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27[th] September 2013

The Company Announcements Platform Australian Securities Exchange

Austbrokers Annual Report 2013

Please find attached the Austbrokers Annual Report 2013 including the Financial Report for the year ended 30[th] June 2013.

Yours sincerely,

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S.S. Rouvray Company Secretary Austbrokers Holdings Limited

For further information, contact Steve Rouvray Tel: (02) 9935 2201

Mobile: 0412 259 158

This announcement may contain forward looking statements relating to future matters, which are subject to known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of Austbrokers and the Austbrokers Group to be materially different from those expressed in this announcement. Except as required by law and only to the extent so required, neither Austbrokers nor any other person warrants that these forward looking statements relating to future matters will occur.

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2013 AnnuAl RepoRt

STATEMENT Of PURPOSE

Austbrokers is a leading network of general insurance broking, underwriting agencies and financial services operations represented in over 180 locations across Australia and New Zealand. Austbrokers member firms provide quality advice on general insurance, financial services and risk management products to all client sectors in the broader community.

ViSiON & MiSSiON

Austbrokers mission is to create a leading national insurance insurance-related group, providing members of that group with all of the back office and marketing support they require to allow them to focus on customer service, innovation and growth.

Austbrokers will continue to build its unique network of independently operated businesses with every member of that network committed to meeting each client’s needs.

With business partners all over the country, Austbrokers delivers value to customers, employees and the partners themselves while providing increasing returns to shareholders.

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1 AUSTBROKERS 2013 ANNUAL REPORT

Contents

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Vision & Mission	1
2013 Highlights	4
Chairman’s Leter	4
Board Of Directors	5
Managing Director’s Report	7
Management Team	8
Chief financial Oficer’s Report	9
insurance Broking Operations	11
Acquisitions & Mergers	12
A & i Member Services	13
Broker Network Steering Commitee	14
Broking firm Presence	15
Broker Network	21
Austagencies	31
Austbrokers Group Services & Support	35
information Technology	36
Corporate Social Responsibility	37
financial Report	38
Directors’ Report	39
Auditor’s independence Declaration	52
Corporate Governance Statement	53
income Statement	57
Statement Of Comprehensive income	58
Statement Of financial Position	59
Statement Of Cash flows	60
Statement Of Changes in Equity	61
Notes To The financial Statements	63
Directors’ Declaration	118
independent Auditor’s Report	119
ASX Additional information	120
AGM Reminder information	121
Corporate Directory	122

AUSTBROKERS 2013 ANNUAL REPORT 2

Chairman’s Letter

Dear Shareholder

This past year was a significant one for Austbrokers. We witnessed the changing of the baton from Lach McKeough to our new Chief Executive Officer, Mark Searles. Lach’s retirement was the culmination of an extraordinary 27 years as the Company’s CEO. Lach has led the Company from its birth through its growth to listing as a public company, now with a market cap in excess of $600 million. At the same time, the Group and Network have built on Austbrokers’ reputation as a reliable and professional organisation whose clients always come first. Lach’s has been a truly outstanding contribution.

The appointments continue the addition of experienced senior executives to the Group that has been occurring over the past few years.

The need for renewal will equally apply to your Board. As part of this process, we propose to appoint two new directors and are therefore seeking an increase in the limit on directors’ fees to allow this as well as bringing directors’ fees into alignment with the market. Phil Shirriff has decided not to stand for reelection at this year’s Annual General Meeting. Phil is a former Chief Executive Officer and Director of ING Australia, and its predecessor, Mercantile Mutual Group. He was one of the founding fathers of Austbrokers. Alongside Lach, Phil not only oversaw the growth of the Company and Network but has provided important guidance to the Group and the Board since listing. We believe that the Company is now mature enough to move forward notwithstanding the loss of Phil’s experience and advice but his Board colleagues will miss his insightful views. We will have an opportunity at the AGM to thank Phil for his many years of service to the Company.

Lach agreed to stay on to assist with the transition to Mark’s leadership, a task which has now been successfully completed.

Mark Searles comes from a strong background in insurance and technology innovation and is well known in the insurance industry having most recently been General Manager Broker & Agent and Chief Commercial Officer with CGU Insurance Limited. We are already seeing the impact of his leadership.

Whilst Austbrokers and its partner network remain focused on sustainable growth, we continue to recognise the need for renewal and investment in the development of the business to meet the rapidly changing marketplace. Mark has been charged by the Board with the task of reviewing strategies and the resources required to successfully execute this process. As a result, the Group has created a number of new positions including Sunil Vohra as Chief Operating Officer, and Keith McIvor, as Chief Broking Officer. Sunil was the Director of Sales Operations at CGU Insurance, and Keith a former Managing Director of OAMPS and Executive General Manager of Crombie Lockwood, one of New Zealand’s largest broking firms.

Austbrokers has continued its consistently strong financial performance through our eighth year as a listed company. Our strong partnerships with our key stakeholders has enabled us to again deliver outstanding increases in profits, earnings per share, dividends and share price growth.

Although headline Net Profit after Tax increased to $41.2 million, a 61% increase over last year, this was inflated by a number of accounting adjustments relating to the acquisition of further equity in associates. Excluding these adjustments Net Profit after Tax increased 17% over last year.

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Net profit
2013 after tax
HiGHLiGHTS (MiLLiONS)
.6
2010
5
1
2012
2
2 8.
. 2
1
2011
2
4
14.
2013
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61% IncReAse In net pRofIt AfteR tAx to $41.2 mIllIon foR the yeAR ended 30 June 2013

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3 AUSTBROKERS 2013 ANNUAL REPORT

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As a consequence the Directors have declared a final franked dividend of 24.5 cents per share, payable in October. This, together with the interim dividend of 11 cents, is a dividend for the full year of 35.5 cents and represents a 14.5% increase. Earnings per share showed underlying growth of 13.7% over last year.

The Austagencies’ underwriting agency business also continued its acquisition program with 90% of Lawsons Underwriting Australasia and 91% of Guardian Underwriting Services. These specialise in the labour hire and hospitality industries respectively.

For the full year, Austagencies performed very well with a 23% increase in its contribution to the group profit, largely as a result of the development of new businesses including a jointly owned Strata Plan underwriting agency and growth in its existing agencies.

Shareholders have enjoyed substantial returns since listing with total shareholder returns of 37.6% per annum for the last five years. Given the economic conditions and the state of the investment markets, this is a strong performance.

It is pleasing that this acquisition program for both the Network and Austagencies has been achieved whilst increasing dividends and maintaining a conservative gearing ratio of not more than 20%.

The Group had a successful year in its acquisition activity with some 19 individual acquisitions ranging from smaller bolt on portfolios to larger brokers. The most significant of these was 77.1% equity in InterRISK, a medium sized broker specialising in the corporate area. Equity of 50% in new members BGA Insurance Brokers, based in Hobart, and Dalby Insurance Brokers was also acquired. Acquisitions have continued in the new financial year with 50% equity in WRI Insurance Brokers in July. We welcome all the new partners to our Network.

On behalf of the Board I would like to emphasise the contribution to the Group’s success from our partners in the broking network and agency businesses and their employees. Their enthusiasm, expertise and dedication are significant drivers of Austbrokers’ success.

The excellent results achieved for the year give the Board confidence that the development of the business will continue to enhance Austbrokers’ position as Australia’s leading broker network.

Despite increasing our equity in four of our businesses, Austbrokers remains committed to the ‘Owner – Driver’ model. Our intention is that we will sell down part of our interests to new or existing principals to reinforce the model. Consistent with this philosophy additional equity was acquired in three partner businesses by existing and new partners during the year including through capital contributions to fund acquisitions.

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R A Longes Chairman

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DiviDeNDs earNiNgs
per share per share
(CENTS) (CENTS)
72.2 cents peR shARe eARnIngs
totAl dIvIdend of 35.5 cents whIch
foR the fInAncIAl yeAR, 55.9%
RepeRsents A 14.5% IncReAse on
Above lAst yeAR
.0 6.3
2010 2010
1
2 3
2012 2012
3 4
5 2. 5.
3
2
. 5 .
5
2011 2011
2
2 3
3 7
5. 9.
5 6
2013 2013
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totAl dIvIdend of 35.5 cents whIch RepeRsents A 14.5% IncReAse on lAst yeAR’s dIvIdend

AUSTBROKERS 2013 ANNUAL REPORT 4

Board of Directors

OVER THE PAST yEAR, PARTNERSHiPS AND iNNOVATiON HAVE BEEN iMPORTANT STRATEGiC THEMES fOR AUSTBROKERS

phillip shirriff

Richard Longes Chairman

Age 68

Age 67

Non-Executive Director

Richard was a lawyer with Freehill Hollingdale & Page and a Partner from 1974 to 1988. In 1988, Richard was a founding partner of Wentworth Associates, a boutique corporate advisory firm.

Phillip has over 40 years’ experience in the financial services industry and was formerly the Chief Executive Officer of ING Financial Services International - Asia/Pacific and a director of ING. From 1985 to 1995, Phillip was Managing Director of the Mercantile Mutual Group (now ING).

Richard is a non-executive director of Investec Bank Australia Limited and is currently a director of Boral Limited and Metcash Limited. Richard has been a director of a number of public companies and government bodies including Chairman of MLC Limited as well as the responsible entity of the General Property Trust.

Phillip has been on the board of Austbrokers since 1986 Phillip previously has held a number of directorships including ING Bank (Australia) Limited (Chairman), ING Australia Limited and ING NZ (Holdings) Limited (including subsidiaries and certain committees).

Richard has a Bachelor of Laws and a Bachelor of Arts from The University of Sydney and a Masters of Business Administration from The University of New South Wales.

Phillip has a Bachelor of Arts (Econ/Finance) from Macquarie University and an Associate Diploma Life from the Australian Insurance Institute. He is a Fellow of CPA Australia and Fellow of the Institute of Chartered Secretaries and Administrators.

mark searles Age 52 Chief Executive Officer & Managing Director (from January 2013)

Age 52

Ray carless Age 58 Non-Executive Director

Mark joined Austbrokers on 1st January 2013. Prior to this he was General Manager, Broker & Agent at CGU where he was responsible for CGU’s intermediary distribution capabilities and was responsible for over $1.9 billion of gross written premium. Prior to this role he was CGU's Chief Commercial Officer & General Manager for Retail. Mark as also held senior management roles in the UK at Zurich Financial Services, Sage Group PLC, Lloyds TSB Group where he was CEO of CSL/ Goldfish/Goldfish Bank, the UK’s leading direct-tocustomer financial services group.

Ray was appointed to the Board of Directors on 1st October 2010.

Ray has been a director of a number of companies involved in the Australian insurance industry since 2000, and is currently chairman of The Mortgage Insurance Company Ltd.

Mark holds a Diploma in Market Research, a Diploma in Advertising and Marketing a Post Graduate Diploma in Marketing Studies. In addition he has undertaken the Executive Development Programme, IMD Lausanne and the AICD Advanced Board Ready programme and AICD Diploma.

Ray has a Bachelor of Economics from The University of Sydney and is a member of the Australian Institute of Company Directors.

david harricks

Age 67

Non-Executive Director

David Harricks was a Financial Services Partner at Pricewaterhouse Coopers for 23 years, specialising in the Insurance Industry. He has been a director of a number of companies including Lumley General Insurance Ltd. He has also been a member of three Compliance Committees of the Commonwealth Bank of Australia Group.

Presently David is the Chairman of the Austbrokers Audit and Risk Management Committee.

David has a Bachelor of Arts degree from Macquarie University, a Bachelor of Commerce from The University of New South Wales and is a Fellow of The Institute of Chartered Accountants in Australia.

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5 AUSTBROKERS 2013 ANNUAL REPORT

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riCharD loNges
Chairman
ray Carless
Non-Executive Director
Mark searles
Chief Executive Officer
& Managing Director
phillip shirriff
Non-Executive Director
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DaviD harriCks Non-Executive Director

AUSTBROKERS 2013 ANNUAL REPORT 6

Managing Director’s Report

In 2012 I was delighted to be invited to lead a Group with such a successful track record as Austbrokers Holdings and I am pleased that FY2013 was another successful year. The strength of the business model as well as the diversity and capabilities of the individual broking, financial services and underwriting agency businesses has again generated outstanding results. The Austbrokers partnership model continues to reward to all stakeholders including our equity partners.

The 17% growth in underlying net profit after tax before amortisation was a considerable achievement in a market where moderate premium rate increases in property lines were evident but rates were fairly flat in liability classes.

A total of 19 acquisitions were made during the financial year, including 3 new Network Members. In November, a 50% equity stake in BGA Insurance Brokers, based in Hobart, was acquired followed by the acquisition of 50% ownership in Dalby Insurance Brokers in April. The largest acquisition was InterRISK Australia in which 77.1% of the equity was acquired in June. These acquisitions bring further geographical and sector diversity to the Group. All up, in excess of $40 million was spent on direct acquisitions during the year and since year end a 50% interest in WRI Insurance Brokers, based in Parramatta, has been acquired.

Profits from the broking network were up 17.6%. This growth was assisted by higher profit commissions paid by underwriters, direct and bolt-on acquisitions (reduced by acquisition expenses), increases in equity in existing brokers, some increase in premium rates as well as an increase in market share.

Austagencies, the over-arching brand for the underwriting agency businesses, has also shown excellent growth with its contribution to group profit increasing by 23% largely due the continued development of the business with new joint venture agencies being established. The recent acquisitions of Lawsons Underwriting Australasia and Guardian Underwriting Services in May, although only contributing marginally this year due to acquisition costs, will assist growth in following periods. Austagencies continue to build up resources to ensure future growth.

In August 2012, an arrangement in relation to premium funding was entered into with Hunter Premium Funding for a period of 5 years. This provides the opportunity to increase earnings from assisting our clients with the financing of their insurance premiums.

The joint venture with IBNA has been successful in achieving its objectives and with both parties support will continue to do so.

The first six months of my tenure have been taken up reviewing strategy and determining the resources required to achieve those strategic objectives. It was evident that the Group, having grown significantly over the past few years, was in need of additional resources to take advantage of all the opportunities that the market is offering. Accordingly we have made a number of senior management appointments in July and August 2013 including a Chief Operating Officer, a Chief Broking Officer, a Marketing and Communications Manager and an additional Partner Development Manager. These appointments will add to our core bench strength and assist management in delivering the support to our broker network that will enable it to continue to grow.

Technology is a key enabler in achieving business growth through improved efficiency and over the last 12 months additional resources have been applied to this area. The focus has been on developing business intelligence reporting to assist in development of the broking businesses and also increasing business efficiency through the use of the iClose platform.

The outlook for the next financial year is characterised by the expectation of moderate premium rate increases continuing, somewhat uncertain economic conditions especially impacting SME businesses and a lower interest rate environment. The results next year will benefit from the contribution from acquisitions completed in 2013 and expected growth in the business but lower interest rates are likely to have a negative impact. In addition while profit commissions made a significant contribution this year they cannot be predicted. Our expectation for the 2014 financial year is that moderate growth will still be achieved.

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M P L Searles CEO & Managing Director

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7 AUSTBROKERS 2013 ANNUAL REPORT

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stepheN rouvray
Chief financial Officer
greg arMs
General Manager Partner Development
fabiaN pasquiNi
General Manager Acquisitions & Mergers
Craig pattersoN
Managing Director Austagencies
theo steveNs
Chief information Officer
keith MCivor
Chief Broking Officer
suNil vohra
Chief Operating Officer
fraNk gualtieri
National Manager Business Centre
AUSTBROKERS 2013 ANNUAL REPORT
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AUSTBROKERS 2013 ANNUAL REPORT

Chief financial Officer’s Report

i AM PLEASED TO REPORT TO

Operating Results

SHAREHOLDERS THAT NET PROfiT AfTER TAX (NPAT) fOR THE yEAR ENDED 30 JUNE 2013 wAS $41.2 MiLLiON REPRESENTiNG AN iNCREASE Of 60.7% OVER THE 2012 fiNANCiAL yEAR.

Revenue for the year was $180 million, up almost 44% on 2012. Whilst acquisitions contributed, the increases in equity in companies that were associates now results in their revenue and expenses being shown in the consolidated financial statements rather than just their equity accounted profits.

While the year saw hardening of rates across property classes of insurance business, premium rate increases in other areas were limited and generally only moderate during the year. Acquisition activity was strong through the year but the stand alone acquisitions were largely in the latter part which, together with the requirement to expense acquisition costs, limited their contribution to the year’s results.

This profit includes adjustments to the carrying value of associates of $12.001 million, after tax profits on sale of portfolios, interests in associates and controlled entities and contingent consideration adjustments of $0.272 million. The profit for last year also included an income tax credit arising from recognition of a deferred tax asset in relation to prior years' share based payment expense. If the above mentioned items, together with the amortisation of intangibles are excluded (as shown in the Operating and Financial Review), the net profit (Adjusted NPAT) was $32.075 million in 2013 (2012: $27.395 million).

Growth from the broker network, contributed 16.6% to the 17.1% profit growth reflecting both direct and bolt on acquisitions, increases in equity in existing brokers and business development initiatives undertaken by individual brokers.

The network’s growth in base commission and fee income was around 3% to 4% (excluding acquisitions). Total commission and fee income increased by 4.9% and total income was also up 6.4% over the prior period (excluding direct acquisitions). Expenses in the broker network increased by 4.1% (excluding direct acquisitions). This reflected some increase as a result of bolt on acquisitions within the network and direct expenses related to income growth, as well as some inflationary increase in costs.

Earnings per share (EPS) of 72.2 cents represented an increase of 56% over the prior corresponding period (this increase was 13.7% based on Adjusted NPAT). This is the seventh year in succession since the company was listed on the Australian Securities Exchange in 2005 that it has delivered strong growth in NPAT and EPS for shareholders.

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Growth in Growth in
earnings per share NPAT
2013 13.7% 17.1%
2012 11.9% 15.0%
2011 12.8% 18.1%
2010 9.2% 12.0%
2009 14.5% 14.7%
2008 18.4% 18.5%
on an Adjusted NPAT basis
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9 AUSTBROKERS 2013 ANNUAL REPORT

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Underwriting agency profits were up by 23% on 2012 contributing 3.5% of overall growth. Commission and fee income increased by 32%, of which, start up businesses contributed 14% and acquisitions 4% with 14% from growth in existing businesses. Profit shares received from underwriters were down 32% on 2012. Overall, new start up businesses and acquisitions contributed 66% of the profit increase and 9% of total profits.

Corporate expenses were up $2.7 million, 30% over the prior year due to expensing of acquisition costs, increased spend in the information technology area to assist the network gain efficiencies and business advantage and some transitionary cost for the change over in CEO. This reduced profit growth by 5.2%. Borrowing costs increased only marginally which was more than offset by corporate interest earned.

Balance Sheet

The loan facility by St. George Bank was renegotiated to extend to 30 May 2016. This was set at $40 million of which $5 million is undrawn at 30 June 2013. With free cash held of around $7 million, $12 million would be available for future acquisitions. This assumes that the Dividend Reinvestment Plan will be underwritten for the final dividend. With debt from related companies included, total Group debt is $52.9 million and gearing ratio is 18.7% (debt to debt plus equity). In addition debt in associates amounts to $44 million in total.

m $180 Revenue up 44% on 2012 ¢ per 35.5 share totAl dIvIdend foR the yeAR ended 30 June 2013

Dividend

A final dividend of 24.5 cents per share fully franked (up 14% on the 2012 final dividend) has been declared by the board of directors and is payable on 24 October 2013 to shareholders registered in the company’s register of members at 5pm on 3 October 2013.

The total dividend for the year of 35.5 cents per share represents an increase of 12.9% on 2012, exceeding earnings per share growth of 14.5% based on Adjusted NPAT. The payout ratio on the latter basis increased from 62% to 64%.

The company’s Dividend Reinvestment Plan (DRP) will be open to shareholders entitled to participate in the 2013 final dividend. Shares will be issued under the DRP at a 2.5% discount to the 5 day volume weighted average price. The last day to elect for participation is 2 October 2013. It is proposed to have the Plan underwritten for the final dividend subject to satisfactory arrangements being made.

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S S Rouvray Chief Financial Officer

17.1[%] AdJusted npAt gRowth oveR 2012

23[%] IncReAse In undeRwRItIng Agency pRofIts on 2012

AUSTBROKERS 2013 ANNUAL REPORT 10

insurance Broking Operations

Business is placed with all major insurers including Allianz, CGU (a subsidiary of IAG), QBE, Vero (Suncorp), Zurich and with Lloyd’s of London, as well as most other insurers and underwriting agencies operating in the Australian market.

Insurance broking is the Austbrokers Group’s core business generating 90% of the Group’s revenues for the year ending 30 June 2013.

Currently there are 46 broking and financial services groups in the Austbrokers Network:

The performance of the Network during the year has again been very good with an increase in income of 7.6% and a 17.6% increase in contribution to Group profit. This was achieved through a combination of direct and bolt on acquisitions as well as organic growth. Austbrokers had one of its most active periods of acquisition over the last year with 3 new network members, additional equity was acquired in Insurics (now 100%), Adroit (68.5%), Austbrokers Canberra (85%) and Comsure (80%). These acquisitions were made largely to facilitate the retirement of existing partners. In line with promoting our owner driver model we transferred out 100% shareholding in Austbrokers Gladstone to 50% owned Rivers Insurance Brokers which has other operations in North Queensland.

3: wholly owned • 22: 50% owned

• 20: 51% - 90% owned • 1: 47.5% owned

The Austbrokers ‘Owner – Driver’ model involves proprietors retaining the day to day management of the business along with a significant ownership stake. Many of the businesses replicate this model with subsidiaries or associates, where the managers have some level of equity. Partner Development Managers are appointed to the Board’s of Directors and work closely with the business Principals in relation to strategy and the performance of the business.

Austbrokers supports its member firms with strategic advice, information technology services including a datacentre, business development, marketing assistance, risk management and compliance systems and services. The Austbrokers Business Centre also offers back office services such as full accounting and payroll.

Part of the Austbrokers strategy has been to diversify its service offering into other related areas. Austbrokers holds equity in a standalone financial services business, Austbrokers Financial Solutions which has grown through the acquisition of the Taggart business in July 2012 also acquired Capital Wealth’s life business in May 2013. As part of this process the manager took up 20% equity by providing funds for the acquisition.

Further, through its joint venture with IBNA, A & I Member Services (AIMS), develops products and provides services and negotiates remuneration terms with underwriters on a group basis. AIMS also arranges and manages a leading edge professional indemnity insurance program for the Network.

The broking network also includes a number of businesses which have established subsidiaries which operate life insurance, superannuation and in a few cases financial planning businesses. These vary in scale and the stage of development but are seen as an important aspect of servicing clients in all their insurance needs.

The Austbrokers Members are located throughout Australia. They manage clients across a diverse range of industries with both general and specialised products. Austbrokers’ members service the SME segment of the market and place business for a number of significant corporate clients and individuals. A number of brokers are experts and specialise in areas including mining and construction, heavy motor transport, professional insurances, aviation, trade credit and surety.

The brokers continue to promote premium funding with their clients to assist in cash flow, providing what is essentially short term financing for commercial insurance premiums, allowing businesses to pay premiums in monthly installments. During the year an arrangement was entered into with Hunter Premium Funding as a preferred supplier and there has been a continuing focus on developing this business which provides significant income to the Group.

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toNy Clark Partner Development Manager

greg arMs General Manager Partner Development

roN broaDbeNt Partner Development Manager

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11 AUSTBROKERS 2013 ANNUAL REPORT

Acquisitions & Mergers

Austbrokers has grown from inception since 1985 with consistent acquisition activity. FY2013 has been one of Austbrokers most active periods with a total of 19 acquisitions.

The largest acquisition was a 77.1% equity holding in InterRISK Australia. InterRISK provides Insurance and Risk services to a number of corporate and industrial clients including a number of ASX 200 listed Companies. Strategically, this acquisition has provided further corporate expertise to the Network and has also enabled Austbrokers to further broaden and diversify its earnings.

Other direct acquisitions included 50% equity in BGA Insurance Brokers, Dalby Insurance Brokers and, on 1 July 2013 WRI Insurance Brokers. Each of these businesses brings strategic value to Austbrokers. BGA is the first Austbrokers partner in Tasmania, Dalby, located in Queensland, enhances the regional and rural Australian footprint, and WRI, based in Western Sydney, boosts the presence and expertise in the Motor Dealers and Motor Trade industries.

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niGel thomAs Partner Development Manager

The Austagencies business has also been active, acquiring 90% equity in Lawson’s Underwriting Australasia and 91% of Guardian Underwriting which have added profitable niche providers to the Austagencies stable which delivers on its ongoing strategy of growth in targeted speciality products.

In FY2014, Austbrokers will receive the benefit of a full twelve months profit income from the direct acquisitions.

The Austbrokers Partner businesses continue their entrepreneurial focus and as Owner Drivers, have been successful this year in achieving fifteen acquisitions in their own right. An example of Austbrokers capability to tailor a transaction to suit all stakeholders was PB Broking Queensland. In this acquisition, Austbrokers negotiated and managed a split of the PB Broking portfolio with the corporate clients bought by Strathearn Insurance Brokers and the SME clients were bought by MGA Insurance Brokers.

Merger and acquisition activity, and competition, has increased in the last twelve months with more business owners considering their future and subsequently researching their options. The Austbrokers proven track record in successfully identifying, executing and integrating acquisitions continues to differentiate it from the competition and will continue to attract future opportunities.

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FABiAn PAsquini General Manager Acquisitions & Mergers

AUSTBROKERS 2013 ANNUAL REPORT 12

A & i Member Services

A & I Member Services Pty Ltd (AIMS) was established in 2007 to provide services for the collective benefit of 120 members from Austbrokers and IBNA networks placing premium of over $2.8 billion on behalf of their clients. Austbrokers supports AIMS with the provision of five management staff.

The strategic purpose of AIMS is to:

deliver leading insurance products, industry tools, business intelligence, training and education, in a way that drives commercial access between our brokers and insurance partners;
generate measurable growth for brokers and insurers.

Practice committees are drawn from the member brokers around the country, providing knowledge and resource support in key services. These include Members’ Professional Indemnity; the Annual Business Convention; Insurance Product Development and tailored broking practice training programs.

Leading Products

AIMS has developed advantageous policies to cover the six major products required by clients. Our network members issue Austbrokers branded policies for Commercial & Business Packages, Private and Commercial Motor, Domestic Home and Contents, Industrial Special Risks and General Liability.

These six products generate in excess of 60% of the total client policy sales by broker members. The contents are regularly reviewed by the Insurance Products Committee for effectiveness and market-competitive status. To achieve the best results for brokers, AIMS works closely with LMI Group, a leading insurance technical and loss advisory practice in Australia.

An additional suite of specialised products available to the Austbrokers network includes Management Liability, Corporate Travel, Equipment Breakdown and Heavy Motor Transport.

Business Intelligence

The AIMS intranet continues to be an effective communication and knowledge management tool for Austbrokers across the country.

AIMS has commissioned an independent market research firm to conduct online surveys of our brokers every six months to track brokers opinions about products and service from insurers. These results are used by insurers in planning their service delivery to AIMS members.

Training & Education

AIMS continues to provide residential training courses for Senior Management and Account Management practitioners. Partnering with the principal insurance partners, insurance market training days have been held in each capital city with over 900 broking and insurance company attendees.

Members’ Professional Indemnity Insurance Program

This program is a key service to members. With stable security, it provides an acknowledged market-leading policy wording, a cost-effective structure and high limits of liability to protect participating broker members and shareholders. The program utilises a blend of specialist insurers in the Australian and London markets. All members of the PI committee have relevant expertise in stewardship of this complex policy placement.

Commercial Access

The Annual AIMS Business Convention is a high profile forum for partner networking and promotion of risk and insurance solutions. Approximately 510 delegates and business partners attended in 2013.

Measurable Growth

In representing our broker members to insurers, AIMS recognises that, for the security of the insurance consumer, growth and profitability for our members must be complemented by the growth and profitability of the insurance market. AIMS executives and the management of the principal insurance partners hold regular performance reviews. Growth in policy placements and income generated continues to be satisfactory for all parties.

