.0% and 33.0% 1. The run-off rates refer to the expected loan book attrition rates. Run-off rates are then stratified into time-bands, by managed loan portfolio, and applied to each loan according to the age of that particular loan. 99 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)17 Other financial assets and liabilities Financial assets – current Financial assets held at FVTPL (equity securities) Financial assets held at FVTOCI (equity securities) Consolidated managed fund investments1 Total financial assets – current Financial assets – non-current Financial assets held at FVTPL (non-equity securities) Financial assets held at FVTOCI (equity securities) Total financial assets – non-current Total financial assets Financial liabilities – current Consolidated managed fund investments1 Total financial liabilities – current Total financial liabilities 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 619 1,600 159,015 161,234 7,588 18,117 25,705 186,939 102,415 102,415 102,415 640 11,600 154,860 167,100 15,479 13,733 29,212 196,312 116,419 116,419 116,419 1. Net consolidated managed fund investments at 31 December 2023 at $56.6 million (2022: $38.4 million) represents financial assets and liabilities of funds managed by the Group, that are deemed to be controlled by the Group at the reporting date as a result of a strategic co- investment held by the Group in the fund. Refer to further information in note 34. Accounting policy Recognition and initial measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument and are initially measured at fair value. Transactions costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss (FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised in profit or loss. Classification and subsequent measurement The Group’s financial assets are classified based on the business model within which the asset is held and on the basis of the financial asset’s contractual cash flow characteristics. In determining the business model, all relevant evidence that is available at the date of the assessment is used, including: • how the performance of the business model and financial assets held is evaluated and reported to management; • the risks that affect the performance and the way in which those risks are managed; and • how the managers of the business are compensated; such as whether it is based on the fair value of the assets managed or on contractual cash flows collected. A financial asset is measured at amortised cost if it meets all of the following conditions: • The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on principal amount outstanding; and • The financial asset has not been designated at FVTPL. 100 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)17 Other financial assets and liabilities (continued) Accounting policy (continued) The amortised cost of a financial asset is measured as: • the amount at which the financial asset is measured at initial recognition; • minus the principal repayments; • plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount; and • adjusted for any loss allowance. Refer to note 6 for further information on the effective interest method. A financial asset is measured at fair value through other comprehensive income (FVTOCI) if it meets all of the following conditions: • The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and • The financial asset has not been designated at FVTPL. However, the Group may make the following irrevocable election at initial recognition of a financial asset: • The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met such as, if the equity instrument is not held for trading; and • The Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. A financial asset is held for trading if: • It has been acquired principally for the purpose of selling it in the near term; or • On initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a recent actual pattern of short-term profit-taking; or • It is a derivative. Financial assets designated at FVTOCI are initially measured at fair value plus transaction costs. Gains and losses relating to these financial assets will be recognise in other comprehensive income. Dividends from such investments are recognised as investment income in profit or loss when the Group has the right to receive payments, unless the dividend clearly represents a recovery of part of the cost of the investment. The accumulated fair value reserve related to these investments will never be reclassified to profit or loss. Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Specifically: • Investments in equity instruments are classified at FVTPL, unless the Group designates an equity investment that is neither held for trading nor a contingent consideration arising from a business combination at FVTOCI on initial recognition; and • Debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria are classified at FVTPL. In addition, debt instruments that meet either the amortised cost criteria or the FVTOCI criteria may be designated at FVTPL upon initial recognition if such designation if doing so eliminates or significantly reduces an accounting mismatch. Financial assets measured at FVTPL are classified under a three-level fair value hierarchy that reflects the significance of the inputs used in making the measurements. Any fair value gains or losses including any interest or dividend income earned on the financial asset, are recognised as investment income in profit or loss. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. Refer to note 26 for further information regarding the fair value of financial assets and financial liabilities. 101 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)17 Other financial assets and liabilities (continued) Accounting policy (continued) Financial liabilities and equity instruments Debt or equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Group entity is measured as proceeds received less direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Financial liabilities that are not designated at FVTPL, are subsequently measured at amortised cost using the effective interest method. Borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group that are unpaid. Key estimates and assumptions The Group uses judgement in determining the business model at the level that reflects how groups of financial assets are managed together to achieve a particular business objective. 18 Property, plant and equipment The below table sets out the carrying value of the Group’s property, plant and equipment: Office equipment – at cost Less accumulated depreciation Total office equipment Furniture and fixtures – at cost Less accumulated depreciation Total furniture and fixtures Lease improvements – at cost Less accumulated depreciation Total leasehold improvements Total property, plant and equipment 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 5,160 (3,535) 1,625 1,516 (286) 1,230 2,185 (777) 1,408 4,263 5,269 (2,419) 2,850 1,840 (468) 1,372 3,673 (1,922) 1,751 5,973 102 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)18 Property, plant and equipment (continued) 18.1 Movement in carrying value of property, plant and equipment The below table sets out the movement in carrying value of the Group’s property, plant and equipment: Consolidated Assets for own use Balance as at 1 January 2022 Additions Additions through business combinations Disposals Depreciation expense Balance as at 31 December 2022 Additions Disposals Depreciation expense Foreign currency movement Balance as at 31 December 2023 Office equipment $’000 Furniture and fixtures $’000 Leasehold improvements $’000 1,085 3,117 2 (5) (1,349) 2,850 258 (34) (1,449) - 1,625 808 575 124 (33) (102) 1,372 35 (99) (78) - 1,230 142 1,973 - - (364) 1,751 90 (30) (423) 20 1,408 Total $’000 2,035 5,665 126 (38) (1,815) 5,973 383 (163) (1,950) 20 4,263 The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Impairment losses are recognised in profit or loss. Accounting policy Property, plant and equipment are stated at historical cost (which includes, where applicable, costs directly attributable to the acquisition of the asset) less accumulated depreciation and, where applicable, accumulated impairment losses. Depreciation is calculated on a straight-line basis to realise the net cost of each class of assets over its expected useful life. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The useful lives are as follows: • office equipment: 3 years • • furniture and fittings: 7 years leasehold improvements are amortised over the term of the lease 103 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)19 Right-of-use assets and lease liabilities 19.1 Right-of-use assets Right-of-use assets – at cost Less accumulated amortisation Total right-of-use assets Balance at the beginning of the year Additions Additions through business combinations (note 34) Lease modification Amortisation expense Foreign currency movement Balance at the end of the year 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 81,854 (15,871) 65,983 61,773 12,995 43 614 (9,437) (5) 65,983 71,038 (9,265) 61,773 9,874 60,210 990 (1,281) (8,073) 53 61,773 During the year, a commercial lease commenced for additional office premises in Sydney. The lease term is 10 years with renewal terms included in the contract. Renewal is at the specific option of the Group. 19.2 Lease liabilities Current Lease liabilities Total lease liabilities – current Non-current Lease liabilities Total lease liabilities – non-current Total lease liabilities 19.2 (a) Movement in lease liabilities Opening balance at the beginning of the year Interest on lease liabilities Payment of lease liabilities Additions through business combinations (note 34) Lease modification Additions1 Foreign currency movement Closing balance at the end of the year 1. Additional office premises in Sydney. 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 6,141 6,141 65,369 65,369 71,510 64,952 4,354 (11,444) 43 614 12,995 (4) 71,510 6,219 6,219 58,733 58,733 64,952 10,285 3,513 (8,953) 1,633 (1,578) 59,994 58 64,952 104 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)19 Right-of-use assets and lease liabilities (continued) 19.2 Lease liabilities (continued) 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 19.2 (b) Lease liabilities maturity analysis – contractual undiscounted cashflows Less than one year One to five years More than five years Total undiscounted lease liabilities at the end of the year Accounting policy Right-of-use assets The Group recognises a right-of-use asset and a corresponding lease liability at the commencement date in the Statement of financial position, except for short-term leases and leases of low value assets. Right-of-use assets are measured at cost and comprise of the amount that corresponds to the amount recognised for the lease liability on initial recognition together with any lease payments made at or before the commencement date (less any lease incentives received), initial direct costs and restoration-related costs. The right-of-use asset is amortised over the shorter of the asset’s useful life and the lease term on a straight-line basis. Amortisation of right-of-use assets starts at the commencement date of the lease and is recognised in the Statement of profit or loss and other comprehensive income. Lease liabilities 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. Lease payments included in the measurement of the lease liability comprise: • Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; • Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change in future lease payments arising from a 10,344 57,179 23,236 90,759 10,266 46,563 27,384 84,213 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 a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. Lease payments are recognised as amortisation expense of the right-of-use asset over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: • The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). • A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. 105 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)19 Right-of-use assets and lease liabilities (continued) Key estimates and assumptions Generally, the Group uses its incremental borrowing rate as the discount rate. Interest on lease liabilities is recognised in profit or loss. The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. 20 Investments in associates and joint ventures 20.1 Details of ownership interest Material associates BE ES I LLC1 BE OLD I LLC1 Principal place of business Principal activity United States of America Specialty finance United States of America Specialty finance Redcape Hotel Group Australia Owner and operator of hotels Other associates² Proportion of ownership interest and voting power held by the Group 2023 % - - 2022 % 49.6% 49.9% 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 - - 22,415 8,274 57,086 3,811 91,586 11.7% 10.8% 49,296 1,475 50,771 1. During the year, the Group obtained control of BE ES I LLC and BE OLD I LLC as a result of its acquisition of Blue Elephant (refer to note 34). The Group subsequently derecognised its investments in BE ES I LLC and BE OLD I LLC as associates. 2. Other associates represents the aggregate of the Group’s remaining associates, that are not considered individually material to the Group, and therefore have not been separately disclosed. 106 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)20 Investments in associates and joint ventures (continued) 20.2 Reconciliation of movements in carrying values of investments in associates $’000 BE ES I LLC BE OLD I LLC MA Kincare Fund Redcape Hotel Group Other associates (2,205) (103) (135) (5,413) (127) (7,983) Opening balance as at 1 January 2022 Acquisition Disposal and capital returns Share of profit/(loss) Share of other comprehensive income Less dividends/ distributions received Foreign currency translation reserve Closing balance as at 31 December 2022 Acquisition Disposal and capital returns 19,400 1,609 - 2,422 - 2,068 5,659 - 310 - 1,189 340 22,415 4,763 8,274 - (27,314) (8,239) Share of profit/(loss) 1,601 673 Share of other comprehensive income/(loss) Less dividends/ distributions received Foreign currency translation reserve Closing balance as at 31 December 2023 - - (2,127) (888) 662 180 - - 7,595 620 84,339 - (8,827) (23,313) 747 (731) 6,991 2,859 (4,680) (1,359) Total 120,393 10,747 (36,820) 1,389 - 2,204 - 2,204 - - - - - - - - - - 127 1,656 57,086 6,432 (1,188) (13) (8,856) (4,165) 3,811 410 (2,771) (175) - 74 91,586 11,605 (39,512) 2,086 (8,856) (7,106) - 126 968 49,296 1,475 50,771 The Group also has interests in a number of individually immaterial associates. The unrecognised share of losses for investments in associates that have a nil carrying value for the year ended 31 December 2023 is $6.4 million (2022: $2.2 million). 