OFX Group Limited Annual Report 2017

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FY2017 Annual Report · OFX Group Limited

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O F X G R O U P L I M I T E D
A C N 1 6 5 6 0 2 2 7 3

A Better Way to Move Money

ANNUAL REPORT 2017

CONTENTS

What We Do

Our Service

Our Opportunities and Focus

Our People

Our Values

Financial Highlights

Chairman’s Letter

CEO’s Letter

Executive Team

Directors’ Report
and Financial Report

Shareholder Information

Corporate Information

Customer Stories

03 11

North South
Wines

Zoratto
Enterprises

12 14

Ruze Shoes

Vichet Duk

ANNUAL GENERAL MEETING

2pm on 2 August 2017
at Room III, Establishment Hotel,
252 George Street, Sydney

PEOPLE AND CULTUREDuring the year, we moved our Sydney headquarters to a more modern working environment. We also used this move to re‑articulate our beliefs and behavioural norms. Achieving our growth plans will require a strong performance‑oriented culture, where diversity and inclusion are harnessed to achieve great results. I am very keen to foster an environment where everyone in our team feels empowered to take initiative and challenge outdated conventions for a better outcome. The OFX team grew globally to more than 270 by year end, and we expect that the growth will be similar in the 2017, year with particular emphasis in the technology and product teams. PRODUCT DEVELOPMENTOFX has a proprietary technology platform that has been built over several years. There is a significant amount of intellectual property in our software, and we will continue to invest in the scalability of our platform and the way we develop and deploy our code to support our growth. As OFX’s platform continues to evolve, we are very focused on accelerating the pace of delivery and, to achieve that, we will move our systems to a cloud‑based environment using Amazon Web Services during 2017. Craige Pendleton‑Browne, our new Chief Technology Officer has taken over the leadership of our product teams and integrated them with the technology teams. This approach is already seeing an increase in the number of features we are able to launch per release and a tighter linkage between our business and technical teams.During 2016, we delivered a new transactional mobile app, enabling our customers to make international payments wherever they are and whenever they want. There have been more than 55,000 downloads of the app since it was launched in August, with one in 10 transactions now being undertaken on a mobile device. I expect this proportion will continue to grow. BANKING PARTNERS AND BREADTH OF CURRENCIESOur banking partners are an integral part of our business model. We were delighted to add to the strength of our banking relationships during the year with the addition of another two key global banking partners supporting our growth, particularly in important markets in New Zealand, India and some Nordic countries.During the year, we increased the number of countries that we paid to almost 200, using the 880 currency pairs available to us.PROFITABLE GROWTHOFX is well positioned to address the vast opportunity in the international payments market. There remains significant growth in current and new geographies. Our strategic priorities are to:• Continue penetration in our primary market of Australia and New Zealand through efficient online engagement and building of brand awareness through diversified marketing channels in social media, online, mobile and television;• Place clear emphasis on international expansion, with particular focus on North America;• Continue evolution of the technology platform and move to an AWS cloud‑based environment to enable rapid innovation and cadence in delivery of features;• Continue development of our customer service model through product innovation; • Further embed ourselves in ecosystems with global brands.We have made a substantial start on our Accelerate journey and have the financial resources and balance sheet to internally support the investment in our organic growth.OUTLOOKWe are well on our way to the goal we set ourselves of delivering $200million in revenue by 2019.We have bolstered our leadership, begun our move to a single global brand under OFX, developed a clear marketing strategy and are increasing the speed of innovation through a cloud‑based technical environment and an empowered global team.We are confident and excited about our future. Thank you for your ongoing support.O F X G R O U P L I M I T E D
A N N U A L R E P O R T 2 0 1 7

OFX is changing the way the world
moves money.

We offer fast international money
transfers at highly competitive rates,
for individuals and businesses.

We serve an ambitious globally
orientated society from our six offices
around the world.

NATURALLY,
WE LOVE NUMBERS

$119BN

in transfers

3,380

transfers made daily

159

bank accounts in our
global network

currencies offered

different nationalities
working together

24/7

thanks to our
global network

O F X G R O U P L I M I T E D
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W H AT W E D O

WHAT WE DO

Founded in 1998
in Sydney

Inspired by the concept
of ‘giving customers a fair go’
when it comes to international
money transfers

We send funds securely
through our proprietary
bank-to-bank network

‘Follow the sun’ customer service
offering with 24/7 phone support

119

We are stable and well established –
we’ve handled in excess of $119BN
in transactions over 18 years

Our diversified client base includes
wealthy individuals and retired
couples, expats, companies selling
across online marketplaces such as
eBay and Amazon, and businesses
importing and exporting goods
internationally

C U S T O M E R S T O R Y

Customer Story

NORTH SOUTH WINES
A VOLATILE VINTAGE

“
OFX offered a
stronger exchange
rate and all-round
better service for
foreign currency
exchange.”

Hamish Gillespie

Set up in 2014, North South Wines
operates within a stone’s throw of
Heathrow Airport in London. The multi-
channel wine importer is part-owned by
three wineries, and provides distribution
services for other international winery
partners. As a direct supply distributor,
the company is heavily involved in
overseas trade and makes regular
payments in foreign currencies.

Hamish Gillespie, Finance and
Operations Director, explains why
they cut ties with their bank: “OFX
offered a stronger exchange rate and
all-round better service for foreign
currency exchange. They are extremely
supportive of smaller companies, and
their personalised approach ties in well
with our own values.

Currency volatility is problematic in
the wine trade. Producers set prices
annually, by vintage, and retailers
often print their price lists at the same
time, months in advance of the wine’s
actual delivery. If exchange rates shift
dramatically in the middle of this cycle,
as they did after the EU referendum,
that’s a real problem. For us, having
a strong FX partner has meant that
we have the ability to use forward
contracts and lock in rates, reducing
our exposure to fluctuating rates.”

O F X G R O U P L I M I T E D
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O U R S E R V I C E

OUR SERVICE

OFX provides international money transfers

OFX OPERATES
AROUND THE WORLD

LONDON

TORONTO

SAN FRANCISCO

HOUR

‘Follow the sun’ customer service

MAKING INTERNATIONAL PAYMENTS A LOCAL EXPERIENCE

A client registers and makes a
transfer through OFX.com

Funds are transferred from their bank
account into an OFX bank account
within the same country

OFX transfers funds from a local account
in the destination country to the client’s
bank account

OUR KEY POINTS OF DIFFERENCE

24 HOUR
CUSTOMER SUPPORT
Our customer care
operates 24/7

GREAT RATES
Our rates are better
than those of the banks

RAPID DELIVERY
We move funds quickly,
usually by the next
business day

HONG KONG

SYDNEY

AUCKLAND

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O U R O P P O R T U N I T I E S A N D F O C U S

OUR OPPORTUNITIES
AND FOCUS

CUSTOMERS

TECHNOLOGY

MARKETING

OFX is part of a huge global opportunity.
We operate in a category where customers
are simply paying too much for their
international transfers – they just don’t
know it. Everything we do is driven by a
desire to better serve our customers. From
competitive rates, fast transfer speeds
and high security to excellent customer
service, we are focused on disrupting
the traditional foreign exchange market
to offer individuals and businesses a
significantly better option.

HOW OFX DELIVERS
VALUE FOR CUSTOMERS

Our critical banking relationships
mean that we can secure international
transfers at significantly better rates
than other providers.

In October 2016, we completed a move
to the Cloud with Amazon Web Services
(AWS), which has improved our digital
user experience and our ability to achieve
scale, and furthermore strengthened our
search engine optimisation performance.
This transition has made our data
more secure and enables us to easily
scale our operations globally, without
additional cost.

The Cloud improves
marketing cut
through and
delivers a range
of technical
efficiencies that
translate into cost
savings for the
business.

Outstanding marketing lies at the heart
of our growth, and the creation of a single
global brand is designed to drive the
efficiency and effectiveness of our brand
activities. The rebranding is now complete
in our core markets – the USA, the UK
and Australia, and will be rolled out in our
remaining markets by the end of FY18.

Our focus this year lies in continuing to
build the OFX brand across geographies,
products and channels. We will be
improving our user experience through
customer research projects, aimed at
driving a deeper understanding of who
is using our services, and how we can
communicate better with them. This
process will enable improvements to our
customer journey and service model.

The move to one single global
brand is designed to maximise
the proficiency of our marketing
operations. Ultimately, we will achieve
stronger brand recognition across our
international markets.

We have sophisticated fraud
detection systems in place to keep
client money safe.

Our FX exposure is not purely peer
to peer, meaning that we can remain
trading through significant market
events, e.g. Brexit.

Our workforce
of around 300
employees across
six offices is
characterised by
a commitment to
high standards
and a collaborative
approach.

OUR PEOPLE

OFX is a young and disruptive company
working to redefine the customer
experience in international payments.
We attract young, highly driven talent who
appreciate the challenge we face and take
pride in delivering on this opportunity.

Our open plan office spaces, flat
management structure, and training and
development programs ensure that we
continue to attract and retain leading
professionals. We embrace innovative
techniques such as agile project
management and use digital networking
tools to stay quickly connected
across teams.

Our workplace is one that embraces
diversity in all its forms; over 60% of
our senior leadership team globally is
represented by women and our employees
share the cultures of over 50 different
nationalities. We also employ talent
across a wide range of generations, from
millennials to baby boomers.

O U R P E O P L E / O U R V A L U E S

OUR VALUES

Push boundaries
There’s always a
smarter way.
Find it. Use it. Win.

Get stuff done (GSD)
We are self starters
and team finishers.

Always keep learning
Grow your expertise.
Share it freely.

We’re better together
Understand intuitively,
define articulately
and solve jointly.

Inspire customer confidence
Your commitment to
them will earn their
commitment to us.

O F X G R O U P L I M I T E D
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F I N A N C I A L H I G H L I G H T S

FINANCIAL HIGHLIGHTS

TURNOVER ($B)

FEE AND TRADING INCOME ($M)

NET OPERATING INCOME ($M)

2015

2016

2017

16.6

19.6

19.4

2015

2016

2017

95.6

111.2

114.1

2015

2016

2017

90.1

103.9

105.1

UNDERLYING EBTDA ($M)

UNDERLYING NPAT* ($M)

TRANSACTIONS

2015

2016

2017

34.5

36.1

27.8

23%

2015

2016

2017

24.3

23.9

19.6

18%

2015

2016

2017

702,800

784,200

852,300

* Net Profit After Tax

Macquarie became a
51% shareholder.

Toronto office opened
and CanadianForex
brand launched.

Established first
international payments
solution with Macquarie.

Annual international
payments transaction
turnover exceeded
$1 billion.

London office
opened and UKForex
brand launched.

International
payments services
offered 24 hours a
day, 5 days a week.

Year

156,700
ACTIVE CLIENTS

Annual international
payments transaction
turnover exceeded $7 billion.

Hong Kong office opened and
ClearFX brand launched.

San Francisco office opened
and USForex brand launched.

Established international
payment solution with
Travelex in the UK.

Funds associated
with Accel Partners
and The Carlyle
Group became
shareholders.

Launched Macquarie
International Money
Transfers service
for Macquarie staff
and retail clients
in Australia.

OFX brand
launched.

Move to the
Cloud via AWS.

OFX brand rolled
out in the USA.

OzForex Group Limited
publicly listed on the
Australian Securities
Exchange.

OFX brand rolled
out in the UK.

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C H A I R M A N ’ S L E T T E R

Going forward our
goal is to deliver
sustainable growth.
We will invest in
a thoughtful and
disciplined way
where it offers
value for our
customers and
our shareholders

Steven Sargent
Chairman

CHAIRMAN’S LETTER

Fellow Shareholders,

The past 12 months were a challenging
period for OFX given the tough operating
environment and considerable amount
of change across the business. We are
disappointed that we did not fully deliver
on the commitments and performance
standards we set for ourselves and for
our shareholders.

Despite this, as set out in the CEO’s letter,
we made significant progress on several
fronts. The global branding exercise to
a single brand of ‘OFX’, the transition to
hosting our platform on the Cloud and
several technology enhancements have
strengthened the Board’s confidence in the
future for OFX. The recent appointment of
Skander Malcolm as CEO has also bolstered
the Board’s confidence that OFX can
execute on its growth ambitions.

The Board continues to believe that we
have excellent growth prospects. The
market in which we operate is highly
fragmented and is enormous. While data
on the size of the total global foreign
exchange market varies, it is broadly
believed to be in the trillions of dollars
and growing at double digit rates annually.

Commercial banks account for roughly
90% of the Australian market with money
service businesses such as OFX sharing
just 10% market share, although this is
growing. OFX’s competitive differentiation
comes from our frictionless digital
experience, our industry leading customer
service, competitive pricing and our safe
and secure technology.

This is not an easy industry for new
entrants. The regulatory compliance
hurdles are high. Over more than a
decade, OFX has built out a large network
of licences that positions it to operate
in 55 currency corridors around the
world (including being operational in
49 US states). When combined with the
long-standing relationships we have with
15 global banks and our strong balance
sheet, we believe OFX has a differentiated
competitive position.

In the ever evolving payments landscape,
the Board and I are very committed to
ensure we remain relevant, bold, and at
the forefront of ongoing industry change.
In 2018, Skander and the Executive
team will be focused on driving stronger,
more disciplined execution as we
exploit opportunities across our target
geographies, products and customer
segments.

However, taking advantage of
opportunities takes a lot more than great
execution. Value is created for customers,
and therefore shareholders, by delivering
terrific customer service. Our Net Promoter
Score is 51 for Individuals and 56 for
Corporates, industry leading figures.
We will continue to build on this via:

•

Investing in better understanding our
customers wants and needs;

Improving our technology capabilities to
provide an enhanced digital experience;

• Understanding and complying with

complex financial services regulations;
and

• Maintaining strong and trusting
relationships with our banking
counterparties.

OFX is regarded as one of the leading
international money transfer businesses in
the world because we do these things well
and have built a strong foundation over
nearly two decades.

Going forward our goal is to deliver
sustainable growth. We will invest in
a thoughtful and disciplined way where
it offers value for our customers and
our shareholders.

In concluding, I would like to thank our
people for their extraordinary efforts.
While this past year has presented some
significant challenges, we can look forward
to the future with increasing optimism
and confidence.

O F X G R O U P L I M I T E D
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CEO’S LETTER

Everything else required – great people,
great technology, teamwork, clear thinking
– will all be deployed against these
principles. As your new CEO, you have my
personal commitment, and all my energies,
in helping OFX compete to win.

2017 – FINANCIAL PERFORMANCE

Financially we did deliver improvements:

• Fee and trading income grew by 3%
to $114.1 million, even as average
transaction volumes declined
due to weaknesses in some key
currency corridors.

• NPAT came in on guidance at

$19.6 million, confirming that we are a
profitable business.

• Transactions grew 9% and active

clients grew 4%, confirming that we are
being of more service to our existing
customers each year.

2017 – WE MADE PROGRESS

In 2017, we executed a lot. Some of the
highlights included:

• Our rebrand. We continued our journey
to become a single brand globally. We
completed the rebranding of the sites
in our biggest geographies, and are now
operating under the OFX brand in Australia,
the US and the UK. The main benefit of this
is that it has helped customers understand
where to find us, particularly online, which
is where they typically look.

• Product delivery. In FY17, we rebranded
our OFX secure sites and added over
50 customer features to our existing
products. The benefit of this has been
two-fold: lower costs and a better
customer experience.

• Migrating to Amazon Web Services

(‘AWS’). This has improved productivity,
allowed us to scale up and down quickly
in line with demand, and provided better
security. Having these proficiencies
matters to our customers. Along with
our ‘follow the sun’ service capability, we
were able to remain trading 24x7 through
the highly volatile Brexit period when
most of our competitors – including
one major Australian bank – ceased
supporting their customers.

2018 – OUR PRIORITIES

In 2018, we will be focused on the
following areas:

1. Delivering earnings growth through

strong operational and fiscal discipline.

2. Investing further in developing a

deep understanding of prospect and
customer behaviours, so as to improve
our marketing efforts, and our existing
customer experience. We will drive
our acquisition marketing and sales
efforts harder.

3. Delivering our technology programs on
time, on budget, and on expectation –to
continue improving both our customer
on-boarding and employee experience.

4. Meeting all our regulatory obligations.

5. Identifying further growth

opportunities.

OUR CHALLENGES

We feel positive about our prospects for
growth, but mindful of the challenges
in execution. Specifically, there are two
areas that the leadership team is very
focused on: reducing poor execution that
causes delays and/or added costs that we
haven’t budgeted for; and improving the
customer experience.

Poor execution is within our control. We
have implemented a tighter operating
rhythm that focuses us on fewer but more
important programs. The entire leadership
team is committed to ensuring they are
delivered well.

As I previously highlighted, serving
customers is at the heart of our success,
and will continue to be. By developing a
deeper insight program that gives us richer
and earlier views into what matters to
customers the most, which, when linked
with early actions, will ensure we remain
customer-led.

We are a young company, and customer
needs, as well as the means to serve them,
is evolving rapidly. We are investing in a
number of experiments that will help us
learn quickly – what to do more of, and
when to move on to the next idea.

COMPETING TO WIN
OFX operates in a huge market. In 2017,
we supported over 850,000 transactions
– a huge amount for a small company, but
still a small fraction of what’s possible.
We have grown from zero in less than
20 years by embracing the competitive
drive required to grow and win. As we
reflect on 2017, and look forward to 2018,
this competitive drive will be central to our
efforts. It comprises:

• Putting our customers at the heart

of all our thinking: developing a deep
understanding of their needs, using
them to filter where to invest, and always
trying to improve how we serve, so that
on balance, our customers prefer OFX
for great prices and great service, in this
increasingly competitive market.

• Executing with discipline and focus.
It’s hard to compete and grow when
our limited resources are spread very
thinly or we have a lack of clarity on key
milestones – we will be very thoughtful
about what we do, but we will do it well.

•

Investing selectively, always
experimenting, but always with a view
to generating a healthy financial return.

• Understanding and embracing

our regulatory obligations. Being
conversant on what needs to be done
for our regulators is mandatory, but it
isn’t enough. Our teams need to have
the mindset to do what’s right for our
customers, and when we see something
that isn’t right, or when it is brought
to our attention, we must address it
without delay.

CEO’S LETTERWe can never be enough of a learning
company, but through investment
and visibility, we will be agile and give
ourselves the best chance to see and
capitalise on trends as they emerge.

WHY I AM OPTIMISTIC

In joining OFX I am struck by our significant
opportunity. We operate in a huge market,
and are just getting started. We have over
18 years’ experience on what customers
prefer, and how to deliver it. We are global,
but we support customers in their local
context. Our teams and individuals are high
calibre, and want to compete and win.

Our Board see the opportunities, and
support our ambition. Our core product
is simple, and we can make it better by
continuing to innovate. Our technology
allows us to scale at reasonable cost. It’s
a great time to join OFX. Thank you for your
support, and your Executive team and I
look forward to delivering a good 2018.