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13 AUSTBROKERS 2013 ANNUAL REPORT

Broker Network Steering Committee

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tiM CoNsiDiNe Committee Chairman & ViC Representative

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aNtoNy gallagher wA/SA Representative

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DoN tiCkle QLD Representative

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Matt DrisColl NSw Representative

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steve Markey Regional NSw Representative

the AustbRokeRs netwoRk steeRIng commIttee undeRtAkes the ImpoRtAnt tAsk of beIng the bRIdge fRom the netwoRk to the heAd offIce teAm to fAcIlItAte communIcAtIons And AId pRIoRItIsAtIon.

Representatives from each State are formally elected by the Network Partners and are joined by the Austbrokers operations team members.

The individual Network members meet regularly in State based meetings which facilitate discussions around local market activity, sharing of ideas and best practice, briefing on current activities. Trends and appropriate information is raised and discussed at the Network Steering Committee. The process ensures that the communication flow from the Network is relevant, structured and receives the appropriate attention.

The collaborative approach between the Austbrokers Head Office team and its Partner businesses facilitates working cohesively to improve operational, marketing, information technology and human resources activities and processes.

AUSTBROKERS 2013 ANNUAL REPORT 14

The Austbrokers Family

The AusTbrokers fAmily is represenTed in over 180 locATions ThroughouT AusTrAliA & new ZeAlAnd.

Its strong network can be found throughout capItal cItIes, metropolItan and regIonal australIa, wIth presence In new Zealand.

act

VIctorIa

northern terrItory

• Canberra • Fyshwick

Ballarat • Maryborough

• Darwin

Bayswater • Melbourne • Bendigo • Mildura

new south wales

Queensland

Moorabbin
Chadstone

• Manly

Albury

• Maroochydore

Brisbane
Docklands • Portland • Doncaster • Surrey Hills • Epping • Traralgon • Frankston • Warrnambool • Geelong • Wodonga

• Miranda

Armidale
```
 - Rockhampton
```
- Burleigh Heads
Mona Vale
Artarmon
Cairns, Innisfail
- Roma
Narrabri
Baulkham Hills
- Surfers Paradise
Caboolture
Bega • Newcastle
Dalby
Toowong
Campbelltown • North Sydney
- Toowoomba
Eight Mile Plains
Castle Hill • Nowra
Townsville
Fortitude Valley

western australIa

Coffs Harbour • Orange

• Woolloongabba

Gladstone
Coonabarrabran • Parramatta
Broome • Perth

• Mackay

Coonamble
Port Macquarie
```
 - Stirling
```
- Bunbury
St Leonards
Dubbo
Subiaco
Burswood

south australIa

Shellharbour
Forbes
- Cunderin • Wembley • Geraldton • West Perth • Katanning
Booleroo Centre • Moonta
Forster • Tamworth
- Mount Gambier
Ceduna
Griffith • Taree
Clare
- Naracoorte
Tuggerah
Hornsby
```
 - Leederville • Mandurah • Moora
```
- Port Lincoln
Cummins
Hurstville • Tumut
Dulwich
- Port Pirie
Walgeett
Kempsey
- Tumby Bay
Loxton
Lismore • Wagga Wagga • Liverpool
Narrogin
Mile End
Northam

tasmanIa

• Hobart

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15 AUSTBROKERS 2013 ANNUAL REPORT

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new ZeaLand

Auckland • Newmarket • Rotorua • Christchurch • New Plymouth • Taihape • Dunedin • Northcote • Takapuna • East Hastings East Hastings • North Shore • Tauranga
East Hastings East Hastings
Palmerston North • Timaru
Invercargill
- Wanaka
Papakura
Masterton
- Wellington
Parnell
Meadowbank
Whakatane
Mount Eden
Riccarton

AUSTBROKERS 2013 ANNUAL REPORT 16

The Austbrokers family

when you JoIn AustbRokeRs, you ARe JoInIng the AustbRokeRs fAmIly whIch Is used to descRIbe Its 48 busInesses And 1700 stAff AcRoss 120 locAtIons. the AustbRokeRs fAmIly gRew fRom Its begInnIngs of pRedomInAntly fAmIly owned And Run busInesses. AustbRokeRs undeRstAnds And suppoRts the unIque nAtuRe of fAmIly Run busInesses often wIth multIple geneRAtIons woRkIng wIthIn the busIness.

the sense of fAmIly, belongIng And Respect descRIbes the cultuRe of AustbRokeRs todAy. heRe ARe A few fAmIlIes wIthIn the AustbRokeRs fAmIly And theIR stoRIes.

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17 AUSTBROKERS 2013 ANNUAL REPORT

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The Brown Family has been connected with the Austbrokers the Family since 1987, the sixth broker to join the group. Peter started the business in March 1982 with a staff of 1. In 31 brown years, the business has grown to a staff of 23 and has, at times, included 3 of his 4 children, Scott is currently General Manager and will become Managing Director next year, family Samantha, is a Broking Assistant, and Georgina, ultimately ran the Claims Department and now works with a well known broking company in Melbourne. All three commenced with the company on completing their schooling. Although Peter says that he didn’t pressure the kids into the business, he believes that most parents who start their own companies would like to be able to pass it on to the next generation. Peter ensured that each of the kids started in the business learning from the bottom up. Samantha says “I was always interested in it. There was never anything else I wanted to do, and when it’s the family business, it’s all you ever hear about when you are growing up.” Scott describes working in the family business as a privilege and an honour and speaks of his father’s success with admiration. “We all get along really well in the office, it just seems to work. I don’t know how, but I think it’s mainly down to Dad seeing the next generation coming through. And he’s open to new ideas” says Scott. Peter says “I recognise Scott is now representing the next generation and is taking the business where it should be heading. The most important decision I made after commencing the business was agreeing to join the Austbrokers network back in 1987. Austbrokers welcomed family involvement in the business from the beginning, but more importantly, have supported and encouraged Scott’s succession at management level”.

Scott describes his relationship with Austbrokers “In recent years, Austbrokers has been able to demonstrate in our business the ability to dovetail the bigger efficiencies and support mechanisms without affecting the family management or succession of our business. Following the untimely passing of our financial controller a few years ago, Austbrokers was able to take on the back office administration of our firm and deliver a very high level of service. This was quickly followed with the migration to the data centre which allowed us greater reliability and security across our three branches. These benefits paid off once again following the recent floods which saw the Wagga office closed due to the threat of damage from the floodwaters. “Our first day closed was pay day and to know that all your staff were paid as usual was a great comfort as they have commitments that need to be met. On top of this, we still paid our general accounts as well and insurers. The Data centre also gave us additional relief as our Tumut and Griffith branches which were still trading were not reliant on a server that would have previously been in the disrupted Wagga offices. These benefits and services have allowed us to maintain our teams' focus of delivering customer service, even during times of major upheaval. It is a fantastic position to be in knowing your partners in business have your back.”

the driscoll family

Phil Driscoll started his insurance broking career in 1985 with Finsura Insurance Brokers, after almost 20 years with Mercantile Mutual Insurance Co. In 1990, Phil had the opportunity to buy out his partners in Finsura having introduced Austbrokers Holdings in 1987 as a corporate partner as he had seen the benefits others had derived from the Owner Driver model.

By 1996 Phil’s son Matthew joined the Finsura business after being introduced into the industry via a cadetship at Mercantile Mutual. The pair have worked closely together and built a successful modern broking operation in Sydney’s Castle Hill. Together with Austbrokers involvement, Phil mentored Matthew and helped grow his skills as a broker and business leader.

A disciplined succession process has been achieved in the business with Matthew taking over the reins as MD in 2008 and Phil continuing on as Executive Chairman. The family influence was established in the early days of the business with Phil’s wife Carmel being an important part of the business, working as a life risk adviser within Finsura’s life insurance division.

Of the Austbrokers involvement, Phil Driscoll says “Austbrokers have been a great help to me since becoming my partner in 1987. Having a business that has encouraged family involvement, requires a certain understanding and approach in order to get the best results. Austbrokers understands these idiosyncrasies and has been an excellent partner for growth and leadership.” Reporting from the next generations perspective, Matthew Driscoll describes, “Being part of the Austbrokers family has been a huge benefit. We quite often share knowledge and ideas on how to improve business. I’ve been able to access other experienced business owners through our involvement in Austbrokers, and there is no doubt in my mind that the spirit of family assistance is embedded within the Austbrokers Network.”

In 2000 Matthew’s wife, Leana, joined the business. In 1993, Leana, started her career as a trainee working for her father Leo Bahlmann in his brokerage. She completed her Associate Diploma and Diploma in Financial Services working for her father as an Assistant Account Manager. In 2000, when Leo retired, he sold his portfolio to Finsura, where Leana worked as an Account Manager. Today, she continues to work part-time in conjunction with raising the family and supporting the Management and Administration Teams.

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In the late 1980’s Frances and Amanda joined their father frances John Connolly in his business, Financial Insurance Services, where they learned the craft of insurance broking and running a family business. In 1992, Austbrokers Holdings purchased terry & a shareholding in Financial Insurance Services in suburban Melbourne, and so began a long term partnership with the amanda Connolly family. In 2005 John retired after close to sixty years in the insurance industry and in 2007, FIS was merged with the Adroit Insurance Group . connolly Today, both ladies continue to be a part of the broader Austbrokers Family. Frances holds a senior position within the Compliance and Support Services area within Austbrokers Holdings, and Amanda continues the family broking heritage in her role as Operations Manager at Adroit Insurance Group in Doncaster Melbourne.

Of their family involvement Frances says "Dad was very proud of his achievements as an insurance professional and the family business he created. When he sold part of the business to Austbrokers we stayed in our roles and continued to develop. Today, as part of the Austbrokers family we enjoy flourishing careers that have provided ongoing personal growth and opportunity. We're confident that Dad would be pleased to see that we have continued our career path as part of an organisation that understands and respects family values and dynamics. There's no doubt that the Austbrokers Family culture is real and has a tangible value that is ingrained within this organisation."

AUSTBROKERS 2013 ANNUAL REPORT 20

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austbrokers abs
Specialising in: Corporate, Commercial,
SME, Affinity/ Associations, Strata,
Bloodstock and Workers Compensation.
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austbrokers aeI
Specialising in: Manufacturing,
Retail, Professional Risks,
Construction & Transport.
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austbrokers abs aviation
Specialising in: Aviation
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21 AUSTBROKERS 2013 ANNUAL REPORT

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austbrokers aeI transport

Specialising in: Heavy Transport, Owner Operators, Warehousing & Logistics, Civil Contractors & Earthmoving, Workers Compensation.

austbrokers central coast

Specialising in: Small Medium Enterprises, Sporting Clubs, Heavy Transport, Taxi Fleets, Not For Profits, Aged & Child Care.

austbrokers canberra

Specialising in: Construction, Transport, Motor Vehicle Dealerships, SME Sector, Registered Clubs.

austbrokers bga Services include: General Insurance and Commercial

austbrokers ce mcdonald

Specialising in: Retail Motor Dealer Networks, Market Stall Holders in conjunction with Market Organisers.

AUSTBROKERS 2013 ANNUAL REPORT 22

austbrokers city state

Specialising in: Engineering,Transport, Turf Farming,Construction Industries.

austbrokers coast to coast

Specialising in: Small to Medium Enterprise, Petroleum, Transport, Food Processing Industries.

austbrokers financial solutions

Specialising in: Business Succession Planning, Personal & Family Protection Strategies, Life Insurances, Corporate Superannuation

dalby Insurance brokers Specialising in: Agricultural, Earthmoving, Commercial.

austbrokers countrywide Specialising in: Insurance Advice, Risk Management, Financial Solutions.

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23 AUSTBROKERS 2013 ANNUAL REPORT

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austbrokers hcI

Specialising in: Small Business, Truck Fleets, Personal Insurance, Business Insurance and Financial Planning.

austbrokers phillips

Specialising in: Workers Compensation, Timber Industry, Adventure Leisure, Transport, Health & Safety Industry.

austbrokers premier

Specialising in: Timber, Pet, Construction Industries, Medical Practises, Business Brokers, Professional Services, Hospitality.

austbrokers ntIb

Specialising in: Rural Insurance, Wool Industry, Agricultural Services, Professional Risks, Property Owners.

austbrokers ncfs

Specialising in: Construction, Manufacturing, Mining Industries, Retail Businesses.

AUSTBROKERS 2013 ANNUAL REPORT 24

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----- Start of picture text -----

austbrokers risk
& Insurance services
Specialising in: Bus and Coach Industry, austbrokers rwa
Rural and Workers Compensation
Specialising in: Farm & Crop Insurance,
Nursing Homes.
austbrokers southern
Specialising in: Rural, Fishing,
Forestry, Construction Industries.
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----- Start of picture text -----

austbrokers professional services
Specialising in: Professional Risks Insurance,
Professional Indemnity and D&O/Management
Liability Insurance.
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----- Start of picture text -----

austbrokers spt
Specialising in: Broad Based
Insurance Broking Services.
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25 AUSTBROKERS 2013 ANNUAL REPORT

austbrokers trade credit

Specialising in: Trade Credit Insurance.

adroit Insurance group

austbrokers terrace

Specialising in: Supermarkets, Hardware, Trades, Builders, Manufacturers, Engineers, Hotels, Accountants.

Specialising in: Rail Industry, Dental Industry.

austral risk services

Specialising in: Taxis, Small Charter Vehicle, Learner Drivers, Industrial/ Commercial Enterprises.

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AUSTBROKERS 2013 ANNUAL REPORT 26

fergusons Insurance brokers

Specialising in: Small to Medium Businesses.

carriers Insurance brokers

Specialising in: The Transport Industry.

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comsure Insurance brokers

Specialising in: Industrial/Commercial, SME Businesses, Trades.

citycover

Specialising in: Transport, Plant & Machinery, Caravan Restaurant and Eco Tourism Industries.

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country wide Insurance brokers

Specialising in: Rural, Farm Machinery Dealers, SME Sector.

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AUSTBROKERS 2013 ANNUAL REPORT

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Insurance advisernet australia

Specialising in: All General Insurance Products.

finsura

Specialising in: Commercial Ski Lodges, Nanny Agencies, Pet Industry.

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Insurics

Specialising in: Rail, Transport & Logistics, Earthmoving and Civil Contractors.

InterrIsk

Specialising in: Corporate, Retail, Manufacturing, Marine, Aviation, Construction, Groups and Associations, Property, Hospitality.

Jmd ross Insurance brokers Specialising in: Jewellers Block, Professional Indemnity.

AUSTBROKERS 2013 ANNUAL REPORT 28

markey group

Specialising in: Small to Medium Enterprise, Financial Institutions, Professional Risks, Heavy Plant & Machinery, Crane & Construction Industries.

peter L brown & associates Specialising in: SME, Rural, Professional Services, Construction.

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mgIb
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Specialising in: Tourism & Hospitality.

mga Insurance brokers Specialising in: Strata, Commercial, Transport Industry, Rural.

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oxley Insurance brokers Specialising in: Business Insurances, Workers Compensation, Life Risk Insurance, Financial Planning.

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29 AUSTBROKERS 2013 ANNUAL REPORT

strathearn Insurance brokers

Specialising in: Construction, Mining & Resources, Financial Services, Engineering, Aviation, Clinical Trials & Life Science, Heavy Machinery.

srg corporate

Specialising in: All Commercial Business, Sport & Recreation, Construction & Mobile Plant & Machinery.

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western united
financial services
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Specialising in: Heavy Transport.

wrI Insurance brokers

Specialising in: Motor Dealer and Motor Trades

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rivers Insurance brokers & far north Insurance brokers

Specialising in: Property Development, Construction, Commercial Property, Professional Services, Commercial Manufacturer, Plantations, Marine, Tourism, Agricultural.

AUSTBROKERS 2013 ANNUAL REPORT 30

Austagencies Underwriting Agencies

Austagencies Pty Ltd is wholly owned by Austbrokers Holdings Limited and contributes 16% to Austbrokers total net profit before tax. Austagencies underwrite, distribute and manage specific niche insurance products and portfolios on behalf of locally licensed insurance companies including Lloyd’s.

The underwriters within the Austagencies team are all specialists in specific insurance products or industry sectors, enabling them to understand and evaluate the risks presented by brokers and offer tailored and competitive solutions, specific to each client’s risks. Austagencies holds long term underwriting agency contracts with major insurers including AAI (Vero), Allianz, CGU, Lloyd’s, Lumley, Great Lakes Australia, QBE and WR Berkley.

Gross premium written by Austagencies in the past 12 months was in excess of $220 million. Its growth in net profit has increased by over 20% for the fourth year in succession and includes insurer profit commissions for underwriting the business to target profit levels.

In the past 3 years Austagencies has acquired 7 new underwriting agencies and invested in a further 7 start ups providing local & Lloyd’s insurers with access to new and differentiated product and sources of distribution.

Austagencies has 15 underwriting agency’s offering over 42 specialised product lines transacted through insurance brokers and tailored to the needs of their clients.

This specialisation strategy benefits all stakeholders in the transaction chain:

Insured clients are delivered a policy that responds specifically to their exposures;
Insurance brokers receive strategic input on opportunities for new business and the retention of existing business;
Insurers are able to sidestep the high degree of commoditisation by using an external agency

Austagencies deals only with the professional insurance broker market and has a history of profitable underwriting on behalf of the insurers. Over the past 12 months Austagencies received in excess of $1,500,000 in profit commission and claims handling fee revenue reinforcing its ability to grow both its top and bottom line profitably.

Acquisitions

In May 2013 Austagencies acquired 90% of Lawsons Underwriting Australasia, an underwriting agency with operations Australia wide. Lawsons is a leading labour hire and casualty specialist underwriting agency in the Australian market and has built an enviable brand in this segment where it is able to provide solutions to many brokers and clients requiring a level of technical and product sophistication. This business fits within the Austagencies high specialisation model.

At the same time Austagencies acquired Guardian Underwriting a niche hospitality underwriting agency based in Melbourne. Guardian Underwriting specialises in hotels and high quality restaurants, along with other associated lines of business including group personal accident, professional indemnity & contingency.

New product lines and updates

Austagencies identifies broker or security demand for change and develops innovative solutions to new underwriting opportunities.

In October 2012, Longitude Insurance was established solely to focus on the Domestic and Commercial Strata market in Australia backed by Vero Insurance. Experienced management and underwriters have been employed to develop this new product which has already established itself as one of the go to strata markets in Australia

Over the past twelve months Angel Accident & Health was established and has developed a new market leading product for this segment.

Start up underwriting platforms for Equipment Breakdown, Construction Insurance and Marine all continue to provide positive returns to the business.

In June 2013, one of the newest initiatives to hit the insurance market in Australia was the establishment of New Surety. This underwriting agency is backed by CGU and mandated to underwrite Bid, Performance & Maintenance bonds.

Marketing

Austagencies has developed many products branded according to the niche market it operates in. To ensure that the insurance brokers with whom Austagencies deal with are aware of our total product offering Austagencies are consolidating many existing products under a core group of brands under the Austagencies name as the principal operating entity.

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31 AUSTBROKERS 2013 ANNUAL REPORT

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Austagencies
Specialised in: Professional
Indemnity, Weekly Business
Interruption
Angel Accident health
Specialised in: Corporate
Travel, Accident
& Health
Australian bus & coach
Specialised in: Bus and coach
fleet operators; property and
liability for transport
depots
austagencIes
busInesses
operate under
the foLLowIng
brands:
cinesure
Specialised in: Film & TV
Production, errors and
omissions cover
cemac
Specialised in: Plant &
Equipment, General
Liability
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AUSTBROKERS 2013 ANNUAL REPORT 32

Austagencies Underwriting Agencies

latitude underwriting

Specialised in: Industrial Special Risks, General & Specialist Liability, Commercial Insurance Package products for the general business sector, Commercial Strata Package, Engineering, Equipment breakdown, Construction, Marine - cargo, carriers, pleasure craft, Alpine - Snowfield properties, Professional Indemnity

dolphin underwriting

Specialised in: Tourism, Accommodation, Hospitality programs

longitude Insurance

Specialised in: Domestic Strata, Commercial Strata

guardian underwriting Specialised in: Hotels & Motels, Restaurants, Cafés & takeaway food, Group Personal Accident & Contingency, Professional Indemnity

lawson underwriting Specialised in: Labour force professional liability, Host employer liability, Complex / Specialty liability

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5star underwriting Agency Specialised in: Motor dealership house accounts

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AUSTBROKERS 2013 ANNUAL REPORT

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newsurety millennium underwriting Agency Specialised in: Bid Bonds, Specialised in: Rural, , Domestic Strata, Performance Bonds, Landlords, Commercial Insurance Maintenance Bonds Package products for the general business sector, Commercial Strata Package

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celestial underwriting Agency
Specialised in: Stand alone
Crime / Fidelity, Property /
Liability for Clubs, Excess
Money / Crime
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other
JoInt Venture
partnershIps
Operating under their
own license
tasman underwriting
Specialised in: Professional
Indemnity
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sentinel
Special RiSkS
sentinel special Risks
Specialised in: Entertainment
event cancellation and
abandonment, prize
indemnity.
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AUSTBROKERS 2013 ANNUAL REPORT

Austbrokers Group Services and Support

Austbrokers Business Centre

The Business Centre is an essential part of Austbrokers support for the Member Network and Austagencies. Its services include risk management and compliance including Human Resources policy and advice.

The Business Centre was established as a central hub for Austbrokers future transformation for ‘Innovation’ and ‘Business Enablement’. It continually refines the provision of back-office services. The aim of the Business Centre is to reduce network overheads and enable the brokers sales force growth by affording them additional time to compete in the market more effectively.

The Business Centre’s service provisions now, and in the immediate future include:

Financial accounting and reporting including all tax related matters.

Management Reports are published to the intranet and the preparation of financial reports are timely and accurate. The full gamut of financial statements is prepared by the Business Centre and specific software enables consistency and audit processes are efficiently managed in the process.

2. Online HR Management & Payroll

The Business Centre has developed in conjunction with a software provider a fully integrated online HR system for the efficient recording of all HR information. The fully automated payroll system augments the HR system ensuring an efficient process is achieved for all Network Members.

The Business Centre has increased the number of businesses for which it provides services to 23 during the year.

Risk Management & Compliance

Austbrokers developed a highly specialised framework to comply with Financial Services Regulations which has been implemented by the Brokers. This has been overlaid by a risk management program and audit function to ensure ongoing compliance with requirements.

A team of compliance officers undertake annual compliance audits for each broker. These services provide a solid platform for the business operations and ensure the risks involved in both maintaining business systems and compliance with regulatory requirements are minimised and managed.

The risk and compliance framework is an automated process involving every staff member through the Network. A Risk and Compliance Committee comprising the Austbrokers compliance team and a Network Member representative meet regularly to maintain oversight of this area and report to the Board Audit Committee.

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35 AUSTBROKERS 2013 ANNUAL REPORT

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information Technology

iNSPiRiNG iNNOVATiON, GROwTH AND COLLABORATiON

The effective use of information technology has become increasingly important to the Austbrokers partner’s and underwriting agency business success. Throughout 2012 – 2013 Austbrokers Holdings Limited has transformed its practice to managing information technology by cultivating a collaborative approach to information technology with its partners. This includes identifying, managing and monitoring business trends as well as supporting a move towards an integrated shared services model which combines information technology roles with roles related to business strategy and consulting.

2. Business Intelligence

Provides the Austbrokers business partners and Austagencies with a single view of their data providing:

Greater ability to access and analyse data
Faster and more collaborative decision making
Improved performance through metrics
More accountability, with visibility into key performance indicators by line of business
Faster reaction times, when exceptions and events occur

The growing range of functionality available in technology has produced three significant business pillars in information technology:

This allows the Austbrokers partners and Austagencies to make informed choices and decisions. The information provided by the Business Intelligence team make Austbrokers more productive, its strategic partners more efficient and facilitates customer loyalty.

1. Business Solutions

Operates as a value based business model for the Austbrokers partners and Austagencies to create business led opportunities and to make more informed business assessments along with accelerating business knowledge and expertise to drive technology enablement.

3. Business infrastructure and applications

These both provide a catalogue of services offering end to end integration solutions. The business infrastructure and application team has in-house and out sourced experience on hand to provide Austbrokers with the most reliable, scalable and cost effective business class computing platform.

Business Solutions are focused on:

Preserving capital
Identifying and implementing automation in business processes and procedures across business streams

The Help Desk provides technical support to staff, and strategic partners. Since its inception the Help Desk services have been continually adapted to meet the evolving needs of an increasingly tech-savvy user base. In addition to providing assistance over the phone, the Help Desk has expanded its knowledge-base, cloud, and dialogue services.

Offering the ability to take advantage of best practices to increase productivity in a number of business streams.

The Partner businesses and underwriting agency leaders will continue to play a prominent role in guiding the implementation of technology decisions to meet the increasing expectation of quality customer service in a digital world for their clients.

AUSTBROKERS 2013 ANNUAL REPORT 36

Corporate Social Responsibility

THE AUSTBROKERS PARTNER BUSiNESSES ARE STRONG CONTRiBUTORS TO A DiVERSE GROUP Of COMMUNiTy ORGANiSATiONS, EVENT, fUNDRAiSiNG ACTiViTiES AND CHARiTiES.

Insurance Advisernet Australia: Are active supporters of the RSL Soldiers Kokoda. Since its inception in 2011, they have sponsored 60 soldiers and family members of soldiers killed in Afghanistan. In addition, 53 members of IAA and associates have also undertaken the walk. During this period $350,000 has been raised. They have also provided $80,000 across 14 charities including KidsXpress, Humpty Dumpty Foundation, Variety, Royal Far West and The Reach Foundation.

Across the Network, over $580,000 was donated to 146 organisations including international, national and local programs. In addition to the funds raised, many brokers have implemented employee programs including volunteering, workplace giving and active fundraising activities.

The Network is proud to be such strong contributors to so many worthy causes. While every contribution is significant, worthy of special mention is:

Adroit: continued to provide support to regional Victorian charities including $80,000 for the Geelong Community Foundation through their annual charity golf day, and $167,000 towards the Children’s Ward Redevelopment at Ballarat Base Hospital, in conjunction with Cotton On, through the event Run Ballarat.

Markey Group: Contribute around $70,000 to 9 charities including the Hunter Children’s Research Foundation, The Cancer Council, Life Education Gold Harold Awards and Ocsober and the Hunter Medical Research Institute.

MGA: MGA Insurance Brokers founder and Chairman John George was awarded a Medal of the Order of Australia (OAM) in the 2013 Queen’s Birthday honours. The award was given for service to the welfare of children in Cambodia. John is the Chairman of the Australia Cambodia Foundation. During the past 12 months MGA with its partners has continued its major support of the Royal Flying Doctor Service and the Australia Cambodia Foundation (ACF) with donations totalling around $70,000 to these projects. The emphasis in Cambodia has been to the ‘All Kids project’ aimed at children who, through poverty have not been attending school. The focus has been in the South of Cambodia where 350 school age kids were identified as not going to school. The project has seen 200 of these kids now attending school with the balance due to commence later this year.

Austbrokers ABS: supported the Salvation Army’s Oasis Young Parents Program through a charity dinner which raised $20,000. They also contribute monthly to a range of charities and are contributors to KIVA which provide micro-finance loans to third world countries.

Austbrokers City State: Have contributed $6,500 toward the Kidzwish Foundation which provides support to the sick, disabled and disadvantaged children in the Illawarra region.

Austbrokers Premier: for the past 3 years, Scott Hastings has been participating in the St. Vincent de Paul CEO Sleepout, raising $6,440 in June 2013 and over $13,000 over the past 3 years.

Austbrokers Financial Solutions: donated $5,000 to the Salvation Army’s Red Shield Appeal.

Peter Brown & Associates: Scott Brown is heavily involved in the Heart Kids charity. In November 2012 he organised a road bike ride with 12 local riders covering over 600kms through the Snowy Mountains raising over $87,000 for the NSW branch of Heart Kids.

Austbrokers Risk & Insurance Services: Matt Coleman participates in the Outback Car Trek. The business and Matt contribute around $8,000 for the Royal Flying Doctor Service.

Austral: Provided $18,000 support to a number of programs through Group Training Australia including WA Apprentice of the Year, Hospitality Training Showcase, and to the Kelly’s Orphanage in Cambodia.

Strathearn: In addition to donating $77,000, 2 employees worked 8 times per month at the Salvation Army Soup Kitchen in Perth.

In addition, Austbrokers Holdings donated over $46,000 to 9 charities including the Australian Cambodian Foundation, HeartKids, Create Foundation, and The Reach Foundation.