107 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)20 Investments in associates and joint ventures (continued) 20.3 Summarised financial information for the Group’s material associates $’000 31 December 2023 Assets and liabilities Current assets Non-current assets Current liabilities Non-current liabilities Net assets/(liabilities) The above net assets include the following: Cash and cash equivalents Revenue, expenses and results Revenue Profit/(loss) for the year Other comprehensive (loss)/income for the year Total comprehensive loss for the year 31 December 2022 Assets and liabilities Current assets Non-current assets Current liabilities Non-current liabilities Net assets/(liabilities) The above net assets include the following: Cash and cash equivalents Revenue, expenses and results Revenue Profit/(loss) for the year Other comprehensive income for the year Total comprehensive income/(loss) for the year BE ES I LLC BE OLD I LLC Redcape Hotel Group Other associates - - - - - - - - - - - - - - - - - - - - 168,200 109,034 1,018,159 518,000 (191,304) (690,860) (573,740) - 421,315 (63,826) 38,660 104,320 203,847 274,669 23,830 (49,293) (86,459) (62,629) 13,112 (36,181) 3,511 39,392 (2,487) 4,986 33,354 38,809 1,276,318 174,341 841,126 (670) (96,199) (1,081,426) (420) (26,978) (685,383) (97) 39,996 16,147 528,090 (66,056) 2,678 1,534 19,246 176,482 5,302 5,030 - 5,030 4,094 210,219 700 - 700 (4,748) 31,509 26,761 5,122 (3,181) - (3,181) 108 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)20 Investments in associates and joint ventures (continued) 20.3 Summarised financial information for the Group’s material associates (continued) The following information outlines the level of control the Group has over its material associates and the resultant accounting treatment. The results and assets and liabilities of associates or joint ventures are incorporated in these financial statements using the equity method of accounting. Associates’ financial reports are used to apply the equity method. The Statement of profit or loss and other comprehensive income reflects the economic share of the results of operations of associates. Where there has been a change recognised directly in the associates equity, the Group recognises its share of any changes in the Statement of changes in equity. Key estimates and assumptions An assessment is performed at each Statement of financial position date to determine whether there is any indication of impairment and whether it is necessary to recognise any impairment loss against the carrying value of the net investment in associates. The Group determines the dates of obtaining or losing significant influence of another entity based on all pertinent facts and circumstances that affect the ability to significantly influence the financial and operating policies of that entity. Details of investment in Redcape Hotel Group At 31 December 2023, the Group has a 11.7% direct equity investment in Redcape Hotel Group (Redcape) and funds managed by the Group own a further 29.2% of Redcape. During the year, the Group sold 1.0 million units for $1.7 million and purchased 3.9 million units for $6.4 million in Redcape. The Group earns trustee, asset manager, performance and hotel operator fees from Redcape, as well as investment returns on its direct investment. The Group is considered to have significant influence over Redcape as a result of participating in the financial and operating policy decisions of Redcape through its role as responsible entity, asset manager and hotel operator. Redcape owns or operates 31 hotels in New South Wales and Queensland. During the year, the Group completed the divestment of four hotels for total consideration of $63.9m and has exchanged contracts for the divestment of four hotels and the acquisition of one hotel to be settled in the 2024 financial year. Redcape assessed their assets for impairment at 31 December 2023. The Directors are satisfied that the impairment testing performed by Redcape is reasonable, and that no additional impairment is required for the Group’s investment in Redcape. Redcape has recognised a decrease in its net assets at 31 December 2023, of which the Group’s share of the decrease has been equity accounted. Accounting policy Associates are entities over which the Group has significant influence of the entities’ financial and operating policies but not control. Investment in associates are accounted for under the equity method whereby investments are carried at cost adjusted for post-acquisition changes in the Group’s economic share of the net assets of the entity. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. 109 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)21 Intangible assets Intangible assets Customer relationships, brand names and trademarks $’000 Management rights and agreements $’000 Goodwill $’000 Software $’000 Total $’000 31 December 2023 Cost Balance at 1 January 2023 128,169 44,000 22,939 10,499 205,607 Additions through business combinations (note 34) Additions Foreign currency movement 13,877 - (398) - - - - - - - 13,877 3,715 - 3,715 (398) Balance at 31 December 2023 141,648 44,000 22,939 14,214 222,801 Amortisation and impairment losses Balance at 1 January 2023 Amortisation expense for the year Balance at 31 December 2023 - - - (3,405) (14,034) (1,770) (5,175) (3,479) (17,513) (3,150) (1,023) (4,173) (20,589) (6,272) (26,861) Carrying amount at 31 December 2023 141,648 38,825 5,426 10,041 195,940 31 December 2022 Cost Balance at 1 January 2022 Additions through business combinations Additions 14,010 114,159 - - 22,939 4,182 41,131 44,000 - - - 2,300 160,459 4,017 4,017 Balance at 31 December 2022 128,169 44,000 22,939 10,499 205,607 Amortisation and impairment losses Balance at 1 January 2022 Amortisation expense for year Balance at 31 December 2022 - - - Carrying amount at 31 December 2022 128,169 - (3,405) (3,405) 40,595 (11,318) (2,716) (14,034) (1,918) (1,232) (3,150) (13,236) (7,353) (20,589) 8,905 7,349 185,018 During the year, the Group acquired Blue Elephant and recognised $13.9 million of goodwill. Refer to note 34 for further details of the acquisitions. Included in the deferred tax liability of the Group as at 31 December 2023 is an amount of $12.3 million (31 Dec 2022: $13.8 million) relating to the intangible assets recognised from the acquisition of subsidiaries. 110 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)21 Intangible assets (continued) Accounting policy Goodwill Goodwill arising on acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash- generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit (CGU) to which goodwill has been allocated is tested for impairment annually, or more frequently where there is indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit, pro-rated based on the carrying amount of each asset in the unit. Any impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Intangible assets Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to their initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. For intangible assets that have a finite useful life, an assessment is made at each reporting date for indications of impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (CGUs). Intangible assets (other than goodwill) that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Costs incurred in acquiring and developing software, that is not cloud based, that will contribute to the Group’s future financial benefits are capitalised as software and are amortised over the estimated useful life on a straight-line basis. Costs capitalised include external direct costs of materials, service, consultants spent on the projects and internal costs of employees directly engaged in delivering the projects. For software in the course of development, amortisation commences once development is complete and the software is in use. Costs incurred on the maintenance of software is expensed as incurred and recognised in profit or loss. Subsequent expenditure is recognised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands is recognised in profit or loss. Costs incurred on the maintenance of software is expensed as incurred and recognised in profit or loss. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. Amortisation of intangible assets Goodwill is allocated to CGUs and is not amortised. Brand names have an indefinite useful life and are not amortised. For intangible assets which are amortised, the useful lives for the current and comparative periods are as follows: • Management rights: the forecast profile of the profit generated • Customer relationships and property management agreements: the expected life of the contracts • Software and trademarks: 3 to 10 years Useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. 111 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)21 Intangible assets (continued) Key estimates and assumptions Impairment assessment of intangible assets The Group assesses whether goodwill is impaired at least annually. For the purposes of impairment testing, goodwill is allocated to the Group’s CGUs. The CGUs align with the Group’s operating segments as disclosed in note 3 and are consistent with the comparative period. The recoverable amount of each CGU is determined based on the value in use calculations that utilise five-year cash flow projections plus a terminal value based on the financial forecasts approved by management. In determining these cash flow projections, management considers: • current and expected performance of each CGU; • Board and management-approved budgets and strategic plans; and • changes in Australian and international economic and market environments. The relevant assumptions in deriving the value in use of the CGUs are as follows: • the budgeted net profit before tax for each CGU for each year within the cash flow projection period; • the pre-tax discount rate; and • growth rates, which are consistent with long- term trends in the industry segments in which the CGUs operate. No impairment charge was recognised during the year as the recoverable amount of each CGU was determined to be in excess of the carrying amount. The following CGUs represent the carrying amounts of goodwill: Asset Management Lending & Technology CA&E Total 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Terminal growth rates Pre-tax discount rates 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 12.5% 13.0% 11.0% 12.5% 13.0% 11.0% $’000 26,163 114,159 1,326 $’000 12,684 114,159 1,326 141,648 128,169 Sensitivity analysis Management considered, for all CGUs, that reasonable changes in key assumptions, such as an increase in the discount rate by 2.5% and a decrease in the growth rate by 1%, leaving all other assumptions constant, would not result in the carrying amount exceeding the value in use for any of the CGUs. The sensitivity analysis was done on the basis that a reasonably possible change in each key assumption would not have a consequential impact on other assumptions. 112 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)22 Trade and other payables Current Accounts payable and accrued expenses Accrued commissions Other liabilities GST payable Total trade and other payables – current Non-current Other liabilities Total trade and other payables – non-current Total trade and other payables 23 Borrowings Current Unsecured notes Unsecured notes – limited recourse Mortgage trust notes Total borrowings – current Non-current Unsecured notes Unsecured notes – limited recourse Fund preferred units Mortgage trust notes Securitised borrowings¹ Total borrowings – non-current Total borrowings 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 16,050 16,689 25,000 1,901 59,640 5,449 5,449 65,089 40,000 30,030 335,485 405,515 25,000 109,190 26,187 37,541 11,674 2,163 77,565 240 240 77,805 - 30,030 216,475 246,505 65,000 60,000 1,127,452 568,584 471,920 14,419 1,747,981 2,153,496 - - 693,584 940,089 1. The securitised borrowings are within a consolidated credit trust and is secured against the assets of that consolidated credit trust. Information about the Group’s exposure to interest rate and liquidity risk is included in note 25. Unsecured notes programme (a) Except for the obligation to pay periodic interest and repay the principal, the terms of the unsecured notes, including the limited recourse notes, do not include any material undertakings or obligations which, if not complied with, would result in an acceleration of the amount owing. 113 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)23 Borrowings (continued) (a) Unsecured notes programme (continued) (i) Unsecured notes Classification Issue Maturity date Amount ($m) Interest rate per annum (ii) Unsecured notes – limited recourse MA IV MA VI Current Non-current 2020 2022 Sep 2024 Sep 2027 40.0 5.85% 25.0 5.75% Classification Issue Maturity Date Amount ($m) MACI MACPI MALI 1 MALI 2 Current Non-current Non-current Non-current 2019 2021 2023 2023 May 2024 Dec 2027 May 2028 July 2026 30.0 70.0 10.0 29.2 8.10% Interest rate per annum RBA + 4.35% RBA + 4.00% RBA + 10.25% The MACI and MACPI limited recourse notes have been designed and issued principally for investors under the Significant Investor Visa (SIV) programme. The notes constitute unsecured, unsubordinated obligations of issuing special purpose Group entities (issuing entities). The issuing entities invest the proceeds of the note issuances in a diversified portfolio of financial assets. The notes have sole recourse to the assets of the relevant issuing entities and are not guaranteed by the Company. MACI The MACI note has a five-year stated maturity, however can be redeemed at the option of the note holders subject to a minimum 12-month holding period following issue. This redemption feature was designed to provide for the individual requirements of the SIV investors to align with the timing of when the SIV investors receive their permanent residency status. The interest rate is calculated at a margin of 4.35% over the RBA cash rate and resets in February and August of each year. There were no redemptions of the MACI note during the year ended 31 December 2023 (year ended 31 December 2022: nil). MACPI The MACPI note has a six-year maturity with the interest rate calculated at a margin of 4.00% over the RBA cash rate and resets in February and August of each year. $10.0 million of additional funds were raised during the period (year ended 31 December 2022: $35.0 million). The MACPI note facilitates investments for note investors with assets restricted for the benefit of those investors. MALI 1 During the year, $10.0 million was raised via the issuance of the MALI 1 note. The note has a five-year maturity with the interest rate calculated at a margin of 10.25% over the RBA. The note is limited in recourse only to the assets of the issuer. If proceeds from those assets are insufficient to repay or redeem the notes, then there will be no further recourse to the broader assets of the Group. MALI 2 During the year, $29.2 million was raised via the issuance of the MALI 2 note. The note has a three- year maturity with an interest rate of 8.1%. The note is limited in recourse only to the assets of the issuer. If proceeds from those assets are insufficient to repay or redeem the notes, then there will be no further recourse to the broader assets of the Group. 