John Alexander Malcolm
Chief Executive Officer
and Managing Director

C U S T O M E R S T O R Y

Customer Story

AN AUSTRALIAN FAMILY
BUSINESS WITH A
RECIPE FOR SUCCESS

Established in 1966, Zoratto Enterprises
is a third-generation family owned
business specialising in the wholesale
of quality kitchenware and baking
supplies. Based out of Mount Kuring-
Gai in New South Wales, the company
imports products from all over the
world. Operations Manager and Owner
Andrew Zoratto explains; “Partnering
with OFX allows us to save around two
to three cents per dollar on foreign
exchange payments. We spend millions
of dollars with suppliers every year, so
it’s nice to know that the money is going
back into the business, rather than to
the banks. The Aussie dollar has been
extremely volatile, so we now pay all
our invoices in US dollars using forward
contracts. This allows us to lock in good
rates and mitigate risk.”

“Importing products to
Australia from all over
the world means that we
need an international
payments partner that
can help us mitigate
risk, particularly as the
Australian dollar has
been so volatile.”

Andrew Zoratto
Zoratto Enterprises

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C U S T O M E R S T O R Y

Customer Story

THE HEART AND SOLE
OF INTERNATIONAL
E-COMMERCE

Ruze Shoes is a leading internet retailer
based in Southern California, specialising
in men’s shoes. The business started as
a bricks and mortar retail venture at the
Santa Anita Mall in Arcadia, California.
Market changes led to a decision to move
predominantly online, where it began
selling on a global level.

Now a strong e-commerce website with
a presence across over 20 different
online marketplaces, including eBay
and Amazon, Ruze Shoes partners
with OFX to administer its growing raft
of international payments. Getting
customers’ funds back to the US safely
and quickly are key considerations for
the business, along with the speed and
efficiency of the transfer.

Victor Yameen, CEO, Ruze Shoes
commented; “I came across OFX
while attending the Internet Retailer
Conference last year, and was surprised
to find that they could assist us
with many aspects of international
e-commerce that were holding us back.
Now, with OFX, we have a streamlined
process for funds to come through
regularly and without a lot of attention
from our side. It’s reliable. We’re saving
money without investing additional time
– a perfect scenario.”

Victor Yameen, CEO
Ruze Shoes

OFX administers Ruze Shoes’
growing raft of international
payments, creating a simple,
streamlined process that
saves time and money –
essential when the company
trades on over 20 online
marketplaces, including
Amazon and eBay.

EXECUTIVE TEAM

E X E C U T I V E T E A M

From left to right: Adam Smith, Rebecca Shears,
Skander Malcolm, Craige Pendleton-Browne and
Kirsten Pollard

SKANDER MALCOLM
Chief Executive Officer
and Managing Director

Skander Malcolm joined OFX in February
2017 as CEO.

He has more than 23 years’ experience
in financial services including payments
technology platforms in both established
and emerging markets. As President and
CEO of GE Capital (ANZ), he led a team
of more than 4,500 employees with
an emphasis on delivering sustainable
growth and operational excellence. While
in the UK, Skander Malcolm launched the
country’s first and largest digital personal
loan business, Hamilton Direct Bank, which
grew to more than GBP3 billion in its first
five years. While at GE, he also facilitated
GE’s largest ever volunteer donation to
OzHarvest and bolstered participation in
employee volunteering by 40%.

He holds a Bachelor of Economics from
University of Sydney and was selected
by the Chairman for GE’s most senior
Executive Development Program.

CRAIGE PENDLETON-BROWNE
Chief Technology Officer

Craige Pendleton-Browne is Chief
Technology Officer and commenced his
role in November 2015.

Craige has more than 20 years’ experience
in technology roles with over 15 years of
those working in digital. He has worked
as CTO in both the UK and Australia.
His most recent roles include CTO for
News Digital Media, Head of Content and
Digital for News Corp Australia and CTO of
iCareHealth, Australia’s leading provider
of residential aged care software. Craige
has extensive experience in creating the
technology vision and strategy as well as
a proven ability to execute and deliver.

He has a BSC in Computer Science as well
as an MBA from London Business School.

REBECCA SHEARS
Chief Marketing Officer

Rebecca Shears commenced her role as Chief
Marketing Officer at OFX in August 2016.

Rebecca has more than 20 years’
experience in marketing roles both in the
UK and Australia. She started her career
at Unilever and has since held positions at
British Telecom, Telstra and T-Mobile. Her
most recent role was Head of Marketing
for the UK and Ireland at HP Inc. focusing
on increasing brand consideration, market
share and driving digital transformation for
its e-commerce business across Europe.

Rebecca graduated from Nottingham Trent
University, where she studied Business
and Commerce and gained the Chartered
Institute of Marketing Postgraduate Diploma.

ADAM SMITH
Chief Operating Officer

Adam Smith commenced his role as Chief
Operating Officer at OFX in October 2015.

Adam has more than 20 years of
experience in top tier financial institutions,
most recently as Co-Head of ANZ ETFS.
Prior to his current role, Adam has held a
number of commercial and operational
positions within ANZ Global Markets,
Macquarie Group and Deutsche Bank.
Adam combines a strong background
in financial markets products with an
extensive knowledge of business support
functions such as product development,
technology, operations, risk and finance.

Adam has a Bachelor of Economics from
the University of Sydney and a Master of
Business (Finance) from the University of
Technology (Sydney).

KIRSTEN POLLARD
Chief People and Culture Officer

Kirsten Pollard began working with OFX
in November 2014 and commenced her
role as Head of People and Culture in
September 2015.

Prior to joining OFX, Kirsten had a 10-year
career in global equities at Merrill Lynch and
four years in a profitable start-up business.

She has a Bachelor of Commerce from the
University of Western Australia and has
attended an Executive Education program
at the Harvard Business School.

At the time of going to print, our Chief Financial Officer and Chief Risk Officer roles are vacant and candidates are presently being recruited.

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C U S T O M E R S T O R Y

Customer Story

VICHET DUK
SUPPORTING MY SISTER
IN CAMBODIA

When Vichet Duk emigrated to Australia
eight years ago to pursue a career in
engineering, he vowed to financially
support his younger sister Seila back
home in Cambodia. She had always
had her heart set on medical school
and Vichet promised to help make her
dream come true. Vichet had previously
tried bank transfers, but was left
disappointed by the exchange rates and
hassle of the process. In the search for
an alternative, Vichet came across OFX
and discovered a more convenient way
to transfer money to his sister.

“I decided to start small and just
transfer a limited amount to begin with
to see how it went,” Vichet explains.
“My fears were quickly alleviated when
the test money got to my sister’s
account in record time, with minimal
effort and great rates. On top of that,
the customer service was fantastic,
with an OFX representative calling
me shortly after to make sure that
I understood the process and that
everything had gone well.”

“My sister still has another year left at
medical school so I will be continuing to
use OFX to support her through these
studies. The whole experience has been
so uncomplicated, reliable and quick.
My money is secure, it’s transferred
at the best rates available, and it’s a
service I’ll continue to use even after
my sister has graduated as a doctor.”

Vichet found the experience so
advantageous that he has opted
to make all future transactions to
Cambodia with OFX, including paying
for a plot of land in Siem Reap. “In 2013,
I purchased some land in Cambodia
which I eventually intend to build a
house on. I had initially planned to use
my bank to send the three instalments
across, but after my experiences with
Seila’s transfers, I instead chose to
use OFX. This was fortunate, as I saved
about 3% per transaction – funds
which can now go towards the house”
said Vichet.

“
When transferring funds from Australia to
Cambodia, I found that funds reached my
sister’s account in record time, with minimal
effort and great rates. The OFX customer
service is also fantastic.”

Vichet Duk

D I R E C T O R S ’ R E P O R T
A N D F I N A N C I A L R E P O R T

DIRECTORS’ REPORT
AND FINANCIAL REPORT

Directors’ Report

Remuneration Report

Auditor’s Independence Declaration

Financial Statements

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

About This Report

Segment Information

Results for the Year

Financial Assets and Liabilities

Other Assets and Liabilities

Capital Structure

Other Items

Directors’ Declaration

Independent Auditor’s Report to the
Members of OFX Group Limited

Shareholder Information

Corporate Information

O F X G R O U P L I M I T E D
A N N U A L R E P O R T 2 0 1 7

D I R E C T O R S ’ R E P O R T
A N D F I N A N C I A L R E P O R T

DIRECTORS’ REPORT
For the year ended 31 March 2017

Board of Directors’ left to right:
Douglas Snedden,
Steven Sargent, Skander Malcolm,
Melinda Conrad and Grant Murdoch

The Directors of OFX Group Limited (OFX, the Company), submit their report (including the Remuneration Report), Statement of Comprehensive
Income and Statement of Cash Flows for the year ended 31 March 2017 and the Statement of Financial Position as at 31 March 2017 of the
Company and its subsidiaries (the Consolidated Entity, the Group), the auditor’s report, and report as follows:

DIRECTORS
The Directors of the Company as at 31 March 2017 and at any time during or since the end of the financial year are:

STEVEN SARGENT
CHAIRMAN – BBUS, FAICD, FAATSE

Member of the Audit, Risk and Compliance
Committee and Remuneration and
Nomination Committee

Age: 57 years

Appointed: 4 August 2016

Independent director

Residence: Sydney, Australia

Steven joined OFX Group Limited in
August 2016 and has over 36 years of
global corporate experience in industries
including banking, financial services, mining
and energy. Steven’s prior professional
experience includes 14 years at Westpac,
followed by various positions at GE Capital,
including President and CEO GE Capital
Australia and NZ, and President and
CEO GE Capital Asia Pacific. Steven was
appointed Vice President and Officer of
General Electric Company in 2008 and was
a member of GE’s Corporate Executive
Council, the first Australian to ever be
appointed to such positions in GE’s history.

Current directorships
Director: Origin Energy Limited; Nanosonics
Limited; The Great Barrier Reef Foundation;
Chair of the Origin Foundation.

Other: Fellow of the Australian Academy
of Technological Sciences and Engineering
and a Fellow of the Australian Institute of
Company Directors.

President and CEO of GE Healthcare’s
Eastern Europe and African Growth Markets
since 2013. Prior to joining GE Capital,
Skander held several senior leadership roles
at Household International in the UK, now
part of HSBC, and Westpac Bank.

Current directorships
Nil

Interest in shares: 100,000 ordinary shares

Interest in shares: Nil

JOHN ALEXANDER
(‘SKANDER’) MALCOLM
CHIEF EXECUTIVE OFFICER AND
MANAGING DIRECTOR – BECOM

Age: 48 years

Appointed: 1 February 2017

Not independent

MELINDA CONRAD
NON-EXECUTIVE DIRECTOR – MBA
(HARVARD), FAICD

Chair of the Remuneration and Nomination
Committee and Member of the Audit, Risk
and Compliance Committee

Age: 48 years

Residence: Sydney, Australia

Appointed: 19 September 2013

Skander was appointed Chief Executive
Officer and Managing Director on
1 February 2017. Skander has over 23 years’
experience in the financial services sector
in Australia, the United Kingdom and
United States including 10 years with GE
Capital. Prior to joining OFX, Skander was

Independent director

Residence: Sydney, Australia

Melinda joined the OFX Group in
September 2013 and has over 20 years’
experience in business strategy and
marketing. Melinda’s prior professional
experience includes executive

D I R E C T O R S ’ R E P O R T

finance, consulting, strategic management
and outsourcing. Doug has previously
worked as Country Managing Director
of Accenture Australia.

Current directorships
Director: Odyssey House McGrath
Foundation; Chris O’Brien Lifehouse.

Other: Member of the Australian Institute
of Company Directors.

Interest in shares: 100,000 ordinary shares

PETER WARNE
FORMER CHAIRMAN – BA, FAICD

Member of the Audit, Risk and Compliance
Committee and Remuneration and
Nomination Committee

Age: 61 years

Appointed: 19 September 2013

Ceased: 14 November 2016

Independent director

Residence: Sydney, Australia

Peter joined the OFX Group in
September 2013 and has over 30 years’
experience in accounting and finance.
Peter’s prior professional experience
includes 12 years as Head of Bankers Trust
Australia Limited’s Financial Markets Group.

RICHARD KIMBER
FORMER CHIEF EXECUTIVE OFFICER
AND MANAGING DIRECTOR – BSC, MBA
(MACQUARIE)

Age: 48 years

Appointed: 1 June 2015

Ceased: 31 January 2017

Not independent

Residence: Sydney, Australia

Richard was appointed Chief Executive
Officer and Managing Director on 1 June 2015.
Richard has 25 years of diverse global
leadership experience that has included
several chief executive and board roles in
the banking and technology sectors and has
extensive experience in financial services,
marketing, social media and capital markets.

Interest in shares as at 31 January 2017:
80,229 Performance Rights; 205,193
Options; 433,218 ordinary shares in the
OFX Group Limited Executive Share Plan
and 21,000 ordinary shares indirectly held.

roles at Harvard Business School,
Colgate-Palmolive, and several retail
businesses. Melinda was previously
a director of APN News & Media Limited
and David Jones Limited.

Current directorships
Director: ASX Limited, Caltex Australia
Limited, The Reject Shop Limited, the George
Institute for Global Health, the Centre for
Independent Studies.

Other: Fellow of the Australian Institute
of Company Directors; member of the
Australian Institute of Company Directors
Corporate Governance Committee.

Interest in shares: 100,000 ordinary shares

GRANT MURDOCH
NON-EXECUTIVE DIRECTOR – MCOM
(HONS), FAICD, FICAA

Chair of the Audit, Risk and Compliance
Committee

Appointed: 19 September 2013

Age: 65 years

Independent director

Residence: Brisbane, Australia

Grant joined the OFX Group in September
2013 and has over 35 years’ experience in
accounting and corporate finance. Grant’s
prior professional experience includes Head
of Corporate Finance for Ernst & Young
Queensland and he is a graduate of the
Kellog Advanced Executive Program at
the North Western University, Chicago,
United States.

Current directorships
Director: ALS Limited; QIC Limited;
Redbubble Limited, UQ Holdings Limited.

Other: Senator of the University of
Queensland; Adjunct Professor School
of Business, Economics and Law at the
University of Queensland; member of
Queensland State Council of Australian
Institute of Company Directors.

Interest in shares: 245,000 ordinary shares

DOUGLAS SNEDDEN
NON-EXECUTIVE DIRECTOR – BEC, MAICD

Member of the Remuneration and
Nomination Committee and Member of the
Audit, Risk and Compliance Committee

Age: 59 years

Appointed: 16 March 2015

Independent director

Residence: Sydney, Australia

Doug joined the OFX Group in March 2015
and has over 30 years’ experience in

DIRECTORS’ REPORT CONTINUED
For the year ended 31 March 2017

1. STATE OF AFFAIRS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the Directors’ opinion there have been no significant changes in the state of affairs of the Group during the year. A further review of matters
affecting the Group’s state of affairs is contained on pages 19 and 20 in the Operating and Financial Review.

2. STATUTORY AND UNDERLYING INFORMATION
As required for statutory reporting purposes, the consolidated financial statements of the Consolidated Entity have been presented for
the financial year ended 31 March 2017.

The Group’s statutory financial information for the year ended 31 March 2017 and for the comparative year ended 31 March 2016 present the
Group’s performance in compliance with statutory reporting obligations.

To assist shareholders and other stakeholders in their understanding of the Group’s financial information as a publicly listed entity, additional
underlying financial information for the years ended 31 March 2017 and 31 March 2016 are provided in the Operating and Financial Review
section of this Report.

A reconciliation of the Company’s statutory and underlying financial information is included on page 20.

The reconciliation and the underlying information have not been audited.

3. DIRECTORS
The following persons were Directors of the Group either during the year or as at 31 March 2017:

Steven Sargent 1

Peter Warne 2

Skander Malcolm 3

Richard Kimber 4

Melinda Conrad

Grant Murdoch

Douglas Snedden

Chairman

Managing Director and Chief Executive Officer (CEO)

Non-Executive Director

1 Steven Sargent was appointed as a Director on 4 August 2016 and was appointed as Non-Executive Chairman on 14 November 2016.
2 Peter Warne ceased to be a Director and Non-Executive Chairman on 14 November 2016.
3 Skander Malcolm was appointed as a Director on 1 February 2017.
4 Richard Kimber ceased to be Director on 31 January 2017.

The background, qualifications and experience of each of the Directors as at the date of this Report are included on pages 16 and 17.

4. COMPANY SECRETARY
Freya Smith is the Group General Counsel and Company Secretary for OFX Group Limited. Freya was appointed as Company Secretary on
11 October 2016. Freya has over 10 years’ experience in legal practice and governance. Freya holds a Bachelor of Commerce and a Bachelor of
Laws (Honours); a Master of Laws (High Distinction); and a Graduate Diploma of Applied Corporate Governance from the Governance Institute
of Australia. Freya is admitted in the High Court of Australia, the Federal Court of Australia and the Supreme Court of New South Wales and is
a member of the Association of Corporate Counsel and an Associate of the Governance Institute of Australia. Freya is also currently a Non-
Executive Director and Chairman elect of the Sydney Fringe Festival.

5. DIRECTORS’ MEETINGS
The following table shows meetings held between 1 April 2016 and 31 March 2017 and the number attended by each Director or Committee member.

Director

S Sargent

P Warne

S Malcolm 1

R Kimber 1

M Conrad

G Murdoch 2

D Snedden

Board

Audit, Risk and Compliance
Committee

Remuneration and Nomination
Committee

Eligible

Attended

Eligible

Attended

Eligible

Attended

1 Mr Kimber and Mr Malcolm attended the Audit, Risk and Compliance Committee and the Remuneration and Nomination Committee meetings at the invitation of the Committees.
2 Mr Murdoch attended the Remuneration and Nomination Committee meetings at the invitation of the Committee.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT19

6. DIRECTORS’ INTERESTS
The relevant interest of each Director in the equity of the Company as at the date of this Report is outlined in the table below. All interests are
ordinary shares unless otherwise stated.

S Sargent

S Malcolm

M Conrad

G Murdoch

D Snedden

Type

ordinary

Opening
balance

–

100,000

145,000

39,000

Acquisition

100,000

–

100,000

61,000

Disposals/
forfeit

–

Closing
balance

100,000

–

100,000

245,000

100,000

There were no disposals of shares by the Directors during the year or share transactions post year end.

7. PRINCIPAL ACTIVITIES
The Group’s principal activity during the year was the provision of international payments and foreign exchange services.

8. DIVIDENDS AND DISTRIBUTIONS
Dividends paid or declared by the Company during and since the end of the year are set out in Note 20 and Note 21 to the
Financial Statements respectively.