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37 AUSTBROKERS 2013 ANNUAL REPORT

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14.5[%] IncReAse on lAst yeAR’s dIvIdend

55.9[%] IncReAse In eARnIngs peR shARe

fiNANCiAL REPORT

foR the yeAR ended 30 June 2013

IncReAse In net pRofIt AfteR tAx 61%

22.7[%] IncReAse In undeRwRItIng AgencIes pRofIt

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directors’ report For the year ended 30 June 2013

Your Directors submit their report for the year ended 30 June 2013.

DIRECTORS

The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

R.A. Longes BA, LLB, MBA (Non-executive Chairman) Age 68

Richard Longes was a lawyer and partner in Freehill Hollingdale & Page from 1974 – 1988. In 1988 he was a founding Partner of the corporate advisory firm Wentworth Associates and is now a Non-executive Director of Investec Bank Australia Limited.

Presently, he is the Group Chairman, serves on the Audit and Risk Management Committee and chairs the Nomination and Remuneration and Succession Planning Committees of the Group.

P.R. Shirriff BA, FCPA, FCIS, ANZIIF (Sen) CIP Age 67

Phillip Shirriff has had over 40 years’ experience in the financial services sector and was formerly Chief Executive Officer for ING Financial Services International – Asia / Pacific and from 1985 – 1995 Managing Director of Mercantile Mutual. He was Chairman of ING Bank (Australia) Limited until April 2011 and has been a director of a number of companies including ING Australia Limited and ING NZ (Holdings) Limited. Presently he is a member of the Audit and Risk Management, Nomination and Remuneration and Succession Planning Committees.

W.L. McKeough QPIB, Adv Dip Fin Serv, MAICD, FAIM (Director and Chief Executive Officer) Age 63

Lach McKeough resigned as a director on 31 December 2012 on his retirement.

Lachlan McKeough commenced the Austbrokers business in 1985 and has been CEO since that time. Prior to this he was employed in various management roles in general insurance with Mercantile Mutual. He has over 40 years experience in the general insurance industry.

During the past three years Mr. Longes served and continues to serve as a Director of Boral Limited and was formerly a director of Metcash Limited.

Company Secretary

He is also a Director of Pain Management Research Institute.

M. P. L. Searles GAICD, DipM, Grad Dip Mktg (Director and Chief Executive Officer) Age 52

Mark Searles joined Austbrokers on 1 January 2013 as Chief Executive Officer.

Mark Searles was previously General Manager, Broker & Agent at CGU a division of IAG. Prior to this role he was Chief Commercial Officer & General Manager for Retail. From 2005-09, Mr Searles was with Zurich Financial Services where he was Managing Director, Direct and Partnerships and Chief Marketing Officer in the United Kingdom. From 2001-05 he worked for Lloyds TSB Group holding the positions of Marketing and Group Brands Director and prior to that was Managing Director, CSL/Goldfish/Goldfish Bank, the UK’s leading direct-to-customer financial services group. During the 1990s he held roles as Managing Director at MyBusiness Ltd, UK Managing Director/ Marketing Director the Sage Group Plc, Head of Marketing at HSBC Plc. During the 1980s he held a number of senior roles in marketing led organisations, including five years at American Express Europe.

R. J. Carless BEc, MAICD Age 58

Ray Carless has over 35 years’ experience in the insurance industry based in Australia but with management responsibilities throughout the Pacific Rim. Until 2000 he was Managing Director of reinsurance brokers Benfield Greig in Australia, a position he had held for over 14 years, and he had also been a director of the worldwide holding company located in London for 10 years. He has been a director of a number of companies involved in the Australian insurance industry since 2000, and is currently chairman of The Mortgage Insurance Company Ltd. Mr Carless is a member of the Audit and Risk Management, Nomination and Remuneration and Succession Planning Committees.

D.J. Harricks BA, BCom, FCA Age 68

David Harricks has over 40 years’ experience in the insurance industry. Until 2000 he was a Financial Services Partner at PricewaterhouseCoopers for 23 years specialising in the Insurance Industry. Since 2000 he has been a director of a number of companies including Lumley General Insurance Ltd. and was also a member of three Compliance Committees of the Commonwealth Bank of Australia Group. Presently he is Chairman of the Audit and Risk Management Committee and a member of the Nomination and Remuneration and Succession Planning Committees.

S.S. Rouvray BEc, CA, FCIS

S.S. Rouvray has been the Company Secretary of Austbrokers Holdings Limited for 27 years. He has also been Chief Financial Officer and Manager of Investor Relations since 2005. A Chartered Accountant for over 35 years, he was previously Company Secretary of ING Australia Holdings Limited and a number of ING Group companies 1985 – 2005 and General Manager of ING Australia Holdings Limited 2002 – 2005.

Interests in the shares and options of the company and related bodies corporate

As at the date of this report, the interests of the Directors in the shares and options of Austbrokers Holdings Limited were:

		Number of
	Number of	Options over
	Ordinary	Ordinary
	Shares	Shares
R.A. Longes	113,615	—
M. P. L. Searles	—	233,000
R. J. Carless	16,473	—
D.J. Harricks	27,000	—
P.R. Shirrif	100,000	—

PRINCIPAL ACTIVITIES

The principal activities during the year of entities within the consolidated entity were the provision of:

Insurance broking services and the distribution of ancillary products;
Insurance products through insurance underwriting agency businesses;

There has been no significant change in the nature of these activities during the year.

39 AUSTBROKERS 2013 ANNUAL REPORT

OPERATING AND FINANCIAL REVIEW

Group overview

Founded in 1985, the Group has grown consistently to become the leading listed equity-based insurance broking, underwriting and associated financial services group in Australia. Underpinning the growth is the highly successful ‘owner-driver’ model where the Group enters into partnerships with the business owner, taking an equity stake of 50% and providing a range of services to support ongoing growth. These services include technology support via a centralised data centre capability, common platforms to enable efficiency and effectiveness, back office service provision including accounting, payroll and HR support and marketing services. The group has business partnerships across Australia and New Zealand employing in excess of 1,700 people and operating in over 130 locations. A key feature of the Group is the diverse nature of its’ end-client base from individuals to large corporate entities.

The Group has equity interests in 46 broking groups and 15 underwriting agencies many of which are leaders in their respective segments.

Performance indicators

Management and the Board monitor the Group’s overall performance, from its implementation of the mission statement and strategic plan through to the performance of the Group against operating plans and financial budgets.

The Board, together with management, has identified Key Performance Indicators (KPIs) that are used to monitor performance on a regular basis. Directors receive the KPIs for review prior to each Board meeting allowing all Directors to actively monitor the Group’s performance.

Dynamics of the business

The Group operates in the insurance intermediary market sector and this sector has proved to be relatively stable over the period despite economic conditions being subdued. The group’s revenue is largely derived from commissions and fees earned on arranging insurance policies and other services. The amount of commissions earned is determined by the volume of premiums placed which in turn is affected by premium rates, sums insured and the general level of economic activity. Moderate increases in commissions and fees have been achieved during the year through increases in premium rates and initiatives undertaken to increase business volumes. This was boosted by acquisitions, both direct and within the broker network as well as underwriting agencies.

The underwriting agency business also expanded through further developing existing businesses and adding new products and agencies as well as acquisitions.

The nature of insurance, being a necessary purchase for business and individuals, makes the insurance broking business relatively resilient to changing economic conditions and the Group has not been significantly affected by the current economic conditions.

Operating results for the year

Net profit after tax attributable to equity holders of the parent increased by 60.7% to $41.203 million (2012: $25.640 million). This profit includes fair value adjustments to the carrying value of associates of $12.001 million, after tax profits on sale of interests in associates and controlled entities and contingent consideration adjustments totaling $0.276 million. The profit for last year also includes an income tax credit arising from recognition of a deferred tax asset in relation to prior years’ share based payment expense. If the above mentioned items, together with the amortisation of intangibles are excluded (as shown in the table below), the net profit (Adjusted NPAT) was $32.075 million in 2013 (2012: $27.395 million). In the table below, the Adjusted NPAT of $32.075 million is reconciled to the net profit attributable to equity holders of the parent as reported in the Income Statement.

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2013 2012
$000 $000 Increase
Adjusted NPAT attributable
to equity holders of the parent 32,075 27,395 17%
Less Net Profit after tax on
sale of interests in associates.
portfolios and controlled entities 276 192
and contingent consideration
adjustments
Less Adjustments to the
carrying value of associates 12,001
(no income tax applicable)
Income tax credit arising
from recognition of deferred — 631
tax asset on prior years share
based payment expense
Net Profit after tax before amortisation of intangibles 44,352 28,218 57%
Less Amortisation of intangibles
(3,149) (2,578)
(net of tax credit)
Net profit attributable
to equity holders of
41,203 25,640 61%
the pareNt as reported
iN the iNcome statemeNt
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* This financial information has been derived from the consolidated financial statements which have been audited by the company’s auditors.

Adjustment to contingent consideration occurs when there is a variation between the estimated and actual payment made to acquire a controlled entity or associate due to a variation in the expected results on which payment is based. If the payment is under estimated the adjustment is taken as a loss and if it is overestimated it is taken as a profit.

Profits on sale of portfolios or equity interests are essentially the result of adjustments to shareholdings required as a result of pursuing the owner driver model and fluctuate year on year depending on the circumstances arising. Portfolios may be transferred to associates for the same reasons. This year a portfolio was transferred to an entity in return for shares to form a joint venture specialist insurance broker which resulted in a profit on the portfolio transferred.

The adjustment of $12.001 million has arisen this year as a result of the Group increasing its equity in three associates where upon they became controlled entities offset by an impairment charge in relation to an associate. As required by accounting standards the carrying values for the existing investments have been adjusted to fair value and the increase included in Net profit. Such adjustments will only occur in future if further acquisitions of this type are made.

The recognition of the impairment of an associate was largely offset by an adjustment to the contingent consideration relating to that entity.

Amortisation of intangibles expense increased over last year due to acquisition activity flowing on from late last year and in the current year including increases in equity in associates. This expense is a non cash item and will fluctuate depending on the amount and timing of acquisitions.

Analysing the Adjusted NPAT increase of 17.1%, the broker network, including acquisitions, contributed 16.6% and underwriting agencies 3.5%. This was partially offset by increases in finance costs, corporate expenses and other minor costs, which reduced growth by 5.2%. A lower effective tax rate (after allowing for non deductible acquisition expenses) added 2.2%.

auStBroKerS 2013 annuaL rePort 40

directors’ report For the year ended 30 June 2013

Direct acquisitions in the broker network of BGA Insurance Brokers in October 2012, Dalby Insurance Brokers in April 2013 and InterRISK in June 2013 together with the increases in equity in existing network members, Comsure, Adroit, Austbrokers Canberra and Insurics, made up 2.5% of the 16.6% increase contributed by broking. The requirement to expense acquisition costs and the fact that the direct acquisitions were made largely in the second half of the year moderated their contribution which will flow on fully to the next financial year. Significant bolt on acquisition activity continued throughout the year within the broker network.

In the insurance broking network, total commission and fee income increased by 6.2% and total income by 7.6% over the prior year (6.4% excluding direct acquisitions). Premium funding income was up 19.3% and profit shares were 198.5% above last year. Expenses increased by 5.2% (4.1% excluding direct acquisitions). This reflects an increase as a result of bolt on acquisitions within the network, direct expenses related to income growth as well as some inflationary increase in costs.

Underwriting agencies’ profits increased by 22.7%. The acquisition of Film Insurance Underwriting Agency on 1 January 2012 and Lawsons and Guardian in May 2013 contributed 3.5% to this and new startup businesses 10.5% with 8.7% coming from existing businesses. Commission and fee income excluding acquisitions grew by 29%.

Corporate expenses excluding acquisition costs increased by 26% over the prior year largely due to increased investment in resourcing the IT area to provide the broking network with additional support and better business tools to manage and grow their businesses, transitional costs for the change in CEO, and increases in insurance costs following a review of this area.

Excluding the impact of the non deductible acquisition expenses, a lower effective tax rate increased profit growth by 2.2%. This occurred largely as a result of lower non deductible items and the recoupment of tax losses, the benefit of which had not been previously recognised.

Shareholder returns

The Group is pleased to report that return to shareholders, both through dividends and earnings per share growth, has reflected the success of the strategies employed.

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Basic earnings
Year to per share - Increase Dividend Increase
30 June cents % per share %
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30 June	cents	% p	er share	%
2013	72.2	55.9	35.5	14.5
2012	46.3	16.9	31.0	21.6
2011	39.6	12.2	25.5	13.3
2010	35.3	11.4	22.5	9.8
2009	31.7	11.0	20.5	13.9
2008	28.6	13.9	18.0	20.0
2007	25.1	25.5	15.0	15.4
2006	20.0*	N/A	13.0	N/A

* Excluding abnormal profits on sale of equity interests occurring as part of the Initial Public Offering process.

The earnings per share for the 2013 year benefited from some adjustments to fair value, profits on sale of portfolios and interests in associates as well as adjustments to contingent consideration. Earnings per share based on Net Profit after Tax before amortization of intangibles and these items, increased by 13.65% over 2012. Compound average growth rate in earnings per share over the 5 years to 30 June 2013 on this basis was 12.4%.

The company’s total shareholder return (comprising share price growth and dividends paid) reflects the positive impact the results and outlook have had on the share price with a return of 61.7% for the 2013 financial year and 45.9% for the 3 years and 37.6% for the 5 years to 30 June 2013 on an annualized basis. These returns are well above the returns for the ASX All Ordinaries and ASX 200 indices.

Financial Condition

Total equity increased to $230,398,000 from $172,290,000. The main reason for the increase was the profit for the year. The reduction in equity through dividends paid was partially offset by the increase in issued capital arising from dividends paid being reinvested as a result of the company’s dividend reinvestment plan and the issue of shares as a result of the exercise of employee share options. Equity was also increased through an increase in Non-controlling interests which is explained below.

As a result of acquisitions and increasing the equity held in former associates which are now consolidated entities, there has been a significant increase in Trade and other payables which has been more than offset by an increase in Trade and other receivables and Cash and cash equivalents – Trust. These balance sheet items largely represent premiums payable to underwriters and corresponding receivables to be collected and cash held to pay these.

Intangibles also increased as a result of the acquisitions, particularly the requirement to recognize 100% of the intangibles at market value in relation to the former associates that are now consolidated entities. The increase in Non-controlling interests reflects their interest in the increase in intangibles.

The Group continues to generate positive cash flow from operations however cash, excluding insurance trust account funds, decreased from $40,743,000 to $38,083,000 due to the record level of acquisitions achieved during the year. Borrowings increased by $18,371,000 to $52,885,000 as a result of acquisitions by the Group and existing debt of companies acquired. Borrowings of associates of $44,420,000, (2012 $41,552,000) are not included in this nor are shown on the Group balance sheet as these entities are not consolidated. The borrowings relate largely to funding of acquisitions, premium funding and other financing activities.

The Company’s banking facilities of $40,000,000 have a term to 30 May 2016 and at year end there is $5,000,000 available to be drawn down.

Gearing, which is 18.7% at year end, remains below the acceptable limit of 30% set by the Directors. The Group’s policy is to maintain sufficient cash and/or facilities to be able to respond to acquisition opportunities as they arise.

Business Strategies and Prospects for future Years

Austbrokers will continue its strategies to grow focussing on three key pillars:

grow its existing business organically.
grow its footprint in the market through acquisitions.
grow its underwriting agency business by expanding the products underwritten and extending the owner driver model to these activities.

Premium rates are expected to increase moderately in property classes and remain reasonably stable in others.

41 AUSTBROKERS 2013 ANNUAL REPORT

The acquisitions made during 2013 will add to profits for the 2014 year and already 50% of WRI Insurance Brokers has been acquired, effective on 1 July 2013. These will contribute to future growth. It does appear that acquisition opportunities will continue to arise although not at the same level as in 2013 and these also may be impacted by the level of competition in the market. The focus will be on consolidating previous acquisitions and optimising the Austbrokers operating model.

Interest earnings will again be reduced in the 2014 financial year as a result of the reductions in deposit rates which have occurred following the Reserve Bank’s reductions of the cash rate. Also the amount of profit commissions for 2014 to be paid by insurers will depend on their claims experience for future periods and therefore cannot be predicted.

The Group is also investing in additional resources to add to management strength to assist the broker network and agency businesses to expand their businesses and operate more efficiently. This will add to costs in the next financial year.

In general, the short term outlook for the economy remains uncertain which, if it seriously impacts small and medium enterprises, may make trading conditions more difficult. Organic growth, bolstered by acquisitions, should provide moderate growth in 2014 over the 2013 financial year in net profit after tax before amortisation of intangibles, fair value adjustments, profit or losses on sale of equity interests and any adjustment to contingent acquisition payments. The extent of that growth will be impacted by the level of future acquisitions, the extent that profit commissions will be paid and the movement in interest rates.

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DIVIDENDS Cents $000
Final dividend recommended:
• on ordinary shares 24.5 14,247
Dividends paid in the year:
• on ordinary shares - interim 11.0 6,339
• on ordinary shares - final 21.5 12,053
18,392
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RISK MANAGEMENT

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified by the Board. As it is considered that all non executive directors should be part of this process, they all serve on the Audit and Risk Management Committee.

The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with risks identified by the Board. These include the following:

Board approval of the strategic plan, which encompasses the Group’s vision, mission and strategy statements designed to meet stakeholders’ needs and manage business risk.
Implementation of Board approved operating plans and budgets and monitoring of progress against these budgets, including the establishment and monitoring of key performance indicators of both a financial and non financial nature.
The establishment of a committee to specifically review, monitor and report on risk.

The company has identified a series of operational risks which the company believes to be inherent in the industry in which the company operates and these are set out in the Operating and Financial Review. These risk areas are provided to assist investors to understand better the nature of the risks faced by the company and the insurance broking industry. They are not necessarily an exhaustive list. These include:

loss of key broking employees and / or lack of skilled replacements
significant consolidation of underwriters
significant increase in premium rates reducing demand
acquisition risks
availability
performance
licensing and regulatory compliance breaches

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.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 27 August 2013 the Directors of Austbrokers Holdings Limited declared a final fully franked dividend on ordinary shares of 24.5 cents per share in respect of the 2013 financial year. Based on the current number of ordinary shares on issue, the total amount of the dividend is $14,246,500.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company is not subject to any particular or significant environmental regulation under laws of the Commonwealth or of a State or Territory.

change in insurer remuneration practices for brokers
commoditization of business insurance products
significant change in method of distributing insurance products by underwriters
fraud and embezzlement of company funds.

SHARE OPTIONS

All options are granted over shares in the ultimate controlling entity Austbrokers Holdings Limited.

Unissued shares

As at the date of this report, there were 667,853 unissued ordinary shares under options. Refer to note 18 of the financial statements for further details of the options outstanding.

Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate.

Options

The Company’s second tranche of options vested fully on 25 September 2009 and are required to be exercised no later than 25 September 2013. The exercise price for each option was $3.47. During the year 298,200 options were exercised leaving 49,350 unexercised at reporting date.

auStBroKerS 2013 annuaL rePort 42

directors’ report For the year ended 30 June 2013

The third tranche of options fully vested on 14 September 2010 and are required to be exercised no later than 14 September 2014. The exercise price for each option was $4.20. During the year 317,300 options were exercised leaving 202,900 unexercised at reporting date.

The fourth tranche of 142,729 options vested on 29 September 2011 and no further options vested on the retest date of 29 September 2012. All options must be exercised no later than 29 September 2015. During the year 33,340 options were exercised leaving 14,404 unexercised at reporting date. The exercise price for each option remaining was zero.

The earliest vesting date for the fifth tranche of 78,817 options is 3 November 2012. Options totaling 49,655 vested on that date and were exercised leaving 29,162 outstanding at reporting date. If options are exercised within two years of the date the options vest the shares cannot be disposed of before the expiry of the two year period from the date the options vested, except if employment is terminated. All options must be exercised no later than 3 November 2016. The exercise price for each option was zero for all of the options.

The earliest vesting date for the sixth tranche of 67,771 options is 31 October 2013. If options are exercised within two years of the date the options vest the shares cannot be disposed of before the expiry of the two year period from the date the options vested, except if employment is terminated. All options must be exercised no later than 31 October 2017. The exercise price for each option was zero for all of the options.

The earliest vesting date for the seventh tranche of 56,591 options is 31 October 2014. If options are exercised within two years of the date the options vest the shares cannot be disposed of before the expiry of the two year period from the date the options vested, except if employment is terminated. All options must be exercised no later than 5 October 2018. The exercise price for each option was zero for all of the options.

The earliest vesting date for the eighth tranche of 38,320 options is 31 October 2015. If options are exercised within two years of the date the options vest the shares cannot be disposed of before the expiry of the two year period from the date the options vested, except if employment is terminated. All options must be exercised no later than 5 October 2019. The exercise price for each option was zero for all of the options.

A further grant of 233,000 options was made on 15 January 2013 with an earliest vesting date of 1 January 2016. If options are exercised within two years of the date the options vest the shares cannot be disposed of before the expiry of the two year period from the date the options vested, except if employment is terminated. All options must be exercised no later than 1 January 2020. The exercise price for each option was zero for all of the options.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During or since the end of the financial year, the company has paid premiums in respect of a contract insuring all the Directors and Officers of Austbrokers Holdings Limited against liabilities, past, present and future.

In accordance with normal commercial practice, the disclosure of the total amount of premiums under and the nature of the liabilities covered by the insurance contract is prohibited by a confidentiality clause in the contract.

REMUNERATION REPORT

This remuneration report ending on page 50, which has been subject to audit, outlines the remuneration arrangements in place for Directors and Executives of Austbrokers Holdings Limited (the company).

The Remuneration Report for the year ending 30 June 2012 received shareholder support at the 2012 AGM with a strong vote in favour.

Remuneration philosophy

The performance of the company depends upon the quality of its Directors and Executives. To prosper, the company must attract, motivate and retain highly skilled Directors and Executives.

To this end, the company embodies the following principles in its remuneration framework:

Provide competitive rewards to attract high caliber executives;
Link executive rewards to shareholder value;
Have a significant portion of executive remuneration ‘at risk’, dependent upon meeting pre-determined performance benchmarks; and
Establish appropriate, demanding performance hurdles for variable executive remuneration.

Remuneration and Succession Planning Committee

The Remuneration and Succession Planning Committee of the Board of Directors of the company is responsible for determining and reviewing compensation arrangements for the Directors, the Chief Executive Officer (CEO) and Senior Management Team.

Remuneration structure

Shares issued as a result of the exercise of options

During the financial year, employees exercised options to acquire 298,200 fully paid shares in Austbrokers Holdings Limited at $3.47, 317,300 at $4.20, 20,159 at $4.22 and 62,836 for no consideration. Consequently 698,495 ordinary shares were issued during the financial year.

In accordance with the best practice corporate governance, the structure of Non-executive Director and Executive remuneration is separate and distinct.

Non-executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level that provides the company with the ability to attract and retain Directors of the highest caliber, whilst incurring a cost that is acceptable to shareholders.

43 AUSTBROKERS 2013 ANNUAL REPORT

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-executive Directors shall be determined from time to time by a general meeting. The latest determination was approval by shareholders at the 2009 Annual General Meeting to increase the aggregate remuneration to $500,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is paid to Directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to Non-executive Directors of comparable companies when undertaking the review process. Advice was obtained during the current year from an external remuneration consultant to ensure that fees were in line with the current market. As a result of their recommendations, fees were increased from 1 April 2013. It is also proposed to obtain approval from shareholders at the 2013 Annual General Meeting to increase the aggregate remuneration to $750,000. This will allow flexibility in the appointment of additional directors to manage succession as directors retire.

Each Director receives a fee for being a Director of the company which includes a fee for each Board committee on which a Director sits. Following the recent review, the Chairman of the Audit and Risk Management Committee receives an additional fee recognizing the additional workload that this position entails. Directors do not receive retirement benefits, nor do they participate in any incentive programs.

From 1 April 2013 each director receives an annual fee of $100,000 (previously $80,000) with the Chairman of the Audit and Risk Management Committee receiving an additional $20,000 (previously $7,500). The Chairman of the Board receives an annual fee of $170,000 (previously $150,000).

The CEO’s target remuneration mix comprises 47% fixed remuneration, 13% target STI opportunity and 40% LTI. Senior executives target remuneration mix ranges from 60-70% fixed remuneration, 20-25% target STI opportunity and 10- 15% LTI. It is the Company’s policy to have fixed remuneration at market median and total remuneration at the upper quartile.

To ensure the Remuneration Committee is fully informed when making remuneration decisions it seeks external remuneration advice. This process is carried out every second year. A formal appointment process was undertaken in 2012 and KPMG was appointed to advise on senior executive remuneration. In order to ensure that the Remuneration Committee is provided with advice, and as required, recommendations, free from undue influence by members of the Key Management Personnel (KMP) group to whom recommendations may relate, the engagement of KPMG by the Committee was based on an agreed set of protocols that would be followed by the Committee, KPMG and members of the KMP. KPMG provided advice in the form of a written report providing insights on remuneration trends and shareholder views and market data in relation to CEO and executive remuneration. No remuneration recommendations were provided.

Fixed Remuneration

Objective

Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of company wide, business unit and individual performance, relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. As noted above, the Committee has access to external advice independent to management which was obtained as part of the 2012 review.

Structure

Non-executive Directors have been encouraged by the Board to hold shares in the company. It is considered good governance for Directors to have a stake in the companies on whose Boards they sit.

The remuneration of Non-executive Directors for the year ended 30 June 2013 is detailed in Table 1 of this report.

Senior Manager and Executive Director Remuneration

Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group.

The fixed remuneration component of the 5 key management personnel of the Group is detailed in Table 1.

Objective

The company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company and so as to:

reward executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks;
align the interest of executives with those of shareholders;
link rewards with the strategic goals and performance of the company; and
ensure total remuneration is competitive by market standards.

Structure

It is the Remuneration Committee’s policy that a fixed term employment contract is entered into only with the Chief Executive Officer and not with any other executives. Details of contracts are provided on page 46.

Remuneration consists of the following key elements:

Fixed Remuneration
Variable Remuneration - Short Term Incentive (STI)
Variable Remuneration - Long Term Incentive (LTI) or Medium Term Incentive (MTI)

Variable Remuneration – Short Term Incentive (STI)

Objective

The objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the executives charged with meeting those targets. The total potential STI is available at a set level so as to provide sufficient incentive to the senior manager to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

Structure

The Group sets financial targets and each executive has set personal objectives against which their performance is evaluated.

On an annual basis, a rating is determined for each executive based on an evaluation of each executive’s performance against predetermined objectives. This rating is then applied to an allocated STI opportunity determined as a percentage of fixed remuneration. This amount is then scaled up or down to reflect the Group’s performance against its financial target of 10% growth in Adjusted NPAT (net of all STI costs) over the prior year to a maximum of 2 times if 20% achieved. As a result, the level of incentive reflects the performance of the company and the executive, therefore ensuring it is aligned with shareholders’ interests. An incentive pool is set aside annually based on company performance and amounts are allocated to individual executives as set out above. This process usually occurs within 3 months of reporting date.

auStBroKerS 2013 annuaL rePort 44

directors’ report

For the year ended 30 June 2013

The aggregate of annual STI payments available for executives across the Group is subject to the approval of the Remuneration Committee. Payments made are delivered as a cash bonus in the following reporting period.

For the 2012 financial year, 90% of the STI cash bonus provided in the financial statements was paid in the 2013 financial year. The Remuneration Committee will consider the STI payments for the 2013 financial year in September 2013. The maximum amount available for the 2013 financial year is $1,754,000. This amount has been provided for in the 2013 financial year based on the growth in the net profit after tax for the year over the prior year and assumes that executives will substantially achieve their individual performance objectives. The minimum amount of cash bonus is zero assuming no individual performance objectives are met.

The previous Chief Executive Officer retired on 31 December 2012. For the six months period to that date he was granted a short term incentive opportunity, at the discretion of the board and subject to various performance criteria. An amount of $304,000 has been provided in relation to this in the 2013 financial year.

Variable Remuneration – Long Term Incentive (LTI) and Medium Term Incentive (MTI)

Objective

The objective of the LTI and MTI plans is to reward senior executives in a manner that aligns this element of remuneration with the creation of shareholder wealth.

As such, LTI grants are only made to executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the Group’s performance against the relevant long term performance hurdle.