114 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)23 Borrowings (continued) (b) Fund preferred units MA Priority Income Fund (PIF) and MA USD Priority Income Fund (USD PIF) The Group manages the PIF and USD PIF. The Funds provide investors with exposure to a diversified portfolio of credit investments via an investment in Class A Units (Fund Preferred Units) in MA Master Credit Trust, MA USD Master Credit Trust and MA Diversified Credit Trust (MCTs). As a co-investment, the Group holds Class B Units in the respective MCTs. The MCTs are consolidated entities of the Group. Fund Preferred Units receive a preferential distribution from the realised profits of the MCTs. The Class B Units held by the Group receive any excess distributable profits after paying the preferential distribution on the Fund Preferred Units and any MCT expenses. The Class B Units held by the Group also provides investors with a “first loss” capital buffer which affords the Fund Preferred Units preferential treatment on distribution and wind-up of the MCTs. The Group’s maximum economic exposure is limited to the value of the Class B Unit. Redemptions of the Fund Preferred Units are at the discretion of the MCTs trustee and require the consent of the Group. Therefore the units are treated as non- current liabilities as the Group has an unconditional right to defer settlement for at least 12 months after the end of the reporting period. Classification Fund Preferred Units: 31 December 2023 ($m) 31 December 2022 ($m) Fund Preferred Units preferential distribution Class B Units "first loss" co-investment: 31 December 2023 ($m) 31 December 2022 ($m) 1. Secured Overnight Financing Rate. (c) Mortgage trust notes The Group’s mortgage lending activity is funded through a combination of warehouse facilities provided by major and mid-tier Australian and international banks, and public term securitisation transactions. Warehouse facilities are limited recourse funding vehicles established by the Group and funded by key banking partners to originate new mortgages to customers. As at 31 December 2023, the unutilised capacity across all facilities is $1,078.0 million (2022: $208.5 million). The maturity date for these facilities range from less than 12 months to up to 36 months from reporting date. PIF USD PIF Non-current Non-current 1,107.4 544.8 RBA cash rate + 4.00% 10% 110.7 54.5 20.1 23.8 SOFR1 + 3.50% 10% reducing to 5% 2.0 2.4 A term securitisation transaction is where a pool of mortgage assets, initially originated in the Group’s warehouse facilities, are grouped together and sold to a new limited recourse funding vehicle, which then issues securities against those mortgage assets (residential mortgage-based securities) to investors in public wholesale capital markets. The Group completed its first term securitisation transaction in November 2023. 115 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)24 Provisions Current Salaries, wages and bonuses Provision for annual leave Provision for long service leave Total provisions – current Non-current Provision for long service leave Total provisions – non-current Total provisions 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 28,941 6,658 3,196 38,795 1,645 1,645 33,817 7,661 3,527 45,005 1,624 1,624 40,440 46,629 Accounting policy Employee benefit liabilities represents accrued wages, salaries, bonus, annual and long service leave entitlements recognised in respect of employee services up to the end of the reporting date. Liabilities recognised in respect of short-term employee benefits are measured at the amounts expected to be paid when the liabilities are settled by the Group in respect of services provided by employees up to the reporting date. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date. Key estimates and assumptions 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 date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. 116 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management 25.1 Risk management framework The Group’s activities expose it to a variety of financial and non-financial risks. Financial risks include credit risk, liquidity risk and market risk (including currency risk, interest rate risk and price risk). The Group’s overall risk management framework operates to identify and assess all the risks to which the Group is exposed, including financial risks, with the aim of identifying options for risk treatment, maintaining the Group’s exposure within the parameters set out in its Risk Appetite Statement, and to provide management information. The Group’s overall risk management framework is summarised in its Corporate Governance Statement, available on its website, and in the Sustainability report. These documents outline the role of the Board, the Audit and Risk Committee (ARC), the Group’s Risk Appetite Statement and the Risk Management Statement which describes the approach to risk management – including responsibilities, governance, methods for risk identification, treatment and reporting, and coordination across the Group. Detailed procedures and system guides are typically maintained at the business unit level and also in the Group’s finance function. The Board is responsible, in conjunction with senior management, for ensuring the Group maintains a risk management framework, for understanding the risks associated with the activities of the Group, and implementing structures and policies to adequately monitor and manage those risks. The Board is assisted by the ARC and by the Senior Executive Risk Committee. The practical management of many financial risks takes place, in the first instance, within the Group’s business units, led by senior managers. This includes the management of financial risks in relation to investment funds, which can involve client monies, fund costs, financing investments and managing debt facilities. The Group’s finance function maintains oversight of this activity, especially where it has implications for the Group’s financial resources and accounting. 25.2 Capital management The capital structure of the Group consists of net cash (cash and bank balances offset by the unsecured notes, drawn portion of the working capital facility) and equity (comprising contributed equity, retained earnings and reserves). The Group manages its capital with the aim of ensuring that the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall capital management strategy remains unchanged from 2022. The Group’s subsidiaries have satisfied all externally imposed capital requirements throughout the financial year, as per the requirements set out below: • MA Moelis Australia Securities Pty Ltd, is an ASX market participant and therefore has an externally imposed capital requirement. • Certain other subsidiaries of the Company hold an Australian Financial Services Licence (AFSL) and therefore have externally imposed separate capital requirements. • MA Money has a contractual obligation to hold a minimum amount of capital at all times. During the year, the Group upsized its revolving working capital facility from $40.0 million to $80.0 million. The facility was undrawn at 31 December 2023. In accordance with the terms of the working capital facility, the Group is required to comply with certain covenants. During the year ended to 31 December 2023, the Group was compliant with these covenants. The Group’s borrowings comprise unsecured notes of $204.2 million (2022: $155.0 million), mortgage trust notes $807.4 million (2022: $216.5 million), fund preferred units $1,127.5 million (2022: $568.6 million) and securitised borrowings $14.4 million (2022: nil). The maturity dates of the unsecured notes are shown in the table below. Except for the obligation to pay periodic interest and repay the principal at the end of the term, the terms of the unsecured notes do not include any material undertakings or obligations which, if not complied with, would result in an acceleration of the amount owing. The maturity dates of the unsecured notes are shown in the table below. Except for the obligation to pay periodic interest and repay the principal at the end of the term, the terms of the unsecured notes do not include any material undertakings or obligations which, if not complied with, would result in an acceleration of the amount owing. The MACPI note cannot be redeemed at the option of the note holders and must be held to maturity. 117 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.2 Capital management (continued) Unsecured notes Current MA IV Non-current MA IV MA VI Unsecured notes – limited recourse Current MACI Non-current MACPI MALI 1 MALI 2 Total unsecured notes Maturity date 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 30 September 2024 40,000 - 30 September 2024 30 September 2027 - 25,000 40,000 25,000 16 May 2024 30,030 30,030 1 December 2027 10 May 2028 31 July 2026 70,000 10,000 29,190 60,000 - - 204,220 155,030 25.3 Market risk 25.3.1 Currency risk Market risk is the risk that the fair value and/or future cash flows from a financial instrument will fluctuate as a result of changes in market factors. Market risk comprises of: • Currency risk: due to fluctuations in foreign currency exchange rates; • Interest rate risk: due to fluctuations in market interest rates; and • Price risk: due to fluctuations in fair value of equities and other instruments. The Group’s investment of capital in foreign operations, for example, subsidiaries or associates with functional currencies other than the Australian dollar, exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of exchange differences are reflected in the foreign currency translation reserve in equity. The Group manages its exposure to income denominated in foreign currency when foreign currency income is recognised or received in cash. Foreign currency debtors and foreign currency bank balances are periodically reviewed relative to the Group’s balance sheet and liquidity requirements. Revenue received in foreign currency may be retained in those currencies, in order to meet future foreign currency denominated expenses, and exposes the Group to unrealised foreign currency gains or losses. 118 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.3 Market risk (continued) 25.3.1 Currency risk (continued) The following table details the Group’s net exposure to foreign currency as at the reporting date in Australian dollar equivalent amounts. Currency United States Dollar Chinese Yuan Great British Pound Hong Kong Dollar Exposure in Australian dollars Assets Liabilities 31 Dec 2023 $’000 31 Dec 2022 $’000 31 Dec 2023 $’000 31 Dec 2022 $’000 108,494 301 492 1,367 110,654 37,241 218 3,906 1,216 42,581 46,452 36,117 42 43 831 43 43 109 47,368 36,312 Foreign currency sensitivity analysis The Group’s exposure to foreign exchange risk is measured using sensitivity analysis. The table below presets the sensitivity of the Group’s net exposure to the currencies, with the most impact to the Group, against the Australian dollar at the year end. A sensitivity of 10% continues to be applied as it remains reasonable given the current level of exchange rates and volatility. The impact to profit or loss and equity is at a post-tax rate of 30%. The risks faced and methods used in the sensitivity analysis are the same as those applied in the comparative period. Sensitivity 31 Dec 2023 Profit/(loss) $’000 31 Dec 2023 Change in equity $’000 31 Dec 2022 Profit/(loss) $’000 31 Dec 2022 Change in equity $’000 Currency United States Dollar Chinese Yuan Great British Pound Hong Kong Dollar Total +/-10% +/-10% +/-10% +/-10% 6,204/(6,204) 6,204/(6,204) 26/(26) 45/(45) 54/(54) 26/(26) 45/(45) 54/(54) 112/(112) 18/(18) 112/(112) 18/(18) 386/(386) 386/(386) 111/(111) 111/(111) 6,329/(6,329) 6,329/(6,329) 627/(627) 627/(627) 25.3.2 Interest rate risk Interest rate risk is the risk to the Group’s earnings and equity arising from movements in market interest rates. Interest rate exposure is driven by interest rate mismatches between assets and liabilities. Positions are monitored to ensure risk levels are maintained within established limits. 119 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.3 Market risk (continued) 25.3.2 Interest rate risk (continued) The Group’s main interest rate risk arises from cash, loans receivable and interest-bearing facilities. The table below summarises the profile of the Group’s interest-bearing financial instruments at reporting date. Fixed rate instruments Loans receivable Unsecured notes Total Variable rate instruments Loans receivable Unsecured notes Mortgage trust notes Fund preferred units Securitised borrowings Total Carrying amount 31 Dec 2023 $’000 31 Dec 2022 $’000 157,830 (94,200) 63,630 155,049 (65,000) 90,049 1,921,886 700,433 (110,020) (807,405) (90,030) (216,475) (1,127,452) (568,584) (14,419) (137,410) - (174,656) Interest rate sensitivity analysis The Group’s sensitivity to movements in interest rates in relation to the value of interest-bearing financial instruments is shown in the table below. The impact on profit and equity is at a post-tax rate of 30%. The risks faced and methods used in the sensitivity analysis are the same as those applied in the comparative period. Change in interest rates 31 Dec 2023 Profit/(loss) $’000 31 Dec 2023 Change in equity $’000 31 Dec 2022 Profit/(loss) $’000 31 Dec 2022 Change in equity $’000 Loans receivable +/-1% 20,797/(20,797) 20,797/(20,797) 8,533/(8,533) 8,533/(8,533) Borrowings +/-1% 21,535/(21,535) 21,535/(21,535) 8,500/(8,500) 8,500/(8,500) 25.3.3 Price risk Price risk is the risk that the fair value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk). The Group is exposed to equity price risk on its holdings in equity investments. The potential impact of movements in the market value of listed and unlisted equities is shown in the below sensitivity analysis. The impact on profit and equity is at a post-tax rate of 30%. The risks faced and methods used in the sensitivity analysis are the same as those applied in the comparative period. Equities Listed equities Unlisted equities Change in market prices +/-5% +/-5% 31 Dec 2023 Profit/(loss) $’000 31 Dec 2023 Change in equity $’000 31 Dec 2022 Profit/(loss) $’000 31 Dec 2022 Change in equity $’000 55/(55) 55/(55) 806/(806) 806/(806) 1,342/(1,342) 1,342/(1,342) 1,267/(1,267) 1,267/(1,267) 120 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.4 Credit risk Credit risk refers to the risk that a counterparty to a financial instrument will fail to meet its contractual obligations when they fall due. The Group mitigates its treasury-related counterparty credit risk by ensuring its cash and liquid assets are held with financial institutions of requisite credit quality. The Group’s primary credit risk exposures relate to its credit investment and lending activities. Where credit investments are originated or financed through an investment fund vehicle, the Group will only have direct exposure to credit risk to the extent it has participated in funding, underwriting the loan, or co-investing in the fund. The Group co-invests in some of its credit investment fund vehicles in various ways, including as a fund unitholder and, in some cases, as a subordinated unitholder. The Group may face indirect consequences from borrower default or other impacts of credit risk including lower fund investment returns, client dissatisfaction and the time and expense required to intensively manage the position. Note 15 details the Group’s approach to recognising and measuring ECL on credit investments. The Group engages in a range of credit investment activities, managed by its Global Credit Solutions and Real Estate Credit teams, which can include making secured