Per share (cents)

Total amount ($’000)

Franked 1

Payment date

1 All dividends are fully franked based on tax paid at 30%.

9. OPERATING AND FINANCIAL REVIEW
A summary of financial results for the years ended 31 March is outlined below:

Net operating income

Underlying EBITDA 1

Underlying EBITDA margin 2

Underlying net profit (after tax) 3

Underlying earnings per share (EPS) (cents) 4

Statutory EBITDA 2

Statutory EBITDA margin 3

Statutory net profit (after tax)

Earnings per share (cents)

Final 2017

Interim 2017

Final 2016

2.90

7,016

100%

2.80

6,817

100%

3.10

7,440

100%

23 June 2017 4 January 2017

24 June 2016

2017
$’000

105,115

26,583

25.3%

19,596

8.17

26,583

25.3%

19,596

8.17

2016
$’000

103,913

34,453

33.2%

23,889

9.95

31,488

30.3%

21,814

9.09

Growth
%

1.2

(22.8)

(18.0)

(15.6)

(10.2)

Earnings before interest, tax, depreciation and amortisation (EBITDA) is a non International Financial Reporting Standards (IFRS) measure that is unaudited.

1
2 EBITDA margins are calculated with reference to net operating income.
3 Underlying net profit (after tax) (NPAT) is net profit after tax adjusted for one-time expenses. Refer to the NPAT reconciliation on page 20.
4 Underlying earnings per share was calculated with reference to underlying net profit after tax.

DIRECTORS’ REPORT20

DIRECTORS’ REPORT CONTINUED
For the year ended 31 March 2017

9. OPERATING AND FINANCIAL REVIEW CONTINUED
Higher active client numbers with an increased propensity to deal was offset by a depressed average transaction value (ATV) per client in the wake
of Brexit and uncertainty in global markets throughout the year. Net operating income increased slightly by 1.2% to $105.1 million. During the year,
sustained and significant investment was made in the Group’s core business processes, human capital, infrastructure, the continuing roll-out of the
rebranding to OFX and an Executive Team restructure, resulting in statutory net profit after tax (NPAT) decreasing by 10.2% to $19.6 million.

Whilst Australia and New Zealand (ANZ) continued as the largest contributor to fee and trading income for the Group, North America became
the second largest contributor ahead of Europe. Australia and New Zealand and North America experienced growth of 3.0% and 13.6%
respectively. Europe was impacted adversely by Brexit, with fee and trading income decreasing 5.1% from 31 March 2016. However, the underlying
fundamentals of the European business are strong, with transaction volumes growing 9.7% in FY17. Together, ANZ and North America provide the
majority of the Group’s fee and trading income, delivering 71.8% of the Group total, increasing from 69.8% for the year ended 31 March 2016. This
increase demonstrated the strong growth being achieved in the Group’s core strategic growth market, North America.

In North America, there are operations in Canada and the US. As at 31 March 2017, the Group was able to operate in 49 of the states in the
United States of America and has been continuing to develop its presence in North America, utilising search engine marketing, social media
and customer advocacy in order to gain brand awareness. The US customers of the North American segment have, in the main, been with the
Group less than four years; however, the existing customer base is becoming more significant. This growth has enabled the Group to grow
fee and trading income by 13.6% to $20.0 million. North America’s contribution to the Group’s fee and trading income increased from 15.8% in
the year ended 31 March 2016 to 17.5% in the year ended 31 March 2017.

Hong Kong remained the Group’s key Asian focus during the year. The segment experienced 17.3% growth in fee and trading income
to $2.5 million. Hong Kong is typified by a banking marketplace that offers significantly lower retail margins than in other geographies.

The International Payment Solutions (IPS) division (Wholesale division) maintained the Group’s existing branded partnership solutions for Macquarie
Bank, ING and MoneyGram in Australia and New Zealand, as well as the Group’s global partner Travelex. The IPS division’s fee and trading income
decreased by 6.7% to $9.9 million due to the legacy impact of closure of the OzForex ‘branded’ prepaid Travel Card in November 2015.

On 10 October 2015, OzForex Limited, a subsidiary of the Group, was declared an Offshore Banking Unit (OBU). As a result, income which is
deemed to be earned by the OBU is taxable at a reduced rate of 10%. The effective tax rate for the year ending 31 March 2017 reflects 18 months
of OBU transactions at the concessional tax rate of 10%. This, together with a research and development tax credit resulted in an effective tax
rate of 18% for the Group.

Underlying NPAT

Corporate action costs after tax

Rebranding expenditure after tax

Executive Team restructure costs after tax

Statutory NPAT

Growth
%

(18.0)

2017
$’000

19,596

–

2016
$’000

23,889

(827)

(506)

(742)

19,596

21,814

(10.2)

EBITDA is a non-IFRS unaudited measure that is calculated by adding back interest income tax, depreciation and amortisation.
The reconciliation is outlined below:

Underlying EBITDA

Corporate action costs before tax

Rebranding expenditure before tax

Executive Team restructure costs before tax

Statutory EBITDA

Add back interest income

Earnings before tax, depreciation and amortisation (EBTDA) 1

Less income tax expense

Less depreciation and amortisation

Statutory NPAT

26,583

34,453

(22.8)

–

26,583

1,169

27,752

(4,391)

(3,765)

19,596

(1,182)

(723)

(1,060)

31,488

1,662

33,150

(9,979)

(1,357)

21,814

(15.6)

(29.7)

(16.3)

56.0

(177.5)

(10.2)

The Group actively uses its cash balances as part of its hedging strategy, making the interest income integral to its earnings. For this reason, the Group regularly uses
EBTDA as a measure of performance, along with EBITDA.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT21

The Group’s financial position remains strong. The balance sheet consists predominantly of cash and client liabilities. The cash position net of
client liabilities increased to $42.6 million from $38.1 million. The Group currently has no external debt.

Cash and cash equivalents 1, 2

Deposits due from financial institutions

Client liabilities 1

Net cash position

1 Cash and client liabilities can vary greatly depending on the timing of deal flows.
2 Cash and cash equivalents includes cash held for subsequent settlement of client liabilities.

The financial position provides a good platform to pursue future growth opportunities.

2017
$’000

148,459

10,114

2016
$’000

142,088

20,802

(115,924)

(124,827)

42,649

38,063

Growth
%

4.5

(51.4)

7.1

12.0

10. STRATEGY
Our strategy remains simple: deliver a competitively priced and well supported product in the markets in which we operate. Our team will
be focused on the few but critical initiatives that will help us grow: grow our acquisition marketing and sales, improve our service delivery,
especially in on-boarding, and continue to improve our technology platform to drive a better customer experience, lower cost, and enhanced
security for our customers and shareholders.

11. OPERATIONAL HIGHLIGHTS
• Moved our technology production environment to the Cloud hosted by Amazon Web Services (AWS);

• Introduced over 50 new customer-facing features, which doubled our velocity of features delivered over the last 12 months;

• Introduced an improved registration form that simplifies sign-up for consumers;

• Improved reliability and uptime of our website;

• Improved our software release process to improve uptime on our websites during our deployments (new versions can be released without

taking our existing site down);

• Implemented additional fraud technology solutions to detect and prevent fraudulent use of the OFX platform in an automated

scalable manner; and

• Obtained additional US money transmitter licences in the states of Hawaii, New Hampshire and Ohio. OFX licensing footprint in the US now

covers the entire country with the exception of Nevada.

12. RISK
The potential risks associated with the Group’s business are outlined below. This is not a list of every risk that may be associated with the Group,
and the occurrence or consequences of some of the risks described are partially or completely outside the control of the Group, its Directors
and senior management. There is also no guarantee or assurance that the risks will not change or that other risks will not emerge.

• Competition – A substantial increase in competition could result in the Group’s services becoming less attractive to consumer or business

clients and partner companies; require the Group to increase its marketing or capital expenditure; or require the Group to lower its spreads or
alter other aspects of its business model to remain competitive. The Group continues to invest in product innovation, marketing efforts and
monitoring of competition to ensure that it is able to respond to such challenges.

• Relationships with banking counterparties – The Group relies on banks to conduct its business, particularly to provide its network of local
and global bank accounts and act as counterparties in the management of foreign exchange and interest rate risk. There is a risk that one
or more of these banks may cease to deal with the Group (which may occur on short notice), cease to deal with international payments
services generally, substantially reduce the services it offers, substantially alter the terms on which it is willing to offer services to the
Group, exit one or more of the markets for which the Group uses its services, or collapse. This has occurred in the past and may occur again
in the future. The Group manages this risk by having a suite of banking service providers to ensure that there is redundancy in its banking
relationships to operate effectively.

• Regulatory compliance – The international payments market is a highly regulated area of economic activity. The Group devotes significant
resources to comply with applicable regulations. However, there is a risk that any new or changed regulations could require the Group to
increase its spending on regulatory compliance and/or change its business practices, which could adversely affect the Group’s profitability.
There is a risk that such regulations could also make it uneconomic for the Group to continue to operate in places where it currently does
business. In addition, there is a risk that evidence of a serious failure to comply with laws may result in severe penalties, including being
forced to cease doing business as a result of a revocation or cancellation of one or more of the Group’s regulatory licences or authorisations.

• Information technology (IT) – The Group’s business operations rely on IT infrastructure and systems. Any interruptions to these operations

could impair the Group’s ability to operate its customer-facing websites, which could have a negative impact on performance. The Group has
a number of operational processes and disaster risk recovery plans in place to mitigate this risk.

DIRECTORS’ REPORT22

DIRECTORS’ REPORT CONTINUED
For the year ended 31 March 2017

12. RISK CONTINUED
• Data security – Through the ordinary course of business, the Group collects a wide range of personal and financial data from clients.
The Group takes measures to protect this data; however, there is a risk that a cyber-attack may result in data being compromised,
resulting in loss of information integrity, breaches of the Group’s obligations under applicable laws or client agreements and website and
system outages, each of which may potentially have a material adverse impact on the Group’s reputation and financial performance.

• Fraud – There is a risk that, if the Group’s services are used to transfer money in connection with a fraud or theft, the Group may be required
to take steps to recover the funds involved and may in certain circumstances be liable to repay amounts that it accepted for transfer, even
after it has made the corresponding international payment. For example, when the Group accepts payment by direct debit, it may ultimately
be held liable for the unauthorised use of bank account details in an illegal activity and be required to refund the transaction. If the rate of
refunds becomes excessive, banks and card associations also may require the Group to pay additional penalties. The Group has a range of
fraud prevention controls in place to mitigate this risk.

• Foreign exchange rate fluctuations – The Group may be affected by a change in the value of currencies, in particular a strengthening of
the Australian dollar, which may impact both transaction turnover and reported earnings. The Group continues to increase its geographic
footprint and therefore the diversity of its currency flows in order to mitigate the impact of any one currency’s fluctuation.

13. OUTLOOK
Our outlook remains positive. We can drive consistent earnings growth by:

• Strong focus on a critical few initiatives that drive customer and shareholder value;

• Building a deeper understanding of what drives customer and prospect preferences, and translating this knowledge into action; and

• Executing our technology roadmap quickly but rigorously so that we can serve at a lower cost and in a better way – more agile, more secure,

and more sensitive to the needs of our different customers around the world.

We have a strong balance sheet, a good track record of service delivery, an experienced and ambitious team, and a clear mandate from our
Board and our shareholders to be a growth company.

14. EVENTS SUBSEQUENT TO BALANCE DATE
As at the date of this Report, the Directors are not aware of any circumstance that has arisen since 31 March 2017 that has significantly
affected, or may significantly affect the Group’s operations in future financial years, the results of those operations in future financial years,
or the Group’s state of affairs in future financial years.

15. LIKELY DEVELOPMENTS AND EXPECTED RESULTS
While the impacts of foreign exchange market conditions make accurate forecasting challenging, it is currently expected that the combined
net profit for the financial year ending 31 March 2018 will be up on the financial year ended 31 March 2017.

The key growth driver for the business is the number of active clients (the number of clients who have transacted at least once in the prior
12 months). The growth in active clients for the financial year ended 31 March 2017 was 3.7% to 156,700.

Continued growth in the existing client base of the North American segment is anticipated to become a more significant portion of the
segment’s active clients. This will help to drive further profitability in the North American market, and build on the segment’s increased
contribution to the Group’s profit for the financial year ended 31 March 2017.

Europe is a more competitive market, and growth in active clients in this region is expected to be more challenging. Given the regional impact
of Brexit on ATV and profitability, subject to consistent currency exchange rates, contribution in Europe is expected to slightly decrease in the
financial year ending 31 March 2018.

The Australia and New Zealand segment is expected to continue to be the largest single contributor to the net profit of the Group. The growth
in contribution, assuming a constant Australian dollar exchange rate, is expected to be in line with the growth in active clients.

Accordingly, the Group’s result for the financial year ending 31 March 2018 is expected to be up on the result in the financial year ended
31 March 2017, with the potential for a better result if market conditions globally and, more specifically, in the UK improve, and the Group’s
continued investment in human capital, processes, infrastructure and marketing is more successful than anticipated.

The Group’s short-term outlook remains subject to the range of challenges outlined in the risks on page 21, including market conditions, the
impact of volatility in the foreign exchange markets, the cost of its customer acquisition through online channels, potential regulatory changes
and tax uncertainties.

OFX is well positioned to deliver continued growth in the short to medium term.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT23

16. INSURANCE AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Directors of the Company and such other officers as the Directors determine are entitled to receive the benefit of an indemnity contained
in the Constitution of the Company, to the extent allowed by the Corporations Act 2001.

The Company has entered into a standard form deed of indemnity, insurance and access with the Non-Executive Directors against liabilities
they may incur in the performance of their duties as Directors of the Company, to the extent permitted by the Corporations Act 2001. The
indemnity operates only to the extent that the loss or liability is not covered by insurance.

During the year, the Company has paid premiums in respect of contracts insuring the Directors and Officers of the Company against liability
incurred in that capacity to the extent allowed by the Corporations Act 2001. The terms of the policies prohibit disclosure of the details of the
liability and premium paid.

17. NO OFFICERS ARE FORMER AUDITORS
No officer of the Consolidated Entity has been a partner of an audit firm or a Director of an audit company that is the auditor of the Company
and the Consolidated Entity for the financial year.

18. NON-AUDIT SERVICES
The Company may decide to employ the external auditor on assignments additional to its statutory audit duties where the auditor’s expertise
and experience with the Company and/or the Group are important.

The Audit, Risk and Compliance Committee is required to pre-approve all audit and non-audit services provided by the external auditor.
The Committee is not permitted to approve the engagement of the auditor for any non-audit services that may impair or appear to impair
the external auditor’s judgement or independence in respect of the Company.

The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice provided by
resolution of the Audit, Risk and Compliance Committee, is satisfied that the provision of those non-audit services during the year by the auditor
is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Audit,

Risk and Compliance Committee to ensure that they do not impact the integrity and objectivity of the auditor; and

• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES110 Code
of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management
or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risk or rewards.

During the year, the following fees were paid or payable for non-audit services provided by the external auditor (PWC) of the Company to its
related practices and non-related audit firms:

Taxation services

Due diligence services

Other professional services

Total remuneration for non-audit services

2017
$’000

135

–

191

2016
$’000

148

–

178

19. AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the
year ended 31 March 2017 is on page 40 of this Report.

20. CHIEF EXECUTIVE OFFICER/CHIEF FINANCIAL OFFICER DECLARATION
The Chief Executive Officer and the Chief Financial Officer function have given the declarations to the Board concerning the Group’s Financial
Statements and other matters as required under section 295A of the Corporations Act 2001.

21. ROUNDING OF AMOUNTS
The Group is of the kind referred to in Australian Securities and Investments Commission (ASIC) Legislative Instrument 2016/191, and in
accordance with that Class Order amounts in the Directors’ Report and the Financial Report are rounded off to the nearest thousand dollars,
unless otherwise indicated.

DIRECTORS’ REPORT24

REMUNERATION REPORT
For the year ended 31 March 2017

REMUNERATION COMMITTEE CHAIRMAN’S LETTER
Dear Shareholder

On behalf of the Board, I am pleased to introduce OFX’s Remuneration Report 2017, for which we seek your feedback and support at our
Annual General Meeting (AGM) in August 2017.

The past 12 months have been challenging for OFX and our shareholders, and the Board has spent considerable time and effort to ensure that
remuneration outcomes for the year are aligned with the shareholder experience.

Frozen fixed pay

No Short Term Incentive
(STI)

Current Long Term Incentive
(LTI)

Legacy LTI

No pay rises will be awarded except where appropriate on account of a change in role or responsibilities,
or other exceptional circumstances. In FY17, Adam Smith received an increase of 6% to bring him in line
with other Key Management Personnel (KMP) (with the exception of the CEO). Fixed pay was frozen for all
other KMP.

Despite 1% growth in our net operating income, supported by 4% growth in active clients, we failed to keep
our earnings promise, and consequently, the gateway (90% of earnings before tax (EBT) budget) was not
met and so, no STI was awarded to KMP.

In the 2017 financial year, the Group introduced a new LTI, being the Executive Share Plan (ESP). The ESP
was approved by shareholders at the 2016 AGM. For the 2017 financial year, KMP were offered a triple grant.
Each tranche was equal to the KMP’s annual LTI target. No grants issued under the ESP were due to vest in
the 2017 financial year.

OzForex Group Limited Long Term Incentive Plan (Legacy LTI Plan) – The Board determined that in line with OFX’s
strategy, all performance rights issued under the one off special allocation under the Legacy LTI Plan in FY15
will be tested against the unchanged EPS compound annual growth rate (CAGR) gateway in March 2019. Further
detail is provided in section 5 of the Remuneration Report. A number of grants issued under the Legacy LTI Plan
remain on foot subject to vesting conditions as determined by the Board. No grants were due to vest in the 2017
financial year.

IPO performance rights – A small number (31.2%) of performance rights granted on IPO vested between
threshold and target in June 2016 based on 13.41% EBTDA over the performance period from October 2013
to March 2016.

No Director fee Increases

Fees paid to Non-Executive Directors remain fixed since listing in October 2013.

In 2016, the Board undertook a review of OFX’s remuneration framework and made a number of changes to the 2017 framework in light of the
ambitious strategy we set for ourselves at that time.

In 2017, we introduced the ESP, a new LTI plan by way of an executive share loan scheme. By providing for an allocation of shares upfront,
pursuant to a non-recourse company loan, executives are encouraged to ‘think and behave like shareholders’ from the grant date. The loan
needs to be repaid following vesting before the participant has access to any shares. At the end of the day our executives do not benefit from
the plan, unless our shareholders have.

At the time the ESP was introduced, the Board considered it appropriate to provide KMP with three years’ worth of grants upfront (instead
of three grants annually over the next three years) to be tested over three, four and five years. It was intended that this would focus our
executive team on long-term growth beyond the strategy that was set at that time. Since making those decisions, it is clear that we have not
fully delivered on the commitments we made to our shareholders. On his departure, while it was agreed that Mr Kimber will retain a pro-rata
proportion of the shares issued to him, they remain subject to the performance conditions approved by shareholders. It has become apparent
to us that these are now aspirational rather than realistic targets.

