Pason Systems Annual Report 2019

Plain-text annual report

PSC Insurance Group Limited ANNUAL REPORT 2019 PSC Insurance Group Limited & Controlled Entities ACN 147 812 164 Level 4, 96 Wellington Parade East Melbourne VIC 3002 www.pscinsurancegroup.com.au CONTENTS Chairman’s Letter ........................................................................................... 1 Managing Director’s Report ........................................................................ 2 PSC Foundation ............................................................................................... 5 Corporate Governance Statement ............................................................. 6 Directors’ Report ...........................................................................................10 Auditor’s Independence Declaration ......................................................22 Financial Statements ....................................................................................23 Notes To The Financial Statements .........................................................27 Directors Declaration .................................................................................. 80 Independent Auditor’s Report .................................................................. 81 Shareholder Information ............................................................................86 Corporate Information ................................................................................88 CHAIRMAN’S LETTER 1 My fellow Shareholders, I am once again pleased to report that the financial year 2019 has been another successful and busy year for PSC Insurance Group. Dividends have grown at a compound rate of 31% over the last 3 years since listing. Our strong dividend history is shown below: Our Managing Director’s Report will provide detail on the financial results for 2019. Over the year, there has been much focus on the financial services industry and past indiscretions, many of which were caused by not keeping the service provider’s customers as their first focus. With this in mind, as I have stated in all of these letters to our shareholders, customers and clients are paramount in all we do. The strength of our diversified operations, across more than 40 businesses, is evident. The existing businesses have continued to perform well, with a strong performance from our Distribution businesses in particular. We have invested in our first direct broking business in the UK and we have further invested in our worker’s compensation consulting and life broking businesses to add capability to deliver in these areas for our customers and clients. All acquisitions made over 2018 and 2019 are performing well and to expectations. A key focus of the Group in the second half of the 2019 financial year had been working on the acquisitions of two large businesses, the two largest in the history of the Group. Griffiths Goodall Insurance Brokers is a large, family owned insurance broker based in regional Victoria. It has been operating successfully for 30 years. Paragon International Insurance Brokers is a large Lloyd’s wholesale broker based in London, specialising in professional and financial lines. The Founders commenced this business 23 years ago. Both businesses have grown from entirely organic means and in both cases the senior management teams are staying in the business and will be joining as large shareholders in the Group. The Griffiths Goodall acquisition has completed and the Paragon acquisition will complete after regulatory approval. At PSC we believe the best businesses can grow organically, grow via acquisition and be a strong dividend payer. I am pleased to announce an increase in the fully franked final dividend to 5.2 cents per share, for total dividends for the year of 8.3 cents per share. DIVIDENDS - CPS UNDERLYING - NPATA 30.0 25.0 20.0 15.0 10.0 5.0 0.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 45,000 40,000 35,000 30,000 FY2016 FY2017 FY2018 FY2019 1H 2H UNDERLYING EARNINGS PER SHARE Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 UNDERLYING EBITDA FY18 Dist Org Dist Acq Agency Agency UK Org UK Acq Group FY19 Org Acq 10.0 8.0 6.0 4.0 2.0 0.0 FY2016 FY2017 FY2018 FY2019 1H 2H UNDERLYING REVENUE We are also pleased to announce that we will be introducing a Dividend Reinvestment Plan this year. We encourage shareholders to participate. Shareholders will receive further information from Link Market Services. 140.0 120.0 100.0 80.0 0.0 20.0 60.0 40.0 In May this year, we were very pleased to announce Tony Robinson as the Managing Director of the Group. Tony was a Non-Executive Director previously and is a highly experienced Executive and is well known across our shareholder base. Paul Dwyer moved to the Deputy Chairman role. He remains the Group’s largest shareholder, and continues to focus on acquisitions and growth opportunities. UNDERLYING EBITDA FY2017 FY2016 FY2018 FY2019 2H 1H 50.0 45.0 15.0 35.0 25.0 30.0 20.0 40.0 Thanks to my fellow Directors for their continued commitment and support. Importantly, on behalf of the Board, we thank all the PSC staff for their continued and passionate support allowing our company to make 2019 such a success. Unquestionably, they continue to be the greatest asset of the Group. We as a Board also welcome our new staff members gained throughout the year by way of acquisitions and organic growth in our various businesses. FY2017 FY2018 FY2016 FY2019 10.0 0.0 2H 5.0 1H To my fellow Shareholders, thank you for your continued support and confidence you have placed in your Board. The Board, Senior Management and Staff assure you of our intention to strongly grow our business in a measured and disciplined manner as we have in the past. Yours sincerely, Brian Austin Chairman PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES2 MANAGING DIRECTOR’S REPORT Key financial highlights in 2019 for PSC were: • Underlying revenue was up 18% on the prior corresponding period (pcp) to $119.0 million. • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) up 17% on the pcp to $43.3 million. • Operational underlying EBITDA up 19% on the pcp to $41.6 million. • Underlying EBITDA margin broadly steady at 36%. • Underlying net profit after tax and before amortisation (NPATA) up 15% on the pcp to $27.8 million. • Operational underlying NPATA up 18% to $26.7 million. • Statutory net profit after tax down 9% on the pcp to $25.4 million. The reduction reflects the $17.3 million fair value gain from the prior year and not reflective of operational performance. Across our diverse businesses, the areas we focus on are simple: • Strong clients, on whom we are entirely focussed. • Great staff working with our clients. We provide our people with autonomy, purpose, accountability and an environment to increase their expertise. • Good systems and processes to support the operating businesses. This results in a diverse mix of smaller businesses, all with recurring revenues and strong cash conversion. It has been another active and successful year for the Group. We remain focussed on organic growth outcomes (new clients, new businesses and business improvement), supplemented by acquisition based growth where we feel we can add value and grow the businesses. DIVIDENDS - CPS DIVIDENDS - CPS • Whilst not announced until after balance date, during the second half of the period we were focussed on the acquisitions of both Griffiths Goodall Insurance Brokers, a large insurance broker based in Victoria, and Paragon Insurance, a very successful Lloyd’s broker in London, specialising in professional and financial lines. We believe both will be wonderful businesses for the Group and we are looking forward to working with the very capable teams involved. 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 FY2016 FY2016 1H 1H 2H 2H Financial Performance UNDERLYING REVENUE UNDERLYING REVENUE UNDERLYING EARNINGS PER SHARE UNDERLYING EARNINGS PER SHARE 140.0 140.0 120.0 120.0 100.0 100.0 80.0 80.0 60.0 60.0 40.0 40.0 20.0 20.0 0.0 0.0 FY2016 FY2016 2H 2H 1H 1H FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 Jun-15 Jun-15 Dec-15 Dec-15 Jun-16 Jun-16 Dec-16 Dec-16 Jun-17 Jun-17 Dec-17 Dec-17 Jun-18 Jun-18 Dec-18 Dec-18 Jun-19 Jun-19 FY2016 FY2016 1H 1H 2H 2H FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 UNDERLYING - NPATA UNDERLYING - NPATA 30.0 30.0 25.0 25.0 20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 0.0 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 45,000 45,000 40,000 40,000 35,000 35,000 30,000 30,000 UNDERLYING EBITDA UNDERLYING EBITDA FY2016 FY2016 1H 1H 2H 2H FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 FY18 FY18 Dist Org Dist Acq Agency Dist Org Dist Acq Agency Org Org Agency Acq Agency Acq UK Org UK Org UK Acq UK Acq Group Group FY19 FY19 50.0 50.0 45.0 45.0 40.0 40.0 35.0 35.0 30.0 30.0 25.0 25.0 20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 0.0 UNDERLYING EBITDA UNDERLYING EBITDA DIVIDENDS - CPS UNDERLYING - NPATA 10.0 We are a disciplined allocator of capital and view acquisitions as a simultaneous recruitment process which requires cultural fit. 8.0 6.0 4.0 2.0 Key operational highlights have included: 0.0 FY2016 • Strong growth of 29% in the Distribution businesses, including organic growth of 18%. This segment contributed 66% of Group underlying EBITDA. FY2017 FY2018 FY2019 2H 1H • We completed the acquisition of 70% of Turner UNDERLYING REVENUE Insurance Services, the UK based direct commercial insurance broking business. As this is integral to what we do in Australia, we will be looking to grow this area of our business in the UK. 140.0 120.0 100.0 80.0 • We completed acquisitions to expand our workers 60.0 40.0 20.0 0.0 compensation consulting and life broking offering and businesses. These add to the capability of the Group, which is a significant value add to our clients. FY2016 FY2017 FY2018 FY2019 30.0 25.0 20.0 15.0 10.0 5.0 0.0 FY2016 FY2017 FY2018 FY2019 1H 2H UNDERLYING EARNINGS PER SHARE 12.0 The underlying financial performance of the Group since listing is summarised below: 10.0 8.0 6.0 The underlying compound annual growth rates over this period have been: 4.0 2.0 • Revenue: 21%. 0.0 • EBITDA: 27%. Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 1H 2H • NPATA: 25%. UNDERLYING EBITDA UNDERLYING EBITDA 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 45,000 40,000 35,000 30,000 FY2016 FY2017 FY2018 FY2019 1H 2H FY18 Dist Org Dist Acq Agency Agency UK Org UK Acq Group FY19 Org Acq PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES DIVIDENDS - CPS UNDERLYING - NPATA 3 FY2016 FY2017 FY2018 FY2019 FY2016 FY2017 FY2018 FY2019 1H 2H FY2016 FY2017 FY2018 FY2019 FY2016 FY2017 FY2018 FY2019 1H 2H DIVIDENDS - CPS UNDERLYING REVENUE UNDERLYING REVENUE 1H 2H UNDERLYING EBITDA 1H 2H UNDERLYING EBITDA 1H 2H 10.0 8.0 6.0 4.0 2.0 0.0 10.0 8.0 140.0 6.0 120.0 4.0 100.0 2.0 80.0 0.0 60.0 40.0 20.0 0.0 140.0 120.0 100.0 50.0 80.0 45.0 40.0 60.0 35.0 40.0 30.0 20.0 25.0 20.0 0.0 15.0 10.0 5.0 0.0 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 FY2016 FY2017 FY2018 FY2019 1H 2H 30.0 25.0 20.0 15.0 10.0 5.0 0.0 FY2016 FY2017 FY2018 FY2019 1H 2H UNDERLYING - NPATA 30.0 UNDERLYING EARNINGS PER SHARE 25.0 12.0 20.0 10.0 15.0 8.0 10.0 6.0 5.0 4.0 0.0 2.0 0.0 FY2016 FY2017 FY2018 FY2019 1H 2H Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 UNDERLYING EARNINGS PER SHARE 12.0 10.0 8.0 45,000 6.0 UNDERLYING EBITDA The underlying earnings per share of the Group since our IPO has been very strong and market leading against our peer group. It has tripled from 3.7 cents to 11.3 cents over the 4 year period. This represents a compound annual growth rate of 31%. 40,000 2.0 4.0 0.0 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 35,000 We are pleased with the financial year 2019 results, which are outlined more closely below: FY2016 FY2017 FY2018 FY2019 30,000 FY18 Dist Org Dist Acq Agency UNDERLYING EBITDA Org Agency Acq UK Org UK Acq Group FY19 45,000 40,000 35,000 30,000 FY18 Dist Org Dist Acq Agency Org Agency Acq UK Org UK Acq Group FY19 Underlying EBITDA has increased 17% from $37.0 million to $43.3 million (+ $6.3 million). Excluding investment income, operational underlying EBITDA increased 19% from $34.9 million to $41.6 million. Detail as follows: • Organic growth: +$3.0 million (9% operational growth) • Acquisition led growth: +$3.8 million (10% growth). • Investment income: -$0.5 million. Organic growth: • Distribution: strong organic growth of +$4.0 million (+18%). This was largely driven by strong performance in the broking businesses; sound client growth, assistance from a strong premium environment and slightly improved contribution margin. The network business increased revenue by 8% over the period and contributed a broadly flat EBITDA contribution as PSC Connect invested in additional resourcing to aid future growth prospects. • Agency: weak organic growth of -$0.6 million (-10%). This was the result of the hardening market conditions in the second half of the period. Underwriters altered terms and remuneration arrangements which particularly impacted Chase Underwriting’s plant and equipment book. Chase Underwriting continues to retain its facilities and we expect a stabilised performance going forward. • UK: solid organic growth of +$0.5 million (+8%). Breeze Underwriting was the strongest performer and Carroll Holman performed well. The APG business stabilised its position over the year, with the re-orientation of its business under new management continuing. The Chase UK business spent the majority of its year finalising its capacity arrangements. This is now complete and we remain optimistic of its prospects. • Group: Excluding the investment income contribution, Group contribution to organic growth was -$0.7 million. This was the result of increased costs of $0.5 million, being both increased salaries and insurance costs, as well as a lower interest income contribution as we deployed capital on investments. Acquisition growth: • Distribution: contributed $2.5 million in incremental EBITDA over the period. The largest contributor was ~ $0.6 million from the workers compensation business acquired in October 2018. The balance was across 7 broking businesses acquired both in 2018 and 2019 years. All have performed well, with strong contributions from the IMGA and Insurance Solutions businesses. • Agency: contributed $0.1 million in incremental EBITDA over the period. This was the incremental contribution from the medical agency business Medisure Indemnity. • UK: contributed $1.1 million in incremental EBITDA over the period. This was essentially the result of Turner Insurance, which completed in July 2018. This business is performing to expectations. Investment (yield) income: • A lower contribution of $0.5 million. This was the result of the high prior year contribution from Johns Lyng, pre its IPO in the 2018 year. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES4 MANAGING DIRECTOR’S REPORT (continued) Underlying NPATA and Statutory NPAT: A reconciliation between underlying NPATA and statutory NPAT is as follows: The cash conversion for the period remains sound, noting that part of our investment in the Johns Lyng Group was sold in the period and those proceeds being reflected in the investing cashflow section of the cash statement. ($m) Statutory NPAT, incl NCI Amortisation Tax adjusted impact of revenue and expense adjustments Underlying NPATA 2019 25.4 1.6 0.8 27.8 2018 27.8 1.1 -4.7 24.2 Dividends: The Chairman announced an increased final, fully franked dividend to 5.2 cents per share, bringing total dividends for the financial period to 8.3 cents per share. This represents a payout ratio of approximately 77%, based on underlying NPATA. Outlook: We have previously announced the acquisitions of Griffiths Goodall and Paragon. Both businesses have very capable management teams who have grown their businesses entirely from organic means. They are very welcome additions to the Group. Dependent on the timing of completion for Paragon, we expect earnings growth from these acquisitions of over 20% for the financial year 2020. The existing businesses are also expected to continue to perform well and grow organically at a level consistent with prior years. Underlying NPATA of $27.8 million adjusts the statutory NPAT $25.4 million to reflect: • The non-cash amortisation charge. • The Group had $7.9m in fair value and capital gains on the investments held. The largest contributor to this was a fair value gain of $6.3 million on our BP Marsh investment and the balance being a combination of fair value and capital gains on our JLG investment. • The Group had $7.9m in one-off charges, the main of which are as follows: 1) $3.0 million in employment costs that are non-recurring and related to business changes across the year 2) $1.4 million in acquisition and transaction related costs 3) $1.1 million in accounting charges relating to changes in the fair value of deferred consideration payments and 4) $2.0 million in charges relating to equity based option charges for staff. • The net after tax impact of these adjustment was $0.8 million. Balance Sheet: The balance sheet is in a sound position. At balance date, there remained $41 million in undrawn debt capacity. Gearing levels at balance date were a little over 1.5 times as measured by gross debt to underlying EBITDA. Additionally, the Group held $21.5 million in operational cash at balance date. Subsequent to balance date, the Group raised equity of $35 million. This will assist with the completion of Paragon. We are also in the process of arranging debt facilities within the UK. Griffiths Goodall has completed, with part of the undrawn debt capacity used to facilitate this. The liquidity position of the Group is sound. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESPSC FOUNDATION 5 About the PSC Foundation The PSC Foundation continues to support the endeavours of the people in the PSC group of companies in their charitable and community endeavours Australia wide. Our primary purpose is to build upon the amazing contributions our people make in the different communities where they live, work and support. Our people continue to contribute their own time volunteering for community organisations. The PSC Foundation has been established to consolidate and actively support their community involvement so that our team’s passions for the community can be fully realised. This provides benefits for both our team and community organisations and encourages individual involvement at a grassroots level. It is our purpose to help anyone from within our group to be able to give back to the community and to society. We are fortunate enough to have passionate and committed individuals making significant contributions to their community in order to benefit others. The PSC Foundation enables them to contribute even more than they could otherwise do on their own. Our Objectives Our activities are driven by the endeavours of our people and as such our key objectives are: • To support and encourage our people to support the communities they live and work within; • To contribute in skilled and sustainable ways to help community organisations succeed or overcome problems; • To raise the profile of the organisations and causes we support; and • To encourage good corporate citizenship by highlighting the depth and breadth of our community involvement across the Group. We seek to achieve these objectives by: • providing grants to a charity or charitable cause where our people are involved. • • supporting team-led community activities and matching PSC team fundraising efforts; and recognising leadership and community commitment through internal and external communications. Our Funding Approach There are two ways the PSC Foundation can contribute to a charity or community endeavour: • Major donation grant - providing grants to a charity or charitable cause sponsored by a PSC Group team member. • PSC team matching program – gives our team the ability to direct funding towards the issues and commitments that are important to them. We match team fundraising efforts dollar for dollar for fundraising activities in the community up to $2,000 per activity with a six- monthly cap of $20,000. Our beneficiaries this Year PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES6 CORPORATE GOVERNANCE STATEMENT The Board is responsible for the corporate governance of the Group. Outlined are policies and practices adopted by the Group. We are committed to high standards in accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations unless stated otherwise. Principle 1 – Lay solid foundations for management and oversight The Board’s role includes guiding the Group’s strategic direction, driving its performance and overseeing the activities of management and the operation of the Group. The respective roles and responsibilities of the Board and Executives are defined in the Board Charter, a copy of which is available on the Group’s website at www.pscinsurancegroup.com.au. There is a clear delineation between the Board’s responsibility for the Group’s strategy and activities, and the day-to-day management of operations conferred upon the Group’s officers. More specifically, the Board is responsible for: Strategy and financial performance These include: • develop, approve and monitor the Group’s corporate strategy, investment and financial performance objectives; • determine the Group’s dividend policy; • evaluate, approve and monitor all aspects of capital management, including material acquisitions, divestitures and other corporate transactions, including the issue of securities of the Group and undertaking of new debt facilities or issue of debt securities; • approve all financial reports and material reporting and external communications by the Group; • appoint the Chair of the Board and, where appropriate, any Deputy Chair or Senior Independent Director. Executive and Board management These include: • appoint, monitor and manage the performance of the Group’s Directors; • manage succession planning for the Group’s Executive Directors and any other key management positions as identified from time to time; • • ratify the appointment and, where appropriate, the removal of senior management of the Group and any subsidiaries; review and approve the remuneration of individual Board members and Senior Executives, having regard to their performance. Audit and risk management These include: • appoint the external auditor and determine its remuneration and terms of appointment; • ensure effective audit, risk management and regulatory compliance programs are in place; • approve and monitor the Group’s risk and audit framework and its Risk Management Policy; • monitor the Group’s operations in relation to, and in compliance with, relevant regulatory and legal requirements; • approve and oversee the integrity of the accounting, financial and other corporate reporting systems and monitor the operation of these systems. Corporate governance and disclosure These include: • evaluate the overall effectiveness of the Board, its committees and its corporate governance practices and policies; • supervise the public disclosure of all matters that the law and the ASX Listing Rules require to be publicly disclosed in a manner consistent with the Continuous Disclosure Policy; • approve the appointment of Directors to committees established by the Board and oversee the conduct of each committee. The Group Secretary, Stephen Abbott, reports directly to the Chairman of the Board. The role of the Group Secretary is outlined in the Board Charter. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES7 The responsibility for the operation of the Group is delegated by the Board to the Managing Director. The Board and senior management monitor the performance of the Group through monthly reporting of the operating performance of each business, with reference to Board approved budgets and prior corresponding periods. The Remuneration and Nominations Committee monitors the performance of Key Management Personnel. All Directors have a written agreement setting out the terms of their employment. Principle 2 – Structure the Board to add value The Board currently comprises three Non-Executive Directors and two Executive Directors. Of these five Directors, two are independent Non-Executive Directors; Mr Brian Austin and Mr Melvyn Sims. The Board are highly invested in the Group and believe this is in the best interests of all shareholders to drive the performance and add value. Mr Brian Austin, Mr Paul Dwyer and Mr John Dwyer are all substantial shareholders in the Group. While Mr Austin’s direct and indirect shareholding in the Group may be an indicator that he may not be an independent Director under ASX guidelines, the Board believes he continues to act independently of management and in the best interests of all shareholders and consequently the Board has deemed that he is independent. The experience and expertise relevant to the position of Director held by each Director at the date of this report is included in the Directors’ Report. The term in office held by each Director at the date of this report is as follows: Name Mr Brian Austin – Chairman, Independent Non-Executive Director Mr Paul Dwyer – Deputy Chairman, Non-Executive Director (Managing Director to 16 May 2019) Mr Antony Robinson – Managing Director (Independent Director to 16 May 2019) Mr John Dwyer – Executive Director Mr Melvyn Sims – Independent Non-Executive Director Term in office 9 years 9 years 4 years 9 years 3 years Principal 2.4 and 2.5 of the ASX Corporate Governance Principals and Recommendations recommends that the Board comprise a majority of Directors who are independent. The Board as currently composed does not comply with those recommendations. The Board has established two committees to assist it in its endeavours: • Audit & Risk Committee. • Remuneration & Nominations Committee. The charter of each of these committees can be reviewed at www.pscinsurancegroup.com.au. In considering the skills required by members of the Board, consideration is given to the following: • Insurance industry experience. • Executive management experience. • Financial acumen. • Legal knowledge. • UK business experience. • Operational and acquisition experience. The Board has considered these requirements and is satisfied with the current composition. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES8 CORPORATE GOVERNANCE STATEMENT (continued) To enable performance of their duties, all Directors: • Are provided with appropriate information in a timely manner and can request additional information at any time, • Have access to the Company Secretary; • Are able to seek independent professional advice at the company’s expense; • Are able to undertake professional development opportunities to further develop their knowledge and skill needed to perform their role as Director; and • Have undergone an induction process to enable them to be effective Directors and gain substantial knowledge of the company. Principle 3 – Promote ethical and responsible decision making The Group is committed to operating honestly and ethically in all its business dealings and to embody this commitment has adopted a Code of Conduct which applies to all Directors, officers, employees, contractors or consultants of the Group as well as a Securities Trading Policy. Each of these has been prepared having regard to the ASX Corporate Governance Principles and Recommendations and is available on the Group’s website at www.pscinsurancegroup.com.au. The Group has adopted a Diversity Policy, a copy of which is available on the Group’s website at www.pscinsurancegroup.com. au. Where candidates for Board and Executive positions have commensurate experience and expertise, the Group will have a preference for appointments that enhance our diversity. Presently, the proportion of females employees across the Group is 47%. Principle 4 – Safeguard integrity in financial reporting The Group has established an Audit & Risk Management Committee to oversee the management of financial and internal risks. The Committee is now chaired by Non-Executive Director, Mr Paul Dwyer following Mr Antony Robinson’s appiontment as Managing Director. Mr Antony Robinson is the other member of this committee. Principal 4.1 of the ASX Corporate Governance Principals and Recommendations recommends that the audit committee have at least three members all of whom are Non-Executive Directors. The Audit & Risk Management Committee is governed by an Audit & Risk Management Committee Charter, a copy of which is available on the Group’s website at www.pscinsurancegroup.com.au. Key roles of the Committee include: • Review of the half year and full year statutory financial statements; • Consideration of the performance of the external audit and the periodic rotation of that role; • Review of risk management assessment and the Group’s Risk Management Policy and internal financial controls; • The Audit & Risk Committee met three times during the year and each member attended all meetings. Prior to the approval of the financial statements, the Board received a declaration from the Managing Director, Group Chief Executive Officer and Chief Financial Officer that, in their opinion, the financial records have been properly maintained, are in accordance with Australian Accounting Standards and give a true and fair view of the financial performance and financial position of the Group. The company’s auditor, Pitcher Partners, has indicated they will be attending the Annual General Meeting. Principle 5 – Make timely and balanced disclosure The Group is committed to providing timely and balanced disclosure to the market in accordance with its Continuous Disclosure Policy, a copy of which is available on the Group’s website at www.pscinsurancegroup.com.au. The Continuous Disclosure Policy is designed to ensure compliance with ASX Listing Rules and the Corporations Act 2001. All disclosures are subject to Board ratification. Principle 6 – Respect the rights of Shareholders The Group has adopted a Shareholder Communications Policy for Shareholders wishing to communicate with the Board, a copy of which is available on the Group’s website at www.pscinsurancegroup.com.au. The Group seeks to recognise numerous modes of communication, including electronic communication, to ensure that its communication with Shareholders is timely, frequent, clear and accessible. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES9 The Group provides investors with comprehensive and timely access to information about itself and its governance on its website at www.pscinsurancegroup.com.au. All Shareholders are invited to attend the Group’s annual meeting, either in person or by representative. The Board regards the annual meeting as an excellent forum in which to discuss issues relevant to the Group and accordingly encourages full participation by Shareholders. Shareholders have an opportunity to submit questions to the Board and to the Group’s auditor. Principle 7 – Recognise and manage risk In conjunction with the Group’s other corporate governance policies, the Group has adopted a Risk Management Policy, which is designed to assist the Group to identify, evaluate and mitigate risks affecting the Group. The Audit & Risk Management Committee is responsible for reviewing whether the Group has any material exposure to any economic and commercial risks, and if so, to develop strategies to manage such risks, and present such strategies to the Board. The Audit & Risk Management Committee is supported by the Group Manager Governance and Compliance who has a direct line of report into this committee. The Group has identified certain key risks that could materially impact its performance, and implemented measures to manage these risks. These include, however are not limited to: • Regulatory risk – as a Group of regulated financial services businesses, changes in regulation or actions by regulators could impact the Group; • Personnel risk – competent employees and management are very important to the ongoing success of the Group; • Financial risk – sound risk management of the financial controls around client monies and financial reporting are very important; • Underwriter risk – the Group’s underwriting agency businesses require the ongoing support of their underwriters. If this support is withdrawn it could impact the Group. Risk management within the Group is further enhanced by a separate Compliance and Risk Management committee that meets quarterly to assess operational compliance risks across the Group and is comprised of the Group’s compliance managers, finance staff, Company Secretary and chaired by the Group Manager Governance and Compliance. This committee provides a written report to each full Board Meeting via the Group Manager Governance and Compliance. The Group Manager Governance and Compliance attends each full Board Meeting. Compliance managers are responsible for monitoring and auditing insurance related operational functions to ensure continuing compliance with respective jurisdictional licensing requirements. Regular internal communication between the Group’s management and Board supplements the Group’s Risk Management Policy. The Group at least annually evaluates the effectiveness of its risk management framework to ensure that its internal control systems and processes are monitored and updated on an ongoing basis. Under the Audit & Risk Management Committee Charter, the Audit & Risk Management Committee is responsible for providing an independent and objective assessment to the Board regarding the adequacy, effectiveness and efficiency of the Group’s risk management and internal control process. A copy of the Group’s Risk Management policy is available on the Group’s website at www.pscinsurancegroup.com.au. Principle 8 – Remunerate fairly and responsibly The Group has a Remuneration & Nominations Committee to oversee the level and composition of remuneration of the Group’s Directors and Executives. The Group’s Remuneration & Nomination Committee is governed by a Remuneration & Nomination Committee Charter, a copy of which is available on the Group’s website at www.pscinsurancegroup.com.au. The committee comprises two Directors: • Mr Brian Austin (Chairman) • Mr Antony Robinson Principal 8.1 of the ASX Corporate Governance Principals and Recommendations recommends that the Remuneration and Nominations Committee have at least three members all of whom are Non-Executive Directors. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES10 DIRECTORS’ REPORT The Directors present their report together with the financial report of the consolidated entity consisting of PSC Insurance Group Limited and the entities it controlled, for the financial year ended 30 June 2019 and auditor’s report thereon. This financial report has been prepared in accordance with Australian Accounting Standards. Directors The names of Directors in office at any time during or since the end of the year are: Brian Austin John Dwyer Paul Dwyer Antony Robinson Melvyn Sims (appointed 10 December 2010) (appointed 10 December 2010) (appointed 10 December 2010) (appointed 13 July 2015) (appointed 8 August 2016) The Directors have been in office since the start of the year to the date of this report unless otherwise stated. Company Secretary Mr Stephen Abbott holds the office of Company Secretary (appointed 18 May 2015). Principal activities The principal activity of the consolidated entity during the course of the financial year remained unchanged, namely operating a diverse range of insurance services businesses across Australia, the UK and New Zealand, the results of which are disclosed in the attached financial statements. Results The consolidated profit after income tax and eliminating non-controlling interest attributable to the members of PSC Insurance Group Limited was $24,693,000 (2018: $27,573,000). Review of operations A review of the operations of the consolidated entity during the financial year and the results of those operations are as follows: Statutory revenue increased from $118.7m to $126.9m and statutory net profit after tax attributable to owners of PSC Insurance Group Limited decreased from $27.6m to $24.7m. Underlying operating revenue from core operations increased 18% from $101.1m to $119.0m, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 17% from $37.0m to $43.3m and underlying net profit after tax before amortisation (NPATA), increased 15% from $24.2m to $27.8m. Underlying EBITDA margin has remained broadly steady, moving from 36.6% to 36.2%. The Group remains well capitalised. The Board maintains a positive view and outlook on the prospects of the business. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. After balance date events The consolidated entity announced two large acquisitions and an institutional placement of shares. Please refer to Note 32: Subsequent Events for full details. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES11 Likely developments The consolidated entity will continue to focus on creating, acquiring and enhancing its operations to create shareholder value over the medium term to ensure our clients get the best possible service and value. Environmental regulation The consolidated entity’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. Dividend paid, recommended and declared Details of dividends paid, declared or recommended are as follows: (a) Dividends paid or declared by PSC Insurance Group Limited Dividends paid fully franked (b) Dividends paid to non-controlling interests Dividends paid partially franked (c) Dividend declared after the reporting period and not recognised 2019 $ 2018 $ 18,625,261 15,639,646 464,797 300,000 Since the end of the reporting period the Directors have recommended / declared dividends of 5.2 cents per share (2018: 4.5 cents per share) fully franked 13,690,648 11,000,408 Since the end of the reporting period the Directors have recommended / declared dividends to non-controlling interests - - Shares under option Unissued ordinary shares of PSC Insurance Group Limited under option at the date of this report as follows: Name of option holder Date option granted Number of unissued ordinary shares under option Issue price of shares Expiry date of the options Antony Robinson 14 December 2015 300,000 $1.00 per share 14 December 2020 Melvyn Sims 8 August 2016 600,000 $1.66 per share 8 July 2021 Antony Robinson* 16 May 2019 3,500,000 $3.00 per share 31 December 2022 Antony Robinson* 16 May 2019 1,500,000 $3.25 per share 31 December 2022 Antony Robinson* 16 May 2019 1,500,000 $3.50 per share 31 December 2022 Antony Robinson* 16 May 2019 1,500,000 $3.75 per share 31 December 2022 * Held through a related entity, Rowena House Pty Ltd Shares issued on exercise of options No shares were issued during the reporting period or up to the date of this report on exercise of options. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES 12 DIRECTORS’ REPORT (continued) Information on Directors and Company Secretary The qualifications, experience and special responsibilities of each person who has been a director of PSC Insurance Group Limited at any time during or since 1 July 2018 is provided below, together with details of the company secretary as at the year end. Director Expertise, experience and qualifications Brian Austin Non-Executive Chairman Member of Remuneration and Nomination Committee Brian Austin, an Independent Director, was appointed to the Board on 10 December 2010. With over 35 years industry experience, Mr Austin has held senior executive positions in the insurance industry, including CEO of OAMPS Insurance Brokers Limited. Over that time Mr Austin has been instrumental in setting the strategy of capital raising and acquisitions. The executive positions Mr Austin have held has enabled him to develop a global network of key relationships that allow the future growth strategies of the entity to be pursued with much confidence. Mr Austin is a Director of the ASX listed AMA Group Limited. Paul Dwyer Non-Executive Director and Deputy Chairman Dip Fin Serv (Ins) Member of Audit and Risk Management Committee Paul Dwyer was appointed to the Board on 10 December 2010. Mr Dwyer stepped down as Managing Director on 16 May 2019 to the position of Non-Executive Director and Deputy Chairman. Prior to founding the PSC Insurance Group, Mr Dwyer held a senior executive position with OAMPS Insurance Brokers Limited and previous to that role was a Regional Underwriter with CGU. Mr Dwyer’s focus is the strategic direction of the entity, exploring acquisition and organic growth opportunities and to manage and work with the executive and staff within the entity to continually improve business operations. Mr Dwyer resigned as a Director of the ASX listed Johns Lyng Group Limited on 7 December 2018. Antony Robinson Managing Director B Com (Melb), ASA, MBA (Melb) Member of Audit and Risk Management Committee and Remuneration and Nomination Committee Antony Robinson was appointed to the Board on 13 July 2015 and was appointed Managing Director on 16 May 2019. Mr Robinson has significant experience in wealth management and insurance, including Managing Director of Centrepoint Alliance Limited, Chief Executive Officer and Executive Director of IOOF Holdings Ltd and OAMPS Limited, joint Managing Director of Falkiners Stockbroking, Managing Director of WealthPoint, and senior executive positions at Link Telecommunications and Mayne Nickless. Mr Robinson’s appointment carries with it the responsibility to ensure that finances and decision-making are robust and the business is aligned to the growth strategy of the Board. Mr Robinson is a Director of three ASX listed entities being Bendigo and Adelaide Bank Limited, Pacific Current Group Limited and Longtable Group Limited and holds a number of directorships of private companies. John Dwyer Executive Director Dip Fin Serv (Ins) Melvyn Sims Non-Executive Director LLB (Hons) Nottm. John Dwyer was appointed to the Board on 10 December 2010. Mr Dwyer has over 30 years experience in the insurance industry, spending time with QBE as a Regional Underwriting Manager, commencing a joint venture with OAMPS Insurance Brokers Limited and eventually becoming Eastern Region Manager (NSW & ACT). As Director of Broking across the PSC Insurance Group, Mr Dwyer brings specialist business integration and practical operational skills pivotal to a growing business. Mr Dwyer has not held directorships of other listed companies in the last three years. Mel Sims, an Independent Director, was appointed to the Board on 8 August 2016. Mr Sims is a highly regarded London based corporate lawyer with extensive experience in the insurance industry gained during his 28 years as a partner in the international law firm DLA Piper and since July 2015 as a partner in the international law firm DWF Group PLC which is listed on the London Stock Exchange. Over the course of Mr Sims’ career he has held senior management roles, including managing DLA Piper Offices and practice groups in the Middle East and has advised businesses in commercial and transactional matters often with an international perspective and in diverse markets ranging from general retail, aviation, sport and leisure through to regulated financial services businesses. Mr Sims has extensive board experience, having served as a board member of the UK listed Towergate Insurance Limited for over 15 years. Mr Sims has not held directorships of other listed companies in the last three years. Stephen Abbott BBus, CA, CTA Stephen Abbott was appointed Company Secretary on 18 May 2015, having joined the PSC Insurance Group in March 2012. Mr Abbott has over 35 years experience in accounting and finance both within industry and commerce and professional services firms with the last 12 years in insurance broking. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES13 Directors’ meetings The number of meetings of the Board of Directors and of each Board Committee held during the financial year and the numbers of meetings attended by each Director were: Board of Directors Audit & Risk Committee Remuneration Committee Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Brian Austin Paul Dwyer Antony Robinson John Dwyer Melvyn Sims 7 7 7 7 7 7 7 7 7 7 3 3 3 3 2 2 2 2 In addition to the scheduled Board Meetings, the Board has informal discussions on a regular basis to consider relevant issues. It also discusses strategic, operational and risk matters with senior management on an ongoing basis. Director’s interests in contracts Directors’ interests in contracts are disclosed in the Remuneration Report. Directors’ relevant interests in shares of PSC Insurance Group Limited or options over shares in the company are detailed below. Directors’ relevant interests in: Ordinary shares of PSC Insurance Group Limited Options over shares in PSC Insurance Group Limited Brian Austin Paul Dwyer Antony Robinson John Dwyer Melvyn Sims 35,440,600 66,303,000 418,000 35,390,522 - - - 8,300,000 - 600,000 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 financial year is provided with this report. Non-Audit Services Non-audit services are approved by resolution of the Audit Committee to the Board. Non-audit services provided by the auditors of the consolidated entity, Pitcher Partners (Melbourne), network firms of Pitcher Partners, and other non-related audit firms, are detailed below. The Directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by PSC Insurance Group Limited and have been reviewed and approved by the Audit and Risk Committee to ensure they do not impact on 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 APES 110 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 PSC Insurance Group Limited or any of its related entities, acting as an advocate for PSC Insurance Group Limited or any of its related entities, or jointly sharing risks and rewards in relation to the operations or activities of PSC Insurance Group Limited or any of its related entities. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES14 DIRECTORS’ REPORT (continued) Non-Audit Services Amounts paid/payable to Pitcher Partners (Melbourne) for non-audit services: Consulting Services Taxation Services Amounts paid/payable to non-related auditors of group entities for non-audit services: Taxation Services Other Services Total Amount Paid/Payable 2019 $ 2018 $ 14,324 17,015 31,339 - 18,715 18,715 18,524 32,086 21,541 19,522 40,065 51,608 71,404 70,323 Indemnification and insurance of directors, officers and auditors During or since the end of the year, the consolidated entity has given indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums in order to indemnify the Directors of the consolidated entity. Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the contract. No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been an auditor of the consolidated entity. Proceedings on behalf of the consolidated entity No person has applied for leave of Court to bring proceedings on behalf of PSC Insurance Group Limited or any of its subsidiaries. Rounding Amounts In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts in the Directors’ Report and in the financial statement have been rounded to the nearest one thousand dollars, unless otherwise indicated. Remuneration Report (Audited) The Directors present the consolidated entity’s 2019 remuneration report which details the remuneration information for PSC Insurance Group Limited’s Executive Directors, Non-Executive Directors and other key management personnel. A. Details of the Key Management Personnel Directors Brian Austin Paul Dwyer Antony Robinson John Dwyer Melvyn Sims Period of Responsibility Position Full Year Part Year Part Year Full Year Full Year Chairman, Independent Non-Executive Director Deputy Chairman, Non-Executive Director Managing Director Executive Director Independent, Non-Executive Director Antony Robinson was appointed Managing Director on 16 May 2019. Previously Mr Robinson was Independent, Non- Executive Director. Paul Dwyer was appointed Non-Executive Director on 16 May 2019. Previously Mr Dwyer was Managing Director. Other Key Management Personnel Period of Responsibility Position Rohan Stewart Joshua Reid Full Year Full Year Group Chief Executive Officer Chief Financial Officer PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES15 B. Remuneration Policies Remuneration and Nomination Committee The Remuneration and Nomination Committee of the Board of Directors was established on 1 June 2015 and is responsible for making recommendations to the Board on the remuneration arrangements for all key management personnel. The current members of the Remuneration and Nomination Committee are Brian Austin and Antony Robinson. The Remuneration Committee assess the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum shareholder benefit from the retention of high quality, high performing directors and executive team. In determining the level and composition of executive remuneration, the Remuneration and Nomination Committee may also engage external consultants to provide independent advice. The primary responsibility of the Remuneration and Nomination Committee is to review and recommend to the Board: • Executive remuneration and incentive policies and practices; • The Executive Director’s total remuneration having regard to remuneration and incentive policies; • The design and total proposed payments from any incentive plan and reviewing the performance hurdles for any equity based plan; • The remuneration and related policies of Non-Executive Directors for serving on the board and any committee (both individually and in total); and • Any other responsibilities as determined by the Remuneration and Nomination Committee or the Board from time to time. Remuneration Strategy The remuneration strategy of the consolidated entity is designed to attract, motivate and retain employees, Executives and Non-Executive Directors by identifying and rewarding high performers and recognising the contribution of executives and employees to the continued growth and success of the consolidated entity. To this end, the key objectives of the consolidated entity’s reward framework are to: • Align remuneration with the consolidated entity’s business strategy; • Offer an attractive mix of remuneration benchmarked against the applicable market’s region; • Provide strong linkage between individual and the consolidated entity’s performance and rewards; and • Support the corporate mission statement, values and policies through the approach to recruiting, organising and managing people. Remuneration Structure In accordance with best practice corporate governance, the structure of the Non-Executive Directors and Executive remuneration is separate and distinct. Non-Executive Director Remuneration Structure The ASX Listing Rules specify that an entity must not increase the total aggregate amount of remuneration of Non-Executive Directors without the approval of holders of its ordinary securities. The Board and the Remuneration Committee, considers the level of remuneration required to attract and retain Directors with the necessary skills and experience for the consolidated entity’s Board. This remuneration is reviewed with regard to market practice and Directors’ duties and accountability. From 1 December 2018, the consolidated entity set the following maximum annual Non-Executive Directors’ fees: • Chairman: $350,000 per annum inclusive of superannuation; • Non-Executive Directors (Australia based): $100,000 per annum inclusive of superannuation; and • Non-Executive Directors (United Kingdom based): £90,000 per annum. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES16 DIRECTORS’ REPORT (continued) The consolidated entity determines the maximum amount for remuneration, including thresholds for share-based remuneration for Executives, by resolution. The remuneration received by the Non-Executive Directors for the year ended 30 June 2019 is detailed in Table 1 of this section of the report. Executive Remuneration Structure The contracts for service between the consolidated entity and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Remuneration may consist of the following elements: • Fixed remuneration (base salary and superannuation); • Variable remuneration – short term incentives (STI) in the form of performance based incentives; and • Long term incentive (LTI) (shares, options, performance rights and/or loan funded shares). Fixed Remuneration Fixed remuneration is reviewed annually by the Board / Remuneration and Nomination Committee. The process consists of a review of the consolidated entity and individual performance, relevant comparative remuneration from external and internal sources. Variable Remuneration – short-term incentive (STI) Objective The key objective of the STI program is to link the achievement of the consolidated entity’s operational targets with the remuneration received by the Managing Director and other Key Management Personel charged with meeting those targets. Structure Any STI payments granted depends on the extent to which specific targets set at the beginning of the financial year or on appointment are met. The Key Milestones or Key Performance Indicators (KPIs) cover individual and organisational financial measures of performance. On a financial year basis, after consideration of performance against the Key Milestones or KPIs, the Remuneration Committee, in line with their responsibilities determine the amount, if any, of STI to be paid to the Managing Director and other Key Management Personel. There have been no STI payments to either Managing Director or other Key Management Personel in the 2019 year. (2018: $nil) - See Table 3. Variable Remuneration – long-term incentive (LTI) Objective The objectives of providing long-term incentives are: to attract, motivate and retain key PSC Directors and staff through the acquisition of, or entitlements to, shares and options. Structure The Board offers LTIs to reward the performance of Directors and staff, which is in alignment with shareholders’ interests and the long-term benefit of the consolidated entity. LTI awards are made under the PSC Insurance Group Limited Long Term Incentive Plan (Plan). Rewards under the LTI Plan will only vest and be exercisable if the applicable performance hurdles to vesting conditions have been satisfied, waived by the Board or are deemed to have been satisfied under the Plan Rules. Service Agreements The consolidated entity has entered into Agreements with all Executives, including the Managing Director. The consolidated entity may terminate the Executive Director’s Employment Agreements by providing at least six month’s written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). The consolidated entity may terminate the contract at any time without notice if serious misconduct has occurred. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES17 Managing Director’s Remuneration Under Antony Robinson’s employment agreement his fixed remuneration is $600,000 per year inclusive of superannuation with five weeks annual leave. Mr Robinson is eligible to participate in the Long-term incentive arrangements operated by the consolidated entity in accordance with the terms and conditions governing those arrangements and as agreed to by the Board. On Mr Robinson’s appointment as Managing Director he received 8 million options under LTI, full details of which are disclosed further down in this report. C. Details of Remuneration Policies (a) Directors’ remuneration: Table 1 Short- term Post employment Long-term Share-based payments TOTAL Options as % of total Superannuation LSL accruals (b) Incentive plans Options Salary fees (a) $ 2019 Executive Directors Paul Dwyer (i) 285,655 $ - $ - Antony Robinson 45,253 1,692 279 John Dwyer (ii) 325,000 Non-Executive Directors Brian Austin (iii) 325,000 Paul Dwyer (i) 8,431 Antony Robinson 68,303 Melvyn Sims 134,062 1,191,704 - - - 6,236 - 7,928 - - - - - 279 $ - - - - - - - - $ $ % - 285,655 1,558,956 1,606,180 - 325,000 - - - - 325,000 8,431 74,539 134,062 - 97% - - - - - 1,558,956 2,758,867 57% (a) Salary fees includes amounts paid in cash and annual leave accruals which are determined in accordance with AASB 119 Employee Benefits. (b) Long service leave (LSL) accruals are determined in accordance with AASB 119 Employee Benefits. (i) Paul Dwyer provides his services via Paul Dwyer Holdings Pty Ltd. (ii) John Dwyer provides his services via Glendale Dwyer Pty Ltd (ATF Dwyer Family Trust). (iii) Brian Austin provides his services via Melimar Estate Pty Ltd. Short- term Post employment Long-term Share-based payments TOTAL Options as % of total Salary fees (a) $ 2018 Executive Directors Paul Dwyer John Dwyer 300,000 300,000 Non-Executive Directors Brian Austin 300,000 Antony Robinson Melvyn Sims 54,795 86,775 1,041,570 Superannuation LSL accruals (b) Incentive plans Options $ - - - 5,205 - 5,205 $ - - - - - - $ - - - - - - $ - - - - - - $ % 300,000 300,000 300,000 60,000 86,775 1,046,775 - - - - - - PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES18 DIRECTORS’ REPORT (continued) (b) Other Key Management Personel remuneration Table 2 2019 Short- term Post employment Long-term Share-based payments TOTAL Options as % of total Superannuation LSL accruals (b) Incentive plans Options Salary fees (a) $ $ - $ - $ 25,145 Other Key Management Personel Rohan Stewart (i) 450,000 Joshua Reid 374,540 824,540 34,703 34,703 10,990 55,825 10,990 80,970 $ - - - $ 475,145 476,058 951,203 % - - - (a) Salary fees includes amounts paid in cash and annual leave accruals which are determined in accordance with AASB 119 Employee Benefits. (b) Long service leave (LSL) accruals are determined in accordance with AASB 119 Employee Benefits. (i): Rohan Stewart provides his services via H&S Nominee Holdings Pty Ltd Short- term Post employment Long-term Share-based payments TOTAL Options as % of total 2018 Salary fees (a) $ Other Key Management Personel Rohan Stewart 350,000 Superannuation LSL accruals (b) Incentive plans Options $ - $ - $ - Joshua Reid 286,638 636,638 26,027 26,027 7,165 30,680 7,165 30,680 D. Relationship between remuneration and consolidated entity performance (a) Remuneration not dependent on satisfaction of performance condition $ - - - $ 350,000 350,510 700,510 % - - - Executives and Non-Executives remuneration policy is not directly related to the consolidated entity’s performance. The Board considers a remuneration policy based on short-term returns may not be beneficial to the long-term creation of wealth by the consolidated entity for shareholders. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES19 (b) Consequences of the consolidated entity’s performance on shareholder wealth The following table summarises the consolidated entity’s performance and key performance indicators: Table 3 2019 2018 2017 2016 2015 Revenue and other income 126,854,608 118,685,706 84,475,859 67,766,163 52,071,674 % increase in revenue and other income 7% 40% 25% 30% 28% Profit before tax 36,834,805 40,327,294 27,114,780 15,973,533 11,778,678 % (decrease)/increase in profit before tax Change in share price (9%) ($0.27) 49% $0.60 70% $0.55 36% N/a 24% N/a Dividend paid to shareholders 18,625,261 15,639,646 10,148,015 6,505,295 1,550,000 Return of capital 13% 11% 12% 16% 35% Total remuneration of KMP 3,710,070 1,747,285 1,446,871 1,051,346 900,000 Total performance based remuneration - - 200,000 - - E. Key management personnel’s share-based compensation (a) Details of compensation Options In 2019 the following options were granted to Key Management Personnel: Name of key management personnel Date option granted Number of unissued ordinary shares under option Issue price of shares Expiry date of the options Antony Robinson Antony Robinson Antony Robinson Antony Robinson 16 May 2019 16 May 2019 16 May 2019 16 May 2019 3,500,000 1,500,000 1,500,000 1,500,000 $3.00 per share 31 December 2022 $3.25 per share 31 December 2022 $3.50 per share 31 December 2022 $3.75 per share 31 December 2022 In 2019 no options were exercised by Key Management Personnel. (b) Details of Loan Funded Shares In 2019 the following loan funded shares were granted to Key Management Personnel: Name of key management personnel Date loan funded shares granted Number of issued shares Rohan Stewart Joshua Reid 29 September 2018 29 September 2018 170,299 170,299 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES20 DIRECTORS’ REPORT (continued) F. Key management personnel’s equity holdings (a) Number of options held by key management personnel As at 30 June 2019, key management personnel hold options under PSC’s Long Term Incentive Plan to purchase 8,900,000 ordinary shares of the consolidated entity. Table 4 2019 Key management personnel Antony Robinson Melvyn Sims Balance 1/07/18 Granted as remuneration Balance 30/06/19 300,000 8,000,000 8,300,000 600,000 - 600,000 900,000 8,000,000 8,900,000 (b) Number of shares held by key management personnel (consolidated) The relevant interest of each key management personnel in the share capital of the consolidated entity at 30 June 2019 is as follows: Table 5 2019 Directors Brian Austin Paul Dwyer Antony Robinson John Dwyer Melvyn Sims Other Key Management Personel Rohan Stewart Joshua Reid G. Loans to and from key management personnel (a) Aggregate of loans made Balance 1/07/18 LTIP Allocation Net sale / (purchase) of shares Balance 30/06/19 35,410,600 70,223,000 418,000 35,280,522 - - - - - - 3,142,479 1,000,000 170,299 170,299 30,000 35,440,600 (3,920,000) 66,303,000 - 418,000 110,000 35,390,522 - - - - 3,312,778 1,170,299 145,474,601 340,598 (3,780,000) 142,035,199 There have been no loans made, guaranteed or secured, directly or indirectly, by the Group and any of its subsidiaries, in the financial year to a particular key management person, close members of the family of the key management person and entities related to them greater than $100,000. (b) Aggregate of loans received There have been no loans received, guaranteed or secured, directly or indirectly, by the Group and any of its subsidiaries, in the financial year to a particular key management person, close members of the family of the key management person and entities related to them. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES21 H. Other transactions with Key Management Personnel Fuse Recruitment Pty Ltd, ADD Aviation Services Pty Ltd and The Lead Agency Pty Ltd (until 31 December 2018) are related parties as they are entities where John Dwyer, Paul Dwyer and Brian Austin or their closely related entities are shareholders. DWF LLP is a related party as Mel Sims is a Partner at the Company. The Group engages Fuse Recruitment Pty Ltd for recruitment and contractor services, ADD Aviation Services Pty Ltd for transportation services, The Lead Agency Pty Ltd for marketing services and DWF LLP for legal services. During the year ended 30 June 2019 the following related entities provided or received services to/from the consolidated entity. Fees Paid or Payable to associates (ex GST): Recruitment Fees Contractor Fees Marketing service fees Transportation service fees Legal service fees 2019 $ 2018 $ 208,065 106,105 217,418 60,268 94,371 353,422 131,394 266,390 372,377 - All the above services supplied were in the normal course of business and on normal terms and conditions. Additionally, during the year the PSC Insurance Group Limited provided insurance services to related parties of Directors totalling $206,061 (2018: $334,320). The services supplied were in the normal course of business and on normal commercial terms and conditions. The fees outstanding for these services at balance date are $5,766 (2018 $nil). Additionally, during the year the PSC Insurance Group Limited received trust distributions and dividends from entities where there was a common Director between that entity and PSC Insurance Group Limited totalling $318,200 (2018: $2,186,386). The entity ceased to be a related party on 7 December 2018. Outstanding balances due to related parties of a Director are $21,249 (2018: $376,566). No other transactions occurred between key management personnel of the entity, their personally related entities or other related parties. I. Use of remuneration consultants No remuneration consultants were engaged during the course of the 2019 financial year. Signed in accordance with a resolution of the Directors Brian Austin Chairman Melbourne Date: 21 August 2019 Antony Robinson Managing Director Melbourne Date: 21 August 2019 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES22 AUDITOR’S INDEPENDENCE DECLARATION PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF PSC INSURANCE GROUP LIMITED In relation to the independent audit for the year ended 30 June 2019, to the best of my knowledge and belief there have been: (i) (ii) No contraventions of the auditor independence requirements of the Corporations Act 2001; and No contraventions of APES 110 Code of Ethics for Professional Accountants. This declaration is in respect of PSC Insurance Group Limited and the entities it controlled during the year. S SCHONBERG Partner 21 August 2019 PITCHER PARTNERS Melbourne An independent Victorian Partnership ABN 27 975 255 196 Level 13, 664 Collins Street, Docklands VIC 3008 Liability limited by a scheme approved under Professional Standards Legislation Pitcher Partners is an association of independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle An independent member of Baker Tilly International PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Year Ended 30 June 2019 23 Revenue and other income Fee and commission income Other revenue Other income Investment income Less: expenses Administration and other expenses Depreciation and amortisation expense Employee benefits expense Occupancy expense Finance costs Employee contractors Information technology costs Professional fees Profit before income tax expense Income tax expense Net profit from continuing operations Other comprehensive income Items that will not be reclassified subsequently to profit or loss Revaluation of property, plant and equipment Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Other comprehensive income for the year Total comprehensive income Profit is attributable to: • Owners of PSC Insurance Group Limited • Non-controlling interests Total comprehensive income is attributable to: • Owners of PSC Insurance Group Limited • Non-controlling interests Notes 3 3 3 3 3 4 4 4 4 30-Jun 2019 $’000 112,045 4,175 8,998 1,637 30-Jun 2018 $’000 95,158 2,912 18,482 2,134 126,855 118,686 (17,307) (2,947) (53,375) (3,552) (3,449) (3,145) (4,621) (1,624) (18,493) (2,307) (43,116) (3,222) (2,789) (2,866) (3,966) (1,600) (90,020) (78,359) 36,835 40,327 5 (11,478) (12,505) 25,357 27,822 1,100 - 210 1,310 826 826 26,667 28,648 24,693 27,573 664 249 25,357 27,822 26,003 28,399 664 249 26,667 28,648 Earnings per share for profit attributable to the equity holders of the parent entity: Diluted earnings per share Basic earnings per share 25 25 10.1 cents 11.6 cents 10.0 cents 11.6 cents The above statement should be read in conjunction with the accompanying notes. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES24 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As At 30 June 2019 Current assets Cash and cash equivalents Receivables Other assets Total current assets Non-current assets Receivables Other financial assets Equity accounted investments Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Payables Borrowings Provisions Current tax liabilities Other liabilities Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Other liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Equity attributable to owners of PSC Insurance Group Limited Non-controlling interests Total equity The above statement should be read in conjunction with the accompanying notes. 30-Jun 2019 $’000 30-Jun 2018 $’000 Notes 7 8 9 8 10 11 13 5 14 15 16 17 5 18 16 17 5 18 19 20 20 21 132,955 160,972 438,169 359,938 6,206 3,098 577,330 524,008 3,373 51,498 7,571 15,261 3,359 108,075 3,189 24,036 8,151 12,967 3,543 95,672 189,137 147,558 766,467 671,566 518,371 443,420 1,192 3,183 8,004 10,152 935 2,930 3,279 6,945 540,902 457,509 55,831 53,410 455 13,255 1,851 71,392 398 13,482 1,347 68,637 612,294 526,146 154,173 145,420 140,572 140,395 (34,221) (37,368) 44,807 40,429 151,158 143,456 3,015 1,964 154,173 145,420 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For The Year Ended 30 June 2019 Consolidated Entity Balance as at 1 July 2017 Profit for the year Exchange differences on translation of foreign operations, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Increase in non-controlling interests Capital raising issue Capital raising issue costs Shares in lieu of cash for acquisition of subsidiary Dividends paid Total transactions with owners Share capital $’000 Reserves $’000 85,994 (38,194) - - - - 55,002 (1,155) 554 - 54,401 - 826 826 - - - - - - Retained Earnings Non- controlling Interest $’000 28,496 27,573 $’000 1,676 249 Total Equity $’000 77,972 27,822 - - 826 27,573 249 28,648 - - - - 339 - - - 339 55,002 (1,155) 554 (15,640) (15,640) (300) (15,940) 39 38,800 Balance as at 30 June 2018 140,395 (37,368) 40,429 1,964 145,420 Consolidated Entity Balance as at 1 July 2018 Share capital $’000 Retained Earnings Non- controlling Interest Reserves $’000 $’000 $’000 Total Equity $’000 140,395 (37,368) 40,429 1,964 145,420 Adjustment due to change of accounting policy, net of tax (note 1 (b)) - - (1,245) (28) (1,273) 140,395 (37,368) Restated opening balance Profit for the year Revaluation of property, plant and equipment, net of tax Exchange differences on translation of foreign operations, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Non-controlling interest arising from business combination Decrease in non-controlling interests In specie distributions Employee share issues Dividends paid Total transactions with owners 39,184 24,693 1,936 144,147 664 25,357 - - - - 1,100 210 - 1,100 210 1,310 24,693 664 26,667 - - - 1,837 - - (445) - 1,219 1,219 (339) - - (339) (445) 2,014 - (18,625) (465) (19,090) 1,837 (19,070) 415 (16,641) - - - - - - - 177 - 177 Balance as at 30 June 2019 140,572 (34,221) 44,807 3,015 154,173 The above statement should be read in conjunction with the accompanying notes. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES26 CONSOLIDATED STATEMENT OF CASH FLOWS For The Year Ended 30 June 2019 Cash flow from operating activities Receipts from customers Payments to suppliers and employees Trust distributions/dividends received Interest received Interest paid Income tax paid Operating cash before movement in customer trust accounts Net movement in customer trust accounts Net cash provided by operating activities Cash flow from investing activities 30-Jun 2019 Notes $’000 30-Jun 2018 $’000 117,416 98,062 (88,047) (71,973) 997 1,461 (3,449) (7,814) 20,564 (1,214) 19,350 2,086 1,678 (2,789) (6,608) 20,456 35,344 55,800 22 (b) Payments for deferred consideration/business acquisitions (10,824) (21,821) Payment for property, plant and equipment Proceeds from sale of financial assets Payment for other investments Payment for equity investments Proceeds from sale of equity investments Net cash flow (used in) investing activities Cash flow from financing activities Proceeds from borrowings Repayments of borrowings Proceeds from share issue Capital raising costs Dividends paid Loans to related parties Net cash provided by / (used in) financing activities Reconciliation of cash Cash at beginning of the year Net (decrease) / increase in cash held Effect of exchange rate fluctuation on cash held (1,883) 13,927 (33,876) (647) 2,511 (1,815) 578 (851) - 505 (30,792) (23,404) 3,547 14,352 (971) - - (4,660) 55,002 (1,650) (19,090) (15,940) (192) 237 (16,706) 47,341 160,972 (28,148) 131 80,124 79,737 1,111 Cash at end of the year 22 (a) 132,955 160,972 The above statement should be read in conjunction with the accompanying notes. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES27 NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2019 Note 1: Statement Of Significant Accounting Policies The following is a summary of significant accounting policies adopted by the consolidated entity in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of preparation of the financial report This financial report is a general purpose financial report that has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report covers PSC Insurance Group Limited and controlled entities as a consolidated entity. PSC Insurance Group Limited is a company limited by shares, incorporated and domiciled in Australia. The address of PSC Insurance Group Limited’s registered office and principal place of business is 96 Wellington Parade, East Melbourne, Victoria, 3002. PSC Insurance Group Limited is a for-profit entity for the purpose of preparing the financial statements. Compliance with IFRS The consolidated financial statements of the consolidated entity also comply with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Historical cost convention The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. Fair value measurement For financial reporting purposes, ‘fair value’ is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants (under current market conditions) at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. When estimating the fair value of an asset or liability, the consolidated entity uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Inputs to valuation techniques used to measure fair value are categorised into three levels according to the extent to which the inputs are observable: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. • Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. • Level 3 inputs are unobservable inputs for the asset or liability. Significant accounting estimates The preparation of the financial report requires the use of certain estimates and judgements in applying the consolidated entity’s accounting policies. Those estimates and judgements significant to the financial report are disclosed in Note 2 to the consolidated financial statements. (b) New and revised accounting standards effective at 30 June 2019 The consolidated entity has applied all new and revised Australian Accounting Standards that apply to annual reporting periods beginning on or after 1 July 2018, including AASB 9 Financial Instruments (AASB 9) and AASB 15 Revenue from Contracts with Customers (AASB 15). AASB 15 provides (except in relation to some specific exceptions, such as lease contracts and insurance contracts) a single source of accounting requirements for all contracts with customers, and has replaced all previous revenue standards and interpretations. The standard provides a revised principle for recognising and measuring revenue. Under AASB 15, revenue is recognised in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the provider of the goods or services expects to be entitled. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES28 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 The consolidated entity adopted AASB 15 Revenue from Contracts with Customers at 1 July 2018. The adoption of AASB 15 did not have any impact on the consolidated entity recognising insurance revenue for brokerage, commission and fee income upon issue of an invoice. However, the new standard has identified a separate performance obligation relating to claims handling services. Whereas not explicit in the terms of trade, the customary business practise implies the consolidated entity provides after sales claims services. As such, a portion of the insurance revenue relating to the claims handling service which was previously recognised at invoice date, is now recognised over time as the performance obligation is satisfied. The consolidated entity has applied AASB 15 in accordance with transition option paragraph C3(b), which does not require comparative information to be restated. The cumulative effect of applying the new standard has been recognised as an adjustment to opening retained earnings as at 1 July 2018. The amount of adjustment for each financial statement line item affected by the application of AASB 15 compared to AAB 118 for the current period is illustrated below. Impact of adopting AASB 15 at 1 July 2018 on the Consolidated Statement of Financial Position Non-current assets Increase in deferred tax asset Current liabilities Increase in other liabilities (contract liability) Equity Decrease in non-controlling interest retained earnings Decrease in retained earnings Impact of adopting AASB 15 for the year ended 30 June 2019 1-Jul 2018 $’000 545 1,818 28 1,245 Impact on profit/(loss) for the year Fee and commission income Income tax expense Net profit Under AASB 118 Adjustments As reported with AASB 15 $’000 $’000 $’000 112,110 (11,498) 25,402 (65) 20 (45) 112,045 (11,478) 25,357 Further details of the consolidated entity’s accounting policies in relation to accounting for revenue from contracts with customers under AASB 15 are contained in note 1 (e). PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES29 AASB 9 replaces AASB 139: Financial Instruments: Recognition and Measurement. The key changes introduced by AASB 9 in relation to the accounting treatment for financial instruments include: • simplifying the general classifications of financial assets into those measured at amortised cost and those measured at fair value; • permitting entities to irrevocably elect, on initial recognition, for gains and losses on equity instruments not held for trading to be presented in other comprehensive income (OCI); • requiring entities that elect to measure financial liabilities at fair value, to present the portion of the change in fair value arising from changes in the entity’s own credit risk in OCI, except when it would create an ‘accounting mismatch’. Introducing a new ‘expected credit loss’ impairment model (replacing the ‘incurred loss’ impairment model of previous accounting standard). The application of AASB 9 has not materially impacted the classification and measurement of the consolidated entity’s financial assets and financial liabilities. Further details of the consolidated entity’s accounting policies in relation to accounting for financial instruments under AASB 9 are contained in note 1 (q). (c) Going concern The financial report has been prepared on a going concern basis. (d) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and of all entities which the parent entity controls. The consolidated entity controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control ceases. Equity interests in a subsidiary not attributable directly or indirectly to the consolidated entity are presented as non- controlling interests. Non-controlling interests are initially recognised either at fair value or at the non-controlling interests’ proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Non-controlling interests in the results of subsidiaries are shown separately in the consolidated Statement of Profit or Loss and other Comprehensive Income and consolidated Statement of Financial Position respectively. Details of the consolidated entity’s controlling and non-controlling interests are detailed in Note 21. (e) Revenue The consolidated entity derives revenue from the provision of insurance services. Revenue is recognised as, or when, services are transferred to the customer, and is measured at an amount that reflects the consideration to which the consolidated entity expects to be entitled in exchange for the services. Provision of insurance services Commission, brokerage and fees are recognised when the consolidated entity has satisfied its performance obligations, which occurs at the point in time that control of the services are transferred to the customer. This generally coincides with the invoice date. Where the provision of insurance services specifically includes separate performance obligations, then revenue is recognised accordingly. As such, a portion of revenue relating to claims handling services is recognised over time as the performance obligation is satisfied. An allowance is made for anticipated lapses and cancellations. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES30 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Interest income Interest income is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to the financial assets. Investment income Dividend income is recognised when the right to receive a dividend has been established. Dividends received from associates and joint ventures are accounted for in accordance with the equity method. Other revenue and other income Other revenue and other income is recognised when the consolidated entity has satisfied its performance obligations and the transaction price has been determined. Profit on sale of financial assets is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal, net of disposal costs. This is recognised as an item of revenue in the year in which the significant risks and rewards of ownership transfer to the buyer. All revenue is stated net of the amount of goods and services tax (GST). Receivables from contracts with customers A receivable from a contract with a customer represents the consolidated entity’s unconditional right to consideration arising from the transfer of services to the customer (i.e., only the passage of time is required before payment of the consideration is due). Subsequent to initial recognition, receivables from contracts with customers are measured at amortised cost and are tested for impairment. Contract liabilities A contract liability represents the consolidated entity’s obligation to transfer services to the customer for which the consolidated entity has received consideration (or an amount of consideration is due) from the customer. Amounts recorded as contract liabilities are subsequently recognised as revenue when the consolidated entity transfers the contracted services to the customer. (f) Cash and cash equivalents Cash and cash equivalents, and cash held on trust, in the Statement of Financial Position comprise cash at bank, in hand and short-term deposits with an original maturity of three months or less. Cash held on trust is held for insurance premiums received from policyholders which will ultimately be paid to underwriters. Cash held on trust cannot be used to meet business obligations/operating expenses other than payments to underwriters and/ or refunds to policyholders. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents as defined above are shown net of outstanding bank overdrafts. (g) Property, plant and equipment Each class of property, plant and equipment is measured at cost or fair value less, where applicable, any accumulated depreciation and any accumulated impairment losses. Plant and equipment Plant and equipment is measured at cost, less accumulated depreciation and any accumulated impairment losses. Property Land and buildings are measured at revalued amounts, being the fair value at the date of the revaluation, less any subsequent accumulated depreciation and any accumulated impairment losses. At each reporting date the carrying amount of each asset is reviewed to ensure that it does not differ materially from the asset’s fair value at reporting date. Where necessary, the asset is revalued to reflect its fair value. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES31 Increases in the carrying amounts arising on revaluation of land and buildings are recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. To the extent that the increase reverses a decrease of the same asset previously recognised in profit or loss, the increase is recognised in profit or loss. Decreases that offset previous increases of the same asset are recognised in other comprehensive income under the heading of revaluation surplus; all other decreases are charged to profit or loss. Depreciation Land is not depreciated. The depreciable amounts of all property, plant and equipment are depreciated over their estimated useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The useful lives for each class of assets are: Leasehold improvements at cost 2.5% - 30% Straight line and diminishing Value Depreciation Rate Depreciation Basis Buildings Office equipment at cost Computer equipment at cost Motor Vehicles at cost (h) Leases 2.5% 2%-67% 10% - 67% 12.50% Straight line Straight line and diminishing value Straight line and diminishing value Straight line Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases Lease payments for operating leases are recognised as an expense on a straight-line basis over the term of the lease. Lease incentives received under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (i) Business combinations A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses and results in the consolidation of the assets and liabilities acquired. Business combinations are accounted for by applying the acquisition method. The consideration transferred is the sum of the acquisition date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquired. Deferred consideration payable is measured at its acquisition date fair value. Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. At each reporting date subsequent to the acquisition, contingent consideration payable is measured at its fair value with any changes in the fair value recognised in profit or loss unless the contingent consideration is classified as equity, in which case the contingent consideration is carried at its acquisition date fair value. Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non- controlling interest, and the acquisition date fair value of the acquirer’s previously held equity interest (in case of step acquisition), less the fair value of the identifiable assets acquired and liabilities assumed. If the net fair value of the acquirer’s interest in the identifiable assets acquired and liabilities assumed is greater than the aggregate of the consideration transferred, the fair value of the non-controlling interest, and the acquisition date fair value of the acquirer’s previously held equity interest (in case of step acquisition), the gain is immediately recognised in the profit or loss. Acquisition related costs are expensed as incurred. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES32 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 (j) Intangibles Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable or separately recognised. Refer to Note 1(i) for a description of how goodwill arising from a business combination is initially measured. Goodwill on consolidation represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s share of net identifiable assets of the acquired entities at the date of acquisition. Goodwill is not amortised but is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. Identifiable intangible assets Identifiable intangible assets acquired separately or in a business combination (mainly customer lists) are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the acquisition date. The useful lives of these intangible assets are assessed on acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Intangible assets with finite lives are amortised over the useful lives, currently estimated to be up to 10 years. Useful lives are reviewed annually. (k) Impairment of non-financial assets Goodwill, intangible assets not yet ready for use and intangible assets with indefinite useful lives are not subject to amortisation and are therefore tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash flows (‘cash generating units’). Accordingly, most assets are tested for impairment at the cash-generating unit level. Because it does not generate cash flows independently of other assets or groups of assets, goodwill is allocated to the cash generating unit or units that are expected to benefit from the synergies arising from the business combination that gave rise to the goodwill. Assets other than goodwill, intangible assets not yet ready for use and intangible assets with indefinite useful lives are assessed for impairment whenever events or circumstances arise that indicate the asset may be impaired. An impairment loss is recognised when the carrying amount of an asset or cash generating unit exceeds the asset’s or cash generating unit’s recoverable amount. The recoverable amount of an asset or cash generating unit is defined as the higher of its fair value less costs to sell and value in use. Refer to Note 2 for a description of how management determines value in use. Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued amount such as property, plant and equipment, in which case the impairment loss is treated as a revaluation decrease in accordance with the applicable Standard. Impairment losses in respect of cash generating units are allocated first against the carrying amount of any goodwill attributed to the cash generating unit with any remaining impairment loss allocated on a pro rata basis to the other assets comprising the relevant cash generating unit. (l) Income tax Current income tax expense or revenue is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Deferred tax balances Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to be recovered or liabilities are settled. Deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES33 Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Deferred tax assets and liabilities are shown on a net basis in the statement of financial position. Tax consolidation The parent entity and it’s 100% Australian controlled entities formed an income tax consolidated group under the tax consolidation legislation on 8 December 2015. This replaced the three pre-existing tax consolidated groups on that date. Within the consolidated group there is an additional tax consolidated group with AR (WA) Pty Ltd as the head entity. For details of members of the respective tax consolidated groups and other changes to those groups please refer to Note 21. The parent entity in each tax consolidated group is responsible for recognising the current tax liabilities and deferred tax assets arising in respect of tax losses for the tax consolidated group. The tax consolidated groups have also entered into a tax funding agreement with their members whereby each company in the Group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. Each tax consolidated group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax consolidated group arising under the joint and several liability requirements of the tax consolidation system in the event of default by the parent entity to meet its payment obligations. (m) Payables on broking, reinsurance and underwriting agency operations These amounts represent insurance premium payable to the insurance companies for broking, reinsurance and underwriting agency operations on invoiced amounts to customers and liabilities for goods and services provided to the consolidated entity prior to the end of the financial period and which are unpaid. The amounts are unsecured and are usually paid within 30 to 90 days of recognition. (n) Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (o) Employee benefits (i) Short-term employee benefit obligations Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits (other than termination benefits) expected to be settled wholly before twelve months after the end of the annual reporting period are measured at the (undiscounted) amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables in the Consolidated Statement of Financial Position. (ii) Other Long-term employee benefit obligation The provision for employee benefits in respect of long service leave and annual leave which, are not expected to be settled within twelve months of the reporting date, are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee turnover, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the change occurs. Employee benefit obligations are presented as current liabilities in the Consolidated Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES34 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 (iii) Retirement benefit obligations Defined contribution superannuation plan The consolidated entity makes contributions to the employee’s defined contribution superannuation plans of choice in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are received. The consolidated entity’s obligation with respect to employee’s defined contributions entitlements is limited to its obligation for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the Consolidated Statement of Financial Position. (iv) Share-based payments The consolidated entity operates share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is measured at the market bid price at grant date. In respect of share-based payments that are dependent on the satisfaction of performance conditions, the number of shares and options expected to vest is reviewed and adjusted at each reporting date. The amount recognised for services received as consideration for these equity instruments granted is adjusted to reflect the best estimate of the number of equity instruments that eventually vest. (v) Bonus plan The consolidated entity recognises a provision when a bonus is payable in accordance with the employee’s contract of employment, and the amount can be reliably measured. (vi) Termination benefits Termination benefits are payable when employment of an employee or group of employees is terminated before the normal retirement date, or when the entity provides termination benefits as a result of an offer made and accepted in order to encourage voluntary redundancy. The consolidated entity recognises a provision for termination benefits when the entity can no longer withdraw the offer of those benefits, or if earlier, when the termination benefits are included in a formal restructuring plan that has been announced to those affected by it. (p) Borrowing costs Borrowing costs can include interest expense calculated using the effective interest method, finance charges in respect of finance leases, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs are expensed as incurred. (q) Financial instruments Classification Financial assets recognised by the consolidated entity are subsequently measured in their entirety at either amortised cost or fair value, subject to their classification and whether the Group irrevocably designates the financial asset on initial recognition at fair value through other comprehensive income. Financial assets not irrevocably designated on initial recognition at fair value through other comprehensive income are classified as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both: a. the consolidated entity’s business model for managing the financial assets; and b. the contractual cash flow characteristics of the financial asset. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES35 Initial recognition and measurement Financial assets and financial liabilities are recognised when the consolidated entity becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the consolidated entity commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value adjusted for transaction costs, except where the instrument is classified as fair value through profit or loss, in which case transaction costs are immediately recognised as expenses in profit or loss. Trade and other receivables Receivables from broking, reinsurance and underwriting agency operations are initially recognised based on the invoiced amount to customers and are generally due for settlement within 14 to 60 days. After initial recognition, provision is made for lapses or cancellations of insurance policies or other matters that may lead to cancellation. Receivables from reinsurance are initially recognised based on contract value. Following fulfilment of the contract, amounts are then invoiced to customers. Consistent with both the consolidated entity’s business model for managing the financial assets and the contractual cash flow characteristics of the assets, trade and other receivables are subsequently measured at amortised cost. Held for trading equity instruments Held for trading equity instruments comprise those ordinary shares and options in listed entities that have been acquired by the consolidated entity principally for the purpose of sale in the near term. Held for trading investments are classified (and measured) at fair value through profit or loss. Fair values of listed entities are based on closing bid prices at the reporting date. A financial asset meets the criteria for held for trading if: a. b. on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which it has been acquired principally for the purpose of sale in the near term; there is evidence of a recent actual pattern of short-term profit-taking; or it is a derivative other than a designated and effective hedging instrument. c. Non-listed investments for which the fair value cannot be reliably measured, are carried at cost and tested for impairment. Loans and receivables Loans and receivables are debt instruments, and are classified (and measured) at amortised cost using the effective interest rate method on the basis that: a. they are held within a business model whose objective is achieved by the consolidated entity holding the financial asset to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. b. Impairment of financial assets The following financial assets are tested for impairment at each financial year end: a. debt instruments measured at amortised cost; b. receivables from contracts with customers and contract assets. The consolidated entity provides for allowances for credit losses for both receivables from contracts with customers and contract assets. Under the AASB 9, the consolidated entity determines the allowance for credit losses for receivables from contracts with customers and contract assets on the basis of the lifetime expected credit losses of the instrument. Lifetime expected credit losses represent the expected credit losses that are expected to result from default events over the expected life of the financial asset. For all other financial assets subject to impairment testing, when there has been a significant increase in credit risk since the initial recognition of the financial asset, the allowance for credit losses is recognised on the basis of the lifetime expected credit losses. When there has not been an increase in credit risk since initial recognition, the allowance for credit losses is recognised on the basis of 12-month expected credit losses. ’12-month expected credit losses’ is the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES36 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 The consolidated entity considers a range of information when assessing whether the credit risk has increased significantly since initial recognition. This includes such factors as the identification of significant changes in external market indicators of credit risk, significant adverse changes in the financial performance or financial position of the counterparty, significant changes in the value of collateral, and past due information. Where there is a trade receivables balance, assessment is given to establish whether credit risk against this balance is mitigated in full as a result of the allowance for expected revenue losses on policy lapses and cancellations. The gross carrying amount of a financial asset is written off when the counterparty is in severe financial difficulty and the consolidated entity has no realistic expectation of recovery of the financial asset. Financial liabilities Financial liabilities include trade payables, other creditors, loans from third parties and loans or other amounts due to director-related entities. Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Financial liabilities are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. (r) Investments in associates An associate is an entity over which the consolidated entity is able to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. The consolidated entity’s interests in associates are brought to account using the equity method after initially being recognised at cost. Under the equity method, the profits and losses of the associate are recognised in consolidated entity’s profit or loss and the consolidated entity’s share of the associate’s other comprehensive income items are recognised in the consolidated entity’s other comprehensive income. Details relating to associates are set out in Note 12. Unrealised gains and losses on transactions between the consolidated entity and an associate are eliminated to the extent of the consolidated entity’s share in an associate. (s) Interests in joint ventures Joint venture entities The consolidated entity’s interest in joint venture entities are brought to account using the equity method after initially being recognised at cost. Under the equity method, the profits or losses of the joint venture entity is recognised in profit or loss and the share of other comprehensive income items is recognised in other comprehensive income. Details relating to the joint venture entity are set out in Note 12. (t) Foreign currency translations and balances Functional and presentation currency The financial statements of each entity within the consolidated entity are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars which is the consolidated entity’s functional and presentation currency. Transactions and Balances Transactions in foreign currencies of entities within the consolidated entity are translated into functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES37 All resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the financial year. Foreign subsidiaries Subsidiaries that have a functional currency different from the presentation currency of the consolidated entity are translated as follows: a. Assets and liabilities are translated at the closing rate on reporting date. b. c. All resulting exchange differences are recognised in other comprehensive income. Items of revenue and expense translated at average rate. (u) Segment reporting Determination and presentation of operating segments The consolidated entity determines and presents operating segments based on information that is internally provided to the consolidated entity’s Chief Financial decision maker. An operating segment is a component of the consolidated entity that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the consolidated entity’s components. All operating segment results are regularly reviewed by the consolidated entity’s Chief Financial Officer to make decisions about resources to be allocated to the segment and to assess its performance. Refer to Note 31 for details on how management determine the operating segments. Segment results that are reported to the consolidated entity’s Chief Financial decision maker include items directly attributable to a segment, as well as these that can be allocated on a reasonable basis. (v) Goods and services tax (GST) Revenues, expenses and purchased assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Consolidated Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the Consolidated Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (w) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (x) Rounding of amounts The parent entity and the consolidated entity have applied the relief available under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and accordingly, the amounts in the consolidated financial statements and in the Directors’ Report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar (where indicated). (y) Change in accounting policy The consolidated entity changed its accounting policy for measurement of land and buildings from the cost model to the revaluation model. The change is due to the consolidated entity revaluing its land and buildings in December 2018. The revaluation was undertaken by an independent valuer. The revaluation resulted in an increase in the carrying value of the land and building by $1.6 million to $12.0 million. The net of tax adjustment from the carrying amount to the revalued amount has been accounted for in a revaluation surplus - refer to Note 20. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES38 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 There has been no impact on prior periods with the change in accounting policy. The consolidated entity will continue to revalue the land and buildings in future periods where there is an indication of significant change in its fair value or at regular frequency. (z) Accounting standards issued but not yet effective at 30 June 2019 The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the consolidated entity. The consolidated entity has decided not to early adopt any of these new and amended pronouncements. The consolidated entity’s assessment of the new and amended pronouncements that are relevant to the consolidated entity but applicable in future reporting periods is set out below. AASB 16: Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. AASB 16 requires a lessee to recognise most leases on balance sheet as lease liabilities, with corresponding right of use assets. Lessees are not required to recognise short term leases with a term of less than 12 months and leases of low value assets. Right-of-use assets are initially measured at their cost and lease liabilities are initially measured on a present value basis. The consolidated entity will adopt the standard on 1 July 2019 by applying the modified retrospective approach on transition. Under this approach the cumulative effect of adoption will be recognised as an adjustment to opening retained earnings at 1 July 2019, with no restatement of comparative information. The expected impact on transition at 1 July 2019 to the statement of financial position based on the current lease portfolio has been quantified as follows: Non-current assets Increase in right of use assets Current liabilities Increase in lease liabilities Non-Current liabilities Increase in lease liabilities Equity Decrease in retained earnings 1-Jul 2019 $’000 5,860 283 5,991 414 As a result of the adoption of AASB 16, the nature of expenses relating to leases will change. Under AASB 16 the consolidated entity will recognise depreciation expense for right of use assets and interest expense for lease liabilities. Currently lease costs are recognised as occupancy expenses. On the assumption that there are no material changes in the composition of the lease portfolio, the consolidated entity does not expect a material impact on the consolidated statement of comprehensive income in the year of application. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES39 Note 2: Significant Accounting Estimates And Judgements Certain accounting estimates include assumptions concerning the future, which, by definition, will seldom represent actual results. Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Business combinations and goodwill When a business combination occurs, the fair values of the identifiable assets and liabilities assumed, including intangible assets, are recognised. The determination of the fair values of acquired assets and liabilities is based, to a considerable extent, on management’s judgement. If the purchase consideration exceeds the fair value of the net assets acquired then the difference is recognised as goodwill. If the purchase price consideration is lower than the fair value of the assets acquired then a gain is recognised in the income statement. Allocation of the purchase price between finite life assets and indefinite life assets such as goodwill affects the results of the consolidated entity as finite lived intangible assets are amortised, whereas indefinite life intangible assets, including goodwill, are not amortised. (b) Impairment of goodwill Goodwill is allocated to cash generating units (CGU’s) according to applicable business operations. The recoverable amount of a CGU is based on value in use calculations or fair value assessments. Fair value calculations are based on estimates of sustainable revenue for each CGU multiplied by a revenue multiple appropriate for similar businesses, less costs to sell. Value in use calculations are based on projected cash flows approved by management covering a period of 5 years. Management’s determination of cash flow projections and gross margins are based on past performance and its expectation for the future. The present value of future cash flows has been calculated using an average growth rate of 5% (2018: 5%) for cash flows in year two to five and which is based on the historical average and a terminal value growth rate of 2% (2018: 2%) a pre-tax discount rate of 16.67% (2018: 16.67%) to determine value-in-use. The pre-tax discount rate used is dependent on specific attributes of the transactions and determined by the Board. (c) Income Tax Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. (d) Deferred consideration The consolidated entity has made a best estimate of consideration payable for the acquisitions where there is a variable purchase price (generally a multiple of revenue). Should the final revenue vary from estimates, the consolidated entity will be required to vary the consideration payable and recognise the difference as an expense or income. (e) Intangible assets The carrying value of intangible assets with finite lives are assessed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated on the same basis as goodwill above. An impairment loss is recognised if the carrying value of the intangible assets exceed their recoverable amount. (f) Employee benefits The determination of employee benefit provisions required is dependent on a number of forward estimate assumptions including expected wage increases, length of employee service and bond rates. (g) Share based payment transactions The consolidated entity measures the cost of equity-settled transactions with the employees by reference to the fair value of the options at the date at which they are granted. The fair value of options has been valued taking into account the vesting period, expected dividend payout and the share price at the date the options were granted. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES40 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 3: Revenue And Other Income Fee and commission income Commission income Fees income Other fees Other revenue Interest income Other revenue Other Income Share of equity accounted results Gain on fair value adjustments Profit on sale of subsidiary Investment Income Dividend income and trust distributions The total amount of revenue recognised for the financial year includes: Amounts that relate to performance obligations that were satisfied (or partially satisfied) by the Group in previous years The aggregate amount of transaction prices (unrecognised revenue) allocated to remaining performance obligations, at the reporting date, is as follows: Fee and commission income The above amount is included in Note 18 as a contract liability The disaggregation of revenue for each reportable segment is disclosed within Note 31. 2019 $’000 2018 $’000 72,675 61,509 31,039 26,969 8,331 6,680 112,045 95,158 1,461 2,714 4,175 154 7,879 965 1,678 1,234 2,912 285 17,311 886 8,998 18,482 1,637 2,134 126,855 118,686 2019 $’000 2018 $’000 1,818 1,818 2,173 2,173 - - - - PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 4: Operating Profit Profit before income tax has been determined after: Finance costs Depreciation: • Leasehold Improvements • Building • Motor Vehicles • Office Equipment • Computer Equipment Amortisation of non-current assets: • Identifiable intangibles Depreciation and amortisation expense Rental expense on operating leases Foreign currency translation losses / (gains) Employee benefits: • Share-based payments • Superannuation • Other Employee benefits Administration and other expenses includes: • Bank refinance costs • Acquisition legal and professional fees • Other acquisition and transaction related costs • Non-recurring employment costs • Non-recurring Professional Fees - Non Acquisition • FX losses/(gains) • Bad and doubtful debts • Deferred consideration loss relating to business combinations • Share-based payment expense • Other Other income includes Fair value revaluation of assets 41 2019 $’000 2018 $’000 3,449 2,789 129 178 13 237 797 138 253 10 248 626 1,354 1,275 1,593 2,947 2,933 15 2,014 3,529 1,032 2,307 2,537 261 - 2,943 47,832 40,173 53,375 43,116 85 657 719 2,971 - 196 3 1,127 2,014 143 125 380 11 18 218 2,720 3,908 1,406 - 109 7,879 17,311 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES42 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 5: Income Tax (a) Components of tax expense Current tax Deferred tax Adjustment to tax expense on recognition of prior year losses Under/(over) provision in prior years (b) Prima facie tax payable 2019 $’000 13,029 (1,368) - (183) 2018 $’000 6,727 6,188 (505) 95 11,478 12,505 2019 $’000 2018 $’000 Prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows: Prima facie income tax payable on profit before income tax at 30.0% (2018: 30.0%) 11,051 12,098 Add tax effect of: • Overseas tax rate differential • Non-allowable adjustments on formation of tax consolidated group • Under provision for income tax in prior years • Other non-allowable items • Gross up of franking credits • Non-assessable gain / non-deductible loss on business acquisition rise and fall • Amortisation Less tax effect of: • Overseas tax rate differential • Over-provision for income tax in prior year • Franking credit offset • Transfer to deferred tax • Other non-assessable items - - - 1,108 129 349 223 67 140 95 270 9 325 324 1,809 1,230 470 183 429 146 154 1,382 - - 29 505 289 823 Income tax expense attributable to profit 11,478 12,505 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 5: Income Tax (Continued) (c) Current tax Current tax relates to the following: • Opening balance • Income tax • Tax payments • Utilisation of losses against current period liability • Under provisions • Exchange translation difference • Transfer to/(from) deferred tax Current tax liabilities (d) Deferred tax Deferred tax relates to the following: Deferred tax assets The balance comprises: • Tax losses carried forward • Employee benefits • Provision for doubtful debts • Income provisions • Contract liabilities • Accrued expenses • Listing and share issue expenses Deferred tax liabilities The balance comprises: • Customer Lists • Accrued income • Prepayments • Financial assets at fair value through profit and loss • Capital allowances Net deferred tax assets/(liabilities) 43 2019 $’000 3,279 13,029 2018 $’000 3,239 6,727 (7,814) (6,608) (172) (183) 11 (146) 8,004 - 95 150 (324) 3,279 2019 $’000 2018 $’000 747 1,091 - 206 565 233 517 1,620 922 92 - - 170 739 3,359 3,543 2,614 6,204 79 3,869 489 2,220 5,909 68 5,193 92 13,255 13,482 (9,896) (9,939) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES44 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 5: Income Tax (Continued) (e) Deferred income tax (revenue) / expense included in income tax expense comprises Decrease / (increase) in deferred tax assets (Decrease) / increase in deferred tax liabilities Note 6: Dividends (a) Dividends paid or declared Dividends paid at 7.6 cents per share (2018: 6.5 cents per share) by PSC Insurance Group fully franked Dividends paid to non-controlling interests (b) Dividends declared after the reporting period and not recognised Since the end of the reporting period the Directors have recommended / declared dividends of 5.2 cents per share (2018: 4.5 cents per share) fully franked (c) Franking account Balance of franking account on a tax paid basis at financial year-end adjusted for franking credits arising from payment of provision for income tax and dividends recognised as receivables, franking debits arising from payment of proposed dividends and any credits that may be prevented from distribution in subsequent years 2019 $’000 67 (1,435) (1,368) 2018 $’000 (1,650) 7,838 6,188 2019 $’000 2018 $’000 18,625 15,640 465 300 19,090 15,940 2019 $’000 2018 $’000 13,691 11,000 13,691 11,000 2019 $’000 2018 $’000 4,085 342 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 7: Cash And Cash Equivalents Cash on hand Cash at bank Cash on deposit Cash held on trust Note 8: Receivables Current Receivables from broking, reinsurance and underwriting agency operations Allowance for expected losses (a) Other receivables Allowance for expected losses (a) Loans to related parties Non-Current Loans to related parties 45 2019 $’000 3 2018 $’000 2 5,643 8,043 15,829 43,124 111,480 109,803 132,955 160,972 2019 $’000 2018 $’000 438,432 360,963 (4,844) (4,071) 433,588 356,892 4,071 - 510 2,953 (228) 321 438,169 359,938 3,373 3,189 Receivables from broking and underwriting agency operations are non-interest bearing with 14-60 day terms. Receivables from reinsurance operations are non-interest bearing with 30-60 day terms. (a) Allowance for expected losses Receivables include amounts due from policyholders in respect of insurances arranged by controlled entities. Insurance brokers and underwriting agencies have credit terms of 90 days from policy inception to pay funds received from policyholders to insurers. Should policyholders not pay, the insurance policy is cancelled by the insurer and a credit given against the amount due. The consolidated entity’s credit risk exposure in relation to these receivables is limited to commissions and fees charged. Commission and fee income is recognised after taking into account an allowance for expected losses (on policy lapses and cancellations) based on past experiences. Movements in the allowance for expected losses were: Opening balance 1 July Charge for the year Allowance written back Closing balance at 30 June 2019 $’000 4,299 773 (228) 4,844 2018 $’000 514 3,908 (123) 4,299 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES46 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 8: Receivables (continued) (b) Ageing of Receivables • 0-30 Days • 30-60 Days • 60-90 Days • Over 90 Days Note 9: Other Current Assets Current Prepayments Bonds and deposits Accrued income Note 10: Other Financial Assets Non-Current Financial assets Other shares and units held - at cost Shares in listed corporations - at fair value Total financial assets held at cost and fair value Note 11: Equity Accounted Investments Non-Current Equity accounted associates 2019 $’000 2018 $’000 228,533 120,174 11,339 19,921 16,976 32,061 181,584 188,807 438,432 360,963 2019 $’000 2018 $’000 2,399 1,582 47 3,760 6,206 29 1,487 3,098 2019 $’000 2018 $’000 3,516 3,474 47,982 20,562 51,498 24,036 2019 $’000 2018 $’000 7,571 8,151 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES47 Note 12: Interests In Associates And Joint Ventures (a) Associates and joint ventures Investments in associates and joint ventures are accounted for using the equity method in the consolidated entity and carried at cost in the parent entity. Interests are held in the following associated companies: Associated Companies Associates BCS Broking Pty Ltd Just Motorsport Limited RP-Baulkham Hills Pty Ltd PSC Bloodstock Services Pty Ltd RP-Bundoora Pty Ltd RP-Caboolture Pty Ltd RP-Canning Vale Pty Ltd RP-Cannington Pty Ltd RP-Carlton Pty Ltd RP-Edwardstown Pty Ltd RP-Fremantle Pty Ltd RP-Horsham Pty Ltd RP-Hoppers Crossing Pty Ltd RP-Ipswich Pty Ltd RP-Malaga Pty Ltd RP-Maroochydore Pty Ltd RP-Melbourne Pty Ltd RP-Mona Vale Pty Ltd RP-Morayfield Pty Ltd RP-Nerang Pty Ltd RP-Newcastle Pty Ltd RP-North Perth Pty Ltd PSC Property Lync Insurance Brokers Pty Ltd RP-Randwick Pty Ltd RP-Rockingham Pty Ltd RP-South Perth Pty Ltd RP-Success Pty Ltd RP-Tullamarine Pty Ltd RP-Tweed Heads Pty Ltd RP-Wanneroo Pty Ltd RP-Warragul Pty Ltd RP-Yarrawonga Pty Ltd RP-Penrith Pty Ltd RP-Parramatta Pty Ltd (now 100% owned - refer to Note 21) PSC Insurenet JV Pty Ltd Principal place of business Australia United Kingdom Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ownership Interest 2019 30.00% 35.03% 50.00% 50.00% 50.00% 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 0.00% 50.00% 50.00% 25.00% 50.00% 50.00% 50.00% 0.00% 50.00% 50.00% 50.00% 50.00% 0.00% 50.00% 50.00% 0.00% 50.00% 0.00% 50.00% 0.00% 50.00% 2018 25.00% 35.03% 50.00% 0.00% 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 0.00% 50.00% 0.00% 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES48 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 12: Interests In Associates And Joint Ventures (continued) Associated Companies Nature of relationship Investments in entities holding client lists Note 13: Property, Plant And Equipment Leasehold improvements Leasehold improvements at cost Accumulated depreciation Land and Buildings Land and buildings Accumulated depreciation Plant and equipment Motor vehicles at cost Accumulated depreciation Office equipment at cost Accumulated depreciation Computer equipment at cost Accumulated depreciation Total plant and equipment Total property, plant and equipment 2019 $’000 7,571 7,571 2019 $’000 1,953 (1,189) 764 2018 $’000 8,151 8,151 2018 $’000 1,327 (989) 338 12,000 10,107 (98) 11,902 (389) 9,718 58 (18) 40 79 (24) 55 2,770 2,869 (1,941) (1,580) 829 4,883 1,289 3,727 (3,157) (2,160) 1,726 2,595 1,567 2,911 15,261 12,967 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 13: Property, Plant And Equipment (continued) (a) Reconciliations Leasehold improvements Carrying amount at beginning of year Additions Additions through acquisition of entities/operations Disposals Depreciation expense Carrying amount end of year Land and buildings Carrying amount at beginning of year Additions Reclassification from office equipment Revaluation (b) Depreciation expense Carrying amount end of year Plant and equipment Motor vehicles Carrying amount at beginning of year Additions through acquisition of entities/operations Disposals Depreciation expense Carrying amount end of year Office equipment Carrying amount at beginning of year Additions Additions through acquisition of entities/operations Disposals Reclassification to land and buildings Depreciation expense Net foreign currency movements arising from foreign operation Carrying amount end of year 49 2019 $’000 2018 $’000 338 533 22 - (129) 764 369 122 - (15) (138) 338 9,718 9,971 305 486 1,571 (178) 11,902 55 - (2) (13) 40 1,289 242 18 - (486) (237) 3 829 - - - (253) 9,718 8 57 - (10) 55 762 659 141 (30) - (248) 5 1,289 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES50 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 13: Property, Plant And Equipment (continued) (a) Reconciliations (continued) Computer equipment Carrying amount at beginning of year Additions Additions through acquisition of entities/operations Depreciation expense Net foreign currency movements arising from foreign operation Carrying amount end of year Total plant and equipment Total property, plant and equipment 2019 $’000 2018 $’000 1,567 803 149 (797) 4 1,726 2,595 853 1,324 20 (626) (4) 1,567 2,911 15,261 12,967 Additions through acquisitions represent assets acquired through acquisitions per Note 23. (b) Valuation of land and buildings The fair values of land and buildings have been based on independent valuations. Such valuations are performed on a fair value basis, being the amounts for which the assets could be exchanged between market participants in an arm’s length transaction at the valuation date. This is deemed to be a Level 2 fair valuation per the fair value hierarchy disclosed in Note 1. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 14: Intangible Assets Goodwill at cost Goodwill on consolidation at cost Identifiable intangible assets at cost Accumulated amortisation and impairment Total intangible assets 51 2019 $’000 2018 $’000 64,151 60,358 30,801 24,675 17,628 13,834 (4,505) (3,195) 13,123 10,639 108,075 95,672 (a) Reconciliations Reconciliation of the carrying amounts of intangible assets at the beginning and end of the current financial year Goodwill at cost Opening balance Additions (a) Net foreign currency movement arising from foreign operations Closing balance Goodwill on consolidation at cost Opening balance Additions (b) Net foreign currency movement arising from foreign operations Closing balance Identifiable Intangible assets at cost Opening balance Additions through business combination (c) Other additions Amortisation expense Movements on degrouped entities Net foreign currency movement arising from foreign operations Closing balance Total intangible assets 60,358 53,306 3,614 179 5,832 1,220 64,151 60,358 24,675 13,206 6,045 12,426 81 (957) 30,801 24,675 10,639 3,135 2,037 (1,593) (1,129) 34 6,566 2,800 2,301 (1,032) - 4 13,123 10,639 108,075 95,672 (a) Additional goodwill recognised for the business acquisitions of JA Insurance Services and Workers Compensation Services (WCS - acquisition from Workers Compensation Risk Advisory Services Pty Ltd ), and Certus Life Expansion - (a Life Portfolio acquisition from Fife Insurance Planning Pty Ltd). (b) Additional goodwill on consolidation recognised on the acquisition of Turner Financial Services Pty Ltd. (c) Additional identifiable intangible assets represent the acquisition of business acquisitions of Turner Financial Services Pty Ltd, JA Insurance Services and Workers Compensation Services (WCS - acquisition from Workers Compensation Risk Advisory Services Pty Ltd ), and Certus Life Expansion - (a Life Portfolio acquisition from Fife Insurance Planning Pty Ltd). PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES52 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 14: Intangible Assets (continued) The consolidated entity performs, on an annual basis, impairment testing for goodwill and any identifiable intangible assets (customer relationships) which have impairment indicators. There was no impairment for the year ended 30 June 2019 (2018: no impairment provision). In performing impairment testing, each subsidiary acquired or portfolio of businesses acquired is considered a separate cash generating unit (CGU) or grouped into one CGU where operations are linked. The methodologies used in the impairment testing are: • Value in use - a discounted cash flow model, based on a five year projection commencing with the year one approved budget of the tested CGUs plus a terminal value: and • Fair value - based on the consolidated entity’s estimates of sustainable revenue for each CGU multiplied by a revenue multiple appropriate for similar businesses less costs to sell. The following table sets out the key assumptions for the value in use model: Revenue growth Cost growth Terminal growth rate (EBITDA) Approximate discount rate applied (pre tax) 2019 % 2018 % 5% pa for first 5 years 5% pa for first 5 years 3% pa for first 5 years 3% pa for first 5 years 2.00% 16.67% 2.00% 16.67% Sensitivity analysis has been conducted and no reasonable change in the key assumptions of the value in use calculations would result in impairment. The discount rate used is dependent on specific attributes of the transactions and determined by the Board. Note 15: Payables Current Unsecured liabilities Trade creditors Payables from broking, reinsurance and underwriting agency operations Sundry creditors and accruals 2019 $’000 2018 $’000 1,818 1,888 512,406 437,548 4,147 3,984 518,371 443,420 Whilst there is a trade payables balance, there is no credit risk against this balance since we apply this allowance for expected revenue losses on policy lapses and cancellations (Refer Note 8 (a) ). PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 16: Borrowings Current Secured liabilities Bank loans Non-Current Secured liabilities Bank loans 53 2019 $’000 2018 $’000 1,192 935 55,831 53,410 (a) Terms and conditions and assets pledging as security relating to the above financial instruments The consolidated entity has two primary funding facilities: • PSC Insurance Group Limited – Syndicated Facility Agreement - Limit $80,000,000 plus a further $3,000,000 revolving Overdraft / Bank Guarantee Facility • Insurance Holdings Ltd (IHL) - Loan Facility (Clydesdale Bank) - Limit £4,129,364 ($7,467,204) There is a funding facility to PSC Property Holdings Pty Ltd, totalling $7,624,000. The key terms and conditions are as follows: Syndicated Facility Agreement (SFA) The syndication is led by Commonwealth Bank of Australia, and Macquarie Bank Limited are a participant in the syndicate. Security was granted in favour of a security trustee, including a registered first ranking security over all assets and undertakings of the parent entity and certain subsidiaries of the parent entity. The SFA contains a number of representations, warranties and undertakings (including financial covenants and reporting obligations) from the parent entity and each guarantor that are customary for a facility of this nature, including covenants ensuring the parent entity maintains a debt to EBITDA ratio below agreed levels and a debt service cover ratio above agreed levels. These covenants have been met during the year. The SFA is interest only with a 5 year term, current maturity date is March 2022. The interest rate is a variable interest rate based on BBSY plus a margin. Clydesdale Bank Facility The agreement provides for a Cross Guarantee and Mortgage Debenture over the assets of IHL and PSC UK Holdings, and all related trading subsidiaries as security. The Clydesdale Facility contains a number of representations, warranties and undertakings, including financial covenants and reporting obligations. The financial covenants cover PSC UK Holdings and IHL’s rolling EBITDA to loan value ratio, its interest ratio and cash flow cover. These covenants have to be met quarterly and have been met during the Facility term to date. At balance date, the Clydesdale Facility has a remaining 4 year term, maturing July 2023, repayment terms of the Clydesdale Facility are £569,568 per annum. The interest rate is a variable interest rate based on LIBOR plus a margin. Commonwealth Bank of Australia (Property Loan) The facility provided to fund the property at 96 Wellington Parade, East Melbourne, which the parent entity and its subsidiaries occupy. The facility is secured by a first registered mortgage over the property and supporting guarantees from the parent entity and various subsidiaries. The loan is interest only with a 5 year term, current maturity date is March 2022. The interest rate is a variable interest rate based BBSY plus a margin. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES54 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 17: Provisions Current Employee benefits Non-Current Employee benefits Total employee benefits liability Note 18: Other Liabilities Current Deferred income Contract liabilities (a) Amounts payable to vendors (b) Non-Current Amounts payable to vendors (b) 2019 $’000 2018 $’000 3,183 2,930 455 3,638 398 3,328 2019 $’000 2018 $’000 249 2,173 7,730 10,152 232 - 6,713 6,945 1,851 1,347 (a) Contract liabilities represent the consolidated entity’s obligation to transfer services to the customer for which the consolidated entity has received consideration (or an amount of consideration is due) from the customer. Amounts recorded as contract liabilities are subsequently recognised as revenue when the consolidated entity transfers the contracted services to the customer. A contract liability arises in relation to claims handling income when consideration is received from the customer in advance of the claims handling service being performed. (b) Amounts payable to vendors represents deferred and contingent consideration expected to be made to vendors for acquisitions. The contingent consideration payable is calculated based on a multiple of revenue as defined in the various sale and purchase agreements. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES55 2019 $’000 2018 $’000 140,572 140,395 Parent Entity No of shares $’000 244,453,508 140,395 59,986 1,362,382 177 - 245,875,876 140,572 225,912,026 85,994 18,334,000 55,002 - (1,155) 207,482 554 244,453,508 140,395 Note 19: Share Capital (a) Issued and paid-up capital 245,875,876 Ordinary shares fully paid (2018: 244,453,508) Fully paid ordinary shares carry one vote per share and have the right to dividends. (b) Movements in shares on issue 2019 Beginning of financial year Employee share issues Loan funded shares End of financial year 2018 Beginning of financial year Capital Raising issue Capital Raising issue costs Shares in lieu of cash for acquisition of subsidiary undertaking End of financial year (c) Rights of each type of share Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share gives entitlement to one vote when a poll is called. (d) Capital Management When managing capital, management’s objective is to ensure the consolidated entity continues to maintain optimal returns to shareholders. This is achieved through the monitoring of historical and forecast performance and cash flows. During 2019, management paid dividends of: • Dividends paid by PSC Insurance Group Limited $18,625,261 (2018: $15,639,646) • Dividends paid to non-controlling interests $464,797 (2018: $300,000) Management manages capital by proactively assessing future funding needs and determining the best funding measures, principally through retained earnings and debt facilities. When considering prudent gearing levels, the consolidated entity considers its gross debt levels against the forecast levels of EBITDA and free cash flow. The consolidated entity also considers the gearing ratio being net debt / total capital. Net debt is calculated as total borrowings as shown in the balance sheet less cash and cash equivalents (excluding cash held in trust) and total capital includes net debt and book equity. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES56 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 20: Reserves And Retained Earnings Share-based payment reserve Foreign currency translation reserve Revaluation surplus Non-controlling interest reserve Reserves Retained Earnings (a) Share-based payment reserve 2019 $’000 2,160 (130) 1,100 2018 $’000 323 (340) - (37,351) (37,351) (34,221) (37,368) 44,807 40,429 (i) Nature and purpose of reserve The share-based payment reserve comprises the fair value of options and performance share rights recognised as an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital. The share-based payment reserve remains as a separate component of equity. (ii) Movements in reserve Opening balance Fair value of options and performance share rights issued during the year Closing balance (b) Foreign currency translation reserve 2019 $’000 323 1,837 2,160 2018 $’000 323 - 323 (i) Nature and purpose of reserve The foreign currency translation reserve is used to record the unrealised exchange differences arising on translation of a foreign entity and is not distributable. (ii) Movements in reserve Opening balance Exchange differences on translation of foreign operations Closing balance 2019 $’000 (340) 210 (130) 2018 $’000 (1,166) 826 (340) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES57 Note 20: Reserves And Retained Earnings (continued) (c) Revaluation surplus (i) Nature and purpose of reserve In December 2018, an independent valuer undertook a valuation of land and buildings held by the Group. The net of tax adjustment from the carrying amount to the revalued amount has been accounted for in the revaluation surplus. (ii) Movements in reserves Opening balance Revaluation of property, plant and equipment Closing balance (d) Non-controlling interest reserve 2019 $’000 - 1,100 1,100 2018 $’000 - - - (i) Nature and purpose of reserve The non-controlling interest reserve is used to record the fair value of shares issued to buyout non-controlling interests. (ii) Movements in reserves Opening Balance Closing Balance (e) Retained Earnings Retained earnings at beginning of year Adjustment due to change of accounting policy, net of tax Net profit In specie distributions Dividends provided for or paid 2019 $’000 2018 $’000 (37,351) (37,351) (37,351) (37,351) 2019 $’000 2018 $’000 40,429 28,496 (1,245) - 24,693 27,573 (445) - (18,625) (15,640) 44,807 40,429 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES58 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 21: Interests In Subsidiaries (a) Subsidiaries Subsidiaries of the Group Country of incorporation Ownership interest held by Group Ownership interest held by NCI 2019 2018 2019 2018 Agency Holding Corporation Pty Ltd* Australia 100.00% 0.00% Alsford Page & Gems (Holdings) Limited United Kingdom 100.00% 100.00% Alsford Page & Gems Limited AB Risk Solutions Ltd AR (WA) Pty Ltd Breeze Underwriting (Aust) Pty Ltd Breeze Underwriting Limited Breeze Underwriting Pty Ltd Capital Insurance Brokers Pty Ltd Carroll & Partners Limited Carroll Holman Limited Carroll London Markets Holdings Ltd Carroll London Markets Ltd Carvan Pty Ltd Certus Life Australia Pty Ltd Certus Life Melbourne Pty Ltd Certus Life Pty Ltd Chase Surety Pty Ltd Chase Underwriting Pty Ltd Chase UK Holdings Pty Ltd Chase Global UK Ltd Connect Life Pty Ltd Deskhaven Pty Ltd Easy Broking Online Ltd 70.00% 70.00% 30.00% 30.00% United Kingdom 100.00% 100.00% United Kingdom 100.00% 100.00% Australia Australia 100.00% 100.00% United Kingdom 100.00% 100.00% Australia Australia 100.00% 100.00% 100.00% 100.00% United Kingdom 100.00% 100.00% United Kingdom 100.00% 100.00% United Kingdom 100.00% 100.00% United Kingdom 100.00% 100.00% Australia Australia Australia Australia Australia Australia 51.00% 51.00% 49.00% 49.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 80.00% 80.00% 20.00% 20.00% 100.00% 100.00% United Kingdom 100.00% 100.00% United Kingdom 100.00% 100.00% Australia Australia 100.00% 100.00% 100.00% 100.00% United Kingdom 100.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Fenchurch Insurance Risk Management Limited United Kingdom 100.00% 100.00% Insurance Holdings Limited United Kingdom 100.00% 100.00% Insurance Marketing Group of Australia Pty Ltd Jolimont Underwriting Pty Ltd* Medisure Indemnity Australia Pty Ltd McKenna Hampton Insurance Brokers Pty Ltd Online Insurance Brokers Pty Ltd Professional Services Corporation Pty Ltd PSC Coastwide Insurance Services Pty Ltd PSC Coast Wide Newcastle Pty Ltd PSC Connect NZ Ltd PSC Connect Pty Ltd PSC Connect Life NZ Ltd* PSC Direct Pty Ltd PSC Foundation Pty Ltd PSC Group Holdings Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% New Zealand 100.00% 100.00% Australia 100.00% 100.00% New Zealand 100.00% 0.00% Australia Australia Australia 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES59 Note 21: Interests In Subsidiaries (continued) Subsidiaries of the Group Country of incorporation Ownership interest held by group Ownership interest held by NCI PSC Holdings (Aust) Pty Ltd PSC Insurance Brokers (Aust) Pty Ltd PSC Insurance Brokers (Brisbane) Pty Ltd PSC Insurance Brokers (Darwin) Pty Ltd PSC Insurance Brokers (Melbourne) Pty Ltd PSC Insurance Brokers (Wagga) Pty Ltd PSC Insurance Brokers Pty Ltd PSC Insurance Brokers (Western) Pty Ltd PSC Insurance Services Pty Ltd PSC Insurance Brokers (Victoria) Pty Ltd Formerly PSC International Pty Ltd PSC International Holdings Pty Ltd* PSC JLG Investment Pty Ltd PSC McKenna Hampton Insurance Brokers Pty Ltd PSC National Franchise Insurance Brokers Pty Ltd PSC NFIB Markets Pty Ltd PSC Nominees Pty Ltd PSC Property Holdings Pty Ltd PSC Reliance Franchise Partners Pty Ltd PSC UK Pty Ltd PSC UK Holdings Pty Ltd PSC Workers Compensation and Consulting Pty Ltd PSC Wright Fahey Pty Ltd Reliance Workplace Solutions Pty Ltd RP-Parammatta Pty Ltd Turner Financial Services Limited** Turner Insurance Services Limited** UK Facilities Limited Upper Hillwood Holdings Limited Australia Australia Australia Australia Australia Australia Australia Australia Australia 2019 2018 2019 2018 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Australia 100.00% 100.00% 0.00% 0.00% Australia Australia Australia Australia Australia Australia Australia Australia Australia United Kingdom Australia Australia Australia Australia United Kingdom United Kingdom United Kingdom United Kingdom 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 75.00% 100.00% 100.00% 70.00% 50.00% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 70.00% 100.00% 70.00% 70.00% 75.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 25.00% 0.00% 30.00% 0.00% 30.00% 30.00% 0.00% 0.00% 2019 $’000 1,964 (28) 664 (339) 899 320 (465) 3,015 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 25.00% 0.00% 30.00% 50.00% 0.00% 0.00% 0.00% 0.00% 2018 $’000 1,676 - 249 - 339 - (300) 1,964 * Entity entered Group during the 2019 financial year. ** Entity acquired during the 2019 financial year. (b) Reconciliation of the non-controlling interest Accumulated NCI at the beginning of the year Adjustment due to change of accounting policy, net of tax Profit or loss allocated to NCI during the year Movements in degrouped entities Non-controlling interest arising from business combination Increase in non-controlling interest Dividends paid to NCI Accumulated NCI at the end of the year PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES60 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 22: Cash Flow Information (a) Reconciliation of cash Cash at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to the related items in the consolidated statement of financial position as follows: Cash on hand Cash at bank Cash on deposit Cash held on trust (b) Reconciliation of net profit after tax to net cash flows from operations Profit from ordinary activities after income tax Add/(less) items classified as investing/financing activities (Loss)/gain on deferred consideration Adjustments and non-cash items Non-cash items Depreciation and amortisation Bad and doubtful debts Foreign currency translation (gains)/losses Fair value adjustment of shares Share-based payment expense Equity accounted result Disposal of investment in associates 2019 $’000 3 2018 $’000 2 5,643 8,043 15,829 43,124 111,480 109,803 132,955 160,972 2019 $’000 2018 $’000 25,357 27,822 1,127 1,406 2,947 31 196 2,307 3,908 2,981 (7,879) (17,311) 2,014 (154) (466) - - - Net cash flows from operations before change in assets and liabilities 23,173 21,113 Change in assets and liabilities (Increase)/decrease in receivables (Increase)/decrease in other assets Increase/(decrease) in payables Increase/(decrease) in provisions Increase/(decrease) in other liabilities Increase/(decrease) in income taxes payable Increase/(decrease) in deferred tax balances Net cash flow from operating activities (76,955) (32,818) (3,094) (931) 72,183 61,282 450 86 4,275 (768) 19,350 601 763 (125) 5,915 55,800 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES61 Note 22: Cash Flow Information (continued) (c) Acquisitions During the period the consolidated group made a number of acquisitions. The fair value of assets acquired and liabilities assumed were as follows: Cash Property, plant and equipment Identifiable Intangibles Trade receivables Other financial assets Trade and other creditors Income tax payable Provisions Deferred tax balances Net Identifiable assets acquired Net assets exceeding consideration paid Consideration paid in cash Cash acquired Net cash (dispensed) / acquired (d) Loan facilities Loan facilities Amount utilised Unused loan facility (e) Reconcilation of liabilities arising from financing activities Balance at the beginning of the year Payments made Foreign currency movements Other changes Balance at the end of the year 2019 $’000 1,937 189 3,135 1,771 - 2018 $’000 7,977 218 3,609 1,542 4 (2,770) (8,291) (452) (149) (724) 2,937 3,705 (165) (359) (1,082) 3,453 11,572 (6,642) (15,025) 1,937 7,977 (4,705) (7,048) 2019 $’000 98,091 2018 $’000 95,508 57,023 54,345 41,068 41,163 2019 $’000 2018 $’000 54,345 44,383 (971) 102 (4,660) 270 3,547 14,352 57,023 54,345 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES62 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 23: Business Combinations Consideration Deferred consideration Contingent consideration Total purchase consideration Fair value of non-controlling interests 2019 $’000 6,642 1,965 3,089 2018 $’000 15,328 1,455 4,525 11,696 21,308 899 - Acquisitions for the Year Ended 30 June 2019 In accordance with consolidated entity strategy, as series of acquisitions were completed during the year. These included the following acquisition vehicles: i. Company and its subsidiary entity/(ies) ii. Client list and employee benefits iii. Client list, employee benefits and other business assets (a) Consideration paid/payable Turner Financial Services Pty