loans to corporate borrowers, real estate development funding, specialty credit and asset-backed lending opportunities. The Group also undertakes direct lending through its lending platforms, including MA Money (for residential home loans) and its specialty finance business (for certain types of specialty credit where the Group is an originator of assets outside the credit investment activities it undertakes for its managed funds). In general terms, the Group controls its credit risk exposure by assessing the creditworthiness of counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with counterparties with an acceptable level of credit risk through use of a rigorous credit risk evaluation process, which may be augmented by a shadow rating process which can then be monitored over the life of the loan facility. Maximum exposure to credit risk The carrying amount of the Group’s financial assets and contract assets reported on the Statement of financial position represents the maximum exposure to credit risk. Receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group does not require collateral in respect of trade and other receivables. At each reporting period, the Group reviews the recoverable amount of each receivable on an individual basis to ensure that adequate loss allowance is made for irrecoverable amounts. Contract assets The Group’s contract assets relate mainly to high credit quality financial institutions. The Group bears the risk of non-payment of future trail commissions by lenders should they not maintain solvency. However, should a lender not meet its obligations as a debtor then the Group is under no obligation to pay out any future trail commissions to brokers. Commercial loans Where a loan is funded primarily by the Group’s financial resources, it is subject to approval by the Group’s Credit Investment Committee. In other cases, above de minimis levels, it requires the approval of the relevant fund or divisional Credit Investment Committee. The exact nature of the credit analysis undertaken differs depending on the nature of the lending activity and the size of the loan. In general, credit risk analysis is focused on ensuring that risks have been fully identified and that the downside risk is properly understood and acceptable and can include an assessment of: • • • • • • the fundamental characteristics of the borrower, including its asset, business or commercial dynamics; the borrower’s industry and relevant industry dynamics; the owner or sponsor of the borrower; the borrower’s financial characteristics, along with commercial and qualitative performance dynamics; the borrower’s own credit and financial risk management practices; ratings or internal shadow rating calculations using public information and financial information of the borrower; • historical loan performance, nature of risk and yield; • borrower’s credit policy to ascertain their underwriting practices; • alignment to the Group’s risk appetite; and • securitisation of assets and undertakings. 121 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.4 Credit risk (continued) To mitigate exposure to loan defaults, security and collateral are often negotiated and documented in executed loan agreements. Ongoing monitoring of borrowers’ financial performance (including arrears balances, ageing of arrears and losses incurred) are performed and any exceptions reported to senior management who use the information to review individual loan exposures, make decisions on reducing commitments, and where required refinancing options to refinance out of certain exposures no longer aligned to risk appetite. The Group completes an assessment of whether there is a significant increase in credit risk when an amount becomes more than 90 days past due on a case by case basis due to the fact that: • the majority of the counterparties for commercial loans made are through the Group’s managed funds, and therefore the credit risk is lower compared to external counterparties; and • historically there have been no defaults from loans described above despite being over 90 days with amounts being repaid in full within a reasonable period. Residential mortgages The Group manages its credit risk from residential mortgages by lending responsibly and obtaining security over residential property for each loan. In monitoring the credit risk, loans are grouped according to their credit characteristics using credit risk classifications. This includes the use of the Loan to Value Ratio (LVR) and days in arrears to assess the Group’s exposure to credit risk. The Group has a credit risk framework and credit risk policy for its residential lending that aligns to the responsible lending regulations. It includes stringent underwriting criteria and a thorough analysis of a borrower’s credit worthiness. The Group’s Credit Risk Council is responsible for the active management, implementation, and oversight of its credit risk framework. Under the Group’s monitoring procedures, a significant increase in credit risk is identified pre-emptively, before a default occurs. This process includes identifying exposures that become 30 days past due as a key indicator of increased risk. The Group’s loan portfolio management strategies support the individual circumstances of customers in line with its hardship policies. 122 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.4 Credit risk (continued) Ageing of amortised cost financial asset The table below gives information regarding the carrying value of the Group’s financial assets measured at amortised cost. The analysis splits these assets by those that are not past due and those that are past due. Past due Amortised cost financial assets Not past due $’000 1–30 days $’000 31–60 days $’000 61–90 days $’000 90+ days $’000 Total 31 December 2023 Receivables Loans receivable Total 31 December 2022 Receivables Loans receivable Total 59,787 2,013,417 2,073,204 83,021 835,686 918,707 1,869 34,150 36,019 212 12,195 12,407 85 18,246 18,331 96 4,584 4,680 - 24,675 86,416 8,294 8,294 5,609 2,079,716 30,284 2,166,132 799 60 859 4,355 2,957 7,312 88,483 855,482 943,965 The table below summarises the loans receivable and the loss allowance by stage. 31 December 2023 Loans receivable Loss allowance Total 31 December 2022 Loans receivable Loss allowance Total Stage I $’000 2,053,217 (5,649) 2,047,568 852,212 (4,331) 847,881 Lifetime ECL Stage II $’000 26,674 (135) 26,539 4,974 (330) 4,644 Stage III $’000 Total $’000 5,835 (226) 5,609 3,008 (51) 2,957 2,085,726 (6,010) 2,079,716 860,194 (4,712) 855,482 25.5 Liquidity risk Liquidity risk is the risk that financial obligations of the Group cannot be met as and when they fall due without incurring significant costs. The Group manages liquidity risk by monitoring forecast cash requirements, both short and longer term, against its current liquid assets. The Group aims to ensure that it has sufficient liquidity to meet its obligations on a short, medium and long- term basis. In setting the level of sufficient liquidity, the Group considers contractual obligations, minimum cash requirements, AFSL requirements, cash flow forecasts, associated reporting requirements, other liquidity risks and contingency plans. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table reflects the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Mortgage trust notes issued by the Group’s consolidated mortgage warehouse trusts are excluded in the table as, under such arrangements, the note holder recourse is limited to the assets of the relevant mortgage warehouse trust to which the liability relates and the repayment profile of the mortgage trust notes is matched to the repayments collected from the loan assets. 123 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)25 Financial risk management (continued) 25.5 Liquidity risk (continued) Maturity profile of undiscounted financial liabilities Less than 1 month $’000 1–3 months $’000 3–12 months $’000 1–5 years $’000 5+ years $’000 Total $’000 31 December 2023 Trade and other payables Other financial liabilities Unsecured notes Fund preferred units Lease liabilities Total financial liabilities 31 December 2022 Trade and other payables Other financial liabilities Unsecured notes Fund preferred units Lease liabilities - - - 844 51,152 - - - 837 Total financial liabilities 74,063 50,308 9,297 36 5,448 - - - 102,415 - 70,030 134,190 - 1,127,452 - - - - 65,089 102,415 204,220 1,127,452 1,742 7,758 57,179 23,236 90,759 11,039 180,239 1,324,269 23,236 1,589,935 73,226 4,339 - - - 1,714 6,053 - 116,419 240 - - - 155,030 568,584 - - - - 77,805 116,419 155,030 568,584 7,715 46,563 27,384 84,213 124,134 770,417 27,384 1,002,051 The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period. 26 Fair value of financial assets and financial liabilities Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. Where one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observant inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. Financial instruments measured at fair value are categorised under a three-level hierarchy, reflecting the availability of observable market inputs when estimating the fair value. If different levels of inputs are used to measure a financial instrument’s fair value, the classification within the hierarchy is based on the lowest level that is significant to the fair value measurement. Items measured at fair value are categorised in their entirety, in accordance with the levels of the fair value hierarchy as outlined below. Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date (i.e. listed securities). Level 2 Valuation inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Valuation inputs that are not based on observable market data (unobservable inputs). 124 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)26 Fair value of financial assets and financial liabilities (continued) Valuation techniques Financial assets and liabilities are accounted for in accordance with AASB 9 and comprises of the following categories. Basis of measurement Note 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 Financial assets Cash and cash equivalents Amortised cost Restricted cash Receivables Loans receivable Other financial assets Deposits Total financial assets Financial liabilities Amortised cost Amortised cost Amortised cost/FVTPL FVTOCI/FVTPL Amortised cost Trade and other payables Amortised cost Other financial liabilities FVTOCI Unsecured notes Mortgage trust notes Fund preferred units Contract liabilities Total financial liabilities Amortised cost Amortised cost Amortised cost Amortised cost 12 13 14 17 22 17 23 23 23 16 180,319 700 86,416 2,079,716 186,939 3,320 144,589 700 88,483 855,482 196,312 5,027 2,537,410 1,290,593 65,089 102,415 204,220 807,405 1,127,452 661,158 77,805 116,419 155,030 216,475 568,584 571,365 2,967,739 1,705,678 The carrying amount of the Group’s financial assets and financial liabilities measured at amortised cost is assumed to approximate its fair value at the current and prior reporting date. The Group reviewed its valuation techniques and key inputs for its level 2 and level 3 assets on the estimated fair values. The review considered the most recent independent valuations, quoted unit prices of recent equity transactions, expected duration the assets are likely to be held for and the macroeconomic outlook for the industries each asset operates in. As a result of the review, no significant change in the fair values of the assets was identified and the Group considers the fair values adopted to be appropriate. Level 3 assets consist of loans receivable classified at FVTPL and unlisted investments where a best estimate valuation approach is used. Loan valuations are sensitive to changes in credit spreads and discount rates in determining their fair value. Changes in either of these inputs would have an impact on the net profit of the Group. The valuation of unlisted investments is sensitive to variations in unobservable inputs such as cash flow projections and discount rates. An increase or a decrease to the inputs into the valuations would result in an increase or a decrease the net profit of the Group. Valuation processes The Group has an established control framework with respect to the measurement of fair values. This includes a valuation function that has overall responsibility for overseeing all significant fair value measurements, including level 3 fair values, and reports directly to the Chief Financial Officer. The valuation function regularly reviews significant unobservable inputs and valuation adjustments. Significant valuation issues are reported to the Group’s Audit and Risk Committee. 125 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)26 Fair value of financial assets and financial liabilities (continued) The following table summarises the levels of the fair value hierarchy for financial assets and liabilities that are recognised and measured at fair value in the Statement of financial position. Mandatorily at FVTPL FVTOCI- equity instruments Total Level 1 Level 2 Level 3 Total 31 December 2023 Loans receivable Non-equity securities Equity securities Consolidated managed fund investments Total assets measured at fair value Consolidated managed fund investments Total liabilities measured at fair value 31 December 2022 Loans receivable Non-equity securities Consolidated managed fund investments Total assets measured at fair value Consolidated managed fund investments Total liabilities measured at fair value 5,948 7,588 619 - - 5,948 7,588 - - - - 5,948 5,948 7,588 7,588 19,717 20,336 1,087 19,249 - 159,015 159,015 - 159,015 - - 20,336 159,015 14,155 178,732 192,887 1,087 178,264 13,536 192,887 - - 102,415 102,415 102,415 102,415 6,223 15,479 - - 6,223 15,479 - - - - 102,415 102,415 - - 102,415 102,415 - 6,223 6,223 550 14,929 15,479 - - 25,973 154,860 - 154,860 154,860 - 154,860 22,342 180,193 202,535 528 180,855 21,152 202,535 - - 116,419 116,419 116,419 116,419 - - 116,419 116,419 - - 116,419 116,419 Equity securities 640 25,333 25,973 528 25,445 Reconciliation of balances in level 3 of the fair value hierarchy During the year there were no transfers between level 1, level 2 and level 3 fair value hierarchies. The following table summarises the movements in level 3 of the fair value hierarchy for the financial instruments measured at fair value by the Group. Balance at the beginning of the year Purchase, issuances and other additions Sales, settlements and repayments Fair value movements recognised in profit or loss Closing balance at the end of the year 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 21,152 929 (8,756) 211 13,536 29,159 3,053 (11,057) (3) 21,152 Changing inputs to the level 3 valuations to reasonably possible alternative assumptions would not significantly change amounts recognised in profit or loss, total assets, total liabilities or total equity. There are no equity investments classified at Level 3 (2022: nil) and no gains and losses are reported in other comprehensive income. 