The Board and management are cognisant of the fact that we must ‘re-earn’ your trust through execution in 2018. With our new CEO,
Skander Malcolm in the seat, recent changes to the Executive Team and in our search for a new CFO, the Board is also mindful of the need to
retain, motivate and attract the best new talent to deliver strong results for our shareholders.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT25

Accordingly, the Board intends to set the new CEO’s package at competitive levels to take OFX back to where we want to be. Going forward, our
goal is to deliver consistent and sustainable growth through a strong focus on our customers and thoughtful and disciplined investment. For
the first year of the CEO’s appointment, the Board believes the loan scheme remains the right mechanism to deliver the LTI. Details of the CEO’s
2017 LTI grant will be set out in our Notice of Meeting, for which we will seek your approval.

Given the continued disruption in the international payments market, our new CEO and his Executive Team will undertake a detailed review of
strategy and the opportunities we may want to pursue. In this light, the Board is committed to continuing to review our remuneration framework
over 2018 to ensure that our Executive Team is aligned behind Skander’s strategy and our shareholders’ interests going forward.

However, the Board is firm that our short and long term incentives will only vest where we generate acceptable levels of value for our
shareholders. It remains our intention to encourage open dialogue with shareholders, particularly around our remuneration practices and
disclosures. Accordingly, I welcome any feedback you may have.

Yours sincerely

Melinda Conrad
Remuneration Committee Chair

REMUNERATION REPORT26

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

INTRODUCTION
The Directors of OFX Group Limited (the Company) present the Remuneration Report for the Company and its controlled entities (collectively
the Group or OFX) for the financial year ended 31 March 2017 prepared in accordance with the requirements of the Corporations Act 2001 (Cth)
(the Corporations Act) and as audited as required by section 308(3C) of the Corporations Act.

1. KEY MANAGEMENT PERSONNEL

The Remuneration Report outlines the remuneration arrangements in place for the Key Management Personnel (KMP) of the Group, which
comprises all Directors (Executive and Non-Executive) and those Executives who have authority and responsibility for planning, directing
and controlling the activities of the Group. In this report, ‘Executives’ refers to members of the Group Executive Team which includes both
KMP and other Executives.

The following table details the Group’s KMP during the 2017 financial year.

Name

Non-Executive Directors

Role

Steven Sargent1

Peter Warne2

Melinda Conrad

Grant Murdoch

Douglas Snedden

Executive Directors

Skander Malcolm3

Richard Kimber4

Other KMP

Mark Ledsham

Adam Smith

Chairman and Non-Executive Director

Former Chairman and Non-Executive Director

Non-Executive Director

Managing Director and Chief Executive Officer (CEO)

Former Managing Director and Chief Executive Officer (CEO)

Chief Financial Officer (CFO)

Chief Operating Officer (COO)

Craige Pendleton-Browne

Chief Technology Officer (CTO)

Maria Loyez5

Former Chief Marketing Officer (CMO)

1 Steven Sargent commenced as Non-Executive Director and KMP on 4 August 2016.
2 Peter Warne ceased as Non-Executive Director and KMP on 14 November 2016.
3 Skander Malcolm commenced as KMP on 1 February 2017.
4 Richard Kimber ceased as KMP on 31 January 2017.
5 Maria Loyez ceased as KMP on 22 July 2016.

Contractual arrangements – Skander Malcolm – Managing Director and CEO
Mr Malcolm was appointed Managing Director and CEO effective 1 February 2017.

For the 2017 financial year Mr Malcolm’s TFR is $650,000 per annum. Mr Malcolm will be eligible for STI at a target amount of $750,000 in FY18.
Mr Malcolm will also be eligible to participate in the OFX Executive Share Plan (ESP). For the 2017 financial year, subject to shareholder approval
and the terms of any invitation, Mr Malcolm will receive 3 LTI tranches, each equal to his LTI target of $600,000. Mr Malcolm will not be offered
an LTI grant in FY18 or FY19.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT27

The terms of Mr Malcolm’s appointment and termination arrangements are set out below.

Contract components

Details

Duration

Termination by Executive

Termination by the Company

Ongoing contract

Six months’ notice

Post-employment restraints

Six-month post-employment non-compete and non-solicitation restraint

Treatment of STI and LTI

Upon termination, if the CEO is considered a good leaver, the CEO will be entitled to a pro-rata
STI award. Board discretion applies to the treatment of any unvested LTI.

KMP (excluding Managing Director and CEO) employment contracts and notice periods

Contract components

Duration

Details

Ongoing contract

Termination by Executive

Six months’ notice for all KMP

Termination by the Company

Six months’ notice for all KMP

Post-employment restraints

Treatment of STI and LTI

C Pendleton-Browne and A Smith have 6-month post-employment restraints. No other KMP
or Executives have post-employment restraints.

Upon termination, if the KMP or Executive is considered a good leaver, the KMP may be entitled
to a pro-rata STI award. Board discretion applies to the treatment of any unvested LTI.

2. REMUNERATION SNAPSHOT FOR THE 2017 FINANCIAL YEAR

Executives of the Group receive Total Reward Remuneration (TRR) that comprises fixed and variable (at risk) annual pay, a blend of fixed
short-term and long-term incentives and which has three components:

• Fixed – total fixed remuneration (TFR)

• At-risk – Short Term Incentive (STI); and

• At-risk – Long Term Incentive (LTI).

The relative proportion of ‘fixed’ and ‘at-risk’ components of Executive remuneration varies by Executive. Executives with a closer link to
the growth drivers of the business have a higher proportion of ‘at-risk’ remuneration, while Executives more aligned to risk and compliance
functions have a lower ‘at-risk’ component. Participation in special retention plans is not taken into account in determining the Executives’
percentage allocations. The three components of the remuneration framework are outlined as follows:

TFR

STI

LTI1

• 28-70% of TRR.

• 15-43% of TRR.

• 15%-30% of TRR.

• TFR is set by reference to benchmark

market information for comparable roles
and individual performance.

• 40% of target STI is based on non-financial
key performance indicators (KPIs) and 60%
of target STI is based on financial KPIs.

• Executive Share Plan (ESP) as approved by

shareholders at the 2016 AGM.

• Shares granted upfront pursuant to a

• Includes cash, non-financial benefits,

• Paid in cash and shares. The STI paid in

company loan.

and superannuation.

shares is deferred over a two-year period.

• 90% earnings before tax (EBT)

budget gateway.

• Vesting conditions linked to net operating

income (NOI) and EPS at constant currency.

In addition to the components set out above, a number of grants issued under the Legacy LTI Plan remain on foot subject to vesting conditions as determined
by the Board.

REMUNERATION REPORT28

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

3. ROLE OF THE REMUNERATION AND NOMINATION COMMITTEE

The Remuneration and Nomination Committee (Remuneration Committee) is responsible for reviewing and making recommendations to the
Board on the remuneration arrangements for the CEO and Executives. The Charter of the Remuneration Committee is available on the Group’s
website at www.ofx.com/en-au/investors/corporate-governance/.

To assist in performing its duties and making recommendations to the Board, the Remuneration Committee seeks independent advice from
external consultants on various remuneration-related matters. The Remuneration Committee follows protocols relating to the engagement and
use of external remuneration consultants to ensure compliance with the Corporations Act 2001 (Cth).

During the 2017 financial year, 3 degrees consulting were engaged to provide advice on the following:

• Retention arrangements for the CEO and the Executives; and

• Executive remuneration structure.

Throughout the year 3 degrees consulting provided remuneration recommendations as defined in section 9B of the Corporations Act 2001.
The Board is satisfied that the recommendations received from remuneration consultants were made free from undue influence from the KMP
to whom the recommendations relate. 3 degrees consulting provided a formal declaration to the Chair of the Remuneration Committee in this
regard. Further, the following arrangements were made to meet this requirement:

• The remuneration consultants were engaged by and reported to the Remuneration Committee on behalf of the Board. The agreement for the

provision of remuneration consulting services was executed by the Chair of the Remuneration Committee.

• The advice containing the remuneration recommendations was provided by the remuneration consultants directly to the Chair of the

Remuneration Committee.

The remuneration recommendations made by external advisors to the Remuneration Committee and the Board were used as an input to
decision making only. The total fees paid to external advisors for remuneration recommendations included $39,900.00 (excluding GST)
paid to 3 degrees consulting.

In addition to providing remuneration recommendations, 3 degrees consulting provided advice on other aspects of the Company’s remuneration
framework throughout the year, including the provision of market data, governance and stakeholder communications advice. 3 degrees
consulting was paid $42,450.00 (excluding GST) for these additional services.

4. REMUNERATION PRINCIPLES AND STRUCTURE

The objective of the remuneration framework is to ensure that reward for performance is competitive and appropriate for the results delivered.
The remuneration framework aligns remuneration for Executives across the Group with achievement of strategic objectives and the creation of
value for shareholders. The Group’s remuneration framework is structured to:

• Encourage a strong focus on performance and support the delivery of positive returns to the Group’s shareholders;

• Attract, retain and motivate appropriately qualified and experienced individuals who will contribute to the Group’s financial and operational

performance;

• Motivate Executives to deliver results with both short and long term horizons; and

• Align Executive and shareholder interests through share ownership.

Overview of Executive remuneration components
Total fixed remuneration
TFR may be delivered as a combination of cash and prescribed non-financial benefits at the Executive’s discretion. Retirement benefits are
provided via defined contributions to approved superannuation funds.

Executives are offered a competitive base pay that comprises the fixed cash component of pay and rewards inclusive of superannuation. External
remuneration consultants from time to time provide analysis and advice to ensure that TFR is set to reflect the market for a comparable role.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT29

Short Term Incentive

STI component

Details

Eligibility

Opportunity

KPIs

All Executives were eligible to participate in the STI during the 2017 financial year.

The size of the STI opportunity available to each Executive is based on their accountabilities and the impact of their
role on the Company. This is typically in the range of 15-50% of TRR.

If an Executive commences or ceases employment with the Company during the financial year, the Board will
consider eligibility for a pro-rata share of their STI entitlement.

Executives will not be eligible for an STI payment if terminated due to misconduct, poor performance or, in general,
if they resign.

The Remuneration Committee will annually approve the KPIs to link Executive STI and the level of payout if the KPI
targets are met. This includes setting any maximum payout and minimum levels of performance. The Remuneration
Committee is responsible, after the preparation of the financial statements each year (in respect of financial
measures) and after a review of performance against non-financial measures by the CEO (and in the case of the
CEO, by the Board following recommendation by the Remuneration Committee), for recommending to the Board
the final STI payout for the previous financial year. The Board retains the discretion to vary the final STI payout if
performance is considered to be deserving of either a greater or lesser amount.

The KPIs linked to STI comprise two tranches, and within each tranche are a series of objectives. To be eligible for
access to STI, a minimum EBT performance gateway must be achieved of at least 90% of target EBT budget. No STI will
be payable if the 90% EBT budget gateway is not met irrespective of whether the Tranche A and Tranche B performance
indicators are met. Target EBT is approved by the Board at the commencement of the performance period.

Tranche A – Non-financial performance indicators

40% of the total target STI is available in Tranche A (non-financial performance indicators). If an Executive does not
meet a minimum performance threshold in Tranche A, they are not eligible to participate in Tranche B. The non-financial
performance indicators are designed to drive leadership performance and behaviours consistent with the role and
expectations for each Executive. These include objectives relating to leadership and culture, project management and
delivery, risk management outcomes, Net Promoter Score (NPS) outcomes and employee engagement scores.

Tranche B – Financial performance indicators

60% of the total target STI is available in Tranche B. The financial performance indicators for the 2017 financial year were:
• NOI;
• EBT; and
• Active clients1

In the event of outperformance against the target financial and non-financial performance indicators, there is a
potential additional outperformance bonus available of 20% on Tranche A and 33% on Tranche B.

Payment

CEO: 50% in cash and the remaining 50%, subject to shareholder approval, deferred to be delivered in performance
rights, shares or other security to vest 50% (or 25% of total STI entitlement) each year over two years.

Executives: 75% settled in cash, with 25% deferred to be delivered in performance rights, shares or other security to
vest 50% (or 12.5% of total STI entitlement) each year over two years.

1 Active clients are the clients who have transacted at least once in the prior 12 months.

REMUNERATION REPORT30

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

Long Term Incentive
LTI was available to KMP only in the 2017 financial year pursuant to the ESP as approved by shareholders at the 2016 AGM. Under the ESP,
non-recourse loans are issued for the sole purpose of acquiring shares in the Company.

The ESP

LTI component

Details

Objective

Eligibility

The ESP is designed to link long-term KMP reward with the ongoing creation of shareholder value, with the allocation
of equity awards which are subject to satisfaction of performance hurdles as set by the Board.

During the 2017 financial year the ESP was limited to KMP. Non-Executive Directors are not eligible to participate in
the ESP.

Award value

During the 2017 financial year, LTI awards under the ESP were in the range of 15-30% of TRR.

Loan arrangements

The loan amount provided to each KMP is based on their LTI target amount (LTI percentage of TFR) multiplied by an
externally determined ‘loan value’ which is calculated using an adjusted Black-Scholes option pricing valuation model.

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 plan.

The KMP is obliged to pay a portion of the post-tax value of any dividends received during the loan term toward
repayment of the loan amount.

To access shares under the ESP, KMP must repay their loan in full. Following the end of the relevant vesting period,
assuming the earnings ‘gateway’ is achieved, the KMP can either repay the loan directly or sell some or all of their
shares and apply the proceeds to repay the loan. Repayment of the loan must be received within two years in order
for the KMP to access the shares.

The Board may, in its discretion, include one or more vesting conditions as a term of the loan which, if satisfied, will
result in part forgiveness of the loan. The Board may exercise this discretion for current shares on foot under the ESP
if NOI growth or EPS growth for the relevant performance period exceeds the target measure.

Allocation methodology,
timing and performance
period

The ESP was approved by shareholders at the 2016 AGM. For the 2017 financial year, each KMP was offered a triple
grant of shares upfront, each tranche being equal to the KMP’s annual LTI target and with differing performance
periods. A triple grant was issued as an incentive to focus on the key performance drivers of the Group’s strategy at
that time, helping to deliver sustainable growth in shareholder value. The three issuances had performance periods
of three, four and five years respectively.

Vesting condition

Shares under the ESP were issued in the 2017 financial year at a price equal to the five-day volume weighted average
price (VWAP) for the period prior to issue, including the day of issue. A loan will be provided equal to the five-day
VWAP multiplied by the total number of shares to be issued.

The shares for each award are split into two tranches (Tranche A and Tranche B), each having a separate vesting
condition of CAGR of constant currency NOI and CAGR of constant currency EPS over a specified performance
period. The Board implemented a ‘gateway’ level of minimum acceptable growth in EPS performance below which
no shares will vest which applies to both tranches. The gateway conditions for the 2017 financial year are that the
Company must achieve a minimum level of performance of the threshold measure for EPS growth for the tranche
with the corresponding performance period to be available for vesting.

The shares are subject to performance hurdles and ongoing employment. The performance hurdles to apply to each
issuance will be determined by the Board at the time of issue.

Performance testing

Testing of the vesting conditions for each tranche will occur once the results for the relevant financial year in the last
year of the performance period have been approved by the Board.

There is no retesting of the vesting conditions.

Trading restrictions

KMP must not transfer, encumber, hedge or otherwise deal with shares acquired under the ESP until the loan in
respect of those shares has been paid in full or arrangements satisfactory to the Board are made for repayment of
the loan in full from proceeds of sale of the shares.

Forfeiture conditions

If the performance-based vesting conditions are not met, then the shares will be forfeited, with the forfeited shares
treated as full consideration for the repayment of the loan.

Control event

The Board has absolute discretion to determine that some or all of the unvested shares will vest if there is a takeover
or scheme of arrangement of the Company or a proposed winding up of the Company.

Shareholder approval

Shareholder approval is required for the issue of shares to any Director.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT31

Implications of the CEO stepping down
Mr Kimber stepped down as Chief Executive Officer and Managing Director on 31 January 2017.

As a result, the Board resolved that Mr Kimber will retain on foot:

• ESP

– 433,218 ordinary shares in the ESP eligible to vest in accordance with Mr Kimber’s ESP Invitation Terms as approved by shareholders
at the 2016 AGM and subject to the performance conditions set out in Mr Kimber’s ESP Invitation Terms and to Mr Kimber meeting his
ongoing contractual requirements.

• Legacy LTI Plan

– 80,229 performance rights eligible to vest in accordance with Mr Kimber’s Legacy LTI Plan Invitation and subject to the performance

conditions set out in Mr Kimber’s Legacy LTI Plan Invitation and to Mr Kimber meeting his ongoing contractual requirements;

– 205,193 options, subject to Mr Kimber meeting his ongoing contractual requirements.

5. LEGACY REMUNERATION PRACTICES

Legacy LTI Plan
OFX’s LTI changed in the 2017 financial year from the Legacy LTI Plan to the ESP to align with market practice, while continuing to support the
Group’s strategy. The Legacy LTI Plan is now a legacy plan. The Legacy LTI Plan issued performance rights, service rights and share options to
Executives and KMP. The Legacy LTI Plan will continue to operate until all issuances on foot vest or lapse in accordance with relevant vesting
conditions as determined by the Board.

The grants under the Legacy LTI Plan have the following vesting conditions:

Performance rights

Issuance date

EPS CAGR

Retention rights tranche 11

Retention rights tranche 21

Retention rights tranche 3

FY15 performance rights

≥ 14%

≥ 17%

Issuance date

FY16 performance rights2

EPS CAGR

≥ 17%

Vesting level (EBTDA CAGR)

100%

≥ 19%

≥ 22%

100%

≥ 22%

25-100%

14-19%

17-22%

Vesting level (NOI CAGR)

25-100%

17-22%

<14%

<17%

Performance
period

54 months

36 months

Performance
period

36 months

The performance period and performance targets of these tranches were modified during the year to align with Tranche 3.

1
2 No KMP were issued these performance rights during the 2017 financial year.

Service rights
Service rights are not subject to performance conditions. Vesting is subject to meeting employment service requirements.

Share options
Share options are not subject to performance conditions. Vesting is subject to meeting employment service requirements and an exercise price.

IPO performance
31.2% of performance rights granted to Executives who were employed by the Company at the listing date (and others who were members
of the Leadership Team at the time of the IPO) on IPO vested between threshold and target on 7 June 2016 based on 13.41% EBTDA over the
performance period from October 2013 to March 2016.

REMUNERATION REPORT32

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

6. GROUP PERFORMANCE

As the Company only listed on 11 October 2013, it is not possible to present five years of financial Company performance data. The Group’s
2014-2017 annual financial performance measures are listed below. The financial measures for the Group for the period 1 April 2013 to
11 October 2013 are based on the results of OzForex Limited (formerly OzForex Pty Limited), as the Group’s financial results have been prepared
as a continuation of the OzForex Limited consolidated group.