The MTI was introduced to recognise that as some personnel approach retirement, participation in the LTI scheme would not have met the objectives. Following the retirement of the past CEO the MTI only applies to one other KMP.

Structure

LTI grants to executives are delivered in the form of options and the MTI in the form of cash.

The use of Earnings Per Share Growth (EPSG) was selected for the LTI and MTI plans. The use of earnings per share growth was selected due to the lack of an appropriate comparator group for such measures as Total Shareholders Return (TSR). It is believed EPSG provides alignment between comparative shareholder return and reward for executives.

Relationship of rewards to performance

In assessing whether the performance hurdles for each grant have been met, the earnings per share (EPS) are adjusted for significant items where appropriate and are calculated before amortisation of intangibles.

Option exercise conditions

Exercise conditions:

(a) subject to satisfaction of the performance based conditions referred to in paragraphs (b) and (c) below, the Options will vest 3 years after the date of grant;
(b) if the First Test Compound Earnings Per Share Growth (Compound Growth) is:
(i) greater than or equal to 8.5% per annum, 20% of the Options will become exercisable;
(iii) between 10% and 15%, the percentage of Options that are exercisable will be determined on a pro rata basis so that the number of Options that are exercisable will increase from 50% by 1 percentage point for every 0.1% percent additional Compound Growth over 10%;

(iv) 15% per annum or more, 100% of the Options will become exercisable,

in each case on the date on which the Company’s audited financial statements for the third financial year ending after the grant are lodged with the Australian Securities Exchange (the “First Test Date”);

if all of the Options do not become exercisable on the First Test Date and the Second Test Compound Growth is higher than the First Test Compound Growth then on the date on which the Company’s audited financial statements for the fourth financial year ending after the grant are lodged with the Australian Securities Exchange (the “Second Test Date”) an additional number of Options will become exercisable as is equal to the difference between the number of Options which became exercisable under paragraph (b) and the number of Options which would have become exercisable if paragraph (b) applied on the basis of the Second Test Compound Growth (rather than the First Test Compound Growth);

(c) any Options which have not become exercisable by the Second Test Date lapse and are of no further force or effect.
(d) options granted in the 2010, 2011 and 2012 financial years have further restrictions on their disposal or the disposal of any shares acquired on their exercise for a further two years from vesting of these options.

The exercise conditions for 200,000 of the options granted to the CEO are the same as set out above except that between 8.5% and 10% EPSG the Options that are exercisable will be determined on a pro rata basis so that the number of Options that are exercisable will increase from 20% by 2 percentage points for every 0.1% additional Compound Growth over 8.5%.The further 33,000 options granted to the CEO have no performance hurdles but are subject to the CEO still being in the employment of the Group at 1 January 2016.

The exercise conditions for the MTI are the same as for the CEO options. The period for testing the earnings per share growth for the MTI is modified to reflect the anticipated period of future service. The amount anticipated to be paid for the period to 30 June 2013 will be paid in 2015 subject to meeting vesting conditions. An amount of $19,000 has been provided for in the 2013 financial year.

Company performance and the link to remuneration

Long term and medium term incentives are based on compound average annual growth in earnings per share. The table below sets out the basic earnings per share over the last 7 years and the increases achieved.

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Year to Basic earnings Increase
30 June per share - cents %
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Year to 30 June	Basic earnings per share - cents	Increase %
2013	72.2**	56.0
2012	46.3	16.9
2011	39.6	12.2
2010	35.3	11.4
2009	31.7	11.0
2008	28.6	13.9
2007	25.1	25.5
2006	20.0*	N/A

(ii) equal to 10% per annum, 50% of the Options will become exercisable;
Excluding abnormal profits on sale of equity interests occurring as part of Initial Public Offering process.

** Includes profit arising from adjustment to fair value on former associates becoming controlled entities of $12.630 million.

45 AUSTBROKERS 2013 ANNUAL REPORT

Earnings per share based on Net Profit after Tax before amortization of intangibles, adjustments to fair value on former associates becoming controlled entities, adjustments to contingent acquisition payments and profits on sale of portfolios of controlled entities increased by 13.65% over 2012. Compound average growth rate in earnings per share over the 5 years to 30 June 2013 on this basis was 12.4%.

Total annualized shareholder returns over the one year, three year and five year periods to 30 June 2013 were 61.7%, 45.9% and 37.6% respectively, confirming the alignment of executive remuneration to shareholder returns.

Based on the performance achieved, the option grants in 2005, 2006 and 2007 fully vested, 73% of the grants made in 2008 and 69% of the grants made in 2009 vested. The grants made in 2010 are expected to 78% vest based on the performance to 30 June 2013 with any further vesting subject to retesting based on performance over the 4 years to 30 June 2014.

Employment contracts

The CEO, Mr. Searles is employed under contract which terminates on 1 January 2016.

From 1 July 2013, Mr. Searles received fixed remuneration of $597,400 per annum.
Mr Searles was granted 200,000 options to subscribe for ordinary shares under the Senior Executive Option Plan which are subject to performance conditions.
A further 33,000 options were granted to vest on 1 January 2016 and are not subject to any performance hurdles provided Mr Searles is an employee of a group company on that date.
Mr. Searles may resign from his position and thus terminate this contract by giving 6 months written notice. On resignation any options will be forfeited.
The company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, the CEO is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination with cause any unvested options will immediately be forfeited.

Other Key Management Personnel (KMP) have letters of offer of employment or employment contracts with no fixed term, and varying periods up to three month for either party to terminate. Details of remuneration are contained in table 1.

auStBroKerS 2013 annuaL rePort 46

directors’ report For the year ended 30 June 2013

REMUNERATION OF DIRECTORS AND NAMED ExECUTIVES

Table 1: Compensation of Directors and other Key Management Personnel for the year-ended 30 June 2013 (Consolidated)

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Post Share-based
Short-term
employment payment
Total
Cash Short Non Monetary Performance
30 June 2013 Salary & Fees Term Incentive Benefits Superannuation Equity Options Total Related
$ $ $ $ $ $ %
Directors
R.A. Longes 142,202 — 4,460 12,798 — 159,460 —
Chairman
W.L. McKeough 477,579 923,484 45,105 25,000 — 1,471,168 62.77%
Chief Executive
(retired 31 December 2012)
M. P. L. Searles
Chief Executive 254,447 — 23,787 15,030 1,719,540 2,012,804 85.43%
(appointed 1 January 2013)
R.J. Carless 77,982 — 6,129 7,018 — 91,129 —
Non-executive Director
D.J. Harricks
70,625 — 6,253 25,000 — 101,878 —
Non-executive Director
P.R. Shirriff 77,982 — 6,202 7,018 — 91,202 —
Non-executive Director
Executives
S.S. Rouvray 269,802 161,609 32,869 24,182 — 488,462 33.09%
Chief Financial Officer/
Company Secretary
F. Gualtieri 202,543 111,817 29,173 24,831 44,047 412,411 37.79%
National Manager -
Group Services
and Support
F. Pasquini 222,086 107,371 33,605 24,889 47,262 435,213 35.53%
General Manager
- Acquisition and
Development
G.J. Arms 185,379 115,473 70,825 25,000 47,162 443,839 36.64%
General Manager -
Equity Operations
total 1,980,627 1,419,754 258,408 190,766 1,858,011 5,707,566
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Notes

* For W.L. McKeough, salary and fees includes accrued annual leave and long services leave entitlements totalling $264,125 paid out on retirement. Short term incentives includes $177,600 in respect of other long term performance bonus

** Equity options granted to Mr M. Searles represented the long term incentive component of his remuneration for the entire 3 year term of his employment contract.

47 AUSTBROKERS 2013 ANNUAL REPORT

REMUNERATION OF DIRECTORS AND NAMED ExECUTIVES

Table 2: Compensation of Directors and other Key Management Personnel for the year-ended 30 June 2012 (Consolidated)

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Post Share-based
Short-term
employment payment
Total
Cash Short Non Monetary Performance
30 June 2012 Salary & Fees Term Incentive Benefits Superannuation Equity Options Total Related
$ $ $ $ $ $ %
Directors
R.A. Longes 137,615 — — 12,385 — 150,000 —
Chairman
W.L. McKeough 432,254 675,000 58,061 50,000 — 1,215,315 55.54%
Chief Executive
R.J. Carless
73,395 — — 6,605 — 80,000 —
Non-executive Director
D.J. Harricks 37,500 — — 50,000 — 87,500 —
Non-executive Director
P.R. Shirriff 73,395 — — 6,605 — 80,000 —
Non-executive Director
Executives
S.S. Rouvray 236,648 202,836 49,001 49,149 79,015 616,649 45.71%
Chief Financial Officer/
Company Secretary
G. Lambert 167,841 179,167 4,494 24,399 — 375,901 47.66%
General Manager -
Operations and
Strategic Developments
F. Gualtieri 193,132 124,001 27,920 45,808 42,974 433,835 38.49%
National Manager -
Group Services
and Support
J. Howells 258,604 137,850 11,457 49,180 — 457,091 30.16%
General Manager -
Austbrokers Sydney
F. Pasquini 135,950 — 13,158 11,610 42,409 203,127 20.88%
General Manager -
Acquisition and
Development
G.J. Arms 175,397 155,967 63,540 47,869 46,014 488,787 41.32%
General Manager -
Equity Operations
total 1,921,731 1,474,821 227,631 353,610 210,412 4,188,205
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Notes

* Short term incentives for W.L. McKeough includes $137,500 in respect of other long term performance bonus.

** G. Lambert ceased employment on 11 December 2011.
*** F. Pasquini bacame a key management person on 1 December 2011 following his apointment as General Manager - Acquisitions and Development. Remuneration above is only for the period from this date.

auStBroKerS 2013 annuaL rePort 48

directors’ report For the year ended 30 June 2013

REMUNERATION OF DIRECTORS AND NAMED ExECUTIVES (CONTINUED)

Table 3: Options granted as part of remuneration (Consolidated)

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Fair value Exercise
per option at price per
grant date option
No. ($) ($) First Last
30 June 2013 Granted Grant date (Note 18) (Note 18) Expiry date exercise date exercise date
Director
M.P.L. Searles 233,000 15-Jan-13 7.38 — 1-Jan-20 1-Jan-16 1-Jan-20
Executives
S.S. Rouvray — — — — — — —
F. Gualtieri 5,713 31-Oct-12 7.71 — 31-Oct-19 31-Oct-15 31-Oct-19
F. Pasquini 6,130 31-Oct-12 7.71 — 31-Oct-19 31-Oct-15 31-Oct-19
G.J. Arms 6,117 31-Oct-12 7.71 — 31-Oct-19 31-Oct-15 31-Oct-19
total 250,960
30 June 2012
Executives
S.S. Rouvray 12,582 31-Oct-11 6.28 — 31-Oct-18 31-Oct-14 31-Oct-18
G. Lambert — 31-Oct-11 6.28 — 31-Oct-18 31-Oct-14 31-Oct-18
F. Gualtieri 6,843 31-Oct-11 6.28 — 31-Oct-18 31-Oct-14 31-Oct-18
J. Howells — 31-Oct-11 — — — — —
F. Pasquini 6,753 31-Oct-11 6.28 — 31-Oct-18 31-Oct-14 31-Oct-18
G.J. Arms 7,327 31-Oct-11 6.28 — 31-Oct-18 31-Oct-14 31-Oct-18
total 33,505
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49 AUSTBROKERS 2013 ANNUAL REPORT

REMUNERATION OF DIRECTORS AND NAMED ExECUTIVES

Table 4: Options granted as part of remuneration to Key Management Personnel (Consolidated)

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Shares issued on exercise of options
Percentage of
remuneration
Value of Value of Value of consisting Options fully
options granted options exercised options lapsed of options for Paid vested during
30 June 2013 during the year during the year during the year the year Shares issued per share the year
$ $ $ % No. $ No.
Director
M.P. L. Searles 1,719,540 — — 85.43% — — —
W.L. McKeough — 370,646 — 0.00% 400,000 3.96 —
Executives
S.S. Rouvray - 82,920 22,342 0.00% 59,757 2.90 10,841
F. Gualtieri 44,047 116,343 12,123 10.68% 90,415 3.41 5,882
F. Pasquini 47,262 50,210 11,532 10.86% 41,136 3.05 5,595
G.J. Arms 47,162 37,919 12,950 10.63% 16,067 2.73 6,283
total 1,858,011 658,038 58,947 607,375 28,601
30 June 2012
Director
W.L. McKeough — 254,120 — 0.00% 540,000 2.55 —
Executives
S.S. Rouvray 79,015 56,856 20,556 12.81% 13,473 0.00 13,473
G. Lambert [] — 96,530 115,837 — 86,949 3.59 —
F. Gualtieri 42,974 — 11,064 9.91% — — 14,621
J. Howells — — 12,673 0.00% — — 8,307
F. Pasquini 42,409 — 10,453 20.88% — — 6,853
G.J. Arms 46,014 97,477 11,818 9.41% 120,356 2.99 15,618
total 210,412 504,983 182,401 760,778 58,872
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The amount unpaid per share for shares issued on exercise of options during 2012 and 2013 was $NIL.

* G. Lambert forfeited options due to cessation of employment on 11 December 2011.

auStBroKerS 2013 annuaL rePort 50

directors’ report For the year ended 30 June 2013

DIRECTORS’ MEETINGS

The number of Directors’ meetings (including meetings of committees of Directors) held during the year and the numbers of meetings attended by each Director were as follows:

			Meetings	of Committees
				Remuneration
	Directors’	Audit & Risk		& Succession
	Meetings	Management	Nomination	Planning
No. of meetings held:	7	6	5	5
No. of meetings attended:
R.A. Longes	6	4	5	4
W.L. McKeough	4	N/A	N/A	N/A
M.P.L. Searles	3	N/A	N/A	N/A
R.J. Carless	7	6	5	5
D.J. Harricks	7	6	5	5
P.R. Shirrif	7	6	5	5

Mr McKeough and Mr Searles were not members of any Committee. All other Directors were eligible to attend all meetings held except Mr McKeough who was eligible to attend 4 Board Meetings and Mr Searles who was eligible to attend 3.

Committee membership

As at the date of this report, the company had an Audit and Risk Management Committee, Remuneration and Succession Planning Committee and a Nomination Committee of the Board of Directors. Members acting on the committees of the Board during the year were:

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Audit Remuneration Nomination
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Audit	Remuneration		Nomination
D.J. Harricks (Chairman)	R.A. Longes	(Chairman)	R.A. Longes	(Chairman)
R.J. Carless	R. J. Carless		R. J. Carless
R.A. Longes	D. J. Harricks		D.J. Harricks
P.R. Shirrif	P. R. Shirrif		P.R. Shirrif

ROUNDING

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The Directors received an independence declaration from the auditors of Austbrokers Holdings Limited. Refer to page 52 of the directors’ report.

Non-audit services were provided in relation to taxation matters to the Austbrokers Group by the entity’s auditor, Ernst & Young in the financial year ended 30 June 2013. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each of the non-audit services provided means that auditor independence was not compromised. The amounts received or due to be received are detailed in Note 24 of the Financial Report.

Signed in accordance with a resolution of the Directors.

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M P L Searles Director Sydney, 27 August 2013

51 AUSTBROKERS 2013 ANNUAL REPORT

auditor’s Independence declaration

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Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW Australia 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

TO THE DIRECTORS OF AUSTBROKERS HOLDINGS LIMITED

In relation to our audit of the financial report of Austbrokers Holdings Limited for the financial year ended 30 June 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

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Ernst & Young

==> picture [95 x 39] intentionally omitted <==

Paul Harris Partner Sydney, 27 August 2013

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation.

auStBroKerS 2013 annuaL rePort 52

CorPorate GovernanCe Statement

The Board of Directors of Austbrokers Holdings Limited is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Austbrokers Holdings Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

Austbrokers Holdings Limited’s Corporate Governance Statement is structured with reference to the ASX Corporate Governance Council’s principles and recommendations, which are as follows;

Principle 1 Lay solid foundations for management and oversight Principle 2 Structure the Board to add value Principle 3 Promote ethical and responsible decision making Principal 4 Safeguard integrity in financial reporting Principle 5 Make timely and balanced disclosure Principle 6 Respect the rights of shareholders Principle 7 Recognise and manage risk Principle 8 Remunerate fairly and responsibly

Austbrokers Holdings Limited’s corporate governance practices were in place throughout the year ended 30 June 2013 and were fully compliant with the Council’s best practice recommendations.

The responsibilities of the Board of Directors and those functions reserved to the Board together with the responsibilities of the Chief Executive Officer are set out in a Board Charter.

To ensure compliance with the principles the company has established Board Committees and a number of policies and procedures including:

The responsibility for the operation and administration of the Group is delegated, by the Board to the CEO and the executive management team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the CEO and the executive management team.

Whilst at all times the Board retains full responsibility for guiding and monitoring the Group, in discharging its stewardship it makes use of sub-committees.

To this end the Board has established an Audit and Risk Management Committee, a Nomination Committee and a Remuneration and Succession Planning Committee. The roles of these committees are discussed throughout this corporate governance statement. Due to the relatively small Board all Board members are members of all committees.

The Board is responsible for ensuring that management’s objectives and activities are aligned with expectations and risks identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:

Board approval of a strategic plan designed to meet stakeholders needs and manage business risk.
Ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the continued growth and success on the entity.
Implementation of budgets by management and monitoring progress against budget through the establishment of both financial and non financial key performance indicators.

Other functions reserved to the Board are:

Approval of annual and half yearly financial reports.
Code of Conduct
Whistleblower Policy
Securities Trading Policy
Risk Management Policy Summary
Continuous Disclosure Policy
Board / Directors’ Performance Evaluation
Communications Policy
Diversity Policy

For further information on corporate governance policies adopted by Austbrokers Holdings Limited including the Board Charter, Board Committee Terms of Reference and the policies and procedures referred to above, refer to the Corporate Governance Section under the About Us tab on our website:

www.austbrokers.com.au

Board functions

The Board seeks to identify the expectations of shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks.

To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and the operation of the Board.

Approving and monitoring the progress of major acquisitions and divestitures.
Ensuring any significant risks that arise are identified, assessed, appropriately managed and monitored.
Reporting to shareholders.

Structure of the Board

The skills, experience and expertise relevant to the position of Director held by each Director in office at the date of the annual report is included in the Directors’ Report. Directors of Austbrokers Holdings Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgment.

In the context of Director independence, ‘materiality’ is considered from both the company and individual Director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the Director in question to shape the direction of the company’s loyalty.

53 AUSTBROKERS 2013 ANNUAL REPORT

In accordance with the definition of independence above, the materiality thresholds set, the following Directors of Austbrokers Holdings Limited constituting a majority of directors are considered to be independent:

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Name Position
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Name	Position
R.A. Longes	Chairman, Non-executive Director
R. J. Carless	Non-executive Director
D.J. Harricks	Non-executive Director
P. R. Shirrif	Non-executive Director

There are procedures in place, agreed by the Board, to enable Directors in furtherance of their duties to seek independent professional advice at the company’s expense.

The term in office held by each Director in office at the date of this report is as follows:

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Name Term in 0ffice
----- End of picture text -----

Name	Term in 0fce
R.A. Longes	8 years
M.P.L. Searles	8 months
R. J. Carless	3 years
D.J. Harricks	8 years
P.R. Shirrif	28 years

For additional details regarding Board appointments, please refer to information included in the Directors’ Report and on our website.

Performance

The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the Nomination Committee and the Remuneration and Succession Planning Committee conducted performance evaluations as set out in the Performance Evaluation Policy that involved an assessment of each Board member’s and key executive’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which directors and executives are assessed are aligned with the financial and non-financial objectives of Austbrokers Holdings Limited. Directors whose performance is consistently unsatisfactory may be asked to retire.

Nomination Committee

The Board has established a Nomination Committee, which meets at least annually, to ensure that the Board continues to operate within the established guidelines, including when necessary selecting candidates for the position of Director. The Nomination Committee operates under Terms of Reference approved by the Board and comprises four Non-executives Directors. The Nomination Committee comprised of the following:

R.A. Longes (Committee Chairman)

R. J. Carless

D. J. Harricks

P.R. Shirriff

For details on the number of meetings of the Audit and Risk Management Committee held during the year and the attendees at those meetings, refer to the Directors’ Report.

Audit and Risk Management Committee

The Board has established an Audit and Risk Management Committee, which operates under Terms of Reference approved by the Board. It is the Board’s responsibility to monitor that management fulfill their responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as nonfinancial considerations such as the benchmarking of operational key performance indicators. The Board has delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the Audit and Risk Management Committee.

The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the Audit and Risk Management Committee are Non-executive Directors.

The members of the Audit and Risk Management Committee during the year, who were all considered independent, were:

D.J. Harricks (Committee Chairman)

R. J. Carless

R.A. Longes

P.R. Shirriff

Securities Trading Policy

Under the company’s securities trading policy, an executive or director must not trade in any securities of the company at any time when they are in possession of un-published price sensitive information in relation to those securities.

Before commencing to trade, an executive must first notify the Company Secretary of their intention to do so and senior executives and directors must first obtain approval of the Chairman. Only in exceptional circumstances will approval be given by the Chairman to trade outside any of the 6 week periods which commence immediately after the announcement of the half yearly result or the full year results, the annual general meeting or the date of the release of a disclosure document offering equity securities in the company.

The Audit Committee is responsible for monitoring the external audit process. The company has established a summary of procedures for ensuring the rotation, independence and competence of the external auditor which can be found on the company’s website.

For details on the number of meetings of the Audit and Risk Management Committee held during the year and the attendees at those meetings, refer to the Directors’ Report.

As required by the ASX Listing Rules, the company notifies the ASX of any transaction conducted by directors in the securities of the company.

auStBroKerS 2013 annuaL rePort 54

CorPorate GovernanCe Statement

Risk

The identification and effective management of risk, including calculated risk taking is viewed as an essential part of the Group approach to creating long term shareholder value. A policy for risk management has been established by the Board.

Management, through the Chief Executive, is responsible for designing, implementing and reporting on the adequacy of the Group’s risk management and internal control system. Management reports to the Board Audit and Risk Management Committee on the Group’s key risks and the extent to which it believes these risks are being managed. This is performed on a quarterly basis or more frequently as required by the Board or relevant sub-committee.

The Board is responsible for satisfying itself that management has developed and implemented a sound system of risk management and internal control. Detailed work on this task is delegated to the Board Audit and Risk Management Committee and reviewed by the Board. The Board Audit and Risk Management Committee also oversees the adequacy and comprehensiveness of risk reporting from management.

A standardised approach to risk assessment is used across the Group to ensure that risks are consistently assessed and reported to an appropriate level of management, and to the Board as appropriate.

The Group carries out risk specific management activities in four core areas; strategic risk, operational risk, reporting risk and compliance in accordance with Australian / New Zealand Standard for Risk Management (AS / NZS 4360 Risk Management) and the Committee of Sponsoring Organisations of the Treadway Commission (COSO) risk framework.

Detailed internal control questionnaires are completed by key finance managers in relation to financial and other risk reporting on a six monthly basis. These are reviewed by our senior finance team as part of our half yearly reporting to the market and to achieve compliance with section 295A of the Corporations Act and Recommendation 7.3 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.

A detailed compliance program in the insurance broking operations also operates to ensure the Group meets its regulatory obligations. Executive risk management committees also meet regularly to deal with specific areas of risk such as compliance, occupational health and safety and financial risk and report to the Board through the Audit and Risk Management Committee as to the company’s management of its material business risks.

The Board also receives a written assurance from Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) that to the best of their knowledge and belief, the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in relation to financial reporting risks. The Board notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgment, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.

Remuneration and Succession Planning Committee

It is the company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration and Succession Committee links the nature and amount of executive Directors’ and officers’ emoluments to the company’s financial and operational performance. The expected outcomes of the remuneration structure are:

Retention and motivation of key executives;
Attraction of high quality management to the company; and
Performance incentives that allow executives to share the success of Austbrokers Holdings Limited; and
Retention and performance of Directors.

For a full discussion of the company’s remuneration philosophy and framework and the remuneration received by Directors and executives in the current period please refer to the remuneration report, which is contained within the Directors’ Report.

There is no scheme to provide retirement benefits, other than statutory superannuation, to Non-executive Directors.

The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves and the Chief Executive Officer and executive team. The Board has established a Remuneration and Succession Planning Committee through the year, comprising four Non-executive Directors. Members of the Committee, who were all considered independent, throughout the year were:

R.A. Longes (Committee Chairman)

R. J. Carless

D. J. Harricks

P.R. Shirriff

For details on the number of meetings of the Remuneration and Succession Committee held during the year and the attendees at those meetings, refer to the Directors’ Report.

Shareholder Communication Policy

The company’s objective is to promote effective communication with its shareholders at all times. It is committed to:

Ensuring shareholders and the financial markets are provided with full and timely information about the Company’s activities in a balanced and understandable way.
Complying with continuous disclosure obligations contained in the ASX listing rules and the Corporations Act in Australia.
Communicating with its shareholders and making it easier for shareholders to communicate with the Company.

To promote effective communication with shareholders and encourage participation at general meetings, information is communicated to shareholders:

Through the release of information to the market via the ASX
Through the distribution of the annual report and notices of annual general meeting.
Through shareholder meetings and investor relation presentations.
By posting relevant information on Austbrokers Holdings Limited’s website: www.austbrokers.com.au

55 AUSTBROKERS 2013 ANNUAL REPORT

The Company’s website has a dedicated investor relations section for the purposes of publishing all important company information and relevant announcements made to the market.

The external auditors are required to attend the annual general meeting and are available to answer any shareholder questions about the conduct of the audit and preparation of the audit report.

Diversity Policy

The company recognises that to remain competitive in today’s commercial environment it is necessary to focus on developing a talented and diversified workforce. Austbrokers is committed to developing the quality and skills of its people and by encouraging diversity at all levels of the organisation to enable individuals to realise their maximum potential.

To achieve this, a Diversity policy has been put in place. The primary function of the Diversity Policy is to:

ensure that individuals are treated equitably, with a level of mutual respect;
reduce bias and prejudice;
develop a range of practices and guidelines that actively counteracts bias or prejudice;
promote inclusive practices; and
encourage all individuals to communicate respectfully and fairly.

Through the implementation of this Diversity Policy, Austbrokers seeks to achieve the following objectives:

to promote a corporate culture which embraces diversity when determining the composition of employees, senior management and the board, including recruitment of employees and directors from a diverse pool of qualified candidates;
maximise the pool of potential job applicants and improve their chances to recruit the right person first time, every time;
become the employer of choice, reducing the costs of recruitment and improving retention;
make more effective use of human capital, improve workforce morale, reduce staff turnover, sickness and absenteeism;
safeguard the organisation with good succession planning and knowledge transfer;
gain goodwill in the community and improve business profile;
exploit links to increase sales to new customers and clients from minority communities;
develop the capacity of the workforce to do business with all sections of the community;
provide better customer service, respond effectively to change in the marketplace, and become the supplier of choice;
encourage employees to develop to their fullest potential and utilise the talents and resources of the workforce to maximise the efficiency of the organisation; and
comply with relevant equality legislation, codes of practice and relevant best practice guidelines.

The Diversity Policy is overseen by the Remuneration and Succession Planning Committee of the Board. Management reports to the Committee on a six monthly basis on the status of the implementation of the Policy and the progress towards achieving its objectives.

Austbrokers is committed to developing, promoting and retaining women. Our commitment to women in leadership comprises a range of initiatives including:

Board Nomination Committee includes recognition of the need for gender diversity in its Charter;
Implementing recruitment procedures to ensure equal numbers of male and female candidates are put forward for Senior Management and Board positions;
Highlighting promotion of women in Network communications including website;
Mentoring and career resiliency programs embedding equal opportunity to senior positions into recruitment and selection policies;
Attracting and promoting talented women into management positions;
Updating organisation policies and procedures (e.g. work life balance, senior executive meetings to be held in office hours) , policies for career planning (mentoring), encourage promotion from within;
Providing human resources policies that help women balance their work, life and family responsibilities;
Combining the Austbrokers Young Leaders staff training programme with career progression focus; and
Developing and implementing measurable gender diversity objectives to monitor progress.

Austbrokers seeks to reap the benefits of equal opportunity for women in the workplace programs through increased employee effectiveness, attracting and retaining the best talent, improving morale and increasing consumer and market responsiveness.