126 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)27 Contributed equity Ordinary share capital Treasury shares Total contributed equity 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 370,980 354,057 (92,243) (78,970) 278,737 275,087 Contributed equity 31 Dec 2023 Number of shares 31 Dec 2022 Number of shares 31 Dec 2023 $’000 31 Dec 2022 $’000 Ordinary share capital Balance at the beginning of the year 175,073,933 169,591,372 354,057 Ordinary shares issued 3,493,878 6,376,921 Share buy-back and cancellation (236,000) (894,360) Equity transaction costs Transfer from share-based payment reserve on vesting of awards - - - - 17,064 (1,027) (26) 912 311,178 44,188 (4,104) (131) 2,926 Balance at the end of the year 178,331,811 175,073,933 370,980 354,057 Treasury shares Balance at the beginning of the year (15,346,005) (13,066,811) (78,970) (56,188) Ordinary shares issued for staff equity awards (3,420,530) (2,668,356) On market purchases of shares (1,347,789) (1,496,448) (15,167) (6,101) (19,417) (9,920) Shares allocated upon exercise of options - 16,666 - 103 Shares allocated under employee share plans 1,676,941 1,868,944 7,995 6,452 Balance at the end of the year (18,437,383) (15,346,005) (92,243) (78,970) Contributed equity at the end of the year 159,894,428 159,727,928 278,737 275,087 The Company had authorised share capital amounting to 178,331,811 ordinary shares at 31 December 2023 (2022: 175,073,933). Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back On 20 October 2022, the Group announced an on- market share buy-back of up to $25.0 million. The program started on 4 November 2022 and ended on 3 November 2023. During the year, the Company purchased 236,000 shares at an average price of $4.35 per share. Shares acquired under the buy-back were subsequently cancelled resulting in a reduction of the paid-up share capital of the Company. 127 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)27 Contributed equity (continued) Shares purchased on-market for the purpose of an employee incentive scheme During the year, the Company purchased 1,347,789 shares on-market (2022: 1,000,000 shares) and no shares from its employees during a staff trading window (2022: 496,448 shares) in order to meet the Group’s shared based payment awards. The average price of all share purchases during the year was $4.53 (2022: $6.63). Shares issued under a Long-term Incentive Plan During the year, the Company issued 3,420,530 (year ended 31 Dec 2022: 2,668,356) fully paid ordinary shares in order for eligible employees of the Group to acquire loan funded shares in the Company as part of the Long-term Incentive (LTI) plan. The average issue price of the shares was $4.43 (year ended 31 Dec 2022: 28 Earnings per share Basic earnings per share Diluted earnings per share $7.28). The purchase price of the shares acquired by eligible employees under the LTI was fully funded by a limited recourse loan provided by the Company. The shares are subject to vesting conditions, including performance conditions and continuous employment, and carry the same rights as other fully paid ordinary shares. Refer to notes 31.4 and 31.5 for further details. Accounting policy Ordinary shares are classified as equity. Issued capital in respect of ordinary shares is recognised as the fair value of the consideration received by the parent entity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. Treasury shares are ordinary shares in the Company held in respect of equity incentive plan awards to employees. 31 Dec 2023 Consolidated Cents 31 Dec 2022 Consolidated Cents 17.8 17.3 28.0 26.9 The earnings used in the calculation of basic and diluted earnings per share is the Group’s profit after tax attributable to equity holders of the Company. Weighted average number of ordinary shares (net of treasury shares) used in calculating basic earnings per share Adjusted for potential equity shares1 Share options Share rights Restricted shares Salary sacrifice shares Total potential equity shares 31 Dec 2023 31 Dec 2022 160,179,835 160,413,092 1,215,528 430,365 3,170,003 28,091 2,899,198 341,964 2,857,404 21,967 4,843,987 6,120,533 Total weighted average number of ordinary shares (net of treasury shares) and potential equity shares used in calculating diluted earnings per share 165,023,821 166,533,625 1. Refer to note 31 for detail of the terms and conditions of plans impacting diluted earnings per share. Accounting policy Basic earnings per share is calculated by dividing the Group’s profit after income tax for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is calculated by dividing the Group’s profit after income tax for the year attributable to equity holders of the Company, adjusted by profit attributable to all the dilutive potential ordinary shares by the weighted average number of ordinary shares and potential ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary shares. 128 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)29 Dividends Details of the Group's fully franked dividend payments: 2021 final dividend (12 cents per share paid on 11 March 2022) 2022 interim dividend (6 cents per share paid on 21 September 2022) 2022 final dividend (14 cents per share paid on 22 March 2023) 2023 interim dividend (6 cents per share paid on 20 September 2023) Dividends paid Franking credits 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 - - 24,256 10,649 34,905 20,466 10,452 - - 30,918 Franking credits available for the subsequent financial year1 58,826 55,255 1. Calculated at a corporate tax rate of 30% (2022: 30%). Dividends not recognised at the end of the financial year Since the end of the financial year, the Directors have resolved to pay a fully franked dividend of 14 cents per share, payable on 20 March 2024. The aggregate amount of the proposed dividend expected to be paid from retained profits, but not recognised as a liability at the end of the year is $25.0 million. This amount has been estimated based on the number of shares eligible to participate as at 31 December 2023. 128 129 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 39,181 15,124 (6,881) (2,726) 44,698 21,424 (8,856) 2,556 15,124 (6,598) 510 (793) (6,881) 211 (2,937) (2,726) 63,624 63,624 38,974 21,424 (6,598) 211 54,011 19,815 3,141 (1,532) 21,424 (5,677) (2,504) 1,583 (6,598) - 211 211 - - 30 Reserves and non-controlling interests Reserves Share-based payment reserve (refer to note 31) Associates OCI reserve FVTOCI reserve Foreign currency translation reserve (FCTR) Total reserves Associates OCI reserve Balance at the beginning of the year Share of other comprehensive (loss)/income of associates Income tax relating to the revaluation of associates Balance at the end of the year FVTOCI reserve Balance at the beginning of the year Net gain/(loss) arising on revaluation of financial assets Income tax relating to gain/(loss) arising on revaluation of financial assets Balance at the end of the year FCTR reserve Balance at the beginning of the year Foreign exchange movement on translation of foreign operations Balance at the end of the year Non-controlling interests Reserves Total non-controlling interests Accounting policy Share-based payments reserve Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-based payment reserve. Equity settled share-based payment transactions with parties other than employees are measured at the fair value of goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted at the date the entity obtains the goods or the counterparty renders the service. 130 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)30 Reserves and non-controlling interests (continued) Accounting policy (continued) Foreign currency translation reserve The results and financial position of subsidiaries that have a functional currency different from the presentation currency are translated into Australian dollars at the rate of exchange at the Statement of financial position date. Exchange differences arising on the retranslation are taken directly to the foreign currency translation reserve in equity. On disposal of a foreign operation, in part or in full, the cumulative amount in the foreign currency translation reserve is recognised in the Statement of profit or loss and other comprehensive income or to non-controlling interest. 31 Share-based payments Share-based payment reserve Balance at the beginning of the year Amortisation of share options Amortisation of share rights Amortisation of restricted shares Amortisation of loan funded shares Amortisation of share appreciation rights Amortisation of deferred remuneration on business acquisitions Vesting of share-based payments Balance at the end of the year Non-controlling interests This reserve relates to the recognition made directly in equity for outside ownership interests in entities controlled by the Group. It includes changes arising from movements in the ownership interests. 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 38,974 34,353 7 707 7,564 439 1,757 - (10,267) 39,181 59 1,044 8,641 3,963 1,215 800 (11,101) 38,974 The component of annual bonus expected to be paid in shares has been accounted for as a share- based payment, with the amounts accruing over the expected vesting period of between 1 to 3 years. The profit or loss impact (after tax) of the estimated share component for services received for the year ended 31 December 2023 was $2.0 million (2022: $3.5 million). The accounting standards require the value of the share-based component to be determined when there is a shared understanding of the terms and conditions of the scheme and so the estimate of the accrual to date could change until this grant date is achieved. 131 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.1 Employee share options The Group has granted options to certain employees of the Group. For accounting purposes, fair value of the options is amortised as an expense over the vesting period of the options. Number of options Weighted average exercise price $ 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Balance at the beginning of the year 1,986,413 2,875,391 Forfeited during the year Exercised during the year (10,000) (1,086,476) (16,668) (872,310) Balance at the end of the year 889,937 1,986,413 3.53 3.35 3.29 3.82 3.41 3.35 3.14 3.53 No share options were issued, forfeited or exercised since the end of the reporting period. 389,937 employee share options were exercisable as at year end. 2017 share options Prior to the listing of the Company, a number of employees were provided the opportunity to purchase options (share option), with each share option carrying the right to acquire one share in the Company at a future date. As a result of the offer, the Company issued 5,468,750 share options on 8 April 2017. Each share option is exercisable for a period of one year, commencing on the first exercise date applicable to the relevant tranche (exercise window) as set out in the table below. Each share option expires if it is not exercised within the relevant exercise window. The vesting period of the share options runs from the grant date to the first exercise date as shown in the table below. Unless otherwise determined by the Board, a share option holder must continue to be employed by the Group in order to exercise the share option. Share options do not carry any dividend entitlement. Shares issued on exercise of share options will rank equally with other shares of the Company on and from issue. There are no inherent participating rights or entitlements inherent in the share option and share option holders will not be entitled to participate in new issues of capital offered to shareholders during the life of the share option. The issue price of the share option was paid by the recipient on receipt of the share option. The table below provides the details of options issued on 8 April 2017: Numbers of options at beginning of year Acquired by Grant date share price Exercise price of option Issue price Earliest date of exercise Expiry date Options forfeited during the year Options exercised during the year Number of options at year end 351,747 Employees 1,134,666 Employees $2.35 $2.35 $3.15 $3.35 $0.03 8/04/2022 7/04/2023 - 351,747 - $0.01 8/04/2023 7/04/2024 10,000 734,729 389,937 1,486,413 10,000 1,086,476 389,937 Fair value of share options granted The weighted average value of the share option at the time of grant was $0.0375. The fair value of the share option was calculated using a Black-Scholes model, adjusted for expectations of forfeiture due to employee departures. The assumptions used in calculating the fair value are shown below and are common to all tranches of share options, unless otherwise stated: • Dividend yield 4.0%. • Risk-free rate 2.5%. • Expected volatility of 30%, calculated based on the volatility of comparable listed entities. • Expected life of option is the maximum term up to last day of the exercise window. • Forfeiture assumptions for the options granted to employees are that 16%, 20% and 23% of Share options are forfeited for tranches 1, 2 and 3 respectively. 132 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.1 Employee share options (continued) 2020 share options During 2020, the Group granted share options to non-Australian domiciled Group employees. The terms of the 2020 share options plan are the same as the 2017 share options plan unless otherwise stated below. The table below provides a summary of the details of options issued during 2020: Numbers of options at beginning of year Acquired by Grant date share price Exercise price of Earliest date of option Issue price exercise Expiry date 83,334 Employees 83,334 Employees 83,332 Employees $3.09 $3.09 $3.09 $4.04 $4.04 $4.04 $0.00 13/03/2024 13/03/2025 $0.00 13/03/2025 13/03/2026 $0.00 13/03/2026 13/03/2027 250,000 Options forfeited during the year Options exercised during the year Number of options at year end - - - - - - - - 83,334 83,334 83,332 250,000 The weighted average value of the 2020 share options at the time of grant was $0.85. • Expected life of option is the maximum term up to last day of the exercise window The fair value of the share options was calculated using a Monte-Carlo model, adjusted for expectations of forfeiture due to employee departures. The assumptions used in calculating the fair value are shown below and are common to all tranches of share options, unless otherwise stated: • Performance hurdle of 8% per annum increase in total shareholder return. • Risk-free rate 0.67%. • Expected volatility of 42.78%. • Forfeiture assumptions for the options granted to employees are that 25% and 30% of share options are forfeited for tranches 2 and 3 respectively. 2021 share options During 2021, the Group granted share options to non- Australian domiciled Group employees. The terms of the 2021 share options plan are the same as the 2020 share options plan unless otherwise stated below. The table below provides a summary of the details of options issued during 2021: Numbers of options at beginning of year Acquired by Grant date share price Exercise price of Earliest date of option Issue price exercise Expiry date 125,000 Employees 125,000 Employees $4.40 $4.40 $4.34 $4.34 $0.00 10/03/2025 10/03/2026 $0.00 10/03/2026 10/03/2027 250,000 Options forfeited during the year Options exercised during the year Number of options at year end - - - - - - 125,000 125,000 250,000 The weighted average value of the share options at the time of grant was $1.48. The fair value of the share options was calculated using a Monte-Carlo model, adjusted for expectations of forfeiture due to employee departures. The assumptions used in calculating the fair value are shown below and are common to all tranches of share options, unless otherwise stated: • Performance hurdle of 8% per annum increase in total shareholder return. • Risk-free rate 0.67%. • Expected volatility of 42.78%, based on historical MAF share price volatility over the expected term of the plan. • Expected life of option is the maximum term up to last day of the exercise window. • Forfeiture assumptions for the options granted to employees are that 20%, 25% and 30% of share options are forfeited for tranches 1, 2 and 3 respectively. 