Performance metrics

Net operating income1

EBTDA

Underlying EBTDA

Active clients

Basic earnings per share2

Underlying basic earnings per share3

Dividend per share4

Closing share price

2014

$72.6m

$22.4m

$29.4m

120,500

6.84cps

8.92cps

2015

$90.1m

$34.5m

142,500

10.11cps

2016

2017

$103.9m

$105.1m

$33.1m

$36.1m

150,900

9.09cps

9.95cps

$27.8m

156,700

8.17cps

N/A

$0.05875

$0.07184

$0.05900

$3.30
($1.30 above
‘retail’ price)

$2.41

$2.02

$1.48

1 Net operating income, a non-IFRS measure, is the combination of ‘fee and trading income’ and “fee and commission expense’ and ‘interest income’.
2 For the calculation of EPS refer to Note 6 of the financial statements.
3 Underlying basic earnings per share is the basic earnings per share calculation utilising the underlying NPAT of the Group.
4 This represents dividends distributed in the period.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT33

7. EXECUTIVE REMUNERATION DISCLOSURES

Short-term employment benefits

Post-
employ-
ment
benefits

Long-term
benefits

Share-based payments

Cash
salary
and fees
$

Non-
monetary
benefits1
$

Cash
bonus
$

Year

Super-
annuation
$

Other2
$

Long
service
leave
$

Perform-
ance
rights
$

Share
loan
$

Options
$

Total
$

Current KMP

S Malcolm3

2017

105,064

2016

–

M Ledsham4

2017

330,448

A Smith5

C Pendleton-
Browne1

Former KMP

R Kimber6

M Loyez7

L Cox8

J Parker8

J Rohloff8

J Davidson9

S Griffin9

N Helm9

D Higgins9

2016

330,810

2017

320,538

2016

152,159

2017

330,692

2016

124,221

2017

400,397

2016

419,129

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

96,025

197,132

–

23,492

–

54,293

–

43,134

–

82,859

–

2016

167,483

2017

–

2016

157,348

2017

2016

–

147,907

Total KMP remuneration

2017 1,583,164

2016 1,899,967

–

17,236

–

4,904

–

19,539

9,561

(214,724)

65,749

19,177

10,660

282,681

–

366

145,639

65,749

–

61,170

–

339

59,093

65,749

18,199

–

109,968

–

210,573

643,328

558,426

222,983

482,653

167,421

29,356

60,919

18,484 1,061,885

530,398

22,331

–

18,190

184,331

17,866

26,134

9,654

26,780

7,765

12,872

–

2,485

–

3,147

–

71,170

–

16,800

–

47,221

–

3,147

863

36,159

44,257

9,414

–

(37,181)

–

118,564

14,350

2,982

(88,981)

–

8,927

2,887

28,663

–

9,588

2,244

(87,547)

–

42,587

551,076

–

298,222

210,004

–

42,806

–

104,743

–

83,303

–

99,431

–

214,398

–

197,825

–

72,192

714,729

117,554

10,266

19,364

258,166

18,484 2,721,727

17,236

162,821

118,716

19,829

348,354

–

42,587 2,609,510

1 Non-monetary benefits received by C Pendleton-Browne in the prior year related to relocation costs paid by the Company as part of him becoming an employee of the

Group. C Pendleton-Browne commenced employment with the Group on 16 November 2015.

2 Other payments relate to amounts paid subject to separation arrangements following cessation of employment.
3 S Malcolm commenced employment with the Group on 1 February 2017.
4 M Ledsham’s remuneration includes a write-back of previously expensed share-based payments due to the revised probability of the retention rights (Tranches 1, 2 and 3)

vesting which were issued under the Legacy LTI Plan.

5 A Smith commenced employment with the Group on 6 October 2015.
6 R Kimber ceased to be KMP and employee on 31 January 2017.
7 M Loyez ceased to be KMP and employee on 22 July 2016.
8 L Cox, J Parker and J Rohloff ceased being KMP on 31 May 2015.
9 J Davidson, S Griffin, N Helm and D Higgins resigned as KMP and employees during the 2016 financial year.

REMUNERATION REPORT34

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

Executive Share Plan (ESP)
Australian Accounting Standards require the shares be treated as options for accounting purposes due to the structure of the ESP. The
shares are not subject to an exercise price, and the amounts receivable from participants in relation to these loans are not recognised in the
consolidated financial statements.

Grant date

14 June 2016

Vesting date

Expiry date

Fair value per
options at
grant date

Performance
achieved

% vested

7 June 2019

6 June 2021

0.70

To be determined

14 June 2016

7 June 2020

6 June 2022

0.77

To be determined

14 June 2016

7 June 2021

6 June 2023

0.84

To be determined

–

Issuance

Share-based Loan
(Tranche 1)

Share-based Loan
(Tranche 2)

Share-based Loan
(Tranche 3)

The number and value of notional options held by KMP under the ESP during the 2017 financial year are set out below.

Held at
1 April 2016

Granted during
the year

Exercised
during the year

Lapsed
during
the year

Held at
31 March 2017

Value of
options at
grant date
$

Current KMP

M Ledsham

A Smith

C Pendleton-Browne

Former KMP

R Kimber

–

500,000

1,955,895

–

500,000

384,650

500,000

384,650

1,522,677

433,218

1,498,228

Loans to Executives under ESP
The value of non-recourse loans provided to the Executives under the ESP during the 2017 financial year are set out below. The value of the loan
is calculated using the five-day VWAP for the period prior to issue, including the day of issue.

Held at
1 April 2016
$

Advances
during the
year
$

Loan
forgiveness
granted
during
the year
$

Repayments
during the
year
$

Held at
31 March
2017
$

Interest
paid
or payable
$

Interest not
charged
$

Highest
indebtedness
during
the year
$

–

1,065,000

4,166,056

–

(7,140)

1,057,860

(7,140)

1,057,860

(7,140)

1,057,860

(3,271,232)

894,824

–

48,896

1,065,000

160,908

4,166,056

Name

Current KMP

M Ledsham

A Smith

C Pendleton-Browne

Former KMP

R Kimber

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT

Legacy LTI Plan
Performance rights, service rights and options as vested and on foot as at 31 March 2017
Performance rights

On vesting, each performance right is convertible into one ordinary share of the Company. No exercise price is payable.

Service rights

Service rights are issued in certain circumstances as part of the initial employment arrangements for employees. The only vesting condition is ongoing
employment at the vesting date. On vesting, each service right is convertible into one ordinary share of the Company. No exercise price is payable.

Share options

On vesting, each share option is convertible into one ordinary share of the Company. An exercise price of $2.49 is payable in order for the options
to vest and must be exercised within 12 months of the vesting date. There were no share options issued during the year ended 31 March 2017.

Further information on share-based payments is set out in Note 23 of the Financial Report.

Fair value per right/
option at grant date
$

Issuance

Retention rights
Tranche 11

Retention rights
Tranche 21

Retention rights
Tranche 3

Grant date

20 October 2014

Vesting date

7 June 2019

20 October 2014

7 June 2019

20 October 2014

7 June 2019

FY15 performance rights

26 June 2015

Service rights Executive A

16 October 2015

7 June 2018

7 June 2017

Service rights Executive B

20 November 2015

20 November 2018

Share options Tranche 1

Share options Tranche 2

1 June 2015

30 June 2018

30 June 2019

The performance period of these tranches was modified during the year to align with Tranche 3.

2.21

1.84

2.51

2.42

0.52

0.50

Performance
achieved

To be determined

N/A

% vested

–

The minimum valuation of shares yet to vest is $nil as they will be forfeited if vesting conditions are not met.

IPO performance rights issuance

Issuance

IPO rights

KMP shareholding

Current KMP

S Malcolm

M Ledsham

A Smith

C Pendleton-Browne

Former KMP

R Kimber1

M Loyez1

Grant date

11 October 2013

Vesting date

7 June 2016

Fair value per
performance right
at grant date
$

Performance
achieved

1.83

Partly

% vested

31.2%

Held at
1 April 2016

Exercise of share
options or rights
during the period

Other
movements

Held at
31 March 2017

–

27,500

–

21,000

–

17,160

–

(17,160)

–

27,500

–

21,000

–

1 R Kimber and M Loyez ceased being KMP prior to 31 March 2017. The balance above is reflective of the known balance at their resignation date.

There were no shares granted to KMP during the year that was not the result of grants relating to long term incentives vesting.

REMUNERATION REPORT36

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

Movement in share-based payments during the year
The movement in the performance rights, service rights and share options during the year ended 31 March 2017 is outlined below:

Number
granted
during
the year

Number
vested
during
the year

Number
forfeited
during
the year

Held at
31 March
2017

Held at
1 April 2016

Value of
shares at
1 April
2016
$1

Value of
Shares
Granted
$

Value of
vested
shares
$1

Value of
shares
forfeited
$1

Value at
shares at
31 March
2017
$1

Current KMP

M Ledsham

IPO rights

17,160

Retention rights

450,000

FY15 performance
rights

59,838

A Smith

Service rights –
Executive A

C Pendleton-
Browne

Service rights –
Executive B

Former KMP

R Kimber

92,829

82,645

FY15 performance
rights

Share options
Tranche 1

Share options
Tranche 2

135,995

200,000

–

17,160

–

31,403

450,000

994,500

59,838

101,102

–

92,829

233,001

–

82,645

200,001

–

(55,766)

80,229

250,201

–

(82,012)

117,988

104,000

(112,795)

87,205

100,000

–

31,403

–

994,500

101,102

–

233,001

–

200,001

(102,609)

147,592

(42,646)

61,354

(56,397)

43,603

The value of shares reflects the fair value at the time of grant as determined under AASB2.

Fixed and at-risk remuneration
The percentage of remuneration received as fixed pay and at-risk pay during the year ended 31 March 2017 by KMP is outlined below:

Name

M Skander

M Ledsham1

A Smith

C Pendleton-Browne

Fixed
remuneration

100%

171%

62%

74%

At-risk – STI

At-risk – LTI

Other

Cash bonus

Rights

Options

Share loan

–

(102%)

26%

12%

–

31%

12%

14%

1 Mark Ledsham’s fixed remuneration is stated as 171% as a result of the revised probability of the retention rights (Tranches 1, 2 and 3) vesting which were issued under

the Legacy LTI Plan which resulted in a write-back of previously expensed cost.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT

8. NON-EXECUTIVE DIRECTOR DISCLOSURE

Fee framework
The Board seeks to set fees for the Non-Executive Directors that reflect the demands which are made on, and the responsibilities of, the
Directors, and at a level which will attract and retain directors of the highest quality.

The Non-Executive Director fees are based on the findings of a benchmarking exercise undertaken by KPMG prior to the listing which reviewed
Board remuneration relative to peer and comparably sized companies.

Going forward, Non-Executive Directors’ fees will be reviewed from time to time, and they may seek the advice of external remuneration
advisors for this purpose. There were no changes in fees during the year.

Fee pool
The maximum fee pool payable to be shared by all Non-Executive Directors is currently set at $1,000,000 per annum. To preserve
independence, Non-Executive Directors do not receive any equity as part of their remuneration and do not receive any performance-related
compensation. Non-Executive Directors receive superannuation contributions where required by Superannuation Guarantee legislation.

Fees applicable for 2017

Role

Chairperson fee

Base Director fee

Committee chair fee

Committee member fee

Statutory Non-Executive Director fees for the year ended 31 March 2017
Details of the fees paid to the Non-Executive Directors are outlined below:

Non-Executive Directors

S Sargent1

P Warne2

M Conrad

G Murdoch

D Snedden

Total Non-Executive Directors’ remuneration

1 Steven Sargent commenced as Non-Executive Director on 4 August 2016.
2 Peter Warne ceased as Non-Executive Director on 14 November 2016.

200,000

100,000

25,000

15,000

Total

Short-term
employee
benefits

Cash salary
and fees

Post-
employment
benefits

Super-
annuation

118,850

11,198

130,048

–

131,334

211,217

127,854

114,155

118,721

119,254

610,914

572,480

–

12,175

19,177

12,146

10,845

11,279

11,329

57,643

53,497

–

143,509

230,394

140,000

125,000

130,000

130,583

668,557

625,977

Year

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

REMUNERATION REPORT38

REMUNERATION REPORT CONTINUED
For the year ended 31 March 2017

9. NON-EXECUTIVE DIRECTOR SHAREHOLDINGS

Details of Non-Executive Directors’ and their affiliates’ shareholdings in the Company are set out below:

Non-Executive Directors

S Sargent

M Conrad

G Murdoch

D Snedden

Shares held at
the beginning of
the year

Shares held
at the end of
the year

Movement

–

100,000

50,000

145,000

95,000

39,000

–

100,000

–

50,000

100,000

50,000

61,000

39,000

–

100,000

245,000

145,000

100,000

39,000

Year

2017

2016

2017

2016

2017

2016

2017

2016

10. SECURITIES TRADING POLICY

All Directors and employees are required to comply with the Group’s Securities Trading Policy in undertaking any trading in the Company’s
shares and may not trade if they are in possession of any inside information. Directors and employees can only trade during the specified
trading windows immediately following the release of the half year and full year results and the annual meeting. In addition, Directors and
certain restricted employees may only trade during the trading windows with prior written clearance as set out in the Policy. The Policy prohibits
employees who participate in any equity-based plan from entering into any transaction in relation to unvested securities which would have the
effect of limiting the economic risk of an unvested security.

11. OUTLOOK

The Group will continue to review and adjust its reward mechanisms annually, as required, to ensure that its long-term growth aspirations are met.

This Report is made in accordance with a resolution of the Directors.

On behalf of the Board

Steven Sargent
Chairman

23 May 2017

John Alexander Malcolm
Chief Executive Officer and Managing Director

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTF I N A N C I A L R E P O R T

FINANCIAL REPORT

Auditor’s Independence Declaration

Financial Statements

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the financial statements

About this report

Segment information

Results for the year

Financial assets and liabilities

Other assets and liabilities

Capital structure

Other items

Directors’ Declaration

Independent auditor’s report to the
members of OFX Group Limited

Shareholder information

Corporate Information

AUDITOR’S INDEPENDENCE DECLARATION

Auditor’s Independence Declaration

As lead auditor for the audit of OFX Group Limited for the year ended 31 March 2017, I declare that to
the best of my knowledge and belief, there have been:

(a)

no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and

Auditor’s Independence Declaration
(b)

no contraventions of any applicable code of professional conduct in relation to the audit.
As lead auditor for the audit of OFX Group Limited for the year ended 31 March 2017, I declare that to
This declaration is in respect of OFX Group Limited and the entities it controlled during the period.
the best of my knowledge and belief, there have been:

(a)

no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and

(b)

no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of OFX Group Limited and the entities it controlled during the period.

CPG Cooper
Partner
PricewaterhouseCoopers

Sydney
23 May 2017

CPG Cooper
Partner
PricewaterhouseCoopers

Sydney
23 May 2017

PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2000
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2000
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2017

Fee and trading income

Fee and commission expense

Net income

Interest and similar other income

Net operating income

Employment expenses

Occupancy expenses

Promotional expenses

Other operating expenses

Total operating expenses

Net profit before income tax

Income tax expense

Net profit attributable to ordinary shareholders

Other comprehensive income

Other comprehensive income that may be reclassified to profit and loss

Exchange differences on translation of foreign operations net of hedging

Total comprehensive income attributable to ordinary shareholders

Earnings per share attributable to ordinary shareholders:

Basic

Diluted

2016
$’000

111,246

(8,995)

102,251

1,662

103,913

(38,979)

(3,855)

(15,306)

(13,980)

(72,120)

31,793

(9,979)

21,814

(33)

21,781

Cents

9.09

8.99

Notes

2017
$’000

114,063

(10,117)

103,946

1,169

105,115

(42,772)

(5,416)

(16,303)

(16,637)

(81,128)

23,987

(4,391)

19,596

(65)

19,531

Cents

8.17

8.05

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS42

FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2017

Assets

Cash and cash equivalents

Deposits due from financial institutions

Derivative financial assets

Prepayments

Prepaid current income tax

Other receivables

Property, plant and equipment

Intangible assets

Deferred income tax assets

Total assets

Liabilities

Client liabilities

Derivative financial liabilities

Other creditors and accruals

Employee provisions

Deferred income tax liabilities

Total liabilities

Net assets

Equity

Ordinary share capital

Retained earnings

Foreign currency translation reserve

Share-based payments reserve

Total equity attributable to shareholders

Notes

2017
$’000

2016
$’000

148,459

142,088

10,114

14,154

2,402

2,238

1,163

5,473

5,456

219

20,802

26,977

2,216

1,945

986

6,512

2,760

1,310

189,678

205,596

115,924

7,351

7,047

1,763

120

132,205

57,473

24,360

31,636

213

1,264

57,473

124,827

20,297

4,754

2,467

152,367

53,229

24,360

26,293

278

2,298

53,229

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2017

Balance at 1 April 2015

Net profit

Other comprehensive income

Total comprehensive income

Transactions with shareholders in their
capacity as shareholders:

Dividends paid

Expenses related to share based payments

Balance at 31 March 2016

Net profit

Other comprehensive income

Total comprehensive income

Transactions with shareholders in their
capacity as shareholders:

Dividends paid

Expenses related to share based payments

Notes

Ordinary
share
capital
$’000

24,360

–

24,360

–

Balance at 31 March 2017

24,360

Foreign
currency
translation
reserve
$’000

311

–

(33)

–

278

–

(65)

–

213

Share-based
payments
reserve
$’000

1,239

–

1,059

2,298

–

(1,034)

1,264

Retained
earnings
$’000

21,721

21,814

–

21,814

(17,242)

–

(17,242)

26,293

19,596

–

19,596

(14,253)

–

(14,253)

31,636

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Total
equity
$’000

47,631

21,814

(33)

21,781

(17,242)

1,059

(16,183)

53,229

19,596

(65)

19,531

(14,253)

(1,034)

(15,287)

57,473

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2017

Cash flows from operating activities

Cash inflows from clients

Cash outflows to clients, suppliers and employees

Interest received

Income tax paid

Net cash flows from operating activities

Cash flows from investing activities

Payments for property, plant and equipment

Payments for intangible assets

Cash deposited with financial institutions

Net cash flows from investing activities

Cash flows from financing activities

Dividends paid

Net cash flows from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Exchange (losses)/gains on cash and cash equivalents

Cash and cash equivalents at the end of the year

Notes

2017
$’000

2016
$’000

19,368,113

19,596,083

(19,352,460)

(19,569,976)

1,169

(3,495)

13,327

(821)

(4,601)

10,688

5,266

(14,253)

4,340

142,088

2,031

1,662

(11,994)

15,775

(6,490)

(2,927)

(15,602)

(25,019)

(17,242)

(26,486)

168,804

(230)

148,459

142,088

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Cash flow for the year ended 31 March 2017

Net cash flows from operating activities

Net cash flows from
investing activities

Net cash flows from
financing activities

$27.75M

-$3.49M

+$0.19M

-$8.90M

$13.33M

-$2.22M

+$10.69M

EBTDA

Tax payments

Client
liabilities

Other Balance
Sheet
accounts and
reserves

FX
revaluation

Net cash flow
after
operating
activities

Capital
expenditure

Deposits
received from
financial
institutions

-$14.25M

Dividends
paid

Net increase
in cash
and cash
equivalents

Cash
revaluation

Increase in
cash and
cash
equivalents

-$5.42M

+$2.03M

$6.37M

$4.34M

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
A B O U T T H I S R E P O R T

NOTES TO THE FINANCIAL STATEMENTS
ABOUT THIS REPORT
For the year ended 31 March 2017

ABOUT THIS REPORT
OFX Group Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia. Its shares are publicly traded on the
Australian Securities Exchange. This financial report presents the consolidated performance, position and cash flows of OFX Group Limited and
its subsidiaries (the Group). The Group is for-profit for the purpose of preparing the financial statements. The accounting policies explained in this
report are consistent for all the periods presented unless otherwise stated. The Directors have the power to amend and reissue the financial report.