Ltd JA Insurance Services Fife - Life portfolio 2019 Cash consideration paid Deferred consideration Contingent consideration Total purchase consideration Ownership share Acquisition vehicle Fair value of non-controlling interest Total Non-controlling interest $'000 3,540 1,770 1,770 7,080 70% (i) 899 899 $'000 $'000 497 75 320 892 554 120 120 794 WCS $'000 Total Group $'000 2,051 6,642 - 1,965 879 3,089 2,930 11,696 100% 100% 100% (iii) - - (ii) - - (iii) - - 899 899 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES63 WCS $'000 - - Total Group $'000 1,937 189 Note 23: Business Combinations (continued) (b) Identifiable assets and liabilities acquired Turner Financial Services Pty Ltd JA Insurance Services Fife - Life portfolio 2019 Cash and Cash equivalents Property, plant and equipment Identifiable intangibles Trade and other receivables Defered tax assets Deferred tax Liabilities Trade and other payables Income tax payable Provisions (c) Goodwill on acquisition $'000 1,937 189 1,554 1,771 - (295) (2,770) (452) - 1,934 $'000 $'000 - - - - 252 144 1,185 3,135 - 4 - 2 - 39 1,771 45 (75) (43) (356) (769) - - (15) 166 - - (6) 97 - - (128) (2,770) (452) (149) 740 2,937 Turner Financial Services Pty Ltd JA Insurance Services Fife - Life portfolio $'000 $'000 WCS $’000 Total Group $’000 2019 Total consideration paid / payable Total net identifiable (assets)/liabilities acquired Non-controlling interests acquired Goodwill on acquisition (Excess over consideration paid/payable) $'000 7,080 1,934 899 6,045 892 166 - 726 794 2,930 11,696 97 - 740 2,937 - 899 697 2,190 9,658 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES64 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 23: Business Combinations (continued) (d) Financial performance since acquisition date 2019 Revenue Profit after tax Financial performance if held for 12 months Revenue Profit after tax Goodwill on acquisition Customer Lists Turner Financial Services Pty Ltd JA Insurance Services Fife - Life portfolio $’000 $’000 $’000 WCS $’000 Total Group $’000 5,544 819 5,544 819 6,045 1,554 7,599 351 143 465 209 726 252 978 284 57 379 76 697 144 841 1,527 7,706 461 1,480 1,988 536 8,376 1,640 2,190 9,658 1,185 3,135 3,375 12,793 The value of goodwill represents the future benefit arising from the future earnings and synergies expected from the acquisitions. (e) Acquisition related Costs The consolidated entity incurred transaction costs of $0.26 million (2018: $0.07m) in respect of acquisition of Turner Financial Services Pty Ltd and business acquisitions of JA Insurance Services and Workers Compensation Services (WCS), and Life Portfolio acquisition from Fife Insurance Planning Pty Ltd (Fife - Life Portfolio, Certus Life Expansion). Transaction costs included legal fees, stamp duty, due diligence and other direct costs incurred in relation to these acquisitions. These costs are included within Administration and other expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Note 24: Commitments (a) Lease expenditure commitments Operating leases (non-cancellable): (i) Nature of leases Operating leases comprise lease for premises from which the consolidated entity operates and several novated leases of motor vehicles that form part of the salary packages of employees. (ii) Minimum lease payments Not later than one year Later than one year and not later than five years Greater than five years Aggregate lease expenditure contracted for at reporting date 2019 $’000 2,719 6,334 285 9,338 2018 $’000 2,414 6,422 - 8,836 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 24: Commitments (continued) (b) Business acquisition commitments for acquisitions completed post-balance date Turner Financial Services Limited (purchase of business) BP Marsh & Partners plc (c) Bank guarantee commitments 65 2019 $’000 - - - 2018 $’000 7,060 32,962 40,022 The consolidated entity has provided bank guarantees in relation to a number rental premises from which various businesses operate. Total bank guarantees outstanding $928,900 (2018: $805,538). (d) Contingent liabilities The consolidated entity has provided guarantees on indebtedness amounting to $821,201. This contingent liability relates to the guarantee of loans made to non-group interests in certain associate entities and is supported by Put Option agreements held by the lender over the non-group holdings in these associate entities. Note 25: Earnings Per Share Reconciliation of earnings used in calculating earnings per share: Profit from continuing operations attributable to owners of PSC Insurance Group Limited attributable to owners of PSC Insurance Group Limited Profit used in calculating basic earnings per share Profit used in calculating diluted earnings per share Earnings used in calculating diluted earnings per share 2019 $’000 2018 $’000 24,693 27,753 24,693 27,753 24,693 27,753 24,693 27,753 2019 2018 No of Shares No of Shares Weighted average number of ordinary shares used in calculating basic earnings per share 245,536,621 237,795,176 Effect of dilutive securities: Share options 1,889,011 900,000 Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 247,425,632 238,695,176 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES66 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 26: Financial Risk Management The consolidated entity is exposed to a variety of financial risks comprising: • Market price risk • Currency risk • Interest rate risk • Credit risk • Liquidity risk The Board of Directors has overall responsibility for identifying and managing operational and financial risks. The consolidated entity holds the following financial instruments: Financial assets Amortised cost: Cash and cash equivalents Bonds and deposits Receivables from broking, reinsurance and underwriting agency operations Other receivables Loans to related parties Fair value through profit or loss (mandatory classification): Financial assets Financial liabilities Amortised cost: Trade creditors Payables from broking, reinsurance and underwriting agency operations Sundry creditors and accruals Borrowings Contract liabilities Amounts payable to vendors - deferred consideration Fair value through profit or loss (mandatory classification): Amounts payable to vendors - contingent consideration 2019 $’000 2018 $’000 132,955 160,972 47 29 433,588 356,892 4,071 3,883 2,725 3,510 51,498 24,036 626,042 548,164 1,818 1,888 512,406 437,548 4,147 3,984 57,023 54,345 2,173 2,410 - 1,454 7,171 6,606 587,148 505,825 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES67 Note 26: Financial Risk Management (continued) (a) Market price risk Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). Sensitivity The consolidated entity holds two market securities, currently held at fair value. Price sensitivity at 30 June 2019 at +/- 10% represents exposure of $4,798,000 (2018 : $2,056,000). (b) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Sensitivity If foreign exchange rates were to increase/decrease by 10% from rates used to determine fair values of all financial instruments as at the reporting date, assuming all other variables that might impact on fair value remain constant, then the impact on profit for the year and equity is as follows: + / - 10% Impact on profit after tax Impact on equity 2019 $’000 2018 $’000 359 1,827 307 20 (c) Fair value of Financial Instruments The consolidated entity’s financial assets and contingent consideration liabilities are measured at fair value at the end of each reporting period. The following table gives information about how their fair values are determined, including the valuation technique and inputs used. Financial instrument Valuation technique Financial assets - Shares in listed corporations Amounts payable to vendors - contingent consideration The fair value is calculated based on closing bid prices at the reporting date. This is deemed to be a Level 1 fair valuation per the fair value hierarchy disclosed in Note 1. The fair value is calculated based on an agreed multiple of fees and commissions. This is deemed to be a Level 3 fair valuation per the fair value hierarchy disclosed in Note 1. Significant unobservable inputs Relationship of unobservable inputs to fair value None n/a Forecast fees and commissions The estimated fair value would increase/(decrease) if: - The forecast fees and commissions were higher/ (lower) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES68 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 26: Financial Risk Management (continued) (d ) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. The exposure to interest rate risks in relation to future cash flows and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Financial Instruments 2019 (i) Financial assets (variable) Cash Bonds and deposits Receivables from broking, reinsurance and underwriting agency operations Other receivables Loans to related entities Financial Assets Total financial assets (ii) Financial liabilities (variable) Trade creditors Payables from broking, reinsurance and underwriting agency operations Sundry creditors and accruals Contractor liabilities Borrowings Amounts payable to vendors - deferred consideration Amounts payable to vendors - contingent consideration Interest- bearing Non- interest bearing Total carrying amount Weighted average effective interest rate $’000 $’000 $’000 % 132,955 - - - 3,883 - 47 132,955 0.99% 47 433,588 433,588 4,071 - 4,071 3,883 2.63% - 51,498 51,498 136,838 489,204 626,042 - - - - 1,818 1,818 512,406 512,406 4,147 2,173 4,147 2,173 57,023 - 57,023 4.79% - 1,851 2,410 5,320 2,410 7,171 1.24% Total financial liabilities 58,874 528,274 587,148 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES69 Note 26: Financial Risk Management (continued) (d ) Interest rate risk (continued) Financial Instruments 2018 (i) Financial assets (variable) Cash Bonds and deposits Receivables from broking, reinsurance and underwriting agency operations Other receivables Loans to related entities Financial assets Total financial assets (ii) Financial liabilities (variable) Trade creditors Payables from broking, reinsurance and underwriting agency operations Sundry creditors and accruals Borrowings Amounts payable to vendors - deferred consideration Amounts payable to vendors - contingent consideration Total financial liabilities Interest- bearing Non- interest bearing Total carrying amount Weighted average effective interest rate $’000 $’000 $’000 % 160,972 - - - 3,510 - 29 160,972 1.39% 29 356,892 356,892 2,725 - 2,725 3,510 5.65% - 24,036 24,036 164,482 383,682 548,164 - - - 1,888 1,888 437,548 437,548 3,984 3,984 54,345 - 54,345 405 942 1,049 5,664 1,454 6,606 55,692 450,133 505,825 5.65% 1.57% 0.81% No other financial assets or financial liabilities are expected to be exposed to interest rate risk. Sensitivity If interest rates were to increase/decrease by 100 basis points from rates used to determine fair values as at the reporting date, assuming all other variables that might impact on fair value remain constant, then the impact on profit for the year and equity is as follows: + / - 100 basis points Impact on profit after tax Impact on equity 2019 $’000 (546) (546) 2018 $’000 (762) (762) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES70 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 26: Financial Risk Management (Continued) (e) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. Credit risk of the consolidated entity mainly arises from cash and cash equivalents, trade and other receivables, loans to shareholders and loans to a joint venture. Although there is a concentration of cash and cash equivalents held with a major bank, credit risk is not considered significant. The consolidated entity’s exposure to credit risk is concentrated in the financial services industry with parties which are considered to be of sufficiently high credit quality to minimise credit risk losses. Receivables include amounts due from policyholders in respect of insurances arranged by controlled entities. Insurance brokers and underwriting agencies have credit terms of 90 days from policy inception to pay funds received from policyholders to insurers. Should policyholders not pay, the insurance policy is cancelled by the insurer and a credit given against the amount due. The consolidated entity’s credit risk exposure in relation to these receivables is limited to commissions and fees charged. Commission revenue is recognised after taking into account an allowance for expected revenue losses on policy lapses and cancellations, based on past experiences. (f) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The consolidated entity’s risk management includes maintaining sufficient cash and the availability of funding via an adequate amount of credit facilities as disclosed in Note 22. (g) Fair value compared with carrying amounts The fair value of financial assets and financial liabilities approximates their carrying amounts as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES71 Note 26: Financial Risk Management (Continued) (h) Maturity analysis The tables below represents the undiscounted contractual settlement terms for financial instruments and management’s expectation for settlement of undiscounted maturities. 2019 Cash and cash equivalents Receivables Other financial assets Payables Borrowings Other financial liabilities Net maturities 2018 Cash and cash equivalents Receivables Other financial assets Payables Borrowings Other financial liabilities Net maturities < 6 Months 6-12 Months 1-5 years Carrying amount $’000 $’000 $’000 $’000 132,955 - - 132,955 256,585 181,584 3,373 441,542 3,516 - 47,982 51,498 (244,296) (274,075) - (518,371) (596) (596) (55,831) (57,023) (6,026) (4,126) (1,851) (12,003) 93,638 (48,713) (6,327) 38,598 < 6 Months $’000 6-12 Months $’000 1-5 years Carrying amount $’000 $’000 160,972 - - 160,972 171,131 188,807 3,189 363,127 3,098 - 24,036 27,134 (208,973) (230,555) (3,891) (443,419) (468) (467) (53,410) (54,345) - (6,713) (1,347) (8,060) 125,760 (52,819) (27,532) 45,409 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES72 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 27: Directors’ And Executives’ Compensation Key management personnel during the year are the Directors, Group Chief Executive Officer and Chief Financial Officer. The names of Directors who have held office during the year are: Name Brian Austin Paul Dwyer John Dwyer Antony Robinson Melvyn Sims Other key management personnel during the year are: Name Rohan Stewart (Group Chief Executive Officer) Joshua Reid (Chief Financial Officer) Compensation by category Short-term employment benefits Post-employment benefits Long-term incentive plans Share-based payments Appointment Date 10 December 2010 10 December 2010 10 December 2010 13 July 2015 8 August 2016 Appointment Date 2 May 2018 15 December 2015 2019 $ 2018 $ 2,016,244 1,678,208 42,631 31,232 92,239 37,845 1,558,956 - 3,710,070 1,747,285 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES73 Note 28: Related Party Disclosures (a) Ownership interests in related parties Details of interests in controlled entities are set out in Note 21. (b) Related party transactions The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year: (i) Transactions with subsidiaries All transactions that have occurred among the subsidiaries within the consolidated entity have been eliminated for consolidation purposes. (ii) Transactions with entities with director-related entities Fuse Recruitment Pty Ltd, ADD Aviation Services Pty Ltd and The Lead Agency Pty Ltd (until 31 December 2018) are owned by Directors of the consolidated entity and are therefore considered related entities. DWF LLP is a related party as a Director of the consolidated entity is a Partner at the Company. The Group engages Fuse Recruitment Pty Ltd for recruitment and contractor services, ADD Aviation Services Pty Ltd for transportation services, The Lead Agency Pty Ltd for marketing services and DWF LLP for legal services. The following fees were paid on normal third party commercial terms: Fees Paid or Payable to associates on normal commercial terms (ex GST): Recruitment fees Contractor Fees Marketing service fees Transportation service fees Legal service fees 2019 $ 2018 $ 208,065 106,105 217,418 60,268 94,371 353,422 131,394 266,390 372,377 - Additionally, during the year the PSC Insurance Group Limited provided insurance services to related parties of Directors totalling $206,061 (2018: $334,320). The services supplied were in the normal course of business and on normal commercial terms and conditions. The fees outstanding for these services at balance date are $5,766 (2018 $nil). Additionally, during the year the PSC Insurance Group Limited received trust distributions and dividends from entities where there was a common Director between that entity and PSC Insurance Group Limited totalling $318,200 (2018: $2,186,386). The entity ceased to be a related party on 7 December 2018. Outstanding balance due to related parties of a Director are $21,249 (2018: $376,566). Remuneration paid to the Directors for services provided are paid to their respective companies, as disclosed in the Remuneration Report. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES74 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 28: Related Party Disclosures (continued) From time to time, the consolidated entity issues loans to Directors, Key Management Personnel and other related parties. The following balances are outstanding at the reporting date in relation to loans with related parties. Current receivables Loans to related parties Non-Current receivables Loans to related parties 2019 $ 2018 $ 509,892 321,307 3,373,299 3,185,915 All loans with Directors, key management personnel and other related parties are granted at arms length commercial terms for repayment. All pre-listing related party loans met the minimum requirements of the Income Tax Assessment Act 1936 Division 7A in relation to interest rates and repayment terms. All post-listing related party loans are interest bearing at a minimum rate of the Fringe Benefit Tax benchmark interest rate. The maximum loan term is 7 years. (iii) Transactions with joint ventures in which the consolidated entity is a venturer There were no transactions with joint ventures in this financial year. Note 29: Auditor’s Remuneration (a) Amounts paid and payable to Pitcher Partners Melbourne for: i. Audit and other assurance services An audit or review of the financial report of the entity and any other entity in the consolidated entity Total remuneration for audit and other assurance services ii. Other non-audit services Consulting Services Taxation services Total remuneration for non-audit services 2019 $ 2018 $ 441,250 396,600 441,250 396,600 2019 $ 14,324 17,015 31,339 2018 $ - 18,715 18,715 Total remuneration of Pitcher Partners Melbourne 472,589 415,315 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESNote 29: Auditor’s Remuneration (continued) (b) Amounts paid and payable to non-related auditors of Group entities for: i. Audit and other assurance services An audit or review of the financial report of the entity and any other entity in the consolidated entity Total remuneration for audit and other assurance services ii. Other non-audit services Taxation services Other services Total remuneration for non-audit services Total remuneration of non-related auditors of group entities Total auditors' remuneration Note 30: Parent Entity Information (a) Summarised statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Total equity 75 2019 $ 2018 $ 190,595 143,743 190,595 143,743 2019 $ 2018 $ 18,524 32,086 21,541 19,522 40,065 51,608 230,660 195,351 703,249 610,666 2019 $’000 2018 $’000 137,885 138,087 55,787 53,661 193,672 191,748 373 625 42,133 42,120 42,506 42,745 151,166 149,003 147,048 146,870 2,113 2,005 278 1,855 151,166 149,003 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES76 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 30: Parent Entity Information (continued) (b) Summarised statement of comprehensive income Profit for the year Total comprehensive income for the year (c) Parent entity guarantees 2019 $’000 20,013 20,013 2018 $’000 17,349 17,349 The amount of $821,201 of this contingent liability relates to the guarantee of loans made to non-group interests in certain associate entities and is supported by Put Option agreements held by the lender over the non-group holdings in these associate entities. (d) Parent entity contractual commitments • • Business acquisition commitments Bank guarantee commitments Total parent entity contractual commitments Note 31: Segment Information (a) Description of segments The Group has four reportable segments as described below: 2019 $’000 2018 $’000 - 40,022 929 929 806 40,828 • Distribution Insurance Broking, including Broker Networks (PSC Connect, PSC Reliance Franchise Partners), life broking and PSC Workers Compensation Consulting. • Agency Underwriting agencies, including Chase Underwriting, Breeze Underwriting, Online Travel Insurance, Medical Indemnity Australia and PSC Claims Services. • United Kingdom United Kingdom businesses including Caroll Holman, Breeze Underwriting (UK), Alsford Page & Gems, Turner, Easy Broking Online and Chase Underwriting (UK). • Group Group income and investments from non-operating assets and any net group costs not recovered from operating segments. All these operating segments have been identified based on internal reports reviewed by the consolidated entity’s Chief Financial Officer in order to allocate resources to the segments and assess their performance. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES77 Note 31: Segment Information (continued) (b) Segment information The consolidated entity’s Chief Financial decision maker uses segment revenue, segment result, segment assets and segment liabilities to assess each operating segment’s financial performance and position. Amounts reported for each operating segment are the same amount recorded in the internal reports to the Chief Financial Officer. Segment information is measured in the same way as the financial statements. They include items directly attributable to the segment and those that can reasonably be allocated to the segment based on the operations of the segment. Inter-segment revenue is determined on an arm’s length basis. Segment information is reconciled to financial statements and underlying profit disclosure notes if provided elsewhere where these amounts differ. Segment 1 - Distribution Segment 2 – Agency Segment 3 – United Kingdom Segment 4 – Group $’000 $’000 $’000 $’000 12,392 30,030 - - - 1,637 8,822 302 (91) - 306 Total $’000 72,675 31,039 8,331 1,637 13,173 30,253 27,929 7,923 - 3,874 69,979 69,979 18,445 18,445 1,109 (76) (1,636) (7,530) - - 2,808 499 - 171 15,870 15,870 1,685 1,685 171 (2) (395) (1,470) - - 30,547 30,547 10,459 126,855 10,459 126,855 3,246 3,246 20 (338) (666) (926) - - 1,981 1,981 25,357 25,357 161 1,461 (3,033) (250) (3,449) (2,947) (1,552) (11,478) 154 154 7,879 7,879 2019 Segment revenue Commission income Fees income Other fees Investment income Other revenue / Other income Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source Items included within the segment result: Interest income Interest expense Depreciation and amortisation expense Income tax expense Share of net profits/(losses) of associates and joint ventures accounted for using the equity method Fair Value gains relating to shares in listed corporations Total segment assets Total segment assets include: Investments in equity accounted associates and joint ventures 187,129 39,423 371,767 168,148 766,467 5,756 - - 1,815 7,571 Total segment liabilities 166,696 36,513 354,428 54,657 612,294 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES78 NOTES TO THE FINANCIAL STATEMENTS (continued) For The Year Ended 30 June 2019 Note 31: Segment Information (continued) (b) Segment information (continued) 2018 Segment revenue Commission income Fees income Other fees Investment income Other revenue / Other income Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source Items included within the segment result: Interest income Interest expense Depreciation and amortisation expense Income tax expense Share of net profits/(losses) of associates and joint ventures accounted for using the equity method Fair Value gains relating to shares in listed corporations Total segment assets Total segment assets include: Investments in equity accounted associates and joint ventures Segment 1 - Distribution Segment 2 – Agency Segment 3 – United Kingdom Segment 4 – Group $’000 $’000 $’000 $’000 Total $’000 61,509 26,969 6,680 2,134 11,652 2,638 615 - 146 23,490 142 440 43 492 - - - 2,091 18,765 21,394 15,051 24,607 20,856 118,686 15,051 24,607 20,856 118,686 2,742 2,742 134 (23) (350) (1,728) - - (74) (74) 20 (190) (131) 11,281 27,822 11,281 27,822 517 1,678 (2,533) (412) (2,789) (2,307) 607 (5,099) (12,505) - - 285 285 17,311 17,311 26,367 24,189 5,625 - 1,991 58,172 58,172 13,873 13,873 1,007 (43) (1,414) (6,285) - - 176,041 39,872 296,660 158,993 671,566 6,690 - - 1,461 8,151 Total segment liabilities 152,085 36,647 281,829 55,585 526,146 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES79 Note 32: Subsequent Events Circumstances which have arisen since the end of the financial year that affect the state of affairs of the consolidated entity are detailed as follows: (a) Acquisitions 1. Griffiths Goodall Insurance Brokers Pty Ltd - On 26 July 2019, the consolidated entity acquired 100% of Griffiths Goodall Insurance Brokers Pty Ltd, a broking business in the Australia. Details of the acquisition will be disclosed at the next reporting date. The calculation of the fair value of assets is yet to be finalised and accordingly the carrying value of goodwill is yet to be determined. Consideration paid/payable Consideration and costs paid Contingent consideration Total Consideration * * Approximate $’000 38,400 9,600 48,000 2. Paragon Insurance Holdings Ltd - On 24 July 2019, the consolidated entity signed an agreement to acquire 100% of Paragon Insurance Holdings Ltd, a broking business in the United Kingdom. Completion is subject to regulatory approval. Upon completion, details of the acquisition will be disclosed at the next reporting date. The calculation of the fair value of assets is yet to be finalised and accordingly the carrying value of goodwill is yet to be determined. Consideration paid/payable Consideration and costs paid Contingent consideration Total Consideration * * Approximate $’000 62,500 12,500 75,000 3. Capital Raising - On 25 July 2019, the consolidated entity announced an institutional placement of 13,461,529 fully paid ordinary shares at $2.60 per share, raising $35 million in funds. This capital raising was completed on 6 August 2019. (b) Final dividend On 21 August 2019, the Board declared an interim dividend for 2019 of 5.2 cents per share, 100% franked. Note 33: Entity Details PSC Insurance Group Limited 96 Wellington Parade East Melbourne Victoria, 3002 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES80 DIRECTORS DECLARATION The Directors declare that the financial statements and notes set out on pages 23 to 79 are in accordance with the Corporations Act 2001, including: a. Comply with Australian Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting requirements; b. As stated in Note 1(a) the consolidated financial statements also comply with International Financial Reporting Standards; and c. Give a true and fair view of the financial position of the consolidated entity as at 30 June 2019 and of its performance for the year ended on that date. In the Directors’ opinion there are reasonable grounds to believe that PSC Insurance Group Limited will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made by the chief executive officer and chief financial officer to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2019. This declaration is made in accordance with a resolution of the Directors. Antony Robinson Director Melbourne Date: 21 August 2019 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIESINDEPENDENT AUDITOR’S REPORT 81 (cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:4)(cid:17)(cid:69)(cid:3)(cid:1012)(cid:1005)(cid:3)(cid:1005)(cid:1008)(cid:1011)(cid:3)(cid:1012)(cid:1005)(cid:1006)(cid:3)(cid:1005)(cid:1010)(cid:1008)(cid:3) (cid:4)(cid:69)(cid:24)(cid:3)(cid:18)(cid:75)(cid:69)(cid:100)(cid:90)(cid:75)(cid:62)(cid:62)(cid:28)(cid:24)(cid:3)(cid:28)(cid:69)(cid:100)(cid:47)(cid:100)(cid:47)(cid:28)(cid:94)(cid:3) (cid:47)(cid:69)(cid:24)(cid:28)(cid:87)(cid:28)(cid:69)(cid:24)(cid:28)(cid:69)(cid:100)(cid:3)(cid:4)(cid:104)(cid:24)(cid:47)(cid:100)(cid:75)(cid:90)(cid:859)(cid:94)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3) 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(cid:46)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:91)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:72)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3) (cid:68)(cid:3)(cid:86)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:3) (cid:4)(cid:374)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:115)(cid:349)(cid:272)(cid:410)(cid:381)(cid:396)(cid:349)(cid:258)(cid:374)(cid:3)(cid:87)(cid:258)(cid:396)(cid:410)(cid:374)(cid:286)(cid:396)(cid:400)(cid:346)(cid:349)(cid:393)(cid:3)(cid:4)(cid:17)(cid:69)(cid:3)(cid:1006)(cid:1011)(cid:3)(cid:1013)(cid:1011)(cid:1009)(cid:3)(cid:1006)(cid:1009)(cid:1009)(cid:3)(cid:1005)(cid:1013)(cid:1010)(cid:3) (cid:62)(cid:286)(cid:448)(cid:286)(cid:367)(cid:3)(cid:1005)(cid:1007)(cid:853)(cid:3)(cid:1010)(cid:1010)(cid:1008)(cid:3)(cid:18)(cid:381)(cid:367)(cid:367)(cid:349)(cid:374)(cid:400)(cid:3)(cid:94)(cid:410)(cid:396)(cid:286)(cid:286)(cid:410)(cid:853)(cid:3)(cid:24)(cid:381)(cid:272)(cid:364)(cid:367)(cid:258)(cid:374)(cid:282)(cid:400)(cid:3)(cid:115)(cid:47)(cid:18)(cid:3)(cid:1007)(cid:1004)(cid:1004)(cid:1012)(cid:3)(cid:3) (cid:62)(cid:349)(cid:258)(cid:271)(cid:349)(cid:367)(cid:349)(cid:410)(cid:455)(cid:3)(cid:367)(cid:349)(cid:373)(cid:349)(cid:410)(cid:286)(cid:282)(cid:3)(cid:271)(cid:455)(cid:3)(cid:258)(cid:3)(cid:400)(cid:272)(cid:346)(cid:286)(cid:373)(cid:286)(cid:3)(cid:258)(cid:393)(cid:393)(cid:396)(cid:381)(cid:448)(cid:286)(cid:282)(cid:3)(cid:437)(cid:374)(cid:282)(cid:286)(cid:396)(cid:3)(cid:87)(cid:396)(cid:381)(cid:296)(cid:286)(cid:400)(cid:400)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3)(cid:94)(cid:410)(cid:258)(cid:374)(cid:282)(cid:258)(cid:396)(cid:282)(cid:400)(cid:3)(cid:62)(cid:286)(cid:336)(cid:349)(cid:400)(cid:367)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3) (cid:87)(cid:349)(cid:410)(cid:272)(cid:346)(cid:286)(cid:396)(cid:3)(cid:87)(cid:258)(cid:396)(cid:410)(cid:374)(cid:286)(cid:396)(cid:400)(cid:3)(cid:349)(cid:400)(cid:3)(cid:258)(cid:374)(cid:3)(cid:258)(cid:400)(cid:400)(cid:381)(cid:272)(cid:349)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:296)(cid:349)(cid:396)(cid:373)(cid:400)(cid:3) (cid:68)(cid:286)(cid:367)(cid:271)(cid:381)(cid:437)(cid:396)(cid:374)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:94)(cid:455)(cid:282)(cid:374)(cid:286)(cid:455)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:87)(cid:286)(cid:396)(cid:410)(cid:346)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:4)(cid:282)(cid:286)(cid:367)(cid:258)(cid:349)(cid:282)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:17)(cid:396)(cid:349)(cid:400)(cid:271)(cid:258)(cid:374)(cid:286)(cid:878)(cid:3)(cid:3)(cid:69)(cid:286)(cid:449)(cid:272)(cid:258)(cid:400)(cid:410)(cid:367)(cid:286)(cid:3) (cid:4)(cid:374)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:373)(cid:286)(cid:373)(cid:271)(cid:286)(cid:396)(cid:3)(cid:381)(cid:296)(cid:3)(cid:17)(cid:258)(cid:364)(cid:286)(cid:396)(cid:3)(cid:100)(cid:349)(cid:367)(cid:367)(cid:455)(cid:3)(cid:47)(cid:374)(cid:410)(cid:286)(cid:396)(cid:374)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES82 INDEPENDENT AUDITOR’S REPORT (continued) (cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:4)(cid:17)(cid:69)(cid:3)(cid:1012)(cid:1005)(cid:3)(cid:1005)(cid:1008)(cid:1011)(cid:3)(cid:1012)(cid:1005)(cid:1006)(cid:3)(cid:1005)(cid:1010)(cid:1008)(cid:3) (cid:4)(cid:69)(cid:24)(cid:3)(cid:18)(cid:75)(cid:69)(cid:100)(cid:90)(cid:75)(cid:62)(cid:62)(cid:28)(cid:24)(cid:3)(cid:28)(cid:69)(cid:100)(cid:47)(cid:100)(cid:47)(cid:28)(cid:94)(cid:3) (cid:47)(cid:69)(cid:24)(cid:28)(cid:87)(cid:28)(cid:69)(cid:24)(cid:28)(cid:69)(cid:100)(cid:3)(cid:4)(cid:104)(cid:24)(cid:47)(cid:100)(cid:75)(cid:90)(cid:859)(cid:94)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3) (cid:100)(cid:75)(cid:3)(cid:100)(cid:44)(cid:28)(cid:3)(cid:68)(cid:28)(cid:68)(cid:17)(cid:28)(cid:90)(cid:94)(cid:3)(cid:75)(cid:38)(cid:3)(cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:46)(cid:72)(cid:92)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3) (cid:43)(cid:82)(cid:90)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:68)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3) (cid:44)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) Refer to Note 14: Intangible Assets and Note 2: Critical accounting estimates and judgements(cid:3) (cid:44)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:7)(cid:20)(cid:19)(cid:27)(cid:17)(cid:20)(cid:80)(cid:3) (cid:11)(cid:7)(cid:28)(cid:24)(cid:17)(cid:26)(cid:80)(cid:3) (cid:76)(cid:81)(cid:3) (cid:41)(cid:60)(cid:20)(cid:27)(cid:12)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:76)(cid:86)(cid:72)(cid:29)(cid:3) (cid:882) (cid:7)(cid:28)(cid:24)(cid:17)(cid:19)(cid:80)(cid:3) (cid:82)(cid:73)(cid:3) (cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:11)(cid:7)(cid:27)(cid:24)(cid:17)(cid:19)(cid:80)(cid:3) (cid:41)(cid:60)(cid:20)(cid:27)(cid:30)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71) (cid:7)(cid:20)(cid:22)(cid:17)(cid:20)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:76)(cid:86)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:11)(cid:7)(cid:20)(cid:19)(cid:17)(cid:25)(cid:80) (cid:76)(cid:81)(cid:3)(cid:41)(cid:60)(cid:20)(cid:27)(cid:12)(cid:17) (cid:76)(cid:81) (cid:882) (cid:38)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3) (cid:79)(cid:76)(cid:86)(cid:87)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:89)(cid:72)(cid:85)(cid:3) (cid:68)(cid:3) (cid:20)(cid:19)(cid:16) (cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:17)(cid:3)(cid:3) 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(cid:87)(cid:349)(cid:410)(cid:272)(cid:346)(cid:286)(cid:396)(cid:3)(cid:87)(cid:258)(cid:396)(cid:410)(cid:374)(cid:286)(cid:396)(cid:400)(cid:3)(cid:349)(cid:400)(cid:3)(cid:258)(cid:374)(cid:3)(cid:258)(cid:400)(cid:400)(cid:381)(cid:272)(cid:349)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:296)(cid:349)(cid:396)(cid:373)(cid:400)(cid:3) (cid:68)(cid:286)(cid:367)(cid:271)(cid:381)(cid:437)(cid:396)(cid:374)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:94)(cid:455)(cid:282)(cid:374)(cid:286)(cid:455)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:87)(cid:286)(cid:396)(cid:410)(cid:346)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:4)(cid:282)(cid:286)(cid:367)(cid:258)(cid:349)(cid:282)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:17)(cid:396)(cid:349)(cid:400)(cid:271)(cid:258)(cid:374)(cid:286)(cid:878)(cid:3)(cid:3)(cid:69)(cid:286)(cid:449)(cid:272)(cid:258)(cid:400)(cid:410)(cid:367)(cid:286)(cid:3) (cid:4)(cid:374)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:373)(cid:286)(cid:373)(cid:271)(cid:286)(cid:396)(cid:3)(cid:381)(cid:296)(cid:3)(cid:17)(cid:258)(cid:364)(cid:286)(cid:396)(cid:3)(cid:100)(cid:349)(cid:367)(cid:367)(cid:455)(cid:3)(cid:47)(cid:374)(cid:410)(cid:286)(cid:396)(cid:374)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES83 (cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:4)(cid:17)(cid:69)(cid:3)(cid:1012)(cid:1005)(cid:3)(cid:1005)(cid:1008)(cid:1011)(cid:3)(cid:1012)(cid:1005)(cid:1006)(cid:3)(cid:1005)(cid:1010)(cid:1008)(cid:3) (cid:4)(cid:69)(cid:24)(cid:3)(cid:18)(cid:75)(cid:69)(cid:100)(cid:90)(cid:75)(cid:62)(cid:62)(cid:28)(cid:24)(cid:3)(cid:28)(cid:69)(cid:100)(cid:47)(cid:100)(cid:47)(cid:28)(cid:94)(cid:3) (cid:47)(cid:69)(cid:24)(cid:28)(cid:87)(cid:28)(cid:69)(cid:24)(cid:28)(cid:69)(cid:100)(cid:3)(cid:4)(cid:104)(cid:24)(cid:47)(cid:100)(cid:75)(cid:90)(cid:859)(cid:94)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3) (cid:100)(cid:75)(cid:3)(cid:100)(cid:44)(cid:28)(cid:3)(cid:68)(cid:28)(cid:68)(cid:17)(cid:28)(cid:90)(cid:94)(cid:3)(cid:75)(cid:38)(cid:3)(cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:46)(cid:72)(cid:92)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3) (cid:43)(cid:82)(cid:90)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:68)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3) (cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) Refer Note 23: Business Combinations(cid:3) (cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:54)(cid:38)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:3) (cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:74)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)(cid:7)(cid:20)(cid:20)(cid:17)(cid:26)(cid:80)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3) (cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:15)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:29)(cid:3) • • (cid:46)(cid:72)(cid:92)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72) (cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:30) • (cid:58)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71) (cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:30) (cid:36)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72) (cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72) (cid:86)(cid:75)(cid:72)(cid:72)(cid:87)(cid:15)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:15) (cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:68)(cid:80)(cid:83)(cid:79)(cid:72)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:86)(cid:30) (cid:41)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:30) (cid:41)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:3)(cid:82)(cid:88)(cid:87)(cid:30) • (cid:42)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:69)(cid:68)(cid:85)(cid:74)(cid:68)(cid:76)(cid:81) • • (cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:30) (cid:50)(cid:88)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:15)(cid:3)(cid:68)(cid:80)(cid:82)(cid:81)(cid:74)(cid:86)(cid:87)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:86)(cid:29)(cid:3) • (cid:53)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82) • (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:30) (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:85)(cid:72)(cid:68)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:81)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:71)(cid:75)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87) (cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:89)(cid:68)(cid:81)(cid:87)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3)(cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:68)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:29) o (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:36)(cid:36)(cid:54)(cid:37)(cid:22)(cid:29)(cid:3)Business Combinations(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)(cid:72)(cid:81)(cid:86)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:30) o (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72) (cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:72)(cid:87)(cid:75)(cid:82)(cid:71)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:76)(cid:81) (cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72) (cid:82)(cid:73)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71) 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(cid:62)(cid:349)(cid:258)(cid:271)(cid:349)(cid:367)(cid:349)(cid:410)(cid:455)(cid:3)(cid:367)(cid:349)(cid:373)(cid:349)(cid:410)(cid:286)(cid:282)(cid:3)(cid:271)(cid:455)(cid:3)(cid:258)(cid:3)(cid:400)(cid:272)(cid:346)(cid:286)(cid:373)(cid:286)(cid:3)(cid:258)(cid:393)(cid:393)(cid:396)(cid:381)(cid:448)(cid:286)(cid:282)(cid:3)(cid:437)(cid:374)(cid:282)(cid:286)(cid:396)(cid:3)(cid:87)(cid:396)(cid:381)(cid:296)(cid:286)(cid:400)(cid:400)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3)(cid:94)(cid:410)(cid:258)(cid:374)(cid:282)(cid:258)(cid:396)(cid:282)(cid:400)(cid:3)(cid:62)(cid:286)(cid:336)(cid:349)(cid:400)(cid:367)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3) (cid:87)(cid:349)(cid:410)(cid:272)(cid:346)(cid:286)(cid:396)(cid:3)(cid:87)(cid:258)(cid:396)(cid:410)(cid:374)(cid:286)(cid:396)(cid:400)(cid:3)(cid:349)(cid:400)(cid:3)(cid:258)(cid:374)(cid:3)(cid:258)(cid:400)(cid:400)(cid:381)(cid:272)(cid:349)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:296)(cid:349)(cid:396)(cid:373)(cid:400)(cid:3) (cid:68)(cid:286)(cid:367)(cid:271)(cid:381)(cid:437)(cid:396)(cid:374)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:94)(cid:455)(cid:282)(cid:374)(cid:286)(cid:455)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:87)(cid:286)(cid:396)(cid:410)(cid:346)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:4)(cid:282)(cid:286)(cid:367)(cid:258)(cid:349)(cid:282)(cid:286)(cid:3)(cid:3)(cid:878)(cid:3)(cid:3)(cid:17)(cid:396)(cid:349)(cid:400)(cid:271)(cid:258)(cid:374)(cid:286)(cid:878)(cid:3)(cid:3)(cid:69)(cid:286)(cid:449)(cid:272)(cid:258)(cid:400)(cid:410)(cid:367)(cid:286)(cid:3) (cid:4)(cid:374)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:373)(cid:286)(cid:373)(cid:271)(cid:286)(cid:396)(cid:3)(cid:381)(cid:296)(cid:3)(cid:17)(cid:258)(cid:364)(cid:286)(cid:396)(cid:3)(cid:100)(cid:349)(cid:367)(cid:367)(cid:455)(cid:3)(cid:47)(cid:374)(cid:410)(cid:286)(cid:396)(cid:374)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES84 INDEPENDENT AUDITOR’S REPORT (continued) (cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:4)(cid:17)(cid:69)(cid:3)(cid:1012)(cid:1005)(cid:3)(cid:1005)(cid:1008)(cid:1011)(cid:3)(cid:1012)(cid:1005)(cid:1006)(cid:3)(cid:1005)(cid:1010)(cid:1008)(cid:3) (cid:4)(cid:69)(cid:24)(cid:3)(cid:18)(cid:75)(cid:69)(cid:100)(cid:90)(cid:75)(cid:62)(cid:62)(cid:28)(cid:24)(cid:3)(cid:28)(cid:69)(cid:100)(cid:47)(cid:100)(cid:47)(cid:28)(cid:94)(cid:3) (cid:47)(cid:69)(cid:24)(cid:28)(cid:87)(cid:28)(cid:69)(cid:24)(cid:28)(cid:69)(cid:100)(cid:3)(cid:4)(cid:104)(cid:24)(cid:47)(cid:100)(cid:75)(cid:90)(cid:859)(cid:94)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3) (cid:100)(cid:75)(cid:3)(cid:100)(cid:44)(cid:28)(cid:3)(cid:68)(cid:28)(cid:68)(cid:17)(cid:28)(cid:90)(cid:94)(cid:3)(cid:75)(cid:38)(cid:3)(cid:87)(cid:94)(cid:18)(cid:3)(cid:47)(cid:69)(cid:94)(cid:104)(cid:90)(cid:4)(cid:69)(cid:18)(cid:28)(cid:3)(cid:39)(cid:90)(cid:75)(cid:104)(cid:87)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3) (cid:44)(cid:73)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:72)(cid:71)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:73)(cid:68)(cid:70)(cid:87)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:17)(cid:3)(cid:3) Responsibilities of the Directors for the Financial Report (cid:55)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:74)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:87)(cid:85)(cid:88)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Corporations Act 2001 (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:74)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:87)(cid:85)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:85)(cid:72)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:85)(cid:68)(cid:88)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3) (cid:72)(cid:85)(cid:85)(cid:82)(cid:85)(cid:17)(cid:3)(cid:3) (cid:44)(cid:81)(cid:3) (cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:15)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3) 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(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3)(cid:43)(cid:82)(cid:90)(cid:72)(cid:89)(cid:72)(cid:85)(cid:15)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71) 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(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:22)(cid:19)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:15)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:19)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Corporations Act 2001(cid:17)(cid:3)(cid:3) Responsibilities 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(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:19)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Corporations Act 2001(cid:17)(cid:3)(cid:50)(cid:88)(cid:85)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) 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(cid:4)(cid:374)(cid:3)(cid:349)(cid:374)(cid:282)(cid:286)(cid:393)(cid:286)(cid:374)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:373)(cid:286)(cid:373)(cid:271)(cid:286)(cid:396)(cid:3)(cid:381)(cid:296)(cid:3)(cid:17)(cid:258)(cid:364)(cid:286)(cid:396)(cid:3)(cid:100)(cid:349)(cid:367)(cid:367)(cid:455)(cid:3)(cid:47)(cid:374)(cid:410)(cid:286)(cid:396)(cid:374)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3) PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES86 SHAREHOLDER INFORMATION As required under the ASX Listing Rules, the Directors provide the following information. Shareholding Analysis (a) Distribution of Shareholders At 12 August 2019, the distribution of shareholdings was as follows: Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Securities % 251,845,432 95.66 9,400,667 1,199,439 794,968 41,186 3.57 0.46 0.30 0.02 263,281,692 100.00 No. of holders 92 288 148 260 118 906 % 10.15 31.79 16.34 28.70 13.02 100.00 (b) Substantial Shareholders The number of shares held by the substantial shareholders listed in the Company’s register of substantial shareholders as at 12 August 2019 were: Name Mrs Melissa Jane Dwyer Austin Superannuation Pty Ltd Glendale Dwyer Pty Ltd Wilson Asset Management Group (held through nominees) Number of Shares 65,714,555 35,440,600 34,616,522 12,883,591 (c) Class of shares and voting rights At 12 August 2019, there were 906 holders of ordinary shares in the Company. All of the issued shares in the capital of the parent entity are ordinary shares and each shareholder is entitled to one vote per share. PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES87 (d) Twenty Largest Shareholders (At 12 August 2019): Rank Shareholder Number of Shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Mrs Melissa Jane Dwyer HSBC Custody Nominees (Australia) Limited Austin Superannuation Pty Ltd Glendale Dwyer Pty Ltd National Nominees Limited J P Morgan Nominees Australia Pty Limited Mr Michael David Gunnion & Mrs Debra Lee Gunnion Walker Insurance & Financial Services Pty Ltd Locust Fund Pty Ltd Namarong Investments Pty Ltd Citicorp Nominees Pty Limited Uyb.com Pty Ltd Rubi Holdings Pty Ltd Aust Executor Trustees Ltd Dead Grateful Pty Ltd BNG Family Pty Ltd UBS Nominees Pty Ltd BNP Paribas Noms Pty Ltd Mr Joshua Martin Reid HSBC Custody Nominees (Australia) Limited - A/C 2 65,714,555 37,273,769 35,440,600 34,616,522 12,115,533 11,105,128 4,453,669 4,451,168 4,006,539 3,967,731 3,268,010 2,617,479 2,250,000 1,728,133 1,577,715 1,577,715 1,365,867 1,236,546 1,170,299 930,155 PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES88 CORPORATE INFORMATION Directors Brian M Austin (Independent Non-Executive Chairman) Paul R Dwyer (Non-Executive Director, Deputy Chairman) Antony D Robinson (Managing Director) John R Dwyer (Executive Director) Melvyn S Sims (Independent Non-Executive Director) Group Secretary Stephen G Abbott Registered Office 96 Wellington Parade East Melbourne, Victoria, 3002 W: www.pscinsurancegroup.com.au Auditors Pitcher Partners Level 13, 664 Collins Street Docklands, Victoria, 3008 Share Registry Link Market Services Ltd Tower 4, 727 Collins Street Melbourne, Victoria, 3008 Stock Exchange Listing PSC Insurance Group Limited shares are listed on the Australian Stock Exchange with ASX Code : PSI PSC INSURANCE GROUP LIMITED AND CONTROLLED ENTITIES

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