132 133 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.2 Share rights Share rights awarded include those granted to staff on commencement of employment, until 2018 as part of the bonus incentive scheme and from 2022 as promotion and performance awards, with the vesting subject to certain conditions including continuous employment. The value of these grants are amortised over the vesting period. The value of the grant has been determined by reference to the trading in the Company’s shares. For the bonus awards, the amortising period commences from the date employees first had an expectation of receiving an equity component to their bonus incentive scheme. Determination of this date required a degree of judgement. Share rights granted as sign-on incentive The Company has periodically granted share rights to senior employees commencing employment with the Group. The share rights are priced with reference to the trading price of the Company’s shares at the time the offer of employment is made. Vesting is subject to continuous employment, with terms varying on a case by case basis. Amortisation of the expense commences on the day the employees start their employment. Share rights granted as bonus, performance or promotion awards Until 2018, share rights were granted to employees in connection with their annual bonus incentive scheme which entitles the employees to ordinary shares in the Company in the future for no payment. The share rights vest over a prescribed vesting period, and are conditional on continuous employment, unless otherwise determined by the Board. Bonus incentive scheme share rights were fully vested by the end of the first quarter of 2023. From 2022, promotion and performance based awards were issued to selected employees in the form of share rights to better align their interests with shareholders. The number of share rights granted was determined by dividing the face value of the performance or promotion based equity opportunity by the 5-day volume-weighted average price (VWAP) up to and including the grant date, rounded to the nearest number. Rights granted are subject to a vesting period of three years and a service condition, unless otherwise determined by the Board. The amortising period has been assessed to commence at the grant date of the right. The table below sets out the movement in share rights during the year: Balance at the beginning of the year Granted during the year Forfeited during the year Vested during the year Balance at the end of the year Number of share rights Grant date fair value $’000 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 341,964 343,699 (86,843) (165,341) 433,479 971,164 179,784 (5,474) (803,510) 341,964 3,684 1,536 (440) 1,007 5,787 4,625 2,735 (64) (3,612) 3,684 31.3 Restricted shares Restricted shares – staff bonus incentive scheme From 2019, as part of the annual staff bonus incentive scheme, the share-based component of short-term incentive remuneration was delivered in the form of restricted shares, issued to employees as part of their annual bonus awards. The restricted shares were priced at the 5-day VWAP of the shares in the Company at the end of the respective financial years. The restricted shares vest over a prescribed vesting period of 10 months to 34 months, and are conditional on continuous employment, unless otherwise determined by the Board. The amortisation period has been assessed to commence from the date employees first had an expectation of receiving an equity component to their annual bonus (being 1 January of each financial year). 134 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.3 Restricted shares (continued) Number of restricted shares Grant date fair value $’000 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Balance at the beginning of the year 2,857,404 2,634,796 Granted during the year Forfeited during the year Vested during the year 1,925,130 1,310,986 (129,666) (42,696) (1,482,865) (1,045,682) Balance at the end of the year 3,170,003 2,857,404 18,017 8,298 (690) (8,666) 16,959 12,763 10,675 (305) (5,116) 18,017 Restricted shares – 2023 staff bonus incentive scheme As at 31 December 2023, the Group has estimated short-term incentive component of the expected 2023 annual bonuses, including an estimate of the amount of bonuses to be paid in cash and the share-based component, which is anticipated to be delivered in the form of restricted shares. The profit or loss impact (after tax) of the estimated equity component for services received for the year ended 31 December 2023 was $2.0 million (2022: $2.4 million). The estimate of the cost of the restricted share awards could change up until the grant date is achieved. 31.4 Loan funded share plan (LFSP) As part of the long-term incentive plan, from 2020 the Group issued retention LFSP awards for certain employees that enabled the employees to invest in shares of the Company in order to more closely align their long-term interests with shareholders of the Group. During 2022, the Group issued a new Long-term Incentive (LTI) LFSP award. The Group provides an interest free and limited recourse loan to the employees which is used to acquire shares in the Company. The loans to employees are secured on the shares which are not transferable until the loan is fully paid. LFSP shares rank equally in all respects with all shareholder entitlements for the same class of shares including dividends. The total expense recorded for the year in respect of the retention LFSP awards and LTI LFSP awards was $0.44 million (2022: $4.0 million). Number of loan funded shares Grant date fair value $’000 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Balance at the beginning of the year 10,474,440 7,915,184 Granted during the year Forfeited during the year Vested during the year 3,420,530 2,668,356 (493,422) (109,100) - - Balance at the end of the year 13,401,548 10,474,440 56,219 15,167 (2,865) - 68,521 37,253 19,417 (451) - 56,219 134 135 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.4 Loan funded share plan (LFSP) (continued) The shares issued under the retention LFSP awards have been treated as ‘in substance options’ and have been valued using a Monte-Carlo pricing methodology with key inputs shown below. Retention LFSP awards Tranche 1 Tranche 2 Tranche 1 Tranche 2 Tranche 3 2021 Grant 2020 Grant Vesting period Share price at grant date Expected volatility1 Risk-free rate Fair value per security Performance hurdle (total shareholder return) Forfeiture assumptions 4 years $4.34 42.78% 0.67% $1.45 8% p.a. 10% 5 years $4.34 42.78% 0.67% $1.51 8% p.a. 13% 4 years $4.04 42.78% 0.67% $0.75 8% p.a. 20% 5 years $4.04 42.78% 0.67% $0.86 8% p.a. 25% 6 years $4.04 42.78% 0.67% $0.94 8% p.a. 30% LTI LFSP awards From 2022, the Group issued LTI LFSP awards for senior employees including KMP. The LTI LFSP awards are granted to ensure alignment with the creation of ongoing shareholder value. Shares granted are subject to a vesting period of five years, a service condition, unless otherwise determined by the Board, and an EPS performance condition based on average growth in Underlying EPS over the vesting period. The shares issued under the LTI LFSP awards have been treated as ‘in substance options’ and have been valued using a Black-Scholes pricing methodology with key inputs shown below. LTI LFSP awards Vesting period Share price at grant date Expected volatility1 Risk-free rate Fair value per security Performance hurdle (total shareholder return) Forfeiture assumptions 2022 LTI LFSP 2021 LTI LFSP 5 years $4.43 55.22% 3.07% $1.26 5 years $7.91 40.71% 2.73% $0.02 7.5% – 12.0% 7.5% – 12.0% 20.0% 20.0% 1. Based on historical MAF share price volatility over the expected term of the plan. 2023 LTI LFSP awards Due to a change implemented by management regarding the terms and conditions of LTI awards, there are no planned LFSPs to be granted for the service period commencing 1 January 2023. 136 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)31 Share based payments (continued) 31.5 Share appreciation rights plan From 2022, Share Appreciation Rights (SAR) were granted under the LTI plan to senior executives, Managing Directors and equivalent. A SAR is an ‘in substance option’ which gives the holder a right to shares in the future equivalent to the uplift in the share price between the grant date and vesting date. Number of share appreciation rights Grant date fair value $’000 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Balance at the beginning of the year Granted during the year Forfeited during the year Vested during the year 1,723,133 2,874,004 (312,113) - - 1,757,411 (34,278) - 13,612 12,773 (1,683) - Balance at the end of the year 4,285,024 1,723,133 24,702 - 13,883 (271) - 13,612 The SARs issued under the LTI plan have been valued using a Black-Scholes pricing methodology with key inputs shown below. The resulting value is amortised over the vesting period on a probability adjusted basis. LTI SAR awards Vesting period Share price at grant date Expected volatility1 Risk-free rate Dividend yield Forfeiture assumptions – Service condition 1. Based on historical MAF share price volatility over the expected term of the plan. 2022 LTI SAR 2021 LTI SAR 5 years $4.43 55.09% 3.48% 3.54% 20.0% 5 years $7.91 40.71% 2.73% 2.15% 20.0% 2023 LTI SAR awards Due to a change implemented by management regarding the terms and conditions of LTI awards, there are no planned SARs to be granted for the service period commencing 1 January 2023. 31.6 Salary sacrifice share plan From 2020, all permanent full and part-time employees of the Group were invited to participate in the annual salary sacrifice share offer which allowed employees to receive up to $5,000 worth of shares in the Company by sacrificing an equivalent amount of their pre-tax salary or cash bonus award. 34,859 shares were issued under the 2023 arrangement, priced at $4.434, being the 5-day VWAP of the Company’s shares on grant date (2022: 25,576 shares at $7.908). The shares are restricted from being sold by employees until at least 1 July of the year following issue or when the participant is no longer employed by the Group. Number of salary sacrifice shares Grant date fair value $’000 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 Balance at the beginning of the year Granted during the year Vested during the year Balance at the end of the year 21,967 34,859 (28,735) 28,091 16,143 25,576 (19,752) 21,967 172 152 (204) 120 69 202 (99) 172 136 137 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)32 Key management personnel compensation The aggregate compensation made to both Executive and Non-Executive Directors and other members of Key Management Personnel (KMP) of the Company and the Group is set out below. There were 12 KMP in 2023 (2022: 11 KMP). Short-term benefits Share-based payments Annual leave Long service leave Total key management personnel compensation 33 Related party transactions 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 5,487 1,370 (271) (80) 6,506 6,319 3,099 129 94 9,641 Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. 33.1 Loans to related parties Loans to employees The Group has provided interest-free loans to certain senior employees that are used for investment purposes, primarily for investment in funds managed by the Group. The investments purchased have been designated as restricted and are unable to be sold without the approval of the Group. 51% of distributions received on the investments are allocated against the loan balance. The loans are repayable over a maximum term of five years. 33.2 Transactions with Key Management Personnel In 2019 Mr Pridham and Mr Biggins entered into property management service arrangements with the Group on the same terms offered to third-party investors in a property managed by the Group. Total management fees payable by Mr Pridham and Mr Biggins for 2023 amounted to $51,872 and $11,598 respectively (2022: $69,352 and $15,506 respectively). 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 2,383 2,211 33.3 Transactions with funds managed by the Group The Group is involved in the management of various funds, through its role as a trustee, manager, financial advisor and underwriter, and charges fees for doing so. The Group also invests in some of the funds which it manages. 33.4 Transactions with associates Transactions between the Group and its associates principally arise from KMP transactions and investments in the associate. The amounts below for KMP are recorded at the closing price for the relevant investment in accordance with AASB 124 Related Party Disclosures and have not been adjusted for subsequent valuation changes. 138 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)33 Related party transactions (continued) 33.4 Transactions with associates (continued) Related party investments in associates KMP 31 Dec 2023 $’000 Group 31 Dec 2023 $’000 KMP 31 Dec 2022 $’000 Group 31 Dec 2022 $’000 - - 7,162 5,417 12,579 - - 49,295 1,476 50,771 - - 7,757 7,808 15,565 22,415 8,274 57,086 3,811 91,586 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 12,935 2,838 4,335 20,108 6,884 1,206 43,925 52,015 BE ES I LLC BE OLD I LLC Redcape Hotel Group Other associates Related party fees from associates Trustee and management fees Transaction fees Performance fees Receivables from associates Current Accounts receivable and fees receivable from associates 28,609 30,579 34 Acquisitions and disposals of subsidiaries 34.1 Business acquisitions On 1 May 2023, the Group acquired 100% of the issued share capital of Blue Elephant Capital Management LLC, Blue Elephant Partner LLC and Blue Elephant Financing LLC (collectively Blue Elephant), obtaining control of Blue Elephant. The purchase consideration was for USD $8.7 million (AUD $13.1 million), being USD $5.0 million (AUD $7.6 million) in cash and USD $3.7 million (AUD $5.6 million) in contingent consideration at fair value on the date of acquisition. Blue Elephant is a New York based, SEC-registered specialty credit asset manager. Blue Elephant qualifies as a business as defined in AASB 3 Business Combinations. The initial accounting for the acquisition of Blue Elephant has only been provisionally determined at the end of the reporting period. The Group retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the Group receives all the information possible to determine fair value. Since the last reporting period, the Group remeasured the fair value of the acquired net assets in Blue Elephant. The below remeasurements were made which subsequently resulted in a $0.9 million increase to goodwill. • decrease to receivables of $0.1 million; • decrease to investments of $0.03 million; • decrease to right-of-use assets of $0.5 million; and • increase to trade and other payables of $0.1 million. 