The financial report is a general purpose financial report which:

• Is prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. Consequently, this financial report has also been prepared in accordance with and complies with IFRS as
issued by the IASB.

• Has been prepared under the historical cost convention except for derivatives and share-based payments which are measured at fair value.

• Presents reclassified comparative information where required for consistency with the current year’s presentation.

• Is presented in Australian dollars with all values rounded to the nearest thousand dollars in accordance with ASIC Legislative Instrument

2016/191 unless otherwise indicated.

No new Accounting Standards or amendments to Accounting Standards became effective in the current year and had a material impact on the
Group. Refer to Note 29 for further details.

Critical estimates and judgements
Preparing the financial report requires judgement in applying the accounting policies and calculating certain critical accounting estimates.
The Group’s critical accounting estimates and significant judgements are:

• Fair value of financial instruments (Note 10).

• Share-based payments (Note 23).

BASIS OF CONSOLIDATION

The consolidated financial report comprises the assets and liabilities of all subsidiaries of OFX Group Limited (the Group) as at 31 March 2017
and the results of all subsidiaries for the year then ended. A list of controlled entities at year end is contained in Note 22.

Subsidiaries are all those entities over which the Group has the power to direct the relevant activities, exposure to significant variable returns
and the ability to utilise power to affect the Group’s own returns. The determination of control is based on current facts and circumstances and
is continuously assessed.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of the impairment of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the separate financial statements of OFX Group Limited in accordance with AASB 127
Separate Financial Statements.

FUNCTIONAL AND PRESENTATION CURRENCY

Foreign operations are measured in the Group’s financial statements using the currency of the primary economic environment in which the
foreign operation operates (the functional currency). The functional currencies of overseas subsidiaries are listed in Note 22.

The Group’s financial statements are presented in Australian dollars, which is OFX Group Limited’s functional and presentation currency.

GST

Revenues, expenses and fixed assets are recognised net of the associated GST, unless the GST is not recoverable from the relevant taxation authority.

Receivables and creditors are presented including GST. The net GST recoverable from, or payable to, each taxation authority is presented in
other receivables or other payables.

Cash flows are presented including GST. The GST components of the cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.

NOTES TO THE FINANCIAL STATEMENTS
SEGMENT INFORMATION
For the year ended 31 March 2017

NOTE 1. SEGMENT INFORMATION
The operating segments presented below reflect how senior management and the board of directors (the chief operating decision makers)
allocate resources to the segments and review their performance. The chief operating decision makers examine the performance both from
a product and geographic perspective and have identified five reportable segments.

The two products are international payment services and international payment solutions:

• International payment services are monitored by geographic region (based on client location) and provide bank to bank currency transfers

servicing businesses and consumers.

• International payment solutions are monitored globally and provide strategic partners with a package which includes: OFX Technology

platform; client service; compliance sophistication; banking relationships; and payments capabilities.

Segment fee and trading income – 2017 v 2016 ($’000)

2017
2016

International payment services

$114,063

$111,246

$61,920

$60,099

-5%

14%

$19,838

$20,897

$19,968

$17,574

17%

$2,486

$2,119

-7%

$9,851

$10,557

ANZ

Europe

North America

Asia

International
payment solutions

Total

Segment EBITDA – 2017 v 2016 ($’000)

2017
2016

International payment services

-30%

$18,670

$13,108

$31,488

-16%

$26,583

-26%

$5,936

$7,982

435%

$3,876

$725

-82%

$105

$584

$3,558

$3,527

ANZ

Europe

North America

Asia

International
payment solutions

Total

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
S E G M E N T I N F O R M AT I O N

Group EBITDA

Depreciation and amortisation

Interest and similar income

Net profit before income tax

Income tax expense

Net profit

2017

Segment assets

Intergroup eliminations

Deferred tax assets

Total assets

Segment liabilities

Intergroup eliminations

Deferred tax liabilities

Total liabilities

2016

Segment assets

Intergroup eliminations

Deferred tax assets

Total assets

Segment liabilities

Intergroup eliminations

Deferred tax liabilities

Total liabilities

2017
$’000

26,583

(3,765)

1,169

23,987

(4,391)

19,596

2016
$’000

31,488

(1,357)

1,662

31,793

(9,979)

21,814

International
payment
solutions
$’000

Consolidated
$’000

–

197,695

(8,236)

219

189,678

(140,321)

8,236

(120)

(132,205)

210,317

(6,031)

1,310

205,596

(158,376)

6,031

(22)

(152,367)

International payment services

Australia &
New Zealand
$’000

Europe
$’000

North
America
$’000

133,185

(1,934)

21,915

(6,302)

30,823

–

Asia
$’000

11,772

–

(91,454)

(19,277)

–

(24,197)

5,559

(5,393)

2,674

155,138

–

18,379

(5,554)

29,344

–

7,456

(477)

(117,742)

(15,507)

(23,636)

(1,491)

814

–

5,217

–

NOTES TO THE FINANCIAL STATEMENTS
RESULTS FOR THE YEAR
For the year ended 31 March 2017

NOTE 2. REVENUE

FEE AND TRADING INCOME

Fee and trading income consists of the foreign currency transaction margins, fees charged on low-value transactions and changes in exchange
rates between the time when a client rate is agreed and a subsequent hedge transaction is entered into by the Group.

Fee and trading income is presented inclusive of realised and unrealised income earned from the sale of foreign currency contracts to clients.

FEE AND COMMISSION EXPENSE

Fee and commission expenses are transactional banking fees and commissions paid to strategic and referral partners.

INTEREST INCOME

Interest income is recognised using the effective interest rate method, which spreads fees and costs associated with an interest bearing
receivable across its life.

Realised margin and fees on foreign exchange contracts

Unrealised gains/(losses) on foreign exchange contracts

Retranslation of foreign exchange assets and liabilities

Fee and trading income

Fee and commission expense

Net income

Interest and similar income

Net operating income

2017
$’000

2016
$’000

112,279

104,628

(79)

1,863

114,063

(10,117)

103,946

1,169

105,115

6,376

242

111,246

(8,995)

102,251

1,662

103,913

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
R E S U LT S F O R T H E Y E A R

NOTE 3. EXPENSES
Refer to Note 23 for details of the Group’s share-based payments and Note 16 for details of the employee provisions.

Employment expenses

Salaries and related costs including commissions 1

Employee short term incentives

Share-based payments

Defined contribution plan

Total employee compensation expense

Other employment expenses (on-costs, recruitment and staff training)

Total employment expenses

Occupancy expenses

Operating lease rentals

Depreciation: Furniture, fittings and leasehold

Other occupancy expenses

Total occupancy expenses

Other operating expenses

Professional fees

Information technology

Depreciation and amortisation

Communication

Compliance

Insurance

Travel

Bad and doubtful debts

Non-recoverable GST

Other expenses

Total other operating expenses

1 Comparative information has been restated to conform with presentation in the current year.

2017
$’000

2016
$’000

(38,144)

(31,535)

(35)

229

(2,250)

(40,200)

(2,572)

(42,772)

(2,988)

(1,325)

(1,103)

(5,416)

(2,403)

(4,794)

(2,440)

(701)

(2,158)

(841)

(1,058)

(484)

(285)

(1,473)

(16,637)

(1,058)

(1,059)

(1,769)

(35,421)

(3,558)

(38,979)

(2,606)

(613)

(636)

(3,855)

(3,942)

(2,172)

(744)

(682)

(1,824)

(844)

(999)

(1,091)

(446)

(1,236)

(13,980)

NOTES TO THE FINANCIAL STATEMENTS
RESULTS FOR THE YEAR CONTINUED
For the year ended 31 March 2017

NOTE 4. INCOME TAXES
Income tax expense is the tax payable on the current period’s taxable income adjusted for changes in deferred income tax. Changes in deferred
tax assets and liabilities are due to temporary timing differences and to unused tax losses.

Current income tax is based on tax laws enacted or substantively enacted in each jurisdiction of the Group’s operations at the end of the
reporting period. If required, provisions are established for the amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method at the tax rates expected to apply when the assets are recovered or the
liabilities are settled. Deferred tax assets and liabilities arise on temporary differences between the tax base of assets and liabilities and their
carrying amounts. In addition, deferred tax assets may be recognised due to unused tax losses. Amounts are only recognised to the extent it is
probable future taxable amounts will be available to use those temporary differences or tax losses.

Deferred tax assets and liabilities are offset when:

• There is a legally enforceable right to offset current tax assets and liabilities; and

• The deferred tax balances relate to the same taxation authority.

Current tax assets and liabilities are offset when:

• There is a legally enforceable right to offset; and

• There is an intention to settle on a net basis.

Current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity.

TAX CONSOLIDATION

The tax consolidation legislation was adopted by the Group as of 15 October 2013. As a consequence, OzForex Limited and its wholly-owned
Australian controlled entities are taxed as a single entity. The Group has a tax year ending on 30 September.

OFFSHORE BANKING UNIT

OzForex Limited, a subsidiary of OFX Group Limited, was declared an Offshore Banking Unit (OBU) on 10 October 2015. In accordance with
Australian income tax legislation, assessable offshore banking (OB) income derived by the OBU is taxable at a concessional rate of 10%.
OB income includes revenue earned on foreign exchange transactions with offshore counterparties, excluding those with any AUD component.

(A) INCOME TAX EXPENSE

Current tax expense 1

Adjustments to current tax of prior years1, 2

Total current tax expense

Deferred income tax expense

Total income tax expense

(B) RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE

Net profit before income tax

Prima facie income tax expense at 30% (2016: 30%)

Decrease in tax expense as a result of operating as an OBU in the current period2

Decrease in tax expense as a result of operating as an OBU in a prior period2

Research and Development tax credits

Other items

Total income tax expense

2017
$’000

3,782

(580)

3,202

1,189

4,391

2017
$’000

23,987

7,196

(1,060)

(580)

(817)

(348)

4,391

2016
$’000

7,363

–

7,363

2,616

9,979

2016
$’000

31,793

9,538

–

441

9,979

1 Comparative information has been restated to conform with presentation in the current year.
2 The prior period tax adjustment reflected in the current year relates to OBU transactions within the period from 10 October 2015 to 31 March 2016. The current period tax

adjustment relates to OBU transactions within the period from 1 April 2016 to 31 March 2017.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORT

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
R E S U LT S F O R T H E Y E A R

2017
$’000

2016
$’000

1,181

1,043

1,575

1,739

(2,005)

(2,004)

219

(120)

1,310

(22)

1,288

NOTE 5. DEFERRED INCOME TAX ASSETS/(LIABILITIES)

Deferred income tax assets

The balance comprises temporary differences attributable to:

Provisions and accrued expenses

IPO expenditure deemed capital for taxation

Financial instruments

Total deferred income tax assets

Deferred income tax liabilities

Net deferred income tax assets

NOTE 6. EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share shows the profit attributable to each ordinary share. It is calculated as the net profit attributable to ordinary
shareholders divided by the weighted average number of ordinary shares in each year.

Diluted earnings per share shows the profit attributable to each ordinary share if all the dilutive potential ordinary shares had been ordinary shares.

There are no discontinued operations of the Group.

(a) Earnings per share

Basic

Diluted

(b) Earnings

Net profit attributable to ordinary shareholders used to calculate basic and diluted earnings per share

2017
Cents

8.17

8.03

$’000

19,596

2016
Cents

9.09

8.98

$’000

21,814

Number

Weighted average number of ordinary shares used to calculate basic earnings per share

240,000,000

Dilutive potential ordinary shares

Weighted average number of ordinary shares used as the denominator in calculating diluted
earnings per share

3,465,211

2,735,382

243,927,237

242,735,382

NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL ASSETS AND LIABILITIES
For the year ended 31 March 2017

NOTE 7. CASH AND CASH EQUIVALENTS, CLIENT LIABILITIES, AND DEPOSITS DUE FROM

FINANCIAL INSTITUTIONS

Cash and cash equivalents includes cash on hand, deposits held at short call with financial institutions with an original maturity of less than
three months and cash held for subsequent settlement of client liabilities.

Cash held for subsequent settlement of client liabilities represent transactions in progress where amounts have been received but the
corresponding payment has not yet occurred. They are unsecured and short term in nature, and are recognised initially at their fair value.
Client liabilities are subsequently measured at amortised cost using the effective interest method.

Cash assets and client liabilities are intrinsically linked. When a client makes a request to transfer funds internationally, the Group agrees the
foreign exchange rate at which those funds will be delivered to the client in their chosen currency and the client transfers money to the Group.
During such time until funds are settled with the client, the Group is exposed to the risks and rewards of those cash assets. Consequently, the
Group recognises those cash assets on its Consolidated Statement of Financial Position and a corresponding liability to remit that cash to clients.

Deposits due from financial institutions are primarily short-term deposits with an original maturity of greater than three months, but less
than 12 months and are accounted for at the gross value of the outstanding balance and held at amortised cost.

Cash and cash equivalents

Deposits due from financial institutions

Total cash

Cash held for subsequent settlement of client liabilities

Net cash held 1

Includes $21,413,469 (2016: $14,612,000) which is held as collateral by counterparties for over the counter derivative transactions.

2017
$’000

148,459

10,114

158,573

2016
$’000

142,088

20,802

162,890

(115,924)

(124,827)

42,649

38,063

42,649 net cash held

NET CASH POSITION ($’000)
Cash held for payment of client liabilities
Other cash held
Term deposits

2017

2016

115,924

32,535

10,114

38,063 net cash held

124,827

17,261

20,802

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S

NOTE 8. OTHER RECEIVABLES (CURRENT ASSETS)
Other receivables includes GST receivables and other debtors. Other debtors includes rental deposits and interest receivable. All receivables are
recognised at amortised cost, less any impairment. Interest is recognised in the Consolidated Statement of Comprehensive Income using the
effective interest method.

GST receivables

Other debtors

Other receivables

2017
$’000

474

689

1,163

2016
$’000

384

602

986

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
Derivative instruments entered into by the Group include foreign exchange forward contracts. They are principally used to offset foreign
currency contracts with clients and as hedges over the Group’s net investment in foreign operations.

Derivatives are initially and subsequently recognised at fair value. Movements in the carrying amounts of derivatives are recognised in net fee
and trading income within the Consolidated Statement of Comprehensive Income.

Value of forward contracts – assets

Value of forward contracts – liabilities

Net financial instruments at fair value

2017
$’000

14,154

(7,351)

6,803

2016
$’000

26,977

(20,297)

6,680

NOTE 10. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
A financial instrument’s categorisation within the valuation hierarchy is based on the lowest level input that is significant to the fair value
measurement:

Level

Instruments

Valuation process

Level 1 – Traded in active markets and
fair value is based on recent unadjusted
quoted prices.

Cash and cash equivalents, amounts due
from financial institutions, client liabilities,
creditors and receivables.

Over the counter derivatives.

These instruments are held at amortised
cost. Fair values are considered to equate to
their carrying amounts as they are short term
in nature.

Foreign currency forward contract
valuations are based on observable spot
exchange rates and the yield curves of the
respective currencies.

None – the Group does not hold any of
these instruments.

Not applicable.

Level 2 – Not actively traded and fair value
is based on valuation techniques which
maximise the use of observable
market prices.

Level 3 – Not actively traded and fair value
is based on at least one input which is not
observable in the market due to illiquidity
or complexity.

All derivative financial instruments held by the Group at fair value are categorised within Level 2.

NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL ASSETS AND LIABILITIES CONTINUED
For the year ended 31 March 2017

NOTE 11. FINANCIAL RISK MANAGEMENT

RISK MANAGEMENT

The Group is exposed to the following risks, and manages them in the following ways:

Type of risk

How the risk is managed

Market risk – Market risk is comprised of both foreign currency risk
and interest rate risk.

Foreign exchange rate risk arises from exposure to changes in
foreign exchange rates between the time of agreeing rates with
a client and either a corresponding hedge being taken out with a
counterparty or an international payment settlement. Settlement
typically occurs between 12 and 24 hours after the deal is entered or
up to 12 months later for forward contracts with clients.

The Group is also exposed to the interest rate risk embedded in
forward contracts offered to its clients to lock in exchange rates
up to 24 months in advance.

To manage the movement in foreign exchange rates, the Group
aggregates transactions and nets out buy transactions against
sell transactions.

The Group then enters into forward foreign exchange hedging contracts
with counterparty banks once exposure to a single currency reaches or
exceeds a defined thresholds.

The forward book is managed daily and maintained within thresholds
prescribed by board approved policy.

Interest rate risk – Exposure to non-traded interest rate risk results
from cash and term deposits held in different currencies.

Settlement of client liabilities between 12 and 24 hours of receipt of
client cash results in low exposure to non-traded interest rate risk.

Credit risk – The risk that creditors (financial institutions and clients) will
not make payments on their related receivables, when they fall due.

The Group typically does not pay out client deals until associated funds
have been received.

In exceptional circumstances, senior management have the discretion
to authorise same day payments, which can result in funds being paid
prior to clearance of customer funds. These transactions would only
be approved for clients with a low risk of default and are pro-actively
monitored to ensure timely settlement.

For forward deals part payments are required to be made by
clients. Active monitoring of client balances ensures that adequate
collateral is held.

The Group sets credit limits and obtains collateral as security (where
appropriate).

Liquidity risk – The risk that the Group is unable to meet the
obligations of its financial liabilities when they are due.

Regular forecasts of the Group’s liquidity requirements. Surplus cash is
maintained in highly liquid instruments.

Continuous review of currency requirements in operating jurisdictions.
Active maintenance of cash balances in currencies and geographical
locations necessary to fund these requirements.

Risk is managed on a globally consolidated basis for the Group. Risks in subsidiaries are subject to the same risk acceptance policies as the
parent entity.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S

MARKET RISK

The main component of the Group’s market risk is exposure to foreign exchange fluctuations.

The Group’s sensitivity to foreign exchange fluctuations by major currency held on the Consolidated Statement of Financial Position is shown below.

Movement in exchange rate (basis points)

+/-500

31 March 2017

31 March 20161

CAD

EUR

GBP

NZD

SGD

USD

Other

Total

Sensitivity
of profit
before tax
$’000

Sensitivity
of equity
after tax
$’000

Sensitivity
of profit
before tax
$’000

Sensitivity
of equity
after tax
$’000

–

(1)

(58)

(3)

(113)

(5)

(6)

(37)

(3)

(49)

(2)

(30)

(26)

1 Comparative information has been restated to conform with presentation in the current year. In the prior year the sensitivity was performed using 1,000 basis points.