A survey of the makeup of the work force across Austbrokers and related entities is conducted annually (the most recent in April 2013) to monitor gender diversity in leadership, management and support roles. The results of the survey indicated that females made up 55% of total employees and were well represented in management roles at 49% but representation fell to 17% when considering leadership roles. In addition, with a small board of 5 directors (4 non-executives) there are currently no females on the board. This also applies to the make up of the senior management group. The nature of Austbrokers diversified individual insurance broking businesses (the majority with outside shareholding held by the businesses’ management) does allow for females to develop into leadership roles in those businesses. By its nature however, it does not have management progression from those businesses to what is a relatively small specialist senior management group and this provides challenges in increasing females in leadership roles.

Objectives were set in 2011 as follows:

A female board member to be appointed by 2015
Increase number of women in the leadership group by 10% by 2014
Increase the number of women in management roles by 10% by 2013

The number of women in management roles increased from the base period from 45% to 49% which achieved the third objective above. New acquisitions in the group with lower proportions of female leaders and managers have reduced the overall proportion of females in leadership roles from around 20% in August 2012. Continuing focus will be given to increasing female representation in leadership roles. A further survey will be undertaken in April 2014 to monitor progress in achieving the objective of 10% increase.

auStBroKerS 2013 annuaL rePort 56

Income statement

For the year ended 30 June 2013

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Consolidated
Notes 2013 2012
$’000 $’000
Revenue 4 (i) 142,180 101,441
Other income 4 (ii) 6,490 5,929
Share of profit of associates 4 (iii) 19,370 18,060
Expenses 4 (iv) (118,614) (85,678)
Finance costs 4 (v) (3,081) (2,576)
46,345 37,176
Income arising from adjustments to carrying values of associates, sale of interests in associates,
controlled entities and broking portfolios
- Adjustments to carrying value of associates 4(vi), 7(f),(g) 12,001 —
- Profit from sale of interests in controlled entities, broking portfolios and contingent
4(vii) 412 192
consideration adjustments
profit before income tax 58,758 37,368
Income tax expense 5 11,221 7,697
Net profit after tax for the period 47,537 29,671
Net Profit after tax for the period attributable to:
Equity holders of the parent 41,203 25,640
Non-controlling interests 6,334 4,031
47,537 29,671
Basic earnings per share (cents per share) 6 72.2 46.3
Diluted earnings per share (cents per share) 6 71.5 45.8
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57 AUSTBROKERS 2013 ANNUAL REPORT

Statement of comprehensive income For the year ended 30 June 2013

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Consolidated
Notes 2013 2012
$’000 $’000
Net Profit after tax for the period 47,537 29,671
Other comprehensive income
Other comprehensive income — —
Income tax (expense) relating to components of other comprehensive income — —
other comprehensive income after income tax for the period — —
total compreheNsive iNcome after tax for the period 47,537 29,671
Total comprehensive income after tax for the period attributable to:
Equity holders of the parent 41,203 25,640
Non-controlling interests 6,334 4,031
47,537 29,671
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auStBroKerS 2013 annuaL rePort 58

Statement of financial position aS at 30 June 2013

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Consolidated
Notes 2013 2012
$’000 $’000
Assets
Current Assets
Cash and cash equivalents 7 38,083 40,743
Cash and cash equivalents - Trust 7 112,610 74,859
Trade and other receivables 9 156,698 117,167
Other financial assets 10 1,716 1,316
total current assets 309,107 234,085
Non-current Assets
Trade and other receivables 11 264 261
Other financial assets 12 424 152
Investment in associates 13 82,169 79,553
Property, plant and equipment 15 7,455 5,058
Intangible assets and goodwill 16 158,639 82,836
Deferred income tax asset 5 6,006 5,194
total Non-current assets 254,957 173,054
total assets 564,064 407,139
Liabilities
Current Liabilities
Trade and other payables 19 253,395 181,420
Income tax payable 5 6,071 3,655
Provisions 20 9,963 8,418
Interest bearing loans and borrowings 21 10,132 1,130
total current liabilities 279,561 194,623
Non-current Liabilities
Provisions 20 2,469 1,871
Deferred tax liabilities 5 8,883 4,971
Interest bearing loans and borrowings 21 42,753 33,384
total Non-current liabilities 54,105 40,226
total liabilities 333,666 234,849
Net assets 230,398 172,290
Equity
Issued capital 22 90,586 76,036
Retained earnings 100,390 77,017
Share based payments reserve 22 5,173 3,873
Asset revaluation reserve 22 1,500 2,109
equity attributable to equity holders of the parent 197,649 159,035
Non-controlling interests 32,749 13,255
total equity 230,398 172,290
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59 AUSTBROKERS 2013 ANNUAL REPORT

Statement of cash flows For the year ended 30 June 2013

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Consolidated
Notes 2013 2012
$’000 $’000
Cash flows from operating activities
Receipts from customers 127,250 96,564
Net increase in cash held in customer trust accounts 11,230 9,851
Dividends received from others 62 1
Dividends/trust distributions received from associates 17,215 17,213
Interest received 4,491 5,928
Management fees received from associates / related entities 3,524 1,601
Payments to suppliers and employees (110,476) (82,382)
Interest paid (3,164) (2,456)
Income tax (paid) (10,962) (9,112)
Net cash flows from operating activities 7 (a) 39,170 37,208
Cash flows from investing activities
Payment for increase in interests in controlled entities 7 (b),(d) (1,757) —
Proceeds from reduction in interests in controlled entities 7,(c),(e) 3,015 498
Net proceeds from / (payments) for new consolidated entities, net of cash acquired 7(f),(g),(h),(i),(j),(k),(m) 8,367 (3,892)
Payment for new associates 7,(n),(o),(p),(q),(s),(t) (3,235) (184)
Payment for new broking portfolios purchased by members of the economic entity 7 (v) (5,725) (3,627)
Proceeds from sale of broking portfolios by member of the economic entity 7 (w) 953 —
Proceeds from sale of controlled entity ( net of cash disposed) 7 (x) 199 —
(Payment) for purchases of other financial assets (228) —
Proceeds from sale of plant and equipment 246 293
Payment for plant and equipment (1,534) (2,111)
Advances of mortgages to associates / related entities (300) (997)
Proceeds from mortgage repayments from associates / related entities 30 390
Net cash flows from / (used in) investing activities 31 (9,630)
Cash flows from financing activities
Dividends paid to shareholders (8,323) (11,792)
Dividends paid to shareholders of non controlling interests (5,097) (3,286)
Proceeds from issue of share capital 2,414 2,380
Payment for contingent consideration on prior year acquisitions (3,022) (1,186)
Increase in / (repayment) of borrowings and lease liabilities 9,469 (509)
Repayments from related entities 449 83
Net cash flows (used in) financing activities (4,110) (14,310)
Net increase in cash and cash equivalents 35,091 13,268
Cash and cash equivalents at beginning of the period 115,602 102,334
cash aNd cash equivaleNts at eNd of period 7 (a) 150,693 115,602
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auStBroKerS 2013 annuaL rePort 60

Statement of changes in equity For the year ended 30 June 2013

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Non–
Attributable to equity holders of the parent controlling Total equity
interest
Asset Share based
Retained revaluation payment
Issued Capital earnings reserve reserve Total
Consolidated $'000 $'000 $'000 $'000 $'000 $'000 $’000
At 1 July 2011 70,750 65,349 2,656 2,255 141,010 12,306 153,316
Profit for the year. — 25,640 — — 25,640 4,031 29,671
Other comprehensive income. — — — — — — —
Total comprehensive income for the year. — 25,640 — — 25,640 4,031 29,671
Adjustment to asset revaluation reserve — — (7) — (7) 7 —
on part sale of controlled entity.
Profit on part sale of controlled entity — 186 — — 186 — 186
treated as a transaction between
owners and credited directly to retained
earnings (see note 7 (e)).
Transfer to non controlling interest — — — — — 197 197
on 10% share of net assets on part sale
of controlled entity (see note 7(e)).
Transfer from asset revaluation reserve — 772 (772) — — — —
for amortisation of broking register on
step acquisition of broking subsidiaries.
Tax effect on transfer from asset — (232) 232 — — — —
revaluation reserve for amortisation
of broking register on step acquisition
of broking subsidiaries.
Share based payment expense. — — — 191 191 — 191
Tax benefit arising from payments made — — — 762 762 — 762
to employee share trust to acquire shares
to satisfy exercise of share options.
Tax benefit arising from expected future — — — 665 665 — 665
payments to acquire shares to satisfy
vested and partially vested options which
were unexercised at balance date, net of
any benefit previously recognised in the
income statement relating to share based
payment expense. (See note 2).
On 21 September 2011 allotted 420,850 842 — — — 842 — 842
shares at an issue price of $2.00 on
exercise of options (see note 22).
On 21 September 2011 allotted 279,250 969 — — — 969 — 969
shares at an issue price of $3.47 on
exercise of options (see note 22).
On 21 September 2011 allotted 60,600 254 — — — 254 — 254
shares at an issue price of $4.20 on
exercise of options (see note 22).
On 12 December 2011 allotted 16,524 shares 70 — — — 70 — 70
at an issue price of $4.22 (see note 22).
On 12 December 2011 allotted 38,900 135 — — — 135 — 135
shares at an issue price of $3.47 on
exercise of options (see note 22).
On 12 December 2011 allotted 30,150 127 — — — 127 — 127
shares at an issue price of $4.20 on
exercise of options (see note 22).
Issued capital resulting from Dividend 2,906 2,906 — 2,906
Reinvestment Plan (see note 22).
Share issue expenses. (17) — — — (17) — (17)
Equity dividends. — (14,698) — — (14,698) (3,286) (17,984)
at 30 JuNe 2012 76,036 77,017 2,109 3,873 159,035 13,255 172,290
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61 AUSTBROKERS 2013 ANNUAL REPORT

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Non–
Attributable to equity holders of the parent controlling Total equity
interest
Asset Share based
Retained revaluation payment
Issued Capital earnings reserve reserve Total
Consolidated $'000 $'000 $'000 $'000 $'000 $'000 $’000
At 1 July 2012 76,036 77,017 2,109 3,873 159,035 13,255 172,290
Profit for the year. — 41,203 — — 41,203 6,334 47,537
Other comprehensive income. — — — — — — —
Total comprehensive income for the year. — 41,203 — — 41,203 6,334 47,537
Adjustment resulting from the consolidated — (753) — — (753) (747) (1,500)
entity acquiring an additional 10% interest
in the voting shares of a controlled entity.
The acquisition is treated as a transaction
between owners and the resulting goodwill
is recognised directly in retained earnings
(see note 7 (d)).
Adjustment on dilution of voting shares — 810 — — 810 2,205 3,015
in controlled entities resulting from
additional shares issued to non controlling
interests. These adjustments are treated as
transaction between owners and credited
directly to retained earnings (see note 7 (c)).
Cancellation of shares in Inferfin Pty Ltd by — (5) (99) — (104) (153) (257)
Aprikeesh Pty Ltd. (see note 7 (b)).
Non controlling interests relating to — — — — — 16,952 16,952
new acquisitions.
Transfer from asset revaluation reserve for — 728 (728) — — — —
amortisation of broking register recognised
on step acquisition of broking subsidiaries.
Tax effect of transfer from asset revaluation — (218) 218 — — — —
reserve for amortisation of broking register
recognised on step acquisition of broking
subsidiaries.
Share–based payment expense. — — — 504 504 — 504
Tax benefit arising from payments made — — — 754 754 — 754
to employee share trust to acquire shares
to satisfy exercise of share options.
Adjustment to tax benefit arising from — — — 42 42 — 42
expected future payments to acquire shares
to satisfy vested and partially vested options
which were unexercised at balance date (net
of any benefit previously recognised in the
income statement relating to share based
payment expense).
Issued capital resulting from net proceeds 10,069 — — — 10,069 — 10,069
from Dividend Reinvestment Plan.
On 13 September 2012 allotted 36,100 shares 125 — — — 125 — 125
at an issue price of $3.47 (see note 22).
On 13 September 2012 allotted 20,000 shares 84 — — — 84 — 84
at an issue price of $4.20 (see note 22).
On 18 December 2012 allotted 9,747 shares at 41 — — — 41 — 41
an issue price of $4.22 (see note 22).
On 18 December 2012 allotted 223,200 shares 775 — — — 775 — 775
at an issue price of $3.47 (see note 22).
On 18 December 2012 allotted 297,300 shares 1,249 — — — 1,249 — 1,249
at an issue price of $4.20 (see note 22).
On 2 April 2013 allotted 38,900 shares at an 135 — — — 135 — 135
issue price of $3.47 (see note 22).
On 2 April 2013 allotted 10,412, shares at an 44 — — — 44 — 44
issue price of $4.20 (see note 22).
On 13 June 2013 allotted 193,348, shares 2,067 — — — 2,067 — 2,067
at an issue price of $10.692 as part of an
acquisition (see note 7 (j)).
Share issue expenses. (39) — — — (39) — (39)
Equity dividends. — (18,392) — — (18,392) (5,097) (23,489)
at 30 JuNe 2013 90,586 100,390 1,500 5,173 197,649 32,749 230,398
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auStBroKerS 2013 annuaL rePort 62

notes to the financial statements

For the year ended 30 June 2013

1. CORPORATE INFORMATION

The financial report of Austbrokers Holdings Limited for the year ended 30 June 2013 was authorised for issue in accordance with a resolution of the directors on 27 August 2013.

Austbrokers Holdings Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

The principal activities during the year of entities within the consolidated group were the provision of insurance broking services, distribution of ancillary products and conducting underwriting agency businesses.

2.1 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The accounting policies and methods of computation are the same as those adopted in prior years.

See note 3 for new Australian Accounting Standards and interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the group for the year end reporting period 30 June 2013.

2.2 SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation of the financial report

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except where otherwise stated.

The financial report is presented in Australian dollars ($) and all values are rounded to the nearest $1000 (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

(c) Basis of consolidation

The consolidated financial statements are those of the consolidated entity, comprising Austbrokers Holdings Limited (the parent company) and all entities that Austbrokers Holdings Limited controlled from time to time during the year and at the reporting date.

Information from the financial statements of controlled entities is included from the date the parent entity obtains control until such time as control ceases. Where there is a loss of control of a controlled entity, the consolidated financial statements include the results for the part of the reporting period during which the parent entity had control.

The financial information in respect of controlled entities is prepared for the same reporting period as the parent company using consistent accounting policies. Adjustments are made to bring into line dissimilar accounting policies that may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in the consolidated accounts. Unrealised losses are eliminated unless costs cannot be recovered.

Non controlling interests represent the portion of profit or loss and net assets in subsidiaries which are not 100% owned by the Austbrokers Group. These are presented separately in the income statement and within equity in the consolidated statement of financial position. When the Group acquires a non controlling interest in a subsidiary, the transaction is accounted for as a transaction between owners in their capacities as owners and the difference between purchase price and recorded value of non controlling interest is accounted for as an equity transaction.

(d) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(e) Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.

(i) Significant accounting judgements
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future tax profits will be available to utilise those temporary differences.
(ii) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill is allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill are discussed in note 17.

63 AUSTBROKERS 2013 ANNUAL REPORT

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the options at the date at which they are granted. Other than for zero priced options, the fair value is determined by an external valuer using a binomial model, using the assumptions detailed in note 18. The fair value of the zero priced options issued before 1 January 2013 was based on the volume weighted average share price for the 5 day period prior to the options being granted. From 1 January 2013, the fair value of the zero priced options has been based on the dividend yield method taking into account the vesting period, expected dividend payout and the share price at the date the options were granted.

Net assets acquired in a business combination

The Group measures the net assets acquired in a business combination at their fair value at the date of acquisition. Fair value is estimated with reference to market transactions for similar assets or Discounted Cash Flow (DCF) analysis.

Estimation of useful lives of assets

The estimation of useful lives of assets has been based on historical experience as well as lease terms for office fitouts. In addition, the condition of the asset is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

(f) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Commission, brokerage and fees

Commission, brokerage and fees are recognised when it is probable that the Group will be compensated for services rendered and the amount of consideration for such services can be reliably measured. This is deemed to be the invoice date. An allowance is made for anticipated lapses and cancellations.

Interest

Revenue is recognised as interest accrues using the effective interest method.

Dividends and Distributions from trusts

Revenue is recognised when the shareholder’s right to receive the payment is established.

(g) Cash and cash equivalents

Cash and cash equivalents, and cash and cash equivalents - trusts (trust cash), 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.

Trust cash relates to cash held for insurance premiums received from policyholders which will ultimately be paid to underwriters.

Trust cash cannot be used to meet business obligations/operating expenses other than payments to underwriters and/or refunds to policyholders.

For the purposes of the Statement of Cash Flows, cash and cash equivalents as defined above are shown net of outstanding bank overdrafts.

(h) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement. This requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Leases where the lessor retains substantially all the risks and benefits of ownership are classified as operating leases.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

(i) Trade and other receivables

Trade and other receivables which generally have 30 day credit terms, are recognised and carried at original amount less an allowance for lapses and cancellations. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off when identified.

Receivables include amounts due from policyholders in respect of insurances arranged by controlled entities. Insurance brokers have credit terms of 90 days from policy inception to pay funds received from policyholders to insurers. Insurance policies that are not paid in 90 days of inception of the insurance are, in absence from approval from insurer of an extended term to pay, cancelled from inception date. The Group’s exposure in relation to these receivables is limited to commissions and fees charged.

(j) Investment in associates

The Group’s investments in its associates are accounted for under the equity method of accounting in the consolidated financial statements. These are entities in which the Group has significant influence and which are not controlled entities. The Group deems they have significant influence if they have more than 20% of the voting rights.

The financial statements of the associates are used by the Group to apply the equity method. The reporting dates of the associates and the Austbrokers Group are identical and adjustments are made to bring into line dissimilar accounting policies used by associates.

The investment in associates is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less dividends and any impairment in value. The consolidated income statement reflects the Group’s share of the results of operations of the associates.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and discloses this, when applicable, in the statement of comprehensive income.

auStBroKerS 2013 annuaL rePort 64

notes to the financial statements For the year ended 30 June 2013

(k) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing process. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(l) Trade and other payables

Liabilities for trade creditors and other amounts are carried at amortised cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the entity. Payables to related parties are carried at the principal amount. Interest, when charged, is recognised as an expense on an accrual basis. Payables are normally settled on 90 day terms.

Trade and other payables include amounts payable to insurers in respect of insurances arranged by controlled entities. Insurance brokers have credit terms of 90 days from policy inception to pay funds received from policyholders to insurers. Insurance policies that are not paid in 90 days of inception of the insurance are, in absence from approval from insurer of an extended term to pay, cancelled from inception date.

(m) Business combinations

The acquisition method of accounting is used to account for all business combinations. Cost is measured as the fair value of the assets given, shares issued or liabilities assumed at the date of exchange. All acquisition costs including stamp duty and legal fees are charged against profits as incurred.

Change in the ownership interest in a controlled entity (without loss of control) is accounted for as a transaction with owners in their capacity as owners and these transactions will not give rise to a gain or loss. Where there is a change in ownership and the Group loses control, the gain or loss will be recognised in the Income Statement. The carrying value of non-controlling interests is reset to fair value. Prior to 1 July 2009, upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost.

In the year a new business is acquired, an estimate is made of the fair value of the future contingent consideration. Any variation to this amount in future periods (either up or down) is recognised through the Income Statement. Over accruals are recognized as income in the year the amount is reversed and any under accruals are charged as an expense against profits.

All identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non controlling interests. The contingent consideration is carried in the statement of financial position at net present value. The interest expense in the income statement relating to the unwinding of this discounting is offset by a reduction in deferred tax which was raised at the time the net present value adjustment was recognised.

(i) Goodwill

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the fair value of the identifiable net assets acquired at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses and is not amortised.

Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit and part of the operation of that unit is disposed, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Impairment losses recognised for goodwill are not subsequently reversed.

(ii) Intangible assets - Insurance Broking Register
Identifiable intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment costs. Internally generated intangible assets are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.

The useful lives of these intangible assets are assessed to be finite. Intangible assets with finite lives are amortised over the useful life, currently estimated to be 10 years for broking portfolios and 15 years for financial services businesses (life risk), and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an identifiable intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on identifiable intangible assets with finite lives is recognised in the expense category of the income statement consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an identifiable intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

(iii) Revaluation

When a business combination occurs, the acquiree’s identifiable assets and liabilities are notionally restated to their fair value at the date of the exchange transaction to determine the amount of any goodwill associated with the transaction. Any adjustment to those fair values relating to previously held interests of the acquiree is accounted for as an adjustment to fair value and the movement is reflected in the income statement as either a profit or loss. Prior to 1 July 2009, adjustments to fair value were accounted for as a revaluation. This revaluation which related to broking registers was credited to the asset revaluation reserve and included in the equity section of the statement of financial position.

For revaluations that occurred prior to 1 July 2009, an annual transfer from the asset revaluation reserve to retained earnings is made for the difference between amortisation based on the revalued carrying amounts of the broking register and amortisation based on the broking registers’ original costs.

Upon disposal, any revaluation reserve relating to the particular broking register being sold is transferred to retained earnings.

65 AUSTBROKERS 2013 ANNUAL REPORT

(n) Investments and other financial assets

Loans and Receivables

Loans and receivables, including mortgages, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(o) Derecognition of financial assets and financial liabilities

(i) Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred or retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(ii) Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(p) Impairment of financial assets

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

(q) Impairment of non financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

Other than for goodwill and insurance broking register, an assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

auStBroKerS 2013 annuaL rePort 66

notes to the financial statements For the year ended 30 June 2013

(r) Provisions and employee benefits

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Employee benefits

Liabilities for employee entitlements to annual leave and other current entitlements are accrued at amounts calculated on the basis of current wage and salary rates, including package costs and on-costs. Liabilities for non accumulating sick leave are recognised when the leave is taken and are measured at the rate paid or payable.

Liabilities for employee entitlements to long service leave, which are not expected to be settled within twelve months after balance date, are accrued at the present value of the future amounts to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary level, experience of employee departures and periods of service. The discount factor applied to all such future payments is determined using interest rates attaching, as at the reporting date, to national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

Any contributions made to the accumulation superannuation funds by entities within the Group are charged against profits when due.

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards that are cancelled or where vesting is only conditional upon a market condition.

In the event options are cancelled, or cancelled and reissued, the unexpensed cost for these is brought forward and recognised immediately in addition to the expense for any reissued/new options

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured, at the date of modification.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see note 6).

(u) Property, Plant and equipment

Plant and equipment, is stated at cost less depreciation and any impairment in value.

Depreciation is calculated on a straight-line over the estimated useful life of the asset as follows:

Motor vehicles 5 to 8 years
Plant and equipment 5 to 10 years

(s) Issued capital

Ordinary share capital is recognised at the fair value of the consideration received by the company, net of issue costs.

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Impairment

The carrying value of plant and equipment is reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate the carrying value may be impaired.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset or cash generating unit is written down to their recoverable amount.

Derecognition and disposal

(t) Share-based payment transactions

The Group provides benefits to employees (including executive directors) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (‘equitysettled transactions’).

An Employee Share Options Plan (ESOP) is in place which provides benefits to executive directors and senior executives.

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options, other than for zero priced options, is determined by an external valuer using a binomial model, further details of which are given in note 18. Further details of the method for valuing zero priced options is given at note 18.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Austbrokers Holdings Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(v) Make good provision

A provision has been made for the present value of anticipated costs of future restoration of leased premises. The provision includes future cost estimates associated with dismantling existing fitouts, repainting of premises and carpet replacement where necessary.

The calculation of this provision requires assumptions such as engineering cost estimates and future labour costs. These uncertainties may result in future expenditure differing from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimates of future costs are recognised in the statement of financial position by adjusting both the expense or asset and the provision. The related carrying amounts are disclosed in note 20.

67 AUSTBROKERS 2013 ANNUAL REPORT

(w) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the year end date as presented in the statement of financial position.

Deferred income tax is provided on all temporary differences at the date of the statement of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss ; or
when the taxable temporary differences associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary differences associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each year end date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each year end date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the year end date as presented in the statement of financial position.

(x) Other taxes

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(y) Operating Segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

The company’s corporate structure includes equity investments in insurance intermediary entities. Discrete financial information about each of these entities is reported to management on a regular basis and accordingly management considers each entity to be a discrete operating segment of the business. The company believes that all of the Group’s equity investments in insurance intermediary entities exhibit similar economic characteristics and have therefore been aggregated into a single reporting segment, being the insurance intermediary sector. This assessment is based on each of the operating segments having similar products and services, similar types of customer, employing similar operating processes and procedures and operating within a common regulatory environment.

Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the aggregation criteria is still reported separately where information about the segment would be useful for the users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

auStBroKerS 2013 annuaL rePort 68

notes to the financial statements For the year ended 30 June 2013

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

Certain Australian and International Accounting Standards and interpretations have recently been issued or amended but are not yet effective and have not been adopted by the group for the year end reporting period 30 June 2013. The directors have assessed the impact of these new or amended standards and interpretations (to the extent relevant to the group) as follows:

Reference	Title	Summary	Application date of standard	Impact on fnancial report	Application date for Group
AASB 119	Employee	This revised standard changes the	1 January 2013	It is not expected that the change	1 July 2013
	benefts	defnition of short-term employee benefts. The distinction between short-term and long-term employee benefts is now based on whether the benefts are expected to be settled		in defnition of employee benefts will have any material change in the classifcation of employee provisions between current and non current liabilities.
		wholly within 12 months after the
		reporting date.
AASB 10	Consolidated	AASB 10 establishes a new control	1 January 2013	Management have assessed the	1 July 2013
	Financial	model that applies to all entities.		efect of applying AASB 10 by carrying
	Statements	It replaces parts of AASB 127 dealing		out an analysis of voting power and
		with the accounting for consolidated fnancial statements.The new control		infuence over the operations of each associate. It is not expected that
		model broadens the situations when		investments currently recognised as
		an entity is considered to be controlled		associates or joint ventures will need
		by another entity and includes new		to be consolidated into the Group as
		guidance for applying the model		subsidiaries. In the event that after
		to specifc situations, including the		further analysis, an associate will be
		impact of potential voting rights and		required to be consolidated, this would
		when holding less than a majority		have no impact on the net proft after
		voting rights may give control.		tax for the period in the statement
				of comprehensive income, but would
				change the amounts of individual assets
				and liabilities of the Group and increase
				the revenues and expenses reported.
AASB 11	Joint	AASB 11 replaces AASB 131_Interests_	1 January 2013	Whilst the Group has not accounted	1 July 2013
	Arrangements	in Joint Ventures and UIG-113 Jointly		for any investments under AASB 11
		_Controlled Entities._AASB 11 uses the		it is not expected that investments
		principle of control as set out in AASB		currently recognised as associates will
		10 to defne joint control, and therefore		need to be consolidated into the Group
		the determination of whether joint		as controlled entities. A full analysis of
		control exists, may change.		voting power and infuence over the
				operations has been carried out and it
				is not expected that there will be any
				change in the accounting for associates.
				In the event that after further analysis,
				an associate will be required to be
				consolidated, this would have no impact
				on the net proft after tax for the period
				in the statement of comprehensive
				income, but would change the amounts
				of individual assets and liabilities of the
				Group and increase the revenues and
				expenses reported.