138 139 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)34 Acquisitions and disposals of subsidiaries (continued) 34.1 Business acquisitions (continued) The table below represents the aggregated details of the businesses acquired during the year. The purchase price allocation for the current year’s business acquisitions is provisional as at 31 December 2023. Fair value of net assets acquired Cash and cash equivalents Receivables Right-of-use assets Trade and other payables Total fair value of net liabilities acquired Consideration Cash Contingent consideration Total consideration transferred Goodwill recognised on acquisition Net cash outflow arising on acquisition Cash consideration Less: cash and cash equivalent balances acquired Total net cash outflow arising on acquisition Goodwill The goodwill of $13.9 million arising from the acquisition consists of: • the experience and employment of key management; and • assembled workforce of existing employees. None of the goodwill is expected to be deductible for income tax purposes. Acquisition related costs Business acquisition costs of $1.3 million comprising legal fees and due diligence costs were included in the Statement of profit or loss and other comprehensive income. Total $’000 1,076 735 43 (2,584) (730) 7,572 5,575 13,147 13,877 7,572 (1,076) 6,496 Contribution to the Group’s results Blue Elephant contributed $2.5 million of revenue and $4.2 million loss to the Group’s profit before tax for the period between the date of acquisition and the reporting date. If the acquisition of Blue Elephant had been completed on 1 January 2023, Group revenue contribution for the year ended 31 December 2023 would have been $3.7 million and Group profit before tax contribution would have been $1.8 million loss. The Directors of the Group consider these ‘pro-forma’ numbers to represent an approximate measure of the performance of the combined Group for the year ended 31 December 2023 and to provide a reference point for comparison in future years. 140 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)34 Acquisitions and disposals of subsidiaries (continued) 34.2 Subsidiaries The table below presents the Group’s notable subsidiaries that form the main composition of the Group as at 31 December 2023. Proportion of ownership interest and voting power held by the Group Name of subsidiary Principal activity Place of incorporation and operation 31 Dec 2023 31 Dec 2022 Eastern Credit Management Pty Ltd Asset Management Australia MA Asset Management Ltd Asset Management Australia MA Hotel Management Pty Ltd Asset Management Australia MA Investment Management Pty Ltd Asset Management Australia MA Visa Fund Manager Pty Ltd Asset Management Australia MAAM Holdings Pty Ltd Asset Management Australia MAAM RE Limited Asset Management Australia Redcape Hotel Group Management Ltd Asset Management Australia RetPro Management Pty Ltd Asset Management Australia MA Credit Investments Pty Ltd Asset Management Australia MA Credit Portfolio Investments Pty Ltd Asset Management Australia MA Master Credit Trust Asset Management Australia MA Wholesale Global Private Credit Fund Asset Management USA Finsure Finance & Insurance Pty Ltd Lending & Technology Australia Beagle Finance Pty Ltd Lending & Technology Australia MA Money Financial Services Pty Ltd Lending & Technology Australia MA Moelis Australia Advisory Pty Ltd CA&E MA Moelis Australia Securities Pty Ltd CA&E Australia Australia MAFG Operations Pty Ltd Administration Entity Australia MAFG Finance Pty Ltd Administration Entity Australia 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% The subsidiaries included in the list above are identified on the basis of their ongoing contribution to the Group’s assets and operating profit. Additionally, this includes the employing entities, entities that are key providers of funding to other subsidiaries and other key operating entities. All notable subsidiaries have a 31 December reporting date. Non-controlling interest Details of non-controlling interests are covered in note 30. 140 141 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)34 Acquisitions and disposals of subsidiaries (continued) Accounting policy Basis of consolidation The Financial Report reflects the financial performance and financial position of the Company and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Group controls. Control is achieved when the Group: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The determination of control is based on current facts and circumstances and is continually assessed. The Group has power over an entity when it has substantive rights that provides it with the ability to direct the entity’s relevant activities, being those that significantly affect the entity’s returns. If the Group determines that it has power over an entity, then it evaluates its exposure, or rights, to variable returns by considering the magnitude and variability associated with its economic interests. Controlled entities are consolidated from the date on which control is transferred to the Group and ceases to be consolidated from the date control is transferred out of the Group. The effects of all transactions between subsidiaries in the Group are eliminated in full. Non-controlling interests (NCI) represent the share in the net assets of subsidiaries attributable to equity interests not owned directly or indirectly by the Group. The Company reviews its investment in subsidiaries for indicators of impairment at each reporting period. Where subsidiaries had indicators of impairment, the subsidiaries’ carrying value was compared to its recoverable value which is determined as the higher of value-in-use and fair value less cost to sell. Business combinations Business combinations are accounted for using the acquisition method. The consideration exchanged is measured as the aggregate of the acquisition-date fair values of assets transferred, equity instruments issued and liabilities incurred. Acquisition-related costs are recognised directly in the Statement of profit or loss and other comprehensive income. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the date of acquisition. The Group elects, on a transaction-by-transaction basis, to initially measure NCI either at fair value or at the NCI’s proportionate share of the fair values of the identifiable assets and liabilities. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the consideration is less than the Group’s share of the fair value of the identifiable net assets of the business acquired and is recognised in investment income, but only after a reassessment of the identification and measurement of the net assets acquired. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with AASB 9, or AASB 137 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. When a business combination is achieved in stages, the Group’s previously held equity interests in the acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. 142 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)34 Acquisitions and disposals of subsidiaries (continued) Accounting policy (continued) If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts or circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. Consolidated managed fund investments The Group regularly provides seed and growth capital to funds managed by the Group. At each reporting period investments in funds managed by the Group are assessed for control. Determining whether the Group has control over managed fund investments requires the use of judgement and is an assessment of the Group’s power over the activities of the funds and exposure to significant variability in returns from the funds. Managed fund investments where such interests are interests in controlled entities are consolidated by the Group. Where it is determined that control does not exist, the Group’s investments are recognised as either associates or other financial assets in the Statement of financial position. 35 Parent entity disclosures As at, and throughout, the year ended 31 December 2023 the parent entity of the Group was MA Financial Group Limited. Results of the parent company Profit for the year Total comprehensive income for the year Financial position of the parent entity Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets Total equity of the parent entity comprising of: Contributed equity Reserves Retained earnings Total equity 31 Dec 2023 Company $’000 31 Dec 2022 Company $’000 66,259 66,259 195,912 189,951 385,863 - - 46,499 46,499 160,938 190,097 351,035 115 115 385,863 350,920 278,737 36,554 70,572 385,863 275,087 36,348 39,485 350,920 The parent entity had no contingent liabilities, contractual commitments or guarantees with third parties as at 31 December 2023 (2022: nil) other than those already disclosed in the financial statements. 143 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)36 Deed of cross guarantee The Company and certain wholly owned subsidiaries listed below (the Closed Group) have entered into a Deed of Cross Guarantee (Deed) effective 21 December 2022. Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, the wholly- owned subsidiaries listed below are relieved from the Corporations Act 2001 (Cth) requirements for preparation, audit and lodgement of financial reports, and Directors’ reports. The subsidiaries to the Deed are: • Beagle Finance Pty Ltd • Eastern Credit Management Pty Ltd • Finsure Finance & Insurance Pty Ltd • Finsure Holding Pty Ltd • MAAM Holdings Pty Ltd • MAFG Operations Pty Ltd Set out below is the Statement of profit or loss and other comprehensive income, Statement of financial position and a summary of movements in accumulated losses of the entities party to a Deed of Cross Guarantee. Statement of profit or loss and other comprehensive income 31 Dec 2023 $’000 31 Dec 2022 $’000 Fee and commission income Fee and commission expense Net fee and commission income Investment income Other income Total income Employee expenses Marketing and business development Information, technology and data Depreciation and amortisation Finance costs Credit loss allowance Other expenses Total expenses Profit/(loss) before tax Income tax benefit Profit/(loss) after income tax Other comprehensive loss, net of income tax Items that will not be classified subsequently to profit or loss: Fair value benefit/(loss) on investments in equity instruments designated at FVTOCI Total other comprehensive income/(loss) Total comprehensive income/(loss) 565,067 (507,652) 57,415 186,706 54,341 298,462 143,031 11,167 6,476 9,471 5,324 (25) 14,635 190,079 108,383 (16,600) 124,983 88 88 88 461,413 (417,575) 43,838 75,638 58,735 178,211 134,710 9,091 6,878 13,456 3,390 (255) 15,120 182,390 (4,179) (1,236) (2,943) (93) (93) (93) 125,071 (3,036) 144 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)36 Deed of cross guarantee (continued) Statement of financial position Assets Cash and cash equivalents Receivables Loans receivable Other financial assets Contract assets Property, plant and equipment Other assets Restricted cash Right-of-use assets Investments in subsidiaries, associates and joint ventures Intangible assets Goodwill Total assets Liabilities Trade and other payables Borrowings Contract liabilities Lease liabilities Provisions Deferred tax liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity Summary of movements in accumulated losses Accumulated losses at beginning of the financial year Profit/(loss) for the year Dividends paid Accumulated losses at end of the financial year 31 Dec 2023 $’000 31 Dec 2022 $’000 14,784 19,793 3,392 2,044 67,819 43,106 5,610 65,859 705,286 607,233 3,811 5,412 700 65,179 178,007 53,572 98,829 5,223 4,015 700 60,881 89,826 45,638 98,829 1,150,809 1,094,739 33,509 25,845 661,157 70,654 38,001 14,206 843,372 307,437 278,737 39,526 (10,826) 307,437 156,695 - 571,363 63,902 41,858 11,201 845,019 249,720 275,087 39,231 (64,598) 249,720 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 (64,598) 124,983 (71,211) (10,826) (61,655) (2,943) - (64,598) 145 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)37 Structured entities A structured entity is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls the entity and the relevant activities are directed by means of contractual arrangements. The Group engages with structured entities for securitisation, asset-backed financing and to invest its own capital for the purpose of seeding fund vehicles to develop a performance track record prior to external investment being received. The Group assesses at inception and at each reporting date, whether the structured entity should be consolidated based on the Group’s consolidation accounting policy (refer to note 34). Structured entities are classified as subsidiaries and consolidated when control exists. Consolidated structured entities The Group considers its wholly owned entities that originate residential mortgages via notes in mortgage warehouse trusts to be structured entities. These trusts are special purpose vehicles where third-party funders provide limited-recourse financing to the trusts. The facility arrangement partially transfers the risk of credit losses on loan portfolios to the capital providers of the trusts. The Group’s exposure to losses is limited to its investment in the warehouse trusts and its rights to current and future residual income from its trusts. Unconsolidated structured entities The Group has an interest in a structured entity when it has a contractual or non-contractual involvement that exposes it to variable returns from the performance of the structured entity. The Group’s interest includes investment income from it’s interest and fees earned for managing the assets within these structured entities. The following table presents, by asset class, the carrying value and maximum exposure to loss (before the benefit of collateral and credit enhancements) of the Group’s interests in unconsolidated structured entities: Real estate $’000 Hospitality $’000 Credit $’000 Equities $’000 Total $’000 31 December 2023 Carrying value of assets Financial assets held at FVTOCI Financial assets held at FVTPL Total carrying value of assets Maximum exposure to loss Financial assets held at FVTOCI Financial assets held at FVTPL Total maximum exposure to loss 31 December 2022 Carrying value of assets Financial assets held at FVTOCI Financial assets held at FVTPL Total carrying value of assets Maximum exposure to loss Financial assets held at FVTOCI Financial assets held at FVTPL Total maximum exposure to loss 3,053 - 3,053 3,053 - 3,053 837 - 837 837 - 837 3,040 - 3,040 3,040 - 3,040 3,040 - 3,040 3,040 - 3,040 4,201 7,588 11,789 4,201 7,588 11,789 3,754 14,985 18,739 3,754 14,985 18,739 6,850 619 7,469 6,850 619 7,469 5,453 640 6,093 5,453 640 6,093 17,144 8,207 25,351 17,144 8,207 25,351 13,084 15,625 28,709 13,084 15,625 28,709 Unless otherwise specified, the Group’s maximum exposure to loss is the total of its on-balance sheet positions at reporting date. There are no off-balance sheet arrangements which would expose the Group to potential losses in respect of unconsolidated structured entities. During the year, the Group earned management, performance, transaction and upfront fee income of $11.0 million (2022: $9.9 million) and gains or losses from revaluing financial assets held at FVTPL from interests held of $2.0 million (2022: $1.4 million). 