500 basis points is a more reasonable measure in the current environment.

INTEREST RATE RISK

The Group’s sensitivity to movements in interest rates is as follows.

Movement in interest rates (basis points)

+/-50

31 March 2017

31 March 2016

AUD

CAD

EUR

GBP

NZD

SGD

USD

Other

Total

Sensitivity
of profit
before tax
$’000

356

141

100

793

Sensitivity
of equity
after tax
$’000

252

563

Sensitivity
of profit
before tax
$’000

Sensitivity
of equity
after tax
$’000

368

143

129

814

261

102

576

NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL ASSETS AND LIABILITIES CONTINUED
For the year ended 31 March 2017

NOTE 11. FINANCIAL RISK MANAGEMENT CONTINUED

CREDIT RISK

Maximum exposure to credit risk and credit quality of financial assets
The amounts shown represent the maximum credit risk of the Group’s assets. In all cases this is equal to the carrying value of the assets.

The Group uses internal credit ratings to manage the credit quality of its financial assets held with clients. The Group’s financial assets held with
financial institutions are investment grade (between Aaa-Baa3). There are no balances that are past due or impaired as at 31 March 2017 (2016: Nil).

Cash and cash equivalents

Deposits due from financial institutions

Derivative assets – with financial institutions

Derivative assets – with clients

Other receivables

Total gross credit risk

Credit risk exposure

Rating

Investment grade

Unrated1

Unrated

2017
$’000

148,459

10,114

7,251

6,903

1,163

2016
$’000

142,088

20,802

8,063

18,914

986

173,890

190,853

2017
$’000

2016
$’000

Financial Institutions

Investment grade

$165,824

Customers
Other receivables

Unrated

$6,903

$1,163

Financial Institutions

Investment grade

$170,953

Customers
Other receivables

Unrated

$18,914

$986

Credit risk exposure by geography

2017
$’000

2016
$’000

ANZ

Asia

Europe

North America

Other

$91,667

$16,553

$28,562

$37,033

$75

ANZ
Asia
Europe
North America2
Other2

$117,531
$13,552
$23,164
$36,577
$29

1 Unrated balances relate to amounts due from entities that are not graded by a public ratings agency.
2 Comparative information has been restated to conform to presentation in the current year.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S

LIQUIDITY RISK

Maturity profile of obligations
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 March 2017 based on contractual undiscounted
repayment cash flows. Derivatives are included in the less than three months column at their fair value, as they are frequently settled in
the short term. Liquidity risk on these items is not managed on the basis of contractual maturity, since they are not held for settlement
according to such maturity and will frequently be settled in the short term at fair value. Derivatives designated in a hedging relationship are
included according to their contractual maturity.

On demand
$’000

3 months
or less
$’000

3 to 12
months
$’000

1 to 5
years
$’000

Over 5
years
$’000

2016

Other liabilities 1

Derivative financial instruments

Inflows

(Outflows)

Total

2017

(1,210)

(127,163)

–

(315)

–

876,846

360,641

(874,488)

(356,425)

(1,210)

(124,805)

4,216

1,323

(1,217)

(209)

Other liabilities 1

(1,534)

(118,541)

–

(349)

Derivative financial instruments

Inflows

(Outflows)

Total

–

802,641

352,402

(791,098)

(357,000)

(1,534)

(106,998)

(4,598)

6,344

(6,488)

(493)

Excludes items that are not financial instruments and non-contractual accruals and provisions.

NOTE 12. CASH FLOW INFORMATION

–

Total
$’000

(128,688)

1,238,810

(1,232,130)

(122,008)

(120,424)

1,161,387

(1,154,586)

(113,623)

Reconciliation of profit from ordinary activities after income tax to net cash flows from operating activities

Profit from ordinary activities after income tax

Adjustments to profit from ordinary activities

Depreciation and amortisation

Share-based payments expense

Foreign exchange revaluation

Fair value changes on financial assets and liabilities at fair value through profit or loss

Movement in foreign currency translation reserve

Changes in assets and liabilities

Decrease/(increase) in debtors and prepayments

Decrease in deferred tax assets

(Decrease)/increase in client liabilities

(Decrease)/increase in accrued charges and creditors

(Decrease)/increase in deferred tax liabilities

(Decrease)/increase in employee provisions

Decrease/(increase) in tax provision

Net cash flows from operating activities

2017
$’000

2016
$’000

19,596

21,814

3,765

(1,034)

(2,031)

(123)

(65)

(363)

1,091

(8,903)

2,293

(704)

(293)

13,327

1,357

1,059

229

(6,713)

(33)

(119)

2,609

236

492

(532)

(4,631)

15,775

NOTES TO THE FINANCIAL STATEMENTS
OTHER ASSETS AND LIABILITIES
For the year ended 31 March 2017

NOTE 13. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses.

Assets are depreciated on a straight-line basis over their estimated useful lives, as follows:

Asset class

Furniture and fittings

Leasehold improvements

Computer equipment

Year ended 31 March 2016

Cost

Less accumulated depreciation

Net carrying amount

Movement

Balance at 31 March 2015

Additions

Depreciation

Balance at 31 March 2016

Year ended 31 March 2017

Cost

Less accumulated depreciation

Net carrying amount

Movement

Balance at 31 March 2016

Additions

Depreciation

Balance at 31 March 2017

Useful life

5 to 10 years

Up to 5 years

3 years

Total
$’000

10,088

(3,576)

6,512

1,014

6,490

(992)

6,512

10,910

(5,437)

5,473

6,512

821

(1,860)

5,473

Furniture,
fittings and
leasehold
improvements
$’000

Computer
equipment
$’000

7,319

(1,738)

5,581

529

5,665

(613)

5,581

7,459

(3,063)

4,396

5,581

140

(1,325)

4,396

2,769

(1,838)

931

485

825

(379)

931

3,451

(2,374)

1,077

931

681

(535)

1,077

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
O T H E R A S S E T S A N D L I A B I L I T I E S

NOTE 14. INTANGIBLE ASSETS
Costs directly incurred in acquiring and developing certain software are capitalised and amortised over the estimated useful life, typically three
years. Costs incurred on software maintenance are expensed as incurred.

Year ended 31 March 2016

Cost

Less accumulated depreciation

Net carrying amount

Movement

Balance at 31 March 2015

Additions

Amortisation

Balance at 31 March 2016

Year ended 31 March 2017

Cost

Less accumulated depreciation

Net carrying amount

Movement

Balance at 31 March 2016

Additions

Amortisation

Balance at 31 March 2017

NOTE 15. OTHER LIABILITIES (CURRENT LIABILITIES)

Accrued charges and sundry liabilities

Trade creditors

Other liabilities

Total other liabilities

Website
and mobile
application
$’000

Software
$’000

Total
$’000

2,519

(212)

2,307

–

2,519

(212)

2,307

5,908

(1,748)

4,160

2,307

3,389

(1,536)

4,160

1,116

(663)

453

198

408

(153)

453

2,328

(1,032)

1,296

453

1,212

(369)

1,296

2017
$’000

4,430

1,130

1,487

7,047

3,635

(875)

2,760

198

2,927

(365)

2,760

8,236

(2,780)

5,456

2,760

4,601

(1,905)

5,456

2016
$’000

3,382

1,321

4,754

NOTES TO THE FINANCIAL STATEMENTS
OTHER ASSETS AND LIABILITIES CONTINUED
For the year ended 31 March 2017

NOTE 16. EMPLOYEE PROVISIONS
The Group has two employee short term incentive plans which are accrued as a liability and expensed over the annual service period until
they are paid:

• The short term incentive plan for Executives and selected employees which is based on annual Key Performance Indicators (KPIs) and

comprises 15 per cent to 50 per cent of their Total Reward Remuneration (TRR).

• The staff profit share scheme for all other staff which is based on the Group’s earnings before tax growth and the individual

employee’s performance.

When the long service leave is not expected to be settled within 12 months of year end, the liabilities are measured as the present value of
expected future payments using the projected unit credit method.

Carrying amount at beginning of the period

Additional provisions made

Release of provisions

Carrying amount at the end of the period

Annual
leave
$’000

1,175

2,226

(1,973)

1,428

Employee
short term
incentives
$’000

964

1,048

(2,012)

–

Long
service
leave
$’000

328

135

(128)

335

Total
$’000

2,467

2,361

(3,065)

1,763

All employee provisions are current liabilities apart from $229,000 (2016: $293,000) of long service leave which is non-current.

NOTE 17. OPERATING LEASE COMMITMENTS
The Group leases offices under non-cancellable operating leases expiring within one to seven years. The leases have various escalation and
extension clauses. The Group has no other commitments.

Within one year

Between one and five years

After more than five years

Total operating lease commitments

2017
$’000

2,754

7,665

1,407

11,826

2016
$’000

2,479

8,129

2,739

13,347

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
C A P I TA L S T R U C T U R E

NOTES TO THE FINANCIAL STATEMENTS
CAPITAL STRUCTURE
For the year ended 31 March 2017

NOTE 18. CAPITAL MANAGEMENT
The Group’s capital management strategy is to maximise shareholder value by optimising the level and use of capital, defined as share capital
plus reserves. The Group’s capital management objectives are to:

• Support the Group’s business and operational requirements.

• Meet externally imposed capital requirements.

• Safeguard the Group’s ability to continue as a going concern.

The Group has continued to meet its internal and externally imposed capital requirements this year and no breaches have occurred.

NOTE 19. ORDINARY SHARE CAPITAL
Ordinary shares are classified as equity and measured based on the proceeds from issuing the shares less the directly attributable incremental
costs, net of tax.

There are 240,000,000 fully paid ordinary shares (2016: 240,000,000). Ordinary shares entitle the holder to vote and to receive dividends and
the proceeds of the company if it is liquidated in proportion to the number of shares held.

There are 1,933,218 (2016: nil) restricted ordinary shares issued to KMP in connection with the ESL Plan. Refer to Note 23 for further information.

NOTE 20. DIVIDENDS
Dividends are recognised as a liability and a reduction to retained earnings when declared. All dividends recognised in the year were fully
franked (2016: all).

Final dividend from the preceding year $0.03100 (2016: $0.03584) per share

Interim dividend $0.02800 (2016: $0.03600) per share

Dividend withholding tax

Total dividends recognised and paid

2017
$’000

(7,440)

(6,720)

(93)

2016
$’000

(8,602)

(8,640)

–

(14,253)

(17,242)

On 22 May 2017, the Board determined a dividend of $0.029 per share ($6,960,187) as the final dividend for 2017. This dividend was determined
after 31 March 2017 and so is not reflected in this financial report. As the Company is a holding company with no trading profits, this dividend
will be funded through the profits of the subsidiaries.

Ex-dividend date

Record date

Payment date

Franked dividends

8 June 2017

9 June 2017

23 June 2017

2017
$’000

2016
$’000

Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 30%)

6,972

8,122

The above amounts represent the balance of the franking account as at the end of the financial period, adjusted for the franking credits that
will arise from paying the current tax liability, but before taking account of the final declared dividend for 2017.

NOTE 21. EVENTS OCCURRING AFTER BALANCE SHEET DATE
Other than the dividends presented in Note 20, there were no other material post balance sheet events occurring after the reporting date
requiring disclosure in these financial statements.

NOTES TO THE FINANCIAL STATEMENTS
OTHER ITEMS
For the year ended 31 March 2017

NOTE 22. RELATED PARTY INFORMATION

SUBSIDIARIES

The following entities are wholly owned subsidiaries of the Group and all have a 31 March year end:

Entity

CanadianForex Limited

OzForex (HK) Limited

OzForex Limited

OFX Australia Pty Limited

OFX Group Pty Limited

OFX (SNG) PTE. Limited

NZForex Limited

UKForex Limited

USForex Incorporated

Country of Incorporation

Functional currency

Canada

Hong Kong

Australia

Singapore

New Zealand

United Kingdom

United States

CAD

HKD

AUD

SGD

NZD

GBP

USD

NOTE 23. SHARE-BASED PAYMENTS
The Group has two employee share-based payment plans, the Executive Share Plan (ESP) and the Legacy LTI plan, which are both equity-
settled. The nature of the issuances under the plans are listed below:

Issuance

Share loan

Description

Executives are provided with an interest free, non-recourse loan from the Group for the sole purpose of acquiring
shares in the Company. Employees may not deal with the shares while the loan remains outstanding and any
dividends paid on the shares are applied (on an after-tax basis) towards repaying the loan. Employees are entitled to
exercise the voting rights attached to the shares from the date of allocation. If the Executive leaves the Group within
the vesting period the shares allocated are returned to the Group, subject to discretion retained by the Directors.
Vesting of the loan is subject to performance hurdles.

Performance rights

Performance rights are issued to reward employees, including Executives, based on the Group’s performance.
The performance rights vest based on performance hurdles as set by the Board at the time of issuance. Performance
rights are granted for no cost and are settled in shares on a one-for-one basis.

Service rights

Share options

Service rights are issued to employees at the discretion of the Board. The service rights vesting condition is ongoing
employment at the vesting date. There are no performance hurdles. Service rights are granted for no cost and are
settled in shares on a one-for-one basis.

Share options are issued at the discretion of the Board. Share options vesting condition is ongoing employment at
the vesting date. There are no performance hurdles. Share options are subject to an exercise price and are settled in
shares on a one-for-one basis.

For details on the vesting conditions of share issuances, refer to page 34 and 35 in the Remuneration Report.

ESP – Share loan

Legacy LTI Plan – Performance rights

Legacy LTI Plan – Service rights

Legacy LTI Plan – Share options

Total share-based payment expense

1 Comparative period information has been changed to conform with current year presentation.

2017
$

258,167

(888,290)

382,638

18,484

20161
$

–

774,752

241,963

42,587

(229,001)

1,059,302

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
O T H E R I T E M S

ACCOUNTING FOR SHARE-BASED PAYMENTS

The fair value determined at the grant date of the award is recognised as a share-based payment expense in the income statement with an
offsetting increase in equity over the relevant performance period. The expense recognised is reduced to take account of the expense attributable to
participating employees who do not remain in the employment of the Group throughout the vesting period, or if less awards vest than anticipated.

ESP

The ESP has been established to incentivise Executives to generate shareholder wealth. Detailed remuneration disclosures are provided in the
Remuneration Report section of the Directors’ Report.

The Board has implemented a gateway level of minimum performance for the ESP below which no benefit accrues, being a Board determined
EPS CAGR on a constant currency basis over a three, four and five-year period. Calculated from the 31 March preceding the grant date. The
gateway for the unvested plans is 15% for the 2016 award. This gateway is the minimum level of acceptable performance for any of the ESP
shares to vest.

Where the gateway EPS level of performance is met, there is a target measure for two performance hurdles, NOI CAGR on a constant currency
basis (with a 50% weighting) and EPS CAGR on a constant currency basis (with a 50% weighting). The Board has discretion to forgive part of the
loan repayment.

Shares issued/allocated under the ESP are accounted for as options and as such the amounts receivable from employees in relation to these
loans are not recognised in the financial statements. Settlement of share loans upon vesting are recognised as contributed equity.

The options are externally measured at fair value at the date of grant using the Black-Scholes option pricing model. This valuation model
generates possible future share prices based on similar assumptions that underpin relevant option pricing models to calculate the fair value (as
at grant date) of options granted.

Executives have two years from the vesting date to repay the loan and therefore exercise the options.

The assumptions underlying the options’ valuations issued during the year are outlined in the table below.

Performance
period (years)

Vesting date

7 June 2019

7 June 2020

7 June 2021

LEGACY LTI PLAN

Grant date
share price

Fair value
per options
at grant date

Dividend yield

Risk free
interest rate

Share price
volatility

$2.13

$0.70

$0.77

$0.84

3.00%

1.80%

1.87%

1.94%

35%

Performance rights
The performance rights issued under the Legacy LTI plan during the year have performance conditions listed below.

There were no cancellations during 2017.

Issuance date

14 Jun 16

EPS CAGR
Gateway

≥ 15%

Vesting Level (NOI CAGR)

100%

≥ 26%

25%-100%

15%-26%

< 15%

Performance
Period (Years)

Performance
Period end date

31 March 2019

The fair value of the performance rights issued during the year was determined using an option pricing model with the following inputs:

Grant date

14 Jun 16

Vesting date

7 June 19

Grant date
share price

Fair value

Volatility

Dividend yield

Risk free rate

$2.13

$1.94

35.0%

3.0%

1.8%

Modifications were made to certain performance rights during the year. Refer to page 31 in the Remuneration Report for further information.

Service rights
Service rights issued in the 2017 financial year relate to a one-off allocation as part of the initial employment arrangements of an employee.
The only vesting condition is ongoing employment at the vesting date. The service rights had a fair value of $1.67 at grant date using the VWAP
for the five days prior and including grant date.

Share options
There were no share options issued during the year ended 31 March 2017.

NOTES TO THE FINANCIAL STATEMENTS
OTHER ITEMS CONTINUED
For the year ended 31 March 2017

NOTE 23. SHARE-BASED PAYMENTS CONTINUED

SHARE-BASED PAYMENTS OUTSTANDING

Balance at start
of the year

Granted during
the year

Exercised during
the year

Forfeited during
the year

Balance at
end of the year

Legacy LTI Plan – Performance rights

Legacy LTI Plan – Service rights

Legacy LTI Plan – Share options1

ESP – Share loan

2,135,396

372,356

400,000

273,767

130,700

–

3,455,895

(124,642)

(244,169)

–

(736,519)

(18,063)

(194,807)

1,548,002

240,824

205,193

(1,522,677)

1,933,218

The weighted average exercise price is $2.49. The weighted average remaining contractual life is 1.67 years.

NOTE 24. KEY MANAGEMENT PERSONNEL
In accordance with the requirements of AASB 124 Related Party Disclosures, the KMP include Non-Executive Directors and members of
the Group Executive Team who have authority and responsibility for planning, directing and controlling the activities of OFX Group Limited.
A summary of KMP compensation is set out in the table below.

KEY MANAGEMENT PERSONNEL REMUNERATION

Remuneration

Short-term employee benefits

Post-employment benefits

Termination payments

Long-term employee benefits

Share-based payments

Total remuneration paid to key management personnel

Detailed remuneration disclosures of individual KMP are provided in the Remuneration Report.

2017
$

2016
$

2,194,078

2,489,683

175,197

714,729

10,266

296,014

172,213

162,821

19,829

390,941

3,390,284

3,235,487

SHARE HOLDINGS

The total number of shares in the Company held during the year by the Directors and other key management personnel, including their personal
related parties, are set out below.

Number of options and rights for fully paid ordinary shares

Number of fully paid ordinary shares

Number of restricted ordinary shares

OUTSTANDING LOANS

The total loan amount outstanding from KMP in relation to the ESP is $4,068,404.