69 AUSTBROKERS 2013 ANNUAL REPORT

Reference	Title	Summary	Application date of standard	Impact on fnancial report	Application date for Group
AASB 12	Disclosure of	AASB 12 includes all disclosures	1 January 2013	Management have assessed that	1 July 2013
	Interests in	relating to an entity’s interests in		AASB 12 will not have a material
	Other Entities	controlled entities, joint arrangements		impact on the fnancial statements.
		and associates. New disclosures have
		been introduced about the
		judgements made by management
		to determine whether control exists,
		and the required information about
		associates and controlled entities with
		non controlling interests.
AASB 13	Fair Value	AASB 13 establishes a single source	1 January 2013	Management have assessed the	1 July 2013
	Measurement	of guidance for determining the fair		impact on fair value measurement
		value of assets and liabilities. Application		and additional disclosures required
		of this defnition may result in diferent		to comply with AASB 13 and
		fair values being determined for		have determined that there will
		relevant assets. AASB 13 also expands		be no material impact on the
		the disclosure requirements for all		fnancial statements.
		assets and liabilities carried at fair value.

auStBroKerS 2013 annuaL rePort 70

notes to the financial statements For the year ended 30 June 2013

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Consolidated
2013 2012
$'000 $’000
4. Revenue and expenses
(i) Revenue
Commission, Brokerage and Fee Income 138,656 99,840
Management fees related entities 3,524 1,601
ToTal revenue 142,180 101,441
(ii) Other income
Dividends from other persons 62 1
Interest from other persons / corporations 4,491 4,807
Other income 1,937 1,121
ToTal oTher income 6,490 5,929
(iii) Share of profit of associates
Share of Net Profits of Associates Accounted for using the Equity Method before amortisation 20,761 19,458
Amortisation of Intangibles - Associates (1,391) (1,398)
ToTal share of profiT of associaTes 19,370 18,060
(iv) Expenses
Amortisation of Intangibles - controlled entities 3,531 2,414
Salaries and wages 75,637 54,259
Share-based payments 504 191
Audit fees 1,354 1,267
Travel/Telephone/ Motor/Stationery 5,015 4,369
Depreciation of property plant and equipment 1,860 1,397
Other expenses 13,747 9,955
Rent (operating leases) 6,685 4,574
Commission expense 7,335 5,376
Insurance 2,946 1,876
ToTal oTher expenses 118,614 85,678
(v) Finance costs
Borrowing costs 3,081 2,576
ToTal finance cosTs 3,081 2,576
(vi) Adjustments to carrying value of associates
Fair value adjustment to carrying value of associates on the date they became controlled 12,630 —
entities (see note 7(f),(g))
Impairment charge relating to the carrying value of an associate (see note 17) (629) —
ToTal adjusTmenTs To carrying value of associaTes 12,001 —
(vii) Profit from sale of interests in controlled entities, broking portfolios and contingent consideration adjustments
Profit from sale of interests in controlled entities and broking portfolios (see note 7(w),(x)) 305 —
Adjustment to contingent consideration on acquisition of portfolios/controlled entities
(see note 7(r),(u),(v)) - previous year see note(7(l),(u) 107 192
ToTal profiT from sale of inTeresTs in conTrolled enTiTies, broking
412 192
porTfolios and conTingenT consideraTion adjusTmenTs
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71 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $’000
5. INCOME TAx
Major components of income tax expense
Income statement
Current income tax
Current income tax charge 10,998 8,423
Adjustment for prior years (33) (585)
Deferred tax expense
Origination and reversal of temporary differences 256 (141)
total iNcome tax expeNse iN iNcome statemeNt 11,221 7,697
A reconciliation between tax expense and the product of accounting profit before income tax multiplied
by the company’s applicable income tax rate is as follows:
Profit before income tax 58,758 37,368
At the company’s statutory income tax rate of 30% (2012: 30%) 17,627 11,210
Rebateable dividends (14) —
Non assessable income from associated entities (2,887) (3,148)
—
Non-taxable gains/losses on sale (52)
—
Capital Losses recouped (111)
(Over)/ under provision prior year (33) 46
Tax on distributions from associates operating as trusts (80) (61)
Adjustment to contingent consideration on acquisition of controlled entity (33) (58)
—
Fair value adjustment to carrying value of associate on the date it became a controlled entity (3,789)
Impairment charge relating to the carrying value of an associate 189 —
—
Income tax credit arising from recognition of deferred tax asset on prior years' share based payment expense (631)
Non deductible expenses/other 404 339
iNcome tax expeNse reported iN the coNsolidated iNcome statemeNt 11,221 7,697
iNcome tax payable 6,071 3,655
Consolidated Consolidated
Income statement Statement of Financial Position
2013 2012 2013 2012
$'000 $'000 $'000 $'000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liability
Income accrued not assessable (9) (619) 1,723 1,714
Unamortised value of broker register — — 8,219 3,981
Tax credit on amortisation expense (1,059) (724) (1,059) (724)
gross deferred iNcome tax liabilities 8,883 4,971
Deferred tax asset
Provisions and accruals not claimed for tax purposes 812 1,484 6,006 5,194
— — — —
Borrowing costs not claimed
gross deferred iNcome tax assets 6,006 5,194
Deferred tax income/(expense) (256) 141
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auStBroKerS 2013 annuaL rePort 72

notes to the financial statements For the year ended 30 June 2013

5. INCOME TAx (CONTINUED)

Tax consolidation

For the purposes of income taxation, Austbrokers Holdings Ltd entered into a Consolidated Tax Group with its 100% owned entities. Tax consolidation results in the controlled entity being treated as part of the Head Company for tax purposes rather than as a separate taxpayers.

The Income Tax Assessment Act (1997) provides that the Consolidated Tax Group is to be treated as a single entity for Australian tax purposes with the Head Company responsible for the tax payable. Austbrokers Holdings Ltd formally notified the Australian Taxation Office of its adoption of the tax consolidation regime by lodging notice with the Australian Taxation Office.

The Consolidated Tax Group was formalised by entering into tax sharing and tax funding agreements in order to allocate income tax payable to group members. Each member of the group calculates tax expense on an entity basis. The agreement also provides that Austbrokers Holdings Limited carries forward tax funding assets or tax funding liabilities for which an intercompany loan is recognised between the parties.

Tax effect accounting by members of the tax consolidated group

Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes. Allocations under the tax funding agreement are made at the end of each quarter.

6. EARNINGS PER SHARE (EPS)

(a) Earnings used in calculating EPS

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

(b) Changes in weighted average number of shares

There have been no significant transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

(c) Information on the classification of securities

Options granted to employees as described in note 18 are considered to be potential ordinary shares and have been included in the determination of the diluted earnings per share to the extent they are dilutive. These options have not been included in the determination of the basic earnings per share. The amount of the dilution of these options is the average market price of ordinary shares during the year minus the exercise price.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

		Consolidated
	2013	2012
	$'000	$’000
Net proft attributable to ordinary equity holders of the parent	41,203	25,640
	Thousands	Thousands
	Shares	Shares
Weighted average number of ordinary shares for basic earnings per share	57,070	55,396
Efect of dilution:
Weighted average number of shares under option adjusted for shares that would have been issued at average market price	553	596
Weighted average Number of ordiNary shares adJusted for the effect of dilutioN	57,623	55,992
Basic earnings per share (cents per share)	72.2	46.3
Diluted earnings per share (cents per share)	71.5	45.8

73 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $’000
7. CASH AND CASH EqUIVALENTS
(a) Reconciliation of profit after tax to net cash flows from operations
Profit after tax for the period 47,537 29,671
Profit from sale of interests in controlled entities, broking portfolios and contingent consideration adjustments (412) (192)
Equity accounted (profits) after income tax (19,370) (18,060)
Dividends/trust distributions received from associates 17,215 17,213
Amortisation of intangibles 3,531 2,414
Fair value adjustment to carrying value of associates on the date they became controlled entities (12,630) —
Impairment charge relating to the carrying value of an associate 629 —
Depreciation of fixed assets 1,860 1,397
Share options expensed 504 191
Changes in assets and liabilities
(Increase) in trade and other receivables 529 (674)
(Decrease)/Increase in trade and other payables 2,007 (567)
(Increase) in trust receivables (5,609) (12,078)
Increase in trust payables 2,964 19,325
(Decrease)/Increase in provisions 153 (19)
(Increase) in deferred tax asset (408) (958)
(Decrease) in deferred tax liability (1,196) (106)
(Decrease)/Increase in provision for tax 1,866 (349)
Net cash floWs from operatiNg activities 39,170 37,208
Cash and cash equivalents 38,083 40,743
Cash and cash equivalents - Trust 112,610 74,859
total cash aNd cash equivaleNts 150,693 115,602
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Due to acquisitions/disposal of consolidated entities during the year, some changes in assets and liabilities shown above will not agree to the movements in the Statement of Financial Position.

Non cash financing activity transactions include transactions resulting from the dividend reinvestment plan.

Trust cash cannot be used to meet business obligations/operating expenses other than payments to underwriters and/or refunds to policyholders.

Business combinations

All the business combinations referred to in note 7(b) - 7(x) relate to insurance broking and underwriting agency businesses.

A major strategy of the group is to acquire insurance broking portfolios or interests in insurance broking businesses ranging from 50% - 100%. The terms of these acquisitions vary in line with negotiations with individual vendors but are structured to achieve the Group’s benchmarks or return on investment and to take advantage of the rationalisation in the broking industry where many current owners of businesses are approaching retirement.

Where acquisitions include an element of purchase price contingent on business performance, management has estimated the fair value of this contingent consideration based on a probability weighted best estimate of future outcomes for income or profit, on which the purchase price is determined, discounted to present value. Historical trends and any relevant external factors are taken into account in determining the likely outcome.

auStBroKerS 2013 annuaL rePort 74

notes to the financial statements For the year ended 30 June 2013

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Equity transactions between owners - current year

(b) Effective 1 July 2012, Interfin Pty Ltd, an entity within the consolidated group, cancelled voting shares resulting in a payment of $257,000 to non controlling interests. The cancellation of voting shares previously issued to non controlling interests, increased the voting shares owned by Aprikeesh Pty Ltd in Interfin from 67.8% to 78.8%. The cancellation of voting shares was treated as a transaction between owners and the resulting change of $5,000 and $99,000 was reflected in retained earnings and asset revaluation reserve respectively.
(c) Effective 1 July 2012, the Consolidated entity diluted its voting shares of Austbrokers Financial Solutions (Syd) Pty Ltd (AFS) from 100% to 75%, when AFS issued additional shares to a new shareholder for $1,224,920.
Effective 1 July 2012, the Consolidated entity diluted its voting shares of Austbrokers Terrace Pty Ltd (ABT) from 85% to 70.83% when ABT issued additional shares to non controlling interests for $1,018,035.

Effective 1 January 2013, a controlled entity diluted its voting shares in SPT Financial Services Pty Ltd (SPT) from 75% to 70%, when SPT issued additional shares to a new shareholder for $73,119.

Effective 30 June 2013, a controlled entity diluted its voting shares in Austbrokers AEI Pty Ltd (AEI) from 80% to 65%, when AEI issued additional shares to a new and existing shareholders for $1,250,000 including $550,746 to its parent entity.

The value of the non-controlling interests in AFS, ABT, SPT and AEI was determined based on their 25%, 29.17%, 30% and 35% interest in the carrying value of the identifiable net assets of each company respectively as at the date of dilution of shareholding.

The carrying value of the identifiable assets and liabilities of AFS, ABT, SPT and AEI as at the date of the dilution in equity were:

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AFS ABT SPT AEI
Carrying value Carrying value Carrying value Carrying value
$’000 $’000 $’000 $’000
Cash 482 3,020 139 813
Receivables 456 3,650 109 931
Other investments — 121 — —
Property plant and equipment 28 52 15 —
Intangibles 3,832 2,172 836 256
total assets 4,798 9,015 1,099 2,000
Payables and provisions 2,237 6,319 62 1,522
Borrowings — 410 583 —
Tax Liabilities 18 16 45 22
total liabilities 2,255 6,745 690 1,544
Net assets 2,543 2,270 409 456
Non controlling interests (108) (69)
Net assets before share issue 2,435 2,201 409 456
Cash received on share issue to non controlling interests 1,225 1,018 73 699
Shares issued to parent — — — 551
Net assets after share issue 3,660 3,219 482 1,706
cash received on share issue to non controlling interests 1,225 1,018 73 699
Adjustment to non controlling interests 915 608 49 633
traNsfer to retaiNed earNiNgs oN dilutioN
310 410 24 66
of shareholdiNg iN coNtrolled eNtity
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75 AUSTBROKERS 2013 ANNUAL REPORT

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Equity transactions between owners - current year (continued)

(d) Effective 1 July 2012, the Consolidated entity acquired an additional 10% of the voting shares of Austbrokers Canberra Pty Ltd for $1,500,000 increasing the equity ownership to 85%.

The value of the non-controlling interests was determined based on its 10% interest in the carrying value of the identifiable net assets as at the date of acquisition.

The carrying value of the identifiable assets and liabilities of Austbrokers Canberra Pty Ltd as at the date of the acquisition were:

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Carrying value
$’000
Cash 6,880
Receivables 8,589
Property plant and equipment 187
Intangibles 5,695
total assets 21,351
Payables and provisions 14,200
Tax Liabilities 220
total liabilities 14,420
Net assets 6,931
Purchase price - cash paid for additional voting shares 1,500
Less:
Non controlling interest share- acquired 693
Non controlling interest share- adjustment 54
traNsfer to retaiNed earNiNgs oN acquisitioN of additioNal votiNg shares iN coNtrolled eNtity (753)
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The Group has acquired a call option to purchase additional voting shares in Austbrokers Canberra Pty Ltd in the event that the annual profit during the next 12 months falls below $2,700,000. Based on the expected profit from this entity, the fair value of this option has been estimated at $NIL.

auStBroKerS 2013 annuaL rePort 76

notes to the financial statements For the year ended 30 June 2013

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Equity transactions between owners - previous year

(e) On 1 July 2011, the Consolidated entity disposed of 10% of the voting shares of Austbrokers Citystate Pty Ltd for $497,691 reducing the equity ownership to 90%.

The value of the non-controlling interests was determined based on its 10% interest in the carrying value of the identifiable net assets as at the date of disposal.

The carrying value of the identifiable assets and liabilities of Austbrokers Citystate Pty Ltd as at the date of the reduction in equity were:

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Carrying value
$’000
Cash 2,171
Receivables 3,394
Property plant and equipment 140
Intangibles 1,516
total assets 7,221
Payables and provisions 5,078
Tax Liabilities 170
total liabilities 5,248
Net assets 1,973
Cost base of shares sold to non controlling interests 197
sale proceeds 498
Profit on sale on disposal of 10% of voting shares 301
Less capital gains tax on sale of 10% of voting shares (115)
Net traNsfer to reserves 186
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Acquisition of new controlled entities - current year

(f) Effective 1 July 2012, the Company acquired an additional 18.5% of the voting shares in Adroit Holdings Pty Ltd for $4,406,000, bringing the total equity to 68.5%.

On 1 November 2012, the Company acquired an additional 30% of the voting shares in Comsure Insurance Brokers Pty Ltd for $2,237,131 bringing the total equity to 80%.

77 AUSTBROKERS 2013 ANNUAL REPORT

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities - current year (continued)

Fair values of the identifiable assets and liabilities of Adroit Holdings Pty Ltd and Comsure Insurance Brokers Pty Ltd as at the date of acquisition were:

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Comsure Insurance
Adroit Holdings Pty Ltd
Brokers Pty Ltd
Fair value Fair value
recognised Carrying recognised Carrying
on acquisition value on acquisition value
$’000 $’000 $’000 $’000
Cash 13,958 13,958 2,740 2,740
Receivables 13,644 13,644 2,823 2,824
Plant and equipment 2,311 2,311 63 63
Other assets 310 310 29 29
Deferred tax asset 321 321 69 69
Intangibles 6,665 – 1,780 –
total assets 37,209 30,544 7,504 5,725
Payables 27,254 27,254 5,175 5,175
Provisions 517 517 222 222
Borrowings 4,739 4,739 – –
Deferred Tax Liabilities 1,999 – 534 –
total liabilities 34,509 32,510 5,931 5,397
Net assets 2,700 (1,966) 1,573 328
Value attributable to non controlling interests 1,041 1,041 (7) (7)
Net assets excludiNg NoN coNtrolliNg iNterests 1,659 (3,007) 1,580 335
Carrying value of existing 50% equity at the date of acquisition 2,512 520
fair value adjustment on existing holding at the date of acquisition (see note 4(vi)) 9,284 3,209
Adjusted carrying value of existing 50% equity at the date of acquisition 11,796 3,729
purchase price - cash paid for additional voting shares 4,406 2,237
Carrying value of controlled entity 16,202 5,966
Goodwill arising on acquisition 15,066 4,702
Goodwill relating to non controlling interests 6,930 1,175
total goodwill arising on acquisition 21,996 5,877
Cash inflow on acquisition is as follows;
Net cash acquired with the controlled entity 13,958 2,740
Cash paid (4,406) (2,237)
Net cash iNfloW 9,552 503
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The acquisition of an additional 18.5% of Adroit Holdings Pty Ltd was effective on 1 July 2012. The additional acquisition contributed $1,727,250 to net profit after tax and $18,215,683 to revenue.

The acquisition of an additional 30% of Comsure Insurance Brokers Pty Ltd was effective on 1 November 2012. The additional acquisition contributed $703,854 to net profit after tax and $3,697,498 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax contribution would have been $792,568 and revenue would have been $4,817,719.

auStBroKerS 2013 annuaL rePort 78

notes to the financial statements For the year ended 30 June 2013

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities - current year (continued)

(g) On 1 July 2012, the Company acquired the remaining 50% interest in Insurics Pty Ltd it did not already own for $2,527,000.

Effective 1 June 2013, Austbrokers AEI Pty Ltd, acquired 100% of the voting shares in Chegwyn Insurance Brokers Pty Ltd for $1,250,000

Fair values of the identifiable assets and liabilities of Insurics Pty Ltd and Chegwyn Insurance Brokers Pty Ltd as at the date of acquisition were:

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Chegwyn Insurance
Insurics Pty Ltd
Brokers Pty Ltd
Fair value Fair value
recognised Carrying recognised Carrying
on acquisition value on acquisition value
$’000 $’000 $’000 $’000
Cash 1,646 1,646 922 922
Receivables 358 343 4 4
Plant and equipment 155 155 32 32
Deferred tax asset 98 98 — —
Intangibles 993 — 317 —
total assets 3,250 2,242 1,275 958
Payables 2,091 2,090 976 976
Borrowings 324 324 — —
Deferred Tax Liabilities 298 — 95 —
total liabilities 2,713 2,414 1,071 976
Net assets 537 (172) 204 (18)
fair value adjustment on existing holding at the date of acquisition (see note 4(vi)) 137 —
Carrying value of existing 50% share 1,149 —
purchase price - cash paid for voting shares 2,527 1,250
Total cost base 3,813 1,250
Less Fair value of assets acquired 537 204
goodwill arising on acquisition 3,276 1,046
Cash outflow on acquisition is as follows;
Net cash acquired with the controlled entity 1,646 922
Cash paid (2,527) (1,250)
Net cash outfloW (881) (328)
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The acquisition of an additional 50% of Insurics Pty Ltd was effective on 1 July 2012. The additional acquisition contributed $512,794 to net profit after tax and $3,027,010 to revenue.

The acquisition of Chegwyn Insurance Brokers Pty Ltd was effective on 1 June 2013. The additional acquisition contributed $21,990 to net profit after tax and $67,895 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax contribution would have been $71,070 and revenue would have been $699,450.

79 AUSTBROKERS 2013 ANNUAL REPORT

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities - current year (continued)

(h) During the period, Austagencies incorporated Cinesure Pty Limited for $1000. On 1 May 2013, Austbrokers Financial Solutions (Syd) Pty Ltd incorporated a new 100% owned entity, Austbrokers Financial Solutions (ACT) Pty Ltd for $10.
(i) Effective 1 May 2013, Austagencies Pty Ltd acquired 90.0% of the voting shares in Lawsons Underwriting Australasia Pty Ltd for $6,355,682 (including a deferred payment of $1,630,122).
Effective 1 May 2013, Austagencies Pty Ltd acquired 90.91% of the voting shares in Guardian Underwriting Services Pty Ltd, trustee for G.U.S. Trust for $3,618,469 (including a deferred payment of $891,167).

Fair values of the identifiable assets and liabilities of Lawsons Underwriting Australasia Pty Ltd and G.U.S. trust as at the date of acquisition were:

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Lawsons Underwriting G.U.S. Trust
Australasia Pty Ltd
Fair value Fair value
recognised Carrying recognised Carrying
on acquisition value on acquisition value
$’000 $’000 $’000 $’000
Cash 1,806 1,806 780 780
Receivables 4,420 4,420 1,319 1,319
Plant and equipment 32 32 29 29
— — — —
Intangibles
total assets 6,258 6,258 2,128 2,128
Payables 5,417 5,417 2,114 2,114
Provisions 226 226 14 14
Borrowings 500 500 — —
Deferred Tax Liabilities — — — —
total liabilities 6,143 6,143 2,128 2,128
Net assets 115 115 — —
purchase price - cash paid for voting shares 4,725 2,727
Purchase price - deferred consideration 1,631 891
carrying value of controlled entity 6,356 3,618
Goodwill arising on acquisition 6,253 3,618
Goodwill relating to non controlling interests 695 362
total goodwill arising on acquisition 6,948 3,980
Cash outflow on acquisition is as follows;
Net cash acquired with the controlled entity 1,806 780
Cash paid (4,725) (2,727)
Net cash outfloW (2,919) (1,947)
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The acquisition of 90% of Lawsons Underwriting Australasia Pty Ltd was effective on 1 May 2013. The acquisition contributed $244,437, to net profit and $564,323 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax contribution would have been $905,247 and revenue would have been $3,097,068.

The acquisition of 90.91% of G.U.S. Trust was effective on 1 May 2013. The acquisition contributed $25,260 to net profit after tax and $215,644 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax contribution would have been $377,817 and revenue would have been $1,529,592.

auStBroKerS 2013 annuaL rePort 80

notes to the financial statements For the year ended 30 June 2013

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities - current year (continued)

(j) Effective 31 May 2013, the Company acquired 77.09% of the voting shares in InterRISK (Australia) Pty Ltd for $17,242,386 (including a deferred payment of $1,325,960 and shares valued at $2,067,277 ).

Fair values of the identifiable assets and liabilities of InterRISK Pty Ltd as at the date of acquisition were:

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InterRISK (Australia) Pty Ltd
Fair value
recognised Carrying
on acquisition value
$’000 $’000
Cash 18,236 18,236
Receivables 9,197 9,197
Plant and equipment 406 406
Other assets 19 19
Deferred tax asset 213 213
Intangibles 4,984 —
total assets 33,055 28,071
Payables 19,772 19,772
Provisions 1,065 1,065
Borrowings 4,132 4,132
Deferred Tax Liabilities 1,495 —
total liabilities 26,464 24,969
Net assets 6,591 3,102
Value attributable to non controlling interests 672 672
Net assets excludiNg NoN coNtrolliNg iNterests 5,919 2,430
77.09% of net assets acquired 4,563
purchase price - cash paid for voting shares 13,849
193,348 shares issued at $10.692 as part of acquisition price 2,067
Purchase price - deferred consideration 1,326
total acquisition cost 17,242
Goodwill arising on acquisition 12,679
Goodwill on acquisition relating to non controlling interests 3,769
total goodwill arising on acquisition 16,448
Cash inflow on acquisition is as follows;
Net cash acquired with the controlled entity 18,236
Cash paid (13,849)
Net cash iNfloW 4,387
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The acquisition of 77.09% of InterRISK Australia Pty Ltd was effective on 1 June 2013. The acquisition contributed $430,201 to net profit after tax and $1,888,850 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax contribution would have been $1,587,993 and revenue would have been $15,600,823.

81 AUSTBROKERS 2013 ANNUAL REPORT

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities in the previous year

(k) On 1 January 2012, RWA Pty Ltd acquired 100% of the voting shares of CTRL Pty Ltd (CTRL) for $1,193,409.

On 1 January 2012, Austagencies Pty Ltd acquired 100% of the voting shares of Film Industry Underwriting Agencies Pty Ltd (FIUA) for $4,527,034.

Fair values of the identifiable assets and liabilities of CTRL and FIUA at the date of the acquisition were:

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CTRL FIUA
Fair value Fair value
recognised Carrying recognised Carrying
on acquisition value on acquisition value
$’000 $’000
Cash 72 72 829 829
Receivables 28 28 1,018 1,018
Plant and equipment 50 50 — —
Intangibles 281 — — —
Deferred tax asset — — — —
total assets 431 150 1,847 1,847
Payables 85 85 1,564 1,564
Deferred Tax Liabilities 84 — 10 10
total liabilities 169 85 1,574 1,574
Net assets 262 65 273 273
Fair value of assets acquired 262 273
purchase price - cash paid for voting shares 1,193 3,600
Contingent consideration – 927
total purchase price 1,193 4,527
goodwill arising on acquisition 931 4,254
Cash outflow on acquisition is as follows;
Net cash acquired with the controlled entity 72 829
Cash paid (1,193) (3,600)
Net cash outfloW (1,121) (2,771)
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The acquisition of 100% of CTRL Pty Ltd was effective on 1 January 2012. The acquisition contributed $14,656 to net profit before tax and $259,808 to revenue. Had the acquisition taken place at the beginning of the period, the profit before tax contribution would have increased by $57,015 and revenue by $563,844.

The acquisition of 100% of FIUA was effective on 1 January 2012. The additional acquisition contributed $397,604 to net profit before tax and $725,096 to revenue. Had the acquisition taken place at the beginning of the period, the profit before tax contribution would have increased by $471,823 and revenue by $1,315,197.

The purchase price of FIUA includes a deferred payment which was paid in January 2013 based on an agreed amount of $927,034.

auStBroKerS 2013 annuaL rePort 82

notes to the financial statements For the year ended 30 June 2013

7. CASH AND CASH EqUIVALENTS (CONTINUED)

Business combinations (continued)

Acquisition of new controlled entities in the previous year (continued)

(l) On 30 November 2010, Austagencies Pty Ltd acquired 100% of the voting shares of Cemac Pty Ltd for $4,617,029.
The purchase price included an element of contingent consideration which will be determined on a multiple of commission and fees achieved in the financial year immediately following acquisition.
The purchase price included an element of contingent consideration which was paid in March 2012. The actual commission and fee income on which the contingent consideration was based was less than originally estimated resulting in a reduction of $418,421 which has been included in the income statement for the previous period. (see note 4(vii)).
(m) The company acquired 100% of the voting shares in two newly incorporated entities, Austbrokers Gladstone Pty Ltd, Austbrokers Financial Services (Gladstone) Pty Ltd for $100 each. These entities were sold to an associate on 1 May 2013 (see note 7(x)).

Acquisition of associates during current year

(n) On 1 December 2012, the consolidated entity acquired 50% of the voting shares of Brett Grant and Associates Pty Ltd for $1,728,603 including an amount of $752,978 which represents the fair value of the contingent consideration expected to be paid 15 months after the acquisition date.
(o) On 1 April 2013, the consolidated entity acquired 50% of the voting shares of Dalby Insurance Brokers Pty Ltd for $2,538,926 including an amount of $1,481,426 which represents the fair value of the contingent consideration expected to be paid 15 months after the acquisition date.
(p) On 1 May 2013, the consolidated entity acquired 47.5% of the voting shares of HQ Insurance Brokers Pty Ltd for $1,200,000.
(q) During the period, the consolidated entity incorporated or acquired the following entities, Angel Accident and Health Underwriting Agency Pty Ltd, One Liability Underwriting Pty Ltd, NewSurety Pty Ltd and Aust Re Brokers Pty Ltd. The capital contribution for 50% of the voting shares in each entity was $50, $100, $100 and $10 respectively.
(r) On 1 January 2011, the consolidated entity acquired 50% of the voting shares in Celestial Underwriting Agency Pty Ltd for $1,029,733. The purchase price included an element of contingent consideration which is finally determined on a multiple of the average net profit after tax achieved over the three financial years immediately following acquisition. During the current year, the estimated contingent consideration on this acquisition of $569,466 was reduced to $NIL and the adjustment included in the income statement. (see note 4 (vii)).

Acquisition of associates during previous year

(s) On 1 July 2011, the consolidated entity acquired 18.4% of Millennium Underwriting Agency Pty Ltd for $184,000. The consolidated entity has a further 31.6% interest indirectly through an associate. There is no contingent consideration in respect of this acquisition.
(t) On 1 July 2011, Austagencies Pty Ltd acquired 100% of Longitude Pty Ltd for $100. During the current year the consolidated entity diluted its shareholding to 37.5%. The consolidated entity has a further 18.6% interest indirectly through an associate. There is no contingent consideration in respect of this acquisition.
(u) On 1 April 2011, the consolidated entity acquired 50% of the voting shares in Northlake Holdings Pty Ltd trading as Country Wide Insurance Brokers for $4,660,418. The purchase price included an element of contingent consideration which was determined on a multiple of net profit after tax. During the previous year the contingent consideration was reassessed and was increased from $1,660,416 to $1,885,803. The difference of $225,387 was charged to the income statement during the previous year. During the current year, the contingent consideration amount was reduced by $88,284 and included in the income statement (see note 4(vii)).