146 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)38 Auditor’s remuneration Audit and review services Auditors of the Group Audit and review of financial statements – Group Audit and review of financial statements – controlled entities Total audit and review services – auditors of the Group Other auditors Audit and review of financial statements – controlled entities Total audit and review services Assurance services Auditors of the Group Regulatory assurance services Total assurance services Other services Auditors of the Group Advisory services Taxation Other services in relation to the Group Total other services Total auditor remuneration 39 Commitments At 31 December 2023, the Group had undrawn loan commitments of $372.1 million (2022: $144.4 million). Subsequent to 31 December 2023, $30.1 million of these commitments were either cancelled or drawn upon. At 31 December 2023, the Group has committed to a co-investment in class B units in the MCTs which are consolidated entities of the Group. At 31 December 2023, $112.7 million (2022: $56.9 million) has been invested by the Group in the MCTs. Refer to note 23(b) for further information. 31 Dec 2023 Consolidated $’000 31 Dec 2022 Consolidated $’000 928 538 1,466 63 1,529 198 198 169 134 10 313 629 343 972 23 995 101 101 107 619 65 791 2,040 1,887 40 Events after the reporting date There were no material events subsequent to 31 December 2023 up until the authorisation of the financial statements for issue, that have not been disclosed elsewhere in the financial statements. 146 147 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Notes to the financial statements (continued)Directors’ declaration In accordance with a resolution of the Directors of MA Financial Group Limited, we declare that, in the opinion of the Directors: (c) (a) (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the financial statements and notes of MA Financial Group and its controlled entities (Group) are in accordance with the Corporations Act 2001 (Cth) including: (i) complying with the Australian Accounting Standards, and (ii) giving a true and fair view of the Company’s and the consolidated Group’s financial positions as at 31 December 2023 and of its performance for the financial year ended on that date; On behalf of the Board the financial statements and notes of the Group also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board, which is disclosed in note 1(a); (d) this declaration has been made after receiving declarations from the joint Chief Executive Officers and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 and are recommended by the ASX Corporate Governance Principles and Recommendations. Jeffrey Browne Independent Chair and Non-Executive Director Sydney 22 February 2024 Julian Biggins Director and Joint Chief Executive Officer Sydney 22 February 2024 148 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023 Independent auditor’s report 148 149 Independent Auditor’s Report To the shareholders of MA Financial Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of MA Financial Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of theGroup’s financial position as at 31December 2023 and of its financialperformance for the year ended on thatdate; and•complying with Australian AccountingStandards and the CorporationsRegulations 2001.The Financial Report comprises: •Statement of financial position as at 31 December2023;•Statement of profit or loss and other comprehensiveincome, statement of changes in equity, andstatement of cash flows for the year then ended;•Notes, including material accounting policies; and•Directors’ Declaration.The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Independent auditor’s report (continued) 150 Key Audit Matters The Key Audit Matters we identified are: • Advisory success fees revenue recognition; and • Trail Commission Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Advisory success fees revenue recognition ($37.3m) Refer to Note 4 to the Financial Report The key audit matter How the matter was addressed in our audit Advisory success fees revenue recognition is a key audit matter due to the: • significance of this revenue to the Group’s results; and • the judgement required with respect to assessing the timing of revenue recognition, specifically when the Group satisfied its performance obligation as stipulated by the conditions of the underlying contracts, which may vary. In assessing this key audit matter, we involved senior audit team members who understand the Group’s business, industry and the macroeconomic environment in which it operates. Our procedures included: • assessing the Group's revenue recognition policy against AASB 15 Revenue from Contracts with Customers requirements; • obtaining an understanding of processes, systems and controls for advisory success fee revenue. We also tested key controls such as the manual review and approval by management of key revenue calculations and customer invoices; • for a sample of transactions recognised on a non-accrual basis, checking recorded revenue to evidence of deal completion, customer invoices, bank statements and the relevant features of the underlying signed customer contracts; • for a sample of transactions recognised on an accrual basis, checking: • the timing of fee revenue recorded against evidence of fulfilment of performance obligations, and signed customer contracts; • the accuracy of the fee when compared to rates contained in the contracts; • evaluating deal income recognised in January 2024 to understand whether it was recognised in the appropriate reporting year; and • assessing the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Independent auditor’s report (continued) 150 151 Trail Commission contract assets ($705.3m) and contract liabilities ($661.2m) Refer to Note 16 to the Financial Report The key audit matter How the matter was addressed in our audit The Group recognises a contract asset using the expected value method representing the net present value of future trail commission receivable under AASB 15 Revenue from Contracts with Customers. The Group also recognised a corresponding trail commission payable under AASB 9 Financial Instruments as representation of the net present value of trail commission payments to brokers. This is a key audit matter due to • significance of the contract assets and contract liabilities on the Group’s balance sheet; and • the significant judgement applied to assess the Group’s estimation of the value of trail commissions receivable and payable. We focused on the key inputs and assumptions the Group applied in their Net Present Value (“NPV”) model, including: • discount rates, which are judgemental in nature and may vary between different underlying cohorts of trail commissions; • percentage of commissions paid to brokers; and • loan book run off rate assumptions, reflecting the expected loan attrition rate of the portfolio over time, which is subject to change. In assessing this key audit matter, we involved our valuation specialists in assessing management’s NPV model. Our procedures included: • evaluating the Group’s processes and testing key controls such as the review and approval of assumptions used in the Group’s NPV model for estimating the value of the trail commissions receivable and payable; • assessing the completeness and accuracy of the loan data and commission percentage used in the Group’s NPV model by testing a sample of the data to external underlying documents such as lender commission statements and contracts with brokers; • assessing the appropriateness of the methodology adopted in the Group’s NPV model against accepted industry practice and the requirements of the accounting standards; • recalculating the trail commission receivable and payable; • assessing the key assumptions by: • independently developing discount rate ranges considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group; • comparing the loan book run-off rate assumptions to contracted maturities in the relevant portfolio and then further challenging the run-off rate by comparing to historical internal information, available industry market data, and using our knowledge of the current economic environment; • evaluating the sensitivity of the NPV model calculations by considering reasonably possible changes to the discount rate and loan book run-off rate; and • assessing the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Independent auditor’s report (continued) 152 Other Information Other Information is financial and non-financial information in MA Financial Group Limited’s annual report which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Independent auditor’s report (continued) 152 153 Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of MA Financial Group Limited for the year ended 31 December 2023, complies with Section 300A of the Corporations Act 2001. Directors’ 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 responsibilities We have audited sections 1 to 10 of the Remuneration Report included in the Directors’ report for the year ended 31 December 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Shaun Kendrigan Partner Sydney 22 February 2024 MA Financial Group | 2023 Annual ReportFor the year ended 31 December 2023Lunar New Year Lion Dance Investor information Dividend details MA Financial Group Limited generally pays a dividend on its fully paid ordinary shares once a year following its full- year financial results announcement. The payment date for the dividend following the announcement of the 2023 results is 20 March 2024. 20 largest shareholders The following information is correct as at 19 February 2024. Registered holder Moelis & Co International Holdings LLC J P Morgan Nominees Australia Pty Limited Magic TT Pty Ltd Magic TT 2 Pty Ltd MAFG Share Plan Pty Ltd HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited National Nominees Limited MAFG Share Plan Pty Ltd Touchard Pty Ltd BNP Paribas Noms Pty Ltd BNP Paribas Nominees Pty Ltd UBS Nominees Pty Ltd MAFG Share Plan Pty Ltd Richard Germain and Nina Germain Jill Adora Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited BNPP Noms Pty Ltd Hub24 Custodial Serv Ltd Netwealth Investments Limited Distribution of shareholders Number of ordinary shares held % of ordinary shares 23,500,000 20,842,041 19,865,799 14,850,000 13,401,548 10,039,811 8,695,927 7,255,313 3,188,403 3,037,853 2,592,540 2,474,976 2,204,781 1,837,741 1,724,677 1,524,602 1,272,022 1,113,299 1,106,313 946,724 13.18% 11.69% 11.14% 8.33% 7.51% 5.63% 4.88% 4.07% 1.79% 1.70% 1.45% 1.39% 1.24% 1.03% 0.97% 0.85% 0.71% 0.62% 0.62% 0.53% Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Number of shareholders Number of ordinary shares % of ordinary shares 1,560 1,903 724 671 59 766,231 4,987,707 5,279,704 17,096,558 150,200,483 0.43% 2.80% 2.96% 9.59% 84.23% 156 MA Financial Group | 2023 Annual ReportUnmarketable parcels There were 105 shareholders (representing 1,838 shares) who held less than a marketable parcel. Substantial shareholders Name MA Financial Group Limited Moelis & Company International Holdings LLC Magic TT Pty Limited J P Morgan Nominees Australia Pty Ltd Magic TT 2 Pty Limited HSBC Custody Nominees (Australia) Limited Number of ordinary shares % of ordinary shares 18,427,692 23,500,000 19,865,799 20,842,041 14,850,000 10,039,811 10.33% 13.18% 11.69% 11.14% 8.33% 5.63% Voting rights At meetings of members or classes of members, each member may vote in person or by proxy, attorney or (if the member is a body corporate) corporate representative. On a show of hands, every person present who is a member or a proxy, attorney or corporate representative of a member has one vote and on a poll every member present in person or by proxy, attorney or corporate representative has one vote for each fully paid share held by the member. Share options The table below sets out the number of share options, with each share option carrying the right to acquire one share in the Company at a future date, outstanding as at 19 February 2024: Size of holding Under 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total share options Number of holders 4 2 6 3 15 Share Options 12,221 20,000 191,048 666,668 889,937 157 Investor information (continued)MA Financial Group | 2023 Annual Report Glossary Term AASB AFSL ASX ASX AUM Board CA&E CAGR CGU Definition Australian Accounting Standards Board Australian Financial Services Licence Australian Securities & Investment Commission Australian Securities Exchange of ASX Limited (ABN 98 008 624 691) and the market operated by ASX Limited. Assets under Management The Board of Directors of MA Financial Group Limited Corporate Advisory & Equities Compound Annual Growth Rate Cash generating unit Company MA Financial Group Limited (ABN 68 142 008 428), a company limited by shares Corporations Act Corporations Act 2001 (Cth) Directors EBITDA EAD ECL ECM The Directors of the Company as at the date of this Report Earnings before interest, tax, depreciation and amortisation Exposure at default Expected credit loss Equity capital markets Employees Employees of the Group EPS Earnings per share Existing Staff Trusts Trusts established prior to the initial public offering of the Company, which hold shares on behalf of current and former employees of the Group. FVTOCI FVTPL FY22 FY23 Group GST Fair value through other comprehensive income Fair value through profit or loss For the financial year ended 31 December 2022 For the financial year ended 31 December 2023 The Company and its subsidiaries Goods and services tax 158 MA Financial Group | 2023 Annual ReportGlossary (continued) Term IASB IFRS KMP LGD LTI Definition International Accounting Standards Board International Financial Reporting Standards Key management personnel Loss given default Long-term incentive MA Financial Group The Company and/or its subsidiaries as the context requires NPAT Net profit after tax PD PIF RBA ROE SAR Probability of default Priority Income Fund Reserve Bank of Australia Return on Equity Share Appreciation Rights Shareholder The holder of a share Shares Fully paid ordinary shares in the capital of the Company Share options Options over unissued shares Share rights Rights to receive shares at some point in the future SICR SIV VWAP Significant increase in credit risk Significant investor visa Volume-weighted average price 159 MA Financial Group | 2023 Annual ReportRegistered office Principal place of business Level 27, Brookfield Place 10 Carrington Street Sydney NSW 2000 Tel: + 61 2 8288 5555 Sydney Level 27, Brookfield Place 10 Carrington Street Sydney NSW 2000 T + 61 2 8288 5555 Melbourne Level 20, South Tower 80 Collins Street Melbourne VIC 3000 T +61 3 8650 8650 New York 3 W Main St, Suite 301, Irvington, NY 10533, USA Hong Kong Level 29, Two International Finance Centre 8 Finance Street Hong Kong Tel: +852 2575 7188 Shanghai Level 38, Park Place 1601 Nan Jing West Road Jing An District 200040 Shanghai Tel: +86 021 6137 3216 Singapore Level 24, CapitaGreen 138 Market Street Singapore 048946 mafinancial.com 

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