2017
Number

2016
Number

970,734

1,238,467

572,500

582,500

1,933,218

–

OTHER TRANSACTIONS WITH KMP

All transactions with KMP are made on normal commercial terms and conditions and in the ordinary course of business. There were no
transactions during the financial year nor balances owing to or from KMP as at 31 March 2017.

In the normal course of business, the Group occasionally enters into transactions with various entities that have Directors in common with the
Group. Transactions with these entities are made on commercial arm’s length terms and conditions. The relevant Directors do not participate in
any decisions regarding these transactions.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTN O T E S T O T H E F I N A N C I A L S TAT E M E N T S
O T H E R I T E M S

2017
$

2016
$

364,353

135,318

55,960

–

555,631

303,847

148,006

–

29,675

481,528

32,992

33,480

2017
$’000

25,624

1,264

24,360

25,624

14,253

Cents

5.94

5.84

2016
$’000

26,658

26,6581

2,298

24,360

26,6581

17,242

Cents

7.18

7.10

NOTE 25. REMUNERATION OF AUDITORS

(a) PwC Australia

Audit and review of financial statements

Taxation services

Other professional fees

Due diligence services

Total remuneration of PwC Australia

(b) Non-PwC auditors

Audit and review of financial reports

Total remuneration of non-PwC auditors

NOTE 26. PARENT ENTITY FINANCIAL INFORMATION
Dividends are recognised as income when the Company becomes entitled to the dividend.

The ultimate parent entity is OFX Group Limited.

Summary financial information

Statement of Financial Position

Investment in subsidiaries

Total assets

Share-based payments reserve

Ordinary share capital

Total equity

Profit or loss for the year (intercompany dividends received)

Total comprehensive income

Earnings per share attributable to ordinary shareholders:

Basic earnings per share

Diluted earnings per share

1 Comparative information has been restated to conform to presentation in the current year.

NOTES TO THE FINANCIAL STATEMENTS
OTHER ITEMS CONTINUED
For the year ended 31 March 2017

NOTE 27. OTHER ACCOUNTING POLICIES

NEW ACCOUNTING STANDARDS

No new Accounting Standards or amendments to Accounting Standards became effective in the current year and had a material impact on the Group.

AMENDMENTS TO ACCOUNTING STANDARDS AND INTERPRETATIONS THAT ARE NOT YET EFFECTIVE

The following standards, amendments to standards and interpretations are relevant to current operations. They are available for early adoption
but have not been applied by the Group in this financial report.

The effects of the following standards are expected to be material:

Reference

AASB 16
Leases

Description

AASB 16 sets out the principles for leases for both lessees and lessors. For lessees,
the distinction between operating and finance leases has been removed and so
almost all leases will be brought on balance sheet.

Accordingly, from 1 April 2018, commitments for operating leases disclosed in Note 19
will be recognised on the Consolidated Statement of Financial Position.

Based on a preliminary analysis, the effects of the following standards are not expected to be material:

Application
of Standard

Application
by Group

1 April 2019

Reference

Description

AASB 15
Revenue from
Contracts with
Customers

AASB 15 is based on the principle that revenue is recognised when control transfers to
a client – so the principle of control replaces the existing principle of risks and rewards.

Application
of Standard

Application
by Group

1 April 2018

AASB 9
Financial Instruments

AASB 9 will replace AASB 139 Financial Instruments and primarily changes the
accounting for:

1 April 2018

• Classification and measurement: Determined based on the business model for

holding, and the cash flows of, financial assets. Financial assets can only be held
at amortised cost if there is a business model to collect the contractual cash flows
of the asset and those cash flows represent payments which are solely principal
and interest. All other financial assets are measured at fair value.

• Hedge accounting: More closely aligned with financial risk management, and may

be applied to a greater variety of hedging instruments and risks.

• Impairment of financial assets: Expected credit losses are recognised, taking into
account the weighted probability of forward-looking information, which includes
macro-economic factors.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTDIRECTORS’ DECLARATION

D I R E C T O R S ’ D E C L A R AT I O N

In the Directors’ opinion:

(a) the financial statements and notes for the year ended 31 March 2017 are in accordance with the Corporations Act 2001, including;

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirement, and

(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 March 2017 and of its performance for the financial year

ended on that date, and

(b) there are reasonable grounds to believe that OFX Group Limited will be able to pay its debts as and when they become due and payable, and

(c) Note 1(i) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer function required by section 295A of
the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

On behalf of the Board:

Steven Sargent
Chairman

John (Skander) Malcolm
Chief Executive Officer and Managing Director

23 May 2017

INDEPENDENT AUDITOR’S REPORT
To the members of OFX Group Limited

Independent auditor’s report
To the shareholders of OFX Group Limited

Report on the audit of the financial report

Our opinion

Report on the audit of the financial report

In our opinion:
The accompanying financial report of OFX Group Limited and its controlled entities (together, the
Group) is in accordance with the Corporations Act 2001, including:

Our opinion
a)
In our opinion:
The accompanying financial report of OFX Group Limited and its controlled entities (together, the
Group) is in accordance with the Corporations Act 2001, including:

giving a true and fair view of the Group’s financial position as at 31 March 2017 and of its
financial performance for the year then ended; and

complying with Australian Accounting Standards and the Corporations Regulations 2001.

•

giving a true and fair view of the Group’s financial position as at 31 March 2017 and of its
financial performance for the year then ended; and

What we have audited
The financial report comprises:

complying with Australian Accounting Standards and the Corporations Regulations 2001.

•

the consolidated statement of financial position as at 31 March 2017;

What we have audited
The financial report comprises:

•

the consolidated statement of comprehensive income for the year then ended;

the consolidated statement of changes in equity for the year then ended;

•
the consolidated statement of financial position as at 31 March 2017;
•
the consolidated statement of cash flows for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated statement of changes in equity for the year then ended;

the notes to the consolidated financial statements, which include a summary of significant
accounting policies; and

the consolidated statement of cash flows for the year then ended;
•

the directors’ declaration.

the notes to the consolidated financial statements, which include a summary of significant
accounting policies; and

•
Basis for opinion
•
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.

the directors’ declaration.

Basis for opinion

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
Independence

Independence

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.

PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000,
GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

PricewaterhouseCoopers, ABN 52 780 433 757
Liability limited by a scheme approved under Professional Standards Legislation.
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000,
GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTI N D E P E N D E N T
A U D I T O R ’ S R E P O R T

Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.

The Group comprises multiple legal entities globally including OzForex Limited, NZForex Limited,
UKForex Limited, USForex Incorporated, CanadianForex Limited and OzForex (HK) Limited. Most of
the Group’s accounting systems are centralised in the head office located in Sydney, where our audit
was predominately carried out. We ensured that the audit team included the appropriate skills and
competencies needed for the audit. This included tax specialists and experts in the valuation of
derivative financial instruments.

Materiality

Audit scope

Key audit matters

• Our audit focused on where the
directors made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future
events.

• Our overall approach considered
each legal entity’s contribution
to Group financial report
balances.

• Additional audit procedures
were performed over the
consolidation process.

• Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Committee:
- Recognition of fee and

trading income

- Existence of cash and cash

equivalents
- Client liabilities
- Valuation of derivatives
-

Taxation

• These are further described in

the Key audit matters section of
our report.

• For the purposes of our audit we

used as overall Group
materiality of $1.19 million,
which represents approximately
5% of the Group’s profit before
tax.

• We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the
nature, timing and extent of our
audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.

• We chose Group profit before

tax because, in our view, it is the
key financial statement metric
used in assessing the
performance of the Group and is
not as volatile as other profit
and loss measures. We selected
5% based on professional
judgement, noting it is within
the range of commonly accepted
thresholds.

INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of OFX Group Limited

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Recognition of fee and trading income
Fee and trading income consists of the margin
generated from foreign currency spreads, fees
charged on low-value transactions and
changes in exchange rates between the time
when a client rate is agreed and a subsequent
hedge transaction is entered by the Group. Fee
and trading income is presented inclusive of
realised and unrealised income earned from
sale of foreign currency contracts to
customers.

This was a key audit matter because it
represents the most significant revenue
element in the consolidated statement of
comprehensive income.

See note 2 of the financial report for further
information.

Existence of cash and cash equivalents
Cash and cash equivalents include cash on
hand, deposits held at short call with financial
institutions with an original maturity of less
than 3 months, and cash held for subsequent
settlement of client liabilities.
As at 31 March 2017, approximately 73% of
this balance represented cash held for
subsequent settlement of client liabilities
where cash from clients had been received but
corresponding cash payments to nominated
accounts had not yet occurred.
This was a key audit matter due to the size of
the cash balance which represents over 70% of
the Group’s total assets and the inherent
importance of cash to a business involved in
money transfer.

See note 7 of the financial report for further
information.

Client liabilities
The customer liabilities balance consists of
cash receipts received from customers in
relation to foreign exchange transactions,
which await settlement. There are amounts
within the balance that have been static for an
extended period of time and they comprise
part payments awaiting full payment prior to
remittance and/or unidentified clients.

Our audit procedures included, among others, evaluating the
design and performing tests over the operating effectiveness of
relevant key revenue controls, including reconciliation controls
between the transaction recording system, general ledger and
bank statements.
In addition, we have:

Performed data analytic techniques over fee and trading
income and recalculated a sample of transactions using
independently obtained foreign exchange rates;
Compared individual transactions recognised throughout
the financial year to underlying deal tickets and bank
statements on a sample basis;
Tested material reconciling items in cash account
reconciliations at 31 March 2017;
Performed cut off testing over fee and trading income
recognised during and after the reporting period by
comparing individual transactions to underlying deal
tickets and bank statements from each period on a sample
basis;
Examined supporting documentation for a sample of
manual journals related to fee and trading income.

Our testing of the cash and cash equivalents balance included
an assessment of the design and tests of the operating
effectiveness of key reconciliation controls between the
transaction recording system, bank statements and the general
ledger.
In relation to the balance as at 31 March 2017, we:
o Obtained confirmations directly from banks of the

outstanding balances as at the year-end date for 103 of 169
bank accounts and performed alternative procedures such
as obtaining bank statements over the remainder;
Compared the cash amounts recognised to the
independently obtained confirmations and/or bank
statements;
Tested all bank reconciliations and investigated material
reconciling items;
Compared the foreign exchange rates used for the
translation of foreign-currency denominated cash
accounts at year-end to independently sourced exchange
rates.

Our testing of client liabilities included an assessment of the
design and testing of the operating effectiveness of key
reconciliation controls between the transaction recording
system, bank statements and the general ledger.

In addition, we:

Checked a sample of customer liabilities to individual deal
tickets and cash receipts;

OFX GROUP LIMITEDANNUAL REPORT 2017DIRECTORS’ REPORT AND FINANCIAL REPORTI N D E P E N D E N T
A U D I T O R ’ S R E P O R T

Key audit matter

How our audit addressed the key audit matter

Considered the post year-end settlement rates of the total
balance between 1 April 2017 and 30 April 2017;
Assessed the customer complaints log to identify
significant matters raised concerning client liabilities;
Performed scanning analytics on the breakdown of
customer liabilities at 31 March 2017 to consider the age
profile of unallocated customer liabilities.

In relation to the valuations as at 31 March 2017, we:

Checked whether the valuation methodology applied by
the Group was consistent with the prior year;
Compared the valuations of all derivative instruments held
at balance date to our own independently derived
valuations. This involved sourcing independent inputs
from market data providers.

Our procedures over taxation related balances included
evaluating the analysis conducted by the Group for judgements
made in respect of the ultimate amounts expected to be paid to
tax authorities. This was made in the context of our
understanding of the business, engaging tax specialists where
necessary, and assessing the appropriateness of the tax
provisions under Australian Accounting Standards.

In relation to the OBU transactions, we involved our tax
specialists to consider the Group’s OBU arrangements and
tested the classification of OBU and non-OBU transactions on
a sample basis against guidance provided in tax legislation.

In relation to R&D Credits we have involved our tax specialists
to review and assess the projects that are eligible for
concessional treatment.

This was a key audit matter due to the size of
client liabilities which represents 88% of the
Group’s total liabilities and the inherent
uncertainties associated with the static
transactions.

See note 7 of the financial report for further
information.

Valuation of derivatives
Derivative instruments entered into by the
Group include spot and forward foreign
exchange transactions in the foreign exchange
markets.
This was a key audit matter due to the
inherent judgment and estimation involved in
the valuation of these derivatives.

See notes 9, 10 and 11 of the financial report
for further information.

Taxation
The Group is liable for tax in a number of
jurisdictions, and in some cases, the final tax
treatment is uncertain until resolved with the
relevant tax authority. Consequently, the
Group has made judgements about the
incidence and quantum of tax exposures and
liabilities which are subject to the future
outcome of assessments by relevant tax
authorities and potentially associated legal
processes.

In addition, the OzForex Limited, a subsidiary
of OFX Group Limited, was declared an
Offshore Banking Unit (OBU) meaning
assessable offshore banking impact was
subject to a concessional tax rate of 10%. The
subsidiary is also eligible for Research and
Development tax credits (R&D Credits) on
eligible expenditure which further reduces the
tax expense. Adjustments were made during
the financial year to estimate the amount of
these concessional credits, however because
the relevant tax claims are filed in arrears, the
exact amount of the claims are not known with
certainty.

See note 4 of the financial report for further
information.

Other information

The directors are responsible for the other information. The other information comprises What we do,
Our Services, Our Opportunities & Focus, Our People, Financial Highlights, the Chairman’s Letter, the
CEO’s Letter, Executive Team, the Director’s Report, Shareholder Information and Corporate
Information included in the Group’s annual report for the year ended 31 March 2017 but does not
include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.

D I R E C T O R S ’ R E P O R T
A N D F I N A N C I A L R E P O R T

INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of OFX Group Limited

In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our auditor’s report.

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 24 to 38 of the directors’ report for the
year ended 31 March 2017.

In our opinion, the remuneration report of OFX Group Limited for the year ended 31 March 2017
complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with Australian Auditing Standards.

PricewaterhouseCoopers

CPG Cooper
Partner

Sydney
23 May 2017

OFX GROUP LIMITEDANNUAL REPORT 2017

SHAREHOLDER INFORMATION

S H A R E H O L D E R I N F O R M AT I O N

The shareholder information set out below is current as at 30 April 2017.

CORPORATE GOVERNANCE STATEMENT
In accordance with ASX Listing Rule 4.10.3, the Company’s 2017 Corporate Governance Statement can be found on its website at
www.ofx.com.au/investors/corporate governance.

DISTRIBUTION OF SHAREHOLDERS AS AT 30 APRIL 2017

Number of shares

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001-999,999,999

Total

Total holders of
ordinary shares

1,333

3,483

1,906

2,075

8,894

Number of
ordinary shares

810,772

10,334,970

15,096,649

52,121,218

161,636,391

240,000,000

% of Issued Capital

0.34

4.30

6.29

21.72

67.35

100.00

There were 299 holders of less than a marketable parcel of ordinary shares, based on a market price of $1.44 at the close of trading on 30 April 2017.

TWENTY LARGEST SECURITY HOLDERS OF ORDINARY SHARES AS AT 30 APRIL 2017

Rank Name

Units

% of Units

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

J P MORGAN NOMINEES AUSTRALIA LIMITED

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

NATIONAL NOMINEES LIMITED

G AND A LORD PTY LTD

MR MATTHEW GILMOUR

MICROEQUITIES ASSET MANAGEMENT PTY LTD

CITICORP NOMINEES PTY LIMITED

BNP PARIBAS NOMINEES PTY LTD

AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED

BNP PARIBAS NOMS PTY LTD

MIRRABOOKA INVESTMENTS LIMITED

BOND STREET CUSTODIANS LIMITED

MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED

AMCIL LIMITED

M & J GILMOUR PTY LTD

DJERRIWARRH INVESTMENTS LIMITED

MR JOHN LETCHER HOCKING + MRS JEANNETTE ANNE HOCKING

S M & R W BROWN PTY LTD

CITICORP NOMINEES PTY LIMITED

20.

BNP PARIBAS NOMINEES PTY LTD

Totals: top 20 holders of fully paid ordinary shares

Total remaining holders balance

44,432,808

33,215,215

12,397,146

9,400,000

9,245,200

8,142,069

6,672,963

6,216,916

4,886,764

3,047,994

2,200,000

1,623,598

1,435,203

1,200,000

1,023,848

736,763

585,000

550,000

437,725

432,031

18.51

13.84

5.17

3.92

3.85

3.39

2.78

2.59

2.04

1.27

0.92

0.68

0.60

0.50

0.43

0.31

0.24

0.23

0.18

147,881,243

92,118,757

61.62

38.38

S H A R E H O L D E R I N F O R M AT I O N

SHAREHOLDER INFORMATION CONTINUED

UNQUOTED EQUITY SECURITIES AS AT 31 MARCH 2017
Shares issued under the OFX Group Long Term Incentive Plan and the Executive Share Plan which, subject to vesting conditions, entitle the holder
to ordinary shares:

Performance rights

Service rights

Share options

Number held

1,548,002

240,824

2,138,411

Number of
holders

SUBSTANTIAL SHAREHOLDERS
Substantial shareholders (holding not less than 5%) as shown in substantial shareholder notices received by the Company pursuant to Section
671B of the Corporations Act 2001 as at 30 April 2017 are shown below.

Microequities

Northcape Capital Pty Ltd

BT Investment Management Limited

Westpac Banking Corporation

Renaissance Smaller Companies Pty Ltd

Number held

20,931,883

17,452,746

16,043,799

15,591,602

13,223,857

% of issued
capital

8.72%

7.27%

6.68%

6.50%

5.51%

VOTING RIGHTS
The voting rights are governed by clause 37 of the Company’s Constitution which provides that every member present personally or by proxy,
attorney or representative shall on a show of hands have one vote and on a poll shall have one vote for every share held.

ORDINARY SHARES
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.

PERFORMANCE RIGHTS
There are no voting rights attached to performance rights issued under the OFX Group Long Term Incentive Plan.

BUYBACK
There is no current on-market buyback.

OFX GROUP LIMITEDANNUAL REPORT 2017CORPORATE INFORMATION

Directors

Company Secretary

Notice of Annual General Meeting

Principal registered office in Australia

Share register

Auditor

C O R P O R AT E I N F O R M AT I O N

Mr Steven Sargent (Chairman)
Mr Skander Malcolm (Chief Executive Officer and Managing Director)
Ms Melinda Conrad
Mr Grant Murdoch
Mr Douglas Snedden

Ms Freya Smith

Wednesday 2 August 2017 at 2pm
Establishment Hotel
252 George Street
Sydney, NSW 2000
Australia

Level 19
60 Margaret Street
Sydney, NSW 2000
Australia
Ph +61 2 8667 8000
Fax +61 2 8667 8080
Email investors@ofx.com.au

Computershare Registry Services Pty Limited
60 Carrington Street
Sydney, NSW 2000
Australia
Ph +61 3 9415 4000
Ph 1300 850 505 (Australian shareholders)

PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
Barangaroo, NSW 2000
Australia

Stock Exchange Listing

Website address

OFX Group shares are listed on the Australian Securities Exchange: OFX