83 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
Fair value recognised
on acquisition
2013 2012
$’000 $’000
7. CASH AND CASH EqUIVALENTS (CONTINUED)
Business combinations (continued)
Acquisition and disposal of broking portfolios
(v) The group acquired broking portfolios by way of business combinations as follows:
Intangibles 2,296 1,069
Deferred tax liabilities (690) (322)
Fair value of assets acquired 1,606 747
purchase price - cash paid 5,725 3,627
Contingent consideration 1,698 874
7,423 4,501
Less: Fair value of assets acquired 1,606 747
goodWill arisiNg oN acquisitioN 5,817 3,754
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Controlled entities acquired broking portfolios which included an element of contingent consideration which is finally determined on a multiple of commission and fees achieved in the financial year immediately following acquisition. The potential undiscounted amount of all future payments that could be required is between $555,000 and $1,982,000. The fair value of this contingent consideration at the date of acquisition had been estimated as $1,610,000. During June 2013, the amount previously estimated for contingent consideration has been increased by a further $87,854 increasing the total contingent consideration to $1,698,000. This additional amount has been included in the income statement for the current year. ( see note 4(vii)).

During the previous period, the potential undiscounted amount of all future payments that could be required was between $778,000 and $1,236,000. The fair value of that contingent consideration had been estimated as $874,000. During the current year this amount was increased by $461,938 and this amount has been included in the income statement (see note 4(vii)).

(w) The group disposed of broking portfolios as follows:

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||||
|---|---|---|
|proceeds from sale of broking portfolio ( net of sales expenses)|953|—|
|Less carrying value - Intangibles net of amortisation|(543)|—|
|Less - Unrealised profit on sale of broking portfolio to an associate|(287)|
|profit oN sale of brokiNg portfolio ( pre tax)|123|—|
|(x) On 1 May 2013, the company disposed of all of its equity in Austbrokers Gladstone Pty Ltd and|
|Austbrokers Financial Services (Gladstone) Pty Ltd for $268,000 to an associated entity, Rivers|
|Insurance Brokers Pty Ltd.|
|proceeds from sale of controlled entity|268|—|
|Less carrying value / unrealised profit on sale of controlled entity to an associate|(86)|—|
|profit oN sale (pre tax)|182|—|
|Cash inflow on disposal is as follows;|
|Net cash reduction on disposal of controlled entity|(69)|—|
|Cash received on disposal of controlled entity|268|—|
|Net cash iNfloW oN sale oN coNtrolled eNtity|199|—|
|total profit oN disposals pre tax - items 7 (W) - 7(x) (see Note 4 (vii))|305|—|

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$2,620,068 ($2,544,068 net of amortisation) of intangibles recognised by the entities sold, were included in previous year group consolidated financial statements and have been deconsolidated when the entities were sold in May 2013 (see note 16).

auStBroKerS 2013 annuaL rePort 84

notes to the financial statements For the year ended 30 June 2013

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Consolidated
2013 2012
$’000 $’000
8. DIVIDENDS PAID AND PROPOSED
Equity dividends on ordinary shares:
(a) Dividends paid during the year
Final franked dividend for financial year ended 30 June 2011: 17.0 cents — 9,421
Interim franked dividend for financial year ended 30 June 2012: 9.5 cents — 5,277
Final franked dividend for financial year ended 30 June 2012: 21.5 cents 12,053 —
Interim franked dividend for financial year ended 30 June 2013: 11.0 cents 6,339 —
total divideNds paid iN curreNt year 18,392 14,698
In addition to the above, dividends paid to non controlling interests totalled $5,097,000 (2012: $3,286,000).
(b) Dividends proposed and not recognised as a liability
Final franked dividend for financial year ended 30 June 2012: 21.5 cents — 12,040
Final franked dividend for financial year ended 30 June 2013: 24.5 cents 14,247 —
14,247 12,040
Dividends paid per share (cents per share) 32.5 26.5
divideNds proposed per share (ceNts per share) Not recogNised at balaNce date 24.5 21.5
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
• franking account balance as at the end of the financial year at 30% (2012: 30%) 27,985 24,327
• franking credits that will arise from the payment of income tax payable as at the end of the financial year 569 937
the amount of franking credits available for future reporting periods 28,554 25,264
•
impact on the franking account of dividends proposed or declared before the financial report was authorised
(6,105) (5,160)
for issue but not recognised as a distribution to equity holders during the year
the amouNt of fraNkiNg credits available for future reportiNg periods after paymeNt of divideNd 22,449 20,104
The tax rate at which paid dividends have been franked is 30% (2012: 30%)
Dividends proposed will be franked at the rate of 30% (2012: 30%)
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85 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$’000 $’000
9. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables 18,118 9,663
Amount due from customers on broking/underwriting agency operations 137,664 106,917
Other receivables - related entities 916 587
total receivables (curreNt) 156,698 117,167
10. OTHER FINANCIAL ASSETS (CURRENT)
Mortgages - related entities (amortised cost) 1,457 1,316
Other 259 —
total other fiNaNcial assets (curreNt) 1,716 1,316
The mortgages are secured by registered fixed and floating charges over assets in the business, securities and
supplemented with cross guarantees and indemnities where necessary.
11. TRADE AND OTHER RECEIVABLES (NON CURRENT)
Trade receivables 264 128
Loans to associated entities — 133
total receivables (NoN curreNt) 264 261
12. OTHER FINANCIAL ASSETS (NON CURRENT)
Mortgages - related entities (amortised cost) — 30
Other 424 122
total other fiNaNcial assets (NoN curreNt) 424 152
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The mortgages are secured by registered fixed and floating charges over assets in the business, securities and supplemented with cross guarantees and indemnities where necessary.

auStBroKerS 2013 annuaL rePort 86

notes to the financial statements For the year ended 30 June 2013

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Consolidated
2013 2012
$’000 $’000
13. INVESTMENT IN ASSOCIATES
Investments at equity accounted amount:
associated eNtities - uNlisted shares 82,169 79,553
Equity percentage owned Equity accounted amount
Jun-13 Jun-12 2013 2012
% % $’000 $’000
Austral Insurance Brokers Pty Ltd 50.0 50.0 2,977 3,199
A & I Member Services Pty Ltd 50.0 50.0 — —
Adroit Holdings Pty Ltd 0.0 49.9 — 2,512
Austbrokers RIS Pty Ltd 49.9 49.9 2,490 2,360
Austbrokers ABS Aviation Pty Ltd 50.0 50.0 106 —
Bruce Park Pty Ltd 49.9 49.9 1,457 1,431
Brett Grant and Associates Pty Ltd 50.0 0.0 1,562 —
Citycover (Aust) Pty Ltd 49.9 49.9 1,725 1,636
Comsure Insurance Brokers Pty Ltd 0.0 49.9 — 603
Dalby Insurance Brokers Pty Ltd 50.0 0.0 2,467 —
Insurance Advisernet Australia Pty Ltd/ Insurance Advisernet Australia Unit Trust 49.9 49.9 15,386 15,993
Insurance Advisernet Holdings Pty Ltd / Insurance Advisernet Holdings Unit Trust 49.9 49.9 592 390
Insurics Pty Ltd 0.0 50.0 — 1,150
JMD Ross Insurance Brokers Pty Ltd 49.9 49.9 963 840
Markey Group Pty Ltd 49.9 49.9 3,803 3,280
Global Assured Finance Pty Ltd 49.9 49.9 — —
MGA Management Services Pty Ltd 49.9 49.9 7,590 6,539
Northern Tablelands Insurance Brokers Pty Ltd 49.9 49.9 103 79
Northlake Holdings Pty Ltd 50.0 50.0 5,074 4,915
Peter L Brown & Associates Pty Ltd 49.9 49.9 571 625
Power Insurance Brokers Pty Ltd 49.9 49.9 101 56
Rivers Insurance Brokers Pty Ltd 49.9 49.9 3,199 3,074
Secure Enterprises Pty Ltd / Strathearn Insurance Brokers Unit Trust 49.9 49.9 22,153 22,201
Supabrook Pty Ltd 49.9 49.9 1,030 902
SRG Group Pty Ltd 50.0 50.0 2,000 2,019
Western United Financial Services Pty Ltd 49.9 49.9 1,513 1,288
Countrywide Tolstrup Financial Services Group Pty Ltd / Countrywide Tolstrup Group
49.9 49.9 1,976 2,095
Unit Trust
Oxley Insurance Brokers Pty Ltd / Port Macquarie Insurance Brokers Unit Trust 49.9 49.9 539 461
Coffs Harbour Unit Trust 37.5 37.5 109 75
Aust Re Brokers Pty Ltd 50.0 0.0 235 —
Tasman Underwriting Pty Ltd 50.0 50.0 490 473
Millennium Underwriting Agency Pty Ltd 50.0 50.0 264 252
One Liability Underwriting Pty Ltd 50.0 0.0 — —
Angel Accident and Health Underwriting Agency Pty Ltd 50.0 0.0 — —
Longitude Insurance Pty Ltd 56.1 0.0 286 —
NewSurety Pty Ltd 50.0 0.0 — —
Celestial Underwriting Agency Pty Ltd 50.0 50.0 452 1,105
Interprac General Insurance Pty Ltd 18.8 0.0 32 —
HQ Insurance Brokers Pty Ltd 47.5 0.0 924 —
82,169 79,553
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87 AUSTBROKERS 2013 ANNUAL REPORT

13. INVESTMENT IN ASSOCIATES (CONTINUED)

During the current year, the following transactions occurred;

On 1 July 2012, the consolidated entity acquired addition voting shares in Insurics Pty Ltd and Adroit Holdings Pty Ltd on which date they ceased to be associates and became controlled entities.
Interprac General Insurance Pty Ltd was acquired as part of Adroit Holdings Pty Ltd.
On 1 November 2012, the consolidated entity acquired addition voting shares in Comsure Pty Ltd on which date it ceased to be an associate and became a controlled entity.
During the period, the consolidated entity incorporated or acquired the following entities, Angel Accident and Health Underwriting Agency Pty Ltd, One Liability Underwriting Pty Ltd, New Surety Pty Ltd and Aust Re Brokers Pty Ltd. The capital contribution for 50% of the voting shares in each entity was $50, $100, $100 and $10 respectively.
On 1 December 2012, the consolidated entity acquired 50% of the voting shares of Brett Grant and Associates Pty Ltd for $1,728,603.
On 1 April 2013, the consolidated entity acquired 50% of the voting shares of Dalby Insurance Brokers Pty Ltd for $2,538,926.
On 1 May 2013, the consolidated entity acquired 47.5% of the voting shares of HQ Insurance Brokers Pty Ltd for $1,200,000.

During the previous year, the following transactions occurred;

Effective, 1 July 2011, the consolidated entity acquired 18.4% of Millennium Underwriting Agency Pty Ltd for $184,000. The consolidated entity has a further 31.6% interest indirectly through an associate.
During July 2011, the consolidated entity acquired 100% of Longitude Insurance Pty Ltd for $50 which was diluted to 37.5% during the current year. The consolidated entity has a further 18.58% interest indirectly through an associate.

Other information in respect of associated entities which carry on business directly or through controlled entities.

(a) The principal activity of each associate - insurance broking, except for associates owned by Austagencies Pty Ltd, which are underwriting agents.
(b) The proportion of voting power held by the controlling entity in respect of each associate is 50% except for Coffs Harbour Unit Trust and Longitude Insurance Pty Ltd where voting power is 37.5%, Millennium Underwriting where the voting power is 18.4%, HQ Insurance Brokers Pty Ltd where the voting power is 47.5% and Interprac General Insurance Pty Ltd where the voting power is 27%.
(c) The reporting date of each associate is 30 June 2013 (prior year reporting date 30 June 2012).
(d) There have been no significant subsequent events affecting the associates’ profits for the year.
(e) Other than disclosed in note 17, there were no other impairments of investment in associates for the year.
(f) All associates, including unit trusts, were incorporated or established in Australia.
(g) The entity’s share of the associate’s commitments and contingent liabilities are disclosed in note 23.

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Consolidated
2013 2012
$’000 $’000
(h) The entity's share of associates' profits/(losses)
share of associates':
Revenue 77,682 83,417
Operating profits before income tax 24,881 24,333
Amortisation of intangibles (1,391) (1,398)
Net profit before income tax 23,490 22,935
Income tax expense attributable to operating profits (4,120) (4,875)
share of associates' Net profits 19,370 18,060
(i) The entity's share of the assets and liabilities of associates in aggregate:
Current assets 164,636 170,726
Non-current assets 39,737 39,425
Current liabilities (159,840) (167,472)
Non-current liabilities (11,276) (10,441)
Net assets 33,257 32,238
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auStBroKerS 2013 annuaL rePort 88

notes to the financial statements For the year ended 30 June 2013

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Equity interest held
2013 2012
% %
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		2013 %	2012 %
14.	SHARES IN CONTROLLED ENTITIES
* All controlled entities are incorporated in Australia and comprise:
Name and interest in controlled entities
Austbrokers Pty Ltd and its controlled entities		100	100
•	Austbrokers Investments Pty Ltd	100	100
	- Austbrokers Trade Credit Pty Ltd	75	75
	- Salisbury Payne Tinslay Pty Limited / Salisbury Payne Tinslay Unit Trust	70	70
	- Finsura Holdings Pty Ltd and its controlled entities	70	70
	- Finsura Insurance Broking (Australia) Pty Ltd	70	70
	- Finsura Financial Services Pty Limited	70	70
	- Finsura Investment Management Services Pty Limited	70	70
	- Finsura Insurance Broking Unit Trust	70	70
	- RI Hornsby Pty Limited	70	70
Adroit Holdings Pty Ltd and its controlled entities		68.5	0
•	Adroit Financial Group Pty Ltd	68.5	0
•	Stateplan Facilities Pty Ltd	68.5	0
•	Adroit Hume Pty Ltd	55.3	0
•	Adroit Melbourne Pty Ltd	68.5	0
•	Adroit Workers Compensation Solutions Pty Ltd	61.7	0
•	Adroit Insurance Group Pty Ltd	68.5	0
•	Adroit Bellarine Pty Ltd	65.1	0
•	Adroit Sandhurst Pty Ltd	47.0	0
•	Adroit Eureka Pty Ltd	51.1	0
•	Adroit Latrobe Pty Ltd	68.5	0
•	Tealrose Pty Ltd	68.5	0
•	Adroit Albury FG Pty Ltd	34.9	0
•	Adroit Epping Financial Planning Pty Ltd	65.7	0
•	We can Bcoz Pty Ltd	68.5	0
•	Bcoz Underwriting Agencies Unit Trust	62.6	0
•	Adroit Workcom Investments Pty Ltd	68.5	0
•	Adroit Management Services Pty Ltd	68.5	0
Austbrokers Gladstone Pty Ltd		0	100
Austbrokers Financial Services (Gladstone) Pty Ltd		0	100
Austbrokers Services Pty Ltd		100	100
Austbrokers Business Centre Pty Ltd		100	100
Kyrus Cook & Associates Pty Ltd		100	100
Adept Insurance Brokers Pty Ltd and its controlled entity		100	100
•	Geary Smith Pty Limited	100	100
Aprikeesh Pty Ltd and its controlled entities		66	66
•	Austbrokers Phillips Pty Ltd	66	66
•	Austbrokers Australian Compensation Services Pty Ltd	66	66
•	Interfn Pty Ltd	52	45
AEI	Holdings Pty Ltd / AEI Insurance (Brokers) Pty Ltd	100	100
Austbrokers Financial Solutions (Syd) Pty Ltd and its controlled entities		75	100
•	SPT Financial Services Pty Ltd	52	75
•	Austbrokers Financial Solutions (ACT) Pty Ltd	75	0
Austbrokers C.E. McDonald Pty Ltd and its controlled entity		100	100
•	Traders Voice Services Pty Ltd	100	100

89 AUSTBROKERS 2013 ANNUAL REPORT

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Equity interest held
2013 2012
% %
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	2013 %	2012 %
14. SHARES IN CONTROLLED ENTITIES (CONTINUED)
* All controlled entities are incorporated in Australia and comprise:
Name and interest in controlled entities
Austbrokers Central Coast Pty Ltd and its controlled entity	80	80
• Austbrokers Central Coast Financial Services Pty Ltd	80	80
Austbrokers City State Pty Ltd	90	90
Austbrokers Premier Pty Ltd	80	80
Austbrokers Southern Pty Ltd	80	80
Austbrokers Sydney Pty Ltd and its controlled entities	100	100
• Austbrokers Canberra Pty Ltd	85	75
• Austbrokers FWR Pty Ltd	100	100
• Austbrokers Professional Services Pty Ltd	80	80
• Austbrokers AEI Transport Pty Ltd and controlled entities	65	65
- Carriers Insurance Brokers Pty Ltd	52	52
- Austbrokers AEI Pty Ltd	42.3	52
- Chegwyn Insurance Brokers Pty Ltd	42.3	0
Australian Bus and Coach Underwriting Agency Pty Ltd	100	100
AHL Insurance Brokers Pty Ltd and its controlled entity	100	100
• AHL Insurance Brokers (Aust) Pty Ltd	100	100
Austagencies Pty Ltd and its controlled entities	100	100
• Cemac Pty Ltd	100	100
• Cinesure Pty Ltd	100	0
• Latitude Underwriting Agency Pty Ltd	100	100
• Dolphin Insurance Pty Ltd	100	100
• 5 Star Underwriting Agency Pty Ltd	100	100
• Longitude Insurance Pty Ltd	0	100
• Film Insurance Underwriting Agencies Pty Ltd	100	100
• Construction Underwriting Pty Ltd	51	51
• Breakdown Underwriting Pty Ltd	51	51
• Lawsons Underwriting Agency Limited	90	0
• Guardian underwriting Services Pty Ltd / G.U.S. Trust	90.9	0
Austbrokers RWA Pty Ltd and its controlled entities	60	60
• Austbrokers RWA Financial Services Pty Ltd	30	30
• Harvey Business Management Pty Ltd	60	60
• CTRL Pty Ltd	60	60
Comsure Insurance Brokers Pty Ltd and controlled entity	80	0
• Comsure Financial solutions Pty Ltd	60	0
Insurics Pty Ltd	100	0
InterRISK Australia Pty Ltd and its controlled entity	77.1	0
• InterRISK Queensland Pty Ltd	37	0
Shield Underwriting Holdings Pty Ltd	100	100
McNaughton Gardiner Insurance Brokers Pty Ltd and its controlled entity	70	70
• McNaughton Gardiner Financial Services Pty Ltd	70	70
North Coast Insurance Brokers Pty Ltd and its controlled entities	70	70
• NCFS Unit Trust	70	70
• Ballina Insurance Brokers Pty Ltd as trustee for Ballina Insurance Brokers unit trust	56	56
Austbrokers Terrace Insurance Brokers Pty Ltd and controlled entity	70.8	85
• Austbrokers Financial Solutions (SA) Pty Limited	47	43
Austbrokers Employee Share Acquisition Schemes Trust	100	100

auStBroKerS 2013 annuaL rePort 90

notes to the financial statements For the year ended 30 June 2013

14. SHARES IN CONTROLLED ENTITIES (CONTINUED)

During the current year, the following transactions occurred;

On 1 November 2012, the consolidated entity acquired an additional 30% interest in Comsure Insurance Brokers Pty Ltd for $2,237,131, bringing the total equity to 80%.
Effective 1 July 2012, the consolidated entity acquired an additional 18.5% interest in Adroit Holdings Pty Ltd for $4,406,000, bringing the total equity to 68.5%.
On 1 July 2012, the consolidated entity acquired the remaining 50% interest in Insurics Pty Ltd it did not already own for $2,527,000.
Effective 1 July 2012, the consolidated entity acquired an additional 10% of the voting shares of Austbrokers Canberra Pty Ltd for $1,500,000 increasing the equity ownership to 85%.
Effective 1 July 2012, the consolidated entity diluted its voting shares of Austbrokers Financial Solutions (Syd) Pty Ltd (AFS) by 25%, when AFS issued additional shares to a new shareholder for $1,224,920 reducing the equity ownership to 75%.
Effective 1 July 2012, the consolidated entity diluted its voting shares of Austbrokers Terrace Pty Ltd from 85% to 70.83% when Austbrokers Terrace Pty Ltd issued additional shares to non controlling interests for $1,018,035. During the period, Austbrokers Terrace increased its shareholding in Austbrokers Financial Solutions (SA) from 50.98% to 66.67%.
On 15 October 2012, the consolidated entity incorporated Cinesure Pty Ltd. The capital contribution for 100% of the voting shares was $1000.
Effective 1 January 2013, a controlled entity diluted its voting shares in SPT Financial Solutions Pty Ltd (SPT) from 75% to 70%, when SPT issued additional shares to a new shareholder for $73,119.
Effective 1 May 2013, Austagencies Pty Ltd acquired 90.0% of the voting shares in Lawsons Underwriting Australasia Pty Ltd for $6,355,682 (including a deferred payment of $1,630,122).
Effective 1 May 2013, Austagencies Pty Ltd acquired 90.91% of the voting shares in Guardian Underwriting Services Pty Ltd, trustee for G.U.S Trust for $3,618,469 (including a deferred payment of $891,167).
Effective 31 May 2013, the Company acquired 77.09% of the voting shares in InterRISK Australia Pty Ltd for $17,242,386 (including a deferred payment of $1,325,960 and shares valued at $2,067,277 ).
Effective 1 June 2013, Austbrokers AEI Pty Ltd, acquired 100% of the voting shares in Chegwyn Insurance Brokers Pty Ltd for $1,250,000.
Effective 30 June 2013, a controlled entity diluted its voting shares in AEI Pty Ltd (AEI) from 80% to 65%, when AEI issued additional shares to new and existing shareholders for $1,250,000 including $550,746 to its parent entity.
On 1 May 2013, Austbrokers Financial Solutions (Syd) Pty Ltd incorporated a new 100% owned entity, Austbrokers Financial Solutions (ACT) Pty Ltd for $10.
On 1 May 2013, the consolidated entity disposed of 100% of Austbrokers Gladstone Pty Ltd and Austbrokers Financial Services (Gladstone) Pty Ltd to an associate, Rivers Insurance Brokers Pty Ltd for $268,000.
During the period, a controlled entity Aprikeesh Pty Ltd increased its equity in Interfin Pty Ltd from 67.5% to 78.68%. The acquisition was treated as a transaction between owners. See note 7(b).

During the previous year, the following transactions occurred;

The consolidated entity acquired 100% of two newly incorporated entities, Austbrokers Gladstone Pty Ltd and Austbrokers Financial Services (Gladstone) Pty Ltd for $100 each.
On 1 July 2011, the Consolidated entity disposed of 10% of the voting shares of Austbrokers Citystate Pty Ltd for $497,691 reducing the equity to 90%.
Austbrokers Holdings Limited established an employee share trust, to acquire shares, either issued to it by Austbrokers Holdings Limited, or purchased on the open market, to satisfy option grants.
On 1 January 2012, Austbrokers RWA Pty Ltd acquired 100% of the voting shares in CTRL Pty Limited for $1,193,409.
On 1 January 2012, Austagencies Pty Ltd acquired 100% of the voting shares of Film Insurance Underwriting Agencies Pty Ltd for $4,527,034 including a deferred consideration payment on this acquisition of $927,034. The deferred payment was paid in January 2013.
During the previous year, a controlled entity, Austbrokers RWA Pty Ltd, reduced its equity in Austbrokers RWA Financial Services to 50%, by diluting its shareholding, thereby reducing the Austbrokers Holdings Ltd direct equity in this entity to 30%.
On 30 November 2010, the Consolidated group acquired 100% of the voting shares in Cemac Pty Ltd for $4,617,029 including a contingent consideration on this acquisition of $1,442,029. The contingent consideration was paid in March 2012. At 31 March 2012, the contingent consideration was reduced by $418,421 after taking into account actual commission and fee income booked during the period 1 December 2010 and 30 November 2011. The reduction in contingent consideration was included in the income statement for 2012 (see note 4(vi)).

91 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
Plant and
Property equipment Motor vehicles Total
$'000 $'000 $'000 $'000
15. PROPERTy, PLANT AND EqUIPMENT
Year ended 30 June 2013
Balance at the beginning of the year 730 12,029 1,083 13,842
Acquisition of controlled entities — 6,307 391 6,698
Additions during the year — 1,113 421 1,534
Disposals during the year — (2,728) (447) (3,175)
property, plant and equipment at cost 730 16,721 1,448 18,899
Depreciation
Balance at the beginning of the year 83 8,296 405 8,784
Acquisition of controlled entities — 3,588 141 3,729
Disposals during the year — (2,704) (225) (2,929)
Depreciation during year 11 1,629 220 1,860
accumulated depreciation 94 10,809 541 11,444
Summary
Net carrying amount at beginning of year 647 3,733 678 5,058
Net carryiNg amouNt at eNd of year 636 5,912 907 7,455
Year ended 30 June 2012
Balance at the beginning of the year 703 10,845 1,180 12,728
Acquisition of controlled entities 27 11 37 75
Additions during the year — 1,977 215 2,192
Disposals during the year — (804) (349) (1,153)
property, plant and equipment at cost 730 12,029 1,083 13,842
Depreciation
Balance at the beginning of the year 59 7,742 419 8,220
Acquisition of controlled entities 11 9 5 25
Disposals during the year — (653) (205) (858)
Depreciation during year 13 1,198 186 1,397
accumulated depreciation 83 8,296 405 8,784
Summary
Net carrying amount at beginning of year 644 3,103 761 4,508
Net carryiNg amouNt at eNd of year 647 3,733 678 5,058
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auStBroKerS 2013 annuaL rePort 92

notes to the financial statements For the year ended 30 June 2013

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Consolidated
Insurance
Broking
Goodwill Registers Total
$'000 $'000 $'000
16. INTANGIBLE ASSETS AND GOODWILL
Year ended 30 June 2013
Balance at the beginning of the year 71,980 27,317 99,297
Additional businesses and portfolios acquired 65,385 17,036 82,421
Disposal of controlled entities (2,050) (570) (2,620)
Disposals of broking portfolios (543) — (543)
total intangibles 134,772 43,783 178,555
Amortisation
Balance at the beginning of the year — 16,461 16,461
Amortisation current year — 3,531 3,531
Disposal of controlled entities — (76) (76)
accumulated amortisation — 19,916 19,916
Summary
Net carrying amount at beginning of year 71,980 10,856 82,836
Net carryiNg amouNt at eNd of year 134,772 23,867 158,639
Year ended 30 June 2012
63,041 25,967 89,008
Balance at the beginning of the year
Additional businesses and portfolios acquired 8,939 1,350 10,289
total intangibles 71,980 27,317 99,297
Amortisation
Balance at the beginning of the year — 14,047 14,047
Amortisation current year — 2,414 2,414
accumulated amortisation — 16,461 16,461
Summary
63,041 11,920 74,961
Net carrying amount at beginning of year
Net carryiNg amouNt at eNd of year 71,980 10,856 82,836
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Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of the business. As at acquisition date, any goodwill relates to benefits from the combination of synergies as well as the entity's ability to generate future profits. The balance of the Insurance broking register will be amortised over the remaining period ranging from 1 to 10 years depending on original acquisition date.

93 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $'000
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	$'000	$'000
16. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Individual intangible assets material to the group are attributable to the following controlled entities.
(i) Goodwill
Adroit Holdings Pty Ltd and its controlled entities	22,009	—
InterRISK Australia Pty Ltd and its controlled entity	16,448	—
Comsure Insurance Brokers Pty Ltd	5,876	—
Austbrokers Sydney Pty Ltd and its controlled entities	24,941	23,285
Austbrokers Central Coast Pty Ltd and its controlled entities	2,341	2,350
Austbrokers RWA Pty Ltd and its controlled entities	5,495	5,043
Aprikeesh Pty Ltd and its controlled entities	2,315	2,315
Austbrokers Financial Solutions (Syd) Pty Ltd and its controlled entities	7,330	4,008
Austagencies and its controlled entities	27,189	16,261
Austbrokers Premier Pty Ltd	3,407	3,400

	Remaining amortisation	Remaining amortisation
		period (years)
	2013	2012
(ii) Insurance Broking Registers
Adroit Holdings Pty Ltd and its controlled entities	9.0	0.0	5,999	—
InterRISK Australia Pty Ltd and its controlled entity	10.0	0.0	4,943	—
Comsure Insurance Brokers Pty Ltd	9.5	0.0	1,662	—
Austbrokers Sydney Pty Ltd and its controlled entities	4.0	3.0	3,313	3,772
North Coast Insurance Brokers Pty Ltd and its controlled entities	6.5	7.5	536	628
Aprikeesh Pty Ltd and its controlled entities	5.5	6.5	1,564	1,834
MGIB insurance Brokers Pty Ltd	7.5	8.5	732	890
RWA Insurance Brokers Pty Ltd and its controlled entities	8.5	9.5	796	854

auStBroKerS 2013 annuaL rePort 94

notes to the financial statements For the year ended 30 June 2013

17. IMPAIRMENT TESTING OF INTANGIBLE ASSETS, GOODWILL AND INVESTMENT IN ASSOCIATES

The recoverable amount of the equity accounted associates and goodwill and insurance broking registers arising on consolidation of controlled entities is determined based on the higher of the directors’ estimate of fair value of the cash generating unit to which they relate less costs to sell and its value in use. In determining fair value, each subsidiary or associate is considered a separate cash generating unit or grouped into the one cash generating unit where operations are linked.

The measure used in assessing fair value is based on the directors’ estimates of the sustainable profits, which have been tested against the current and prior year’s profits as well as the following year’s financial budgets approved by senior management. After determining the appropriate after tax profit for each associate/controlled entity, the after tax profit is multiplied by a profit multiple from within the range of 9.92 to 11.53 times (2012: 10.65 to 12.20 times).

The profit multiples have been determined based on the cost of capital for each cash generating unit factoring in an assumed sustainable profit growth of 2.0% per annum (2012: 2.5%).

External expert advice has been sought in relation to the determination of the appropriate weighted average cost of capital (WACC) to be used in determining the profit multiples. The WACC is based on the cost of capital calculated for each cash generating unit after taking into account market risks, a risk loading recognising the size of the business, current borrowing interest rates, factoring in the borrowing capacity of the businesses and the risk free rate. As in the previous year, the 10 year average rate for 10 year bonds was used to reflect a sustainable risk free rate of 5.2% (2012: 5.33%).

The profit multiples used are reviewed against externally accessible factors and are considered by directors to be reflective of generally accepted market values.

When considered appropriate, a secondary measure is applied to determine directors’ estimates of fair value. This measure applies a multiple of 1.8 times to broking revenue (2012: 1.8 times) for general insurance broking businesses and 2.5 times to life insurance renewal commissions (2012: 2.5 times). These valuation bases are commonly used in the market to determine value for acquisitions of similar businesses.

The resulting fair values derived from the appropriate measure are compared to the carrying value for each cash generating unit and in the event that the carrying value exceeds the recoverable amount, an impairment loss is recognised.

During the current year, an impairment loss relating to the carrying value of an associate of $629,000 was recognised and included in the income statement as an expense. This was partly offset by a change in the estimated contingent consideration in respect of this associate where the contingent consideration was reduced by $569,466 and this amount was included in the current year income statement. (see note 4 (vi),(vii),7(r)). The impact to the current year result relating to the adjustment to the carrying value of this associate was a net loss of $59,534.

No reasonable change in assumptions would result in the recoverable amount of a cash generating unit being materially less than the carrying value.

18. SHARE-BASED PAyMENT PLANS

Employee Share Option Plan

The share-based payments expense recognised in the income statement is included in note 4 (iv) Expenses.

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share options issued during the year:

Unless otherwise stated, all options are granted over shares in the ultimate controlling entity, Austbrokers Holdings Ltd.

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2013 2012 2013 2012
Share options No. No. WAEP ($) WAEP ($)
Outstanding at the beginning of the year 1,118,673 2,007,541 3.11 2.96
Granted during the period - Zero priced options 271,320 56,591 0.00 0.00
Exercised during the period: Options issued during 2005 — (420,850) 0.00 2.00
Exercised during the period: Options issued during 2006 (298,200) (318,150) 3.47 3.47
Exercised during the period: Options issued during 2007 (317,300) (90,750) 4.20 4.20
Exercised during the period: Options issued during 2008 (20,159) (16,524) 4.22 4.22
Exercised during the period: Options issued during 2008 (13,181) (40,566) 0.00 0.00
Exercised during the period: Options issued during 2009 (49,655) — 0.00 0.00
Lapsed/forfeited during the period: Options issued during 2008 — (13,259) 0.00 4.22
Lapsed/forfeited during the period: Options issued during 2008 — (24,636) 0.00 0.00
Lapsed/forfeited during the period: Options issued during 2009 (23,645) (10,287) 0.00 0.00
Lapsed/forfeited during the period: Options issued during 2010 — (10,437) 0.00 0.00
outstaNdiNg at the eNd of the year 667,853 1,118,673 1.54 3.11
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95 AUSTBROKERS 2013 ANNUAL REPORT

18. SHARE-BASED PAyMENT PLANS (CONTINUED)

The outstanding balance as at 30 June 2013 is represented by:

49,350 (2012: 308,650) options granted on 25 September 2006, exercisable 3 years from the issue date at an exercise price of $3.47.
NIL (2012: 38,900) options granted on 29 January 2007, exercisable 3 years from 25 September 2006 at an exercise price of $3.47.
202,900 (2012: 500,200) options granted on 14 September 2007, exercisable 3 years from the issue date at an exercise price of $4.20.
NIL (2012: 20,000) options granted on 29 January 2008, exercisable 3 years from 14 September 2007 at an exercise price of $4.20.
NIL (2012: 20,160) options granted on 29 September 2008, exercisable 3 years from 29 September 2008 at an exercise price of $4.22.
14,404 (2012: 27,584) options granted on 29 September 2008, exercisable 3 years from 29 September 2008 at an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were issued was $4.22.
5,517 (2012: 78,817) Share options were granted on 3 November 2009, exercisable 3 years from 3 November 2009 at an exercise price of $NIL. The Volume weighted average share price for the 5 business days prior to the date the options were issued was $4.81.
67,771 (2012: 67,771) Share options were granted on 15 October 2010, exercisable 3 years from 15 October 2010 at an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were issued was $5.06.
56,591 (2012: 56,591) Share options were granted on 31 October 2011, exercisable 3 years from 31 October 2011 at an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were issued was $6.28.
38,320 Share options were granted on 31 October 2012, exercisable 3 years from 31 October 2012 at an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were issued was $7.71.
233,000 Share options were granted on 15 January 2013, exercisable 3 years from 1 January 2013 at an exercise price of $NIL. The options were valued using the dividend yield method resulting in an option price of $7.38.

All options must be exercised by no later than 7 years from the issue date.

During the year the following options were exercised or lapsed

36,100 Share options were exercised on 13 September 2012 at an exercise price of $3.47. The volume weighted average price for the 5 business days prior to the date the options were exercised was $7.8065.
223,200 Share options were exercised on 18 December 2012 at an exercise price of $3.47 The volume weighted average price for the 5 business days prior to the date the options were exercised was $8.27.
20,000 Share options were exercised on 13 September 2012 at an exercise price of $4.20. The volume weighted average price for the 5 business days prior to the date the options were exercised was $7.8065.
297,300 Share options were exercised on 18 December 2012 at an exercise price of $4.20 The volume weighted average price for the 5 business days prior to the date the options were exercised was $8.27.
8,307 Share options were exercised on 13 September 2012 at an exercise price of $NIL. The volume weighted average price for 5 business days prior to the date the options were exercised was $7.8065.
9,747 Share options were exercised on 18 December 2012 at an exercise price of $4.22. The volume weighted average price for 5 business days prior to the date the options were exercised was $8.27.
54,529 Share options were exercised on 18 December 2012 at an exercise price of $NIL. The volume weighted average price for 5 business days prior to the date the options were exercised was $8.27.
38,900 Share options were exercised on 2 April at an exercise price of $3.47. The volume weighted average price for 5 business days prior to the date the options were exercised was $9.80.
10,412 Share options were exercised on 2 April 2013 at an exercise price of $4.22. The volume weighted average price for 5 business days prior to the date the options were exercised was $9.80.
23,645 options lapse due to vesting conditions over the 4 years ended 30 June 2013, not being met.

auStBroKerS 2013 annuaL rePort 96

notes to the financial statements

For the year ended 30 June 2013

18. SHARE-BASED PAyMENT PLANS (CONTINUED)

During the previous year the following options were exercised or lapsed

420,850 Share options were exercised on 21 September 2011 at an exercise price of $2.00. The volume weighted average price for the 5 business days prior to the date the options were exercised was $6.2981.
279,250 share options were exercised on 21 September and 38,900 share options were exercised on 12 December 2011 at an exercise price of $3.47. The volume weighted average price for 5 business days prior to the date the options were exercised was $6.2981 and $6.2397 respectively.
60,600 share options were exercised on 21 September and 30,150 share options were exercised on 12 December 2011 at an exercise price of $4.20. The volume weighted average price for the 5 business days prior to the date the options were exercised were $6.2981 and $6.2397 respectively.
16,524 Share options were exercised on 21 September 2011 at an exercise price of $4.22. The volume weighted average price for 5 business days prior to the date the options were exercised was $6.2981.
40,566 Share options were exercised on 12 December 2011 at an exercise price of $NIL. The volume weighted average price for the 5 business days prior to the date the options were exercised was $6.2397.
4,313 Share options that were granted on 29 September 2008, lapsed due to the resignation of a staff member. A further 8,946 options lapsed due to the company not meeting profit targets during the 4 years ended 30 June 2012.
2,157 Zero priced options that were granted on 29 September 2008, lapsed due to the resignation of a staff member. A further 22,479 zero priced options lapse due to vesting conditions over the 4 years ended 30 June 2012, not being met.
10,287 Zero priced options that were granted on 3 November 2009, lapsed due to the resignation of a staff member.
10,437 Zero priced options that were granted on 15 October 2010, lapsed due to the resignation of a staff member.

Share options were granted during the period on similar terms and conditions as options outstanding at 30 June 2012, as noted in the annual report.

The fair value of the zero priced options issued before 1 January 2013 was based on the volume weighted average share price for the 5 day period prior to the options being granted. From 1 January 2013, the fair value of the zero priced options has been based on the dividend yield method taking into account the vesting period, expected dividend payout and the share price at the date the options were granted.

The fair value of the equity-settled share options granted under the option plan, other than zero priced options, is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted.

Options issued under the Austbroker’s Senior Executive Option Plan (“the Plan”) have a contractual life of 7 years. The expected life of the options is 5 years. This assumes that participants will take the opportunity to exercise vested options at an earlier date in the life of the option. For options exercised in respect of grants made in 2009, 2010, 2011, 2012 and 2013, the shares acquired cannot be disposed of before the expiry of a two year period from the date the options vested, except if employment is terminated.

The share-based payments expense recognised in the consolidated income statement is included in note 4 (iv) Expenses.

The weighted average remaining contractual life for the share options outstanding at 30 June 2013 is 4.98 years. (2012: 2.50 years).

Option Exercise conditions

These option exercise conditions apply to all options except 233,000 options issued to the Chief Executive Officer (CEO) on 15 January 2013.

(a) subject to satisfaction of the performance based conditions referred to in paragraphs (b) and (c) below, the Options will vest 3 years after the date of grant;
(b) if the First Test Compound Earnings Per Share Growth (Compound Growth) is:
(i) greater than or equal to 8.5% per annum, 20% of the Options will become exercisable;
(ii) equal to 10% per annum, 50% of the Options will become exercisable;
(iii) between 10% and 15%, the percentage of Options that are exercisable will be determined on a pro rata basis so that the number of Options that are exercisable will increase from 50% by 1 percentage point for every 0.1% percent additional Compound Growth over 10%;
(iv) 15% per annum or more, 100% of the Options will become exercisable
- in each case on the date on which the Company’s audited financial statements for the third financial year ending after the grant are lodged with the Australian Securities Exchange (the “First Test Date”);
(c) if all of the Options do not become exercisable on the First Test Date and the Second Test Compound Growth is higher than the First Test Compound Growth then on the date on which the Company’s audited financial statements for the fourth financial year ending after the grant are lodged with the Australian Securities Exchange (the “Second Test Date”) an additional number of Options will become exercisable as is equal to the difference between the number of Options which became exercisable under paragraph (b) and the number of Options which would have become exercisable if paragraph (b) applied on the basis of the Second Test Compound Growth (rather than the First Test Compound Growth);
(d) any Options which have not become exercisable by the Second Test Date lapse and are of no further force or effect.

The exercise conditions for 200,000 of the options granted to the CEO are the same as set out above except that between 8.5% and 10% compound growth the Options that are exercisable will be determined on a pro rata basis so that the number of Options that are exercisable will increase from 20% by 2 percentage points for every 0.1% additional Compound Growth over 8.5%. The further 33,000 options granted to the CEO have no performance hurdles but are subject to the CEO still being in the employment of the Group at 1 January 2016.

97 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $'000
19. TRADE AND OTHER PAyABLES
Current
Trade payables 14,395 8,135
Amount payable on broking/underwriting agency operations 220,115 162,079
Other payables - non related 17,918 11,056
Other payables - related entities 967 150
total trade aNd other payables 253,395 181,420
Consolidated
Employee Make good
entitlements provision Total
$’000 $'000 $'000
20. PROVISIONS
Year ended 30 June 2013
Balance at the beginning of the year 9,549 740 10,289
Acquisition of controlled entity 1,827 — 1,827
Arising during the year 316 — 316
balaNce at the eNd of the year 11,692 740 12,432
current 2013 9,963 — 9,963
Non–current 2013 1,729 740 2,469
11,692 740 12,432
Year ended 30 June 2012
Balance at the beginning of the year 9,142 562 9,704
Arising during the year 407 178 585
balaNce at the eNd of the year 9,549 740 10,289
current 2012 8,309 109 8,418
Non–current 2012 1,240 631 1,871
9,549 740 10,289
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Make good provision on leased premises

In accordance with the various lease agreements, the Group must restore the leased premises to a similar condition that existed prior to leasing the premises by removing all fixed and removable partitions. A provision has been included for expected amounts payable.

Because of the long-term nature of the liability, the greatest uncertainty in estimating the provision is the cost that will ultimately be incurred. During the year further amounts were provided for premises leased during the year.

Current lease durations range from less than 1 year to 5 years. Make good payments will only be made at the end of the lease.

Employee entitlements

Refer to note 2.2 (r) for the relevant accounting policy and a discussion of the significant estimation and assumptions applied in the measurement of this provision.

auStBroKerS 2013 annuaL rePort 98

notes to the financial statements For the year ended 30 June 2013

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Consolidated
2013 2012
$'000 $'000
21. INTEREST BEARING LOANS AND BORROWINGS
Current
Obligations under finance leases and hire purchase contracts (note 23) 567 266
Unsecured loan from other related parties 128 182
Secured bank loan 9,437 682
10,132 1,130
Non-current
Obligations under finance leases and hire purchase contracts (note 23) 596 482
Unsecured loan from other parties 51 68
Secured bank loan * 42,106 32,834
42,753 33,384
The Group has negotiated facilities through various banks as shown below. Details of those facilities are as follows;
Summary of secured bank loans
• St George Bank 42,115 31,396
• Macquarie Bank 337 282
• Commonwealth Bank 1,312 1,428
• National Australia Bank 2,588 410
• Hunter Premium Funding 838 —
• Bendigo Bank 4,353 —
total secured baNk loaNs 51,543 33,516
----- End of picture text -----

The facilities are subject to financial undertakings and warranties typical of facilities of this nature and have sub-limits for various purposes including acquisitions.

During the current and prior years, there were no defaults or breaches of terms and conditions of any of these facilities.

St George Bank Facilities

St George Bank has provided finance facilities to Austbrokers Holdings Ltd amounting to $40,000,000 plus a further $600,000 in credit card facilities (2012: $38,436,000). The facility expires on 30 May 2016.

Austbrokers Holdings Ltd facilities have been utilised to the amount of $32,820,435 (2012: $27,468,211) in bill acceptance/discount facilities totalling $30,000,000 and bank guarantees/credit cards/overdraft facilities totalling $2,820,435. The unutilised amount of the facility at 30 June 2013 was $7,779,565 (2012: $10,967,789).

Austbrokers Holdings Ltd has utilised $2,820,435 (2012: Austbrokers Services Pty Ltd $2,468,211) in respect of bank guarantees, credit card and overdraft facilities.
Austbrokers Holdings Ltd, has utilised $25,000,000 (2012: Austbrokers Services Pty Ltd $25,000,000) in commercial bill facilities at period end. Interest rates have been fixed at an effective rate of 5.35% (2012: 7.17%) until 31 August 2015. Bills are rolled over on quarterly intervals. Rollover of the bills is guaranteed for the duration of the facility as long as there are no breaches of the facility agreement.
Austbrokers Holdings Ltd, has utilised $5,000,000 (2012: $NIL) in commercial bill facilities at 30 June 2013. The commercial bill has a variable rate of 4.79% (2012: NIL%). Bills are rolled over on monthly intervals. Rollover of the bills is guaranteed for the duration of the facility as long as there are no breaches of the facility agreement.
The facilities are secured by registered fixed and floating charges over the assets and undertakings of the Group and cross guarantees and indemnities given by each of the wholly owned subsidiaries.

99 AUSTBROKERS 2013 ANNUAL REPORT

21. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)

St George Bank Facilities (continued)

A controlled entity, Austbrokers AEI Transport Pty Ltd has negotiated a loan facility amounting to $4,650,000 (2012: $4,650,000). These facilities have been utilised to the amount of $4,650,000 (2012:$4,650,000) This facility expires on 15 May 2015.

A commercial bill for $650,000 has a variable interest rate of 4.97% (2012: 5.79%).
A commercial bill for $4,000,000 has an interest rate of 5.75% (2012: 5.75%) and the rate is fixed until 15 May 2015.
The facility is secured by registered fixed and floating charges over the assets of Austbrokers AEI Transport Pty Ltd, a guarantee for 65% of the amount given by Austbrokers Holdings Ltd and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, Austbrokers Central Coast Pty Ltd has negotiated a commercial bill facility from St George Bank for $1,005,000. This facility is fully drawn down at year end. The facility expires on 3 October 2017.

The commercial bill for $1,005,000 has an interest rate of 7.33% (2012: 7.33%) and the rate is fixed until November 2013 after which time it will revert to the variable rate prevailing at that time.
The facility is secured by registered fixed and floating charges over the assets of Austbrokers Central Coast Pty Ltd, a letter of comfort from Austbrokers Holdings Ltd and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, Austbrokers Financial Solutions (Syd) Pty Ltd has negotiated a commercial bill facility from St George Bank for $2,700,000. (2012: $NIL). The undrawn amount of this facility is $1,361,282 (2012: $NIL). The facility expires on 31 May 2016.

The commercial bill for $1,338,718 has an interest rate of 5.77% (2012: NIL%) and the rate is fixed until 29 May 2015 after which time it will revert to the variable rate prevailing at that time.
The facility is secured by registered fixed and floating charges over the assets of Austbrokers Financial Solutions (Syd) Pty Ltd, a letter of comfort from Austbrokers Holdings Ltd and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, SPT Financial Services Pty Ltd, entered into an agreement with St George Bank to provide finance facilities amounting to $480,974 ($410,974 in loans and $70,000 for bank overdraft facilities) (2012: $304,000 including bank overdraft of $70,000). At balance date these facilities have been utilised to the amount of $480,974 (2012: $234,000). The undrawn amount of this facility is $70,000 (2012: $70,000).

The facility expires on 13 March 2018. The variable interest rate is renegotiated quarterly and the rate applicable at 30 June 2013 was 6.11% (2012: 6.56%).
The facilities are secured by registered fixed and floating charges over the assets of SPT Financial Services Pty Ltd , a letter of comfort given by Austbrokers Holdings Ltd, and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, Finsura Holdings Pty Ltd, has negotiated a loan facility amounting to $750,000 (2012: $750,000). At balance date these facilities have been utilised to the amount of $506,805 (2012: $506,805). The undrawn amount of the facility at 30 June 2013 was $243,195 (2012: $243,195). This facility will expire on 10 June 2019.

A loan of $260,000 (2012:$260,000) has a variable interest rate of 5.3% (2012: 6.62%).
A loan of $247,000 (2012:$247,000) has a variable interest rate of 5.3% which is renegotiated quarterly (2012: 6.6%).
The facilities are secured by registered fixed and floating charges over the assets of Finsura Holdings Pty Ltd , a letter of comfort given by Austbrokers Holdings Ltd, and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, InterRISK Australia Pty Ltd, has negotiated a loan facility amounting to $4,490,000 including bank guarantees totalling $350,000 (2012: $NIL).The drawn down amount of these facilities at 30 June 2013 was $4,133,008 (2012: $NIL). The undrawn amount of the facility at 30 June 2013 was $6,992 (2012: $NIL). The facility expires in 1 November 2015.

A loan of $4,133,008 (2012:$NIL) has a variable interest rate of 4.57% (2012: NIL%).
The facilities are secured by registered fixed and floating charges over the assets of InterRISK Australia Pty Ltd.

Macquarie Bank facilities

A controlled entity, Aprikeesh Pty Ltd, has negotiated a loan facility amounting to $557,000 (2012: $785,000). At 30 June 2013 these facilities have been utilised to the amount of $337,000. (2012: $282,000) The undrawn amount of the facility at 30 June 2013 was $220,000 (2012: $503,000). The loan facility matures in March 2014.

The term of the loan facility is interest only for 5 years ending on 31 March 2014. Interest rates on the facility are negotiated quarterly and the interest rate at 30 June 2013 was 6.02% (2012: 7.41%).
The facilities are secured by registered fixed and floating charges over the assets and undertakings of the Aprikeesh Group and cross guarantees and indemnities given by each of the wholly owned subsidiaries.

auStBroKerS 2013 annuaL rePort 100

notes to the financial statements For the year ended 30 June 2013

21. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)

Commonwealth Bank facilities

A controlled entity, North Coast Insurance Brokers Pty Ltd has negotiated three loan facilities totalling $1,312,353 (2012: $1,644,338).The facilities were fully drawn down at 30 June 2013 (2012: $1,428,170).

A loan facility of $472,337 (2012:$475,000) has been fixed until 13 September 2014 at a rate of 6.6%. (2012: fixed at 8.6%). The facility expires in September 2014.
A loan facility of $76,708 (2012:$300,000) has a variable rate of 6.85% (2012: fixed at 8.59%). The facility expires in 13 September 2014.
A loan facility of $763,308 (2012:$869,338) has a variable rate of 8.14% (2012: 8.49%). The facility expires on 21 June 2018. Principal repayments of $134,480 are due to be repaid during the next 12 months.
The facilities are secured by registered fixed and floating charges over the assets of North Coast Insurance Brokers Pty Ltd, its controlled entities and guarantees and indemnities given by the shareholders with non controlling interests.

National Australia Bank facilities

A controlled entity, Austbrokers Terrace Insurance Brokers Pty Ltd, negotiated a $500,000 (30 June 2012: $500,000) loan facility that expires on 29 July 2016. The undrawn amount of this facility at 30 June 2013 was $330,000 (30 June 2012: 90,000).

The interest rate on the loan of $170,000 (2012: $410,000) is renegotiated monthly and the variable rate applicable at 30 June 2013 was 6.42%(30 June 2012: 7.12%).
The facilities are secured by registered fixed and floating charges over the assets of Terrace Insurance Brokers Pty Ltd, its controlled entities and guarantees and indemnities given by the shareholders with non controlling interests.

A controlled entity, Austbrokers RWA Pty Ltd, negotiated a loan facility for $3,047,620. The undrawn amount of this facility is $629,276 (2012 $NIL). The company has negotiated a further $250,000 in credit card and overdraft facilities which have been drawn down to $202,225 (2012:$NIL). The loan facility expires in March 2018.

A loan facility of $3,047,620 (2012:$NIL) has a variable rate of 6.62% (2012: NIL%). The utilised amount of this facility is $2,418,344.
The facilities are secured by registered fixed and floating charges over the assets of Austbrokers RWA Pty Ltd, its controlled entities and guarantees and indemnities given by the shareholders with non controlling interests.

Hunter Premium Funding

A controlled entity, Austbrokers Southern Pty Ltd, negotiated a $837,669 (2012: $NIL) loan facility that expires on 28 June 2018. The undrawn amount of this facility at 30 June 2013 was $NIL (2012: NIL).

The interest rate on the loan of $837,669 (2012: $NIL) is renegotiated six monthly and the rate applicable at 30 June 2013 was 5.53% (2012: NIL%).
The facilities are secured by registered fixed and floating charges over the assets of Austbrokers Southern Pty Ltd, its controlled entities and guarantees and indemnities given by the shareholders with non controlling interests.

Bendigo Bank

A controlled entity, Adroit Holdings Pty Ltd, negotiated a loan facility for $7,610,000 (30 June 2012: $NIL). The undrawn amount of this facility at 30 June 2013 was $3,257,325 (2012 $NIL). The facility expires in December 2015.

A loan facility of $2,305,000 (2012:$NIL) has been fixed until December 2015 at a rate of 8.58%. (2012: NIL%) The facility was fully drawn down at 30 June 2013.
A loan facility of $2,305,000 (2012:$NIL) has a variable rate of 5.46% (2012: NIL%). The utilised amount of this facility is $1,180,000.
A loan facility of $3,000,000 (2012:$NIL) has a variable rate of 5.46% (2012: NIL%). The utilised amount of this facility is $867,675.
The facilities are secured by registered fixed and floating charges over the assets of Adroit Holdings Pty Ltd, its controlled entities and guarantees and indemnities given by the shareholders with non controlling interests.

101 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $'000
22. ISSUED CAPITAL AND RESERVES
Issued Capital opening balance 76,036 70,750
On 13 September 2012 allotted 8,307 shares at an issue price of $NIL — —
On 13 September 2012 allotted 36,100 shares at an issue price of $3.47 125 —
On 13 September 2012 allotted 20,000 shares at an issue price of $4.20 84 —
On 18 December 2012 allotted 54,529 shares at an issue price of $NIL — —
On 18 December 2012 allotted 9,747 shares at an issue price of $4.22 41 —
On 18 December 2012 allotted 223,200 shares at an issue price of $3.47 775 —
On 18 December 2012 allotted 297,300 shares at an issue price of $4.20 1,249 —
On 2 April 2013 allotted 38,900 shares at an issue price of $3.47 135 —
On 2 April 2013 allotted 10,412, shares at an issue price of $4.22 44 —
On 13 June 2013 allotted 193,348, shares at an issue price of $10.692 (see note 7 (j)) 2,067 —
Net Proceeds from Dividend Reinvestment Plan 10,069 2,906
On 21 September 2011 allotted 420,850 shares at an issue price of $2.00 — 842
On 21 September 2011 allotted 279,250 shares at an issue price of $3.47 — 969
On 21 September 2011 allotted 60,600 shares at an issue price of $4.20 — 254
On 12 December 2011 allotted 40,566 shares at an issue price of $NIL — —
On 12 December 2011 allotted 38,900 shares at an issue price of $3.47 — 135
On 12 December 2011 allotted 30,150 shares at an issue price of $4.20 — 127
On 12 December 2011 allotted 16,524 shares at an issue price of $4.22 — 70
Share issue expenses (39) (17)
issued capital 90,586 76,036
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auStBroKerS 2013 annuaL rePort 102

notes to the financial statements For the year ended 30 June 2013

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Consolidated
2013 2012
Shares No. Shares No.
22. ISSUED CAPITAL AND RESERVES (CONTINUED)
Number of shares oN issue (ordiNary shares fully paid) 58,148,980 55,999,095
Movements in number of shares on issue
Beginning of the financial year 55,999,095 54,658,736
On 13 September 2012 allotted 8,307 shares at an issue price of $NIL 8,307 —
On 13 September 2012 allotted 36,100 shares at an issue price of $3.47 36,100 —
On 13 September 2012 allotted 20,000 shares at an issue price of $4.20 20,000 —
On 18 December 2012 allotted 54,529 shares at an issue price of $NIL 54,529 —
On 18 December 2012 allotted 9,747 shares at an issue price of $4.22 9,747 —
On 18 December 2012 allotted 223,200 shares at an issue price of $3.47 223,200 —
On 18 December 2012 allotted 297,300 shares at an issue price of $4.20 297,300 —
On 2 April 2013 allotted 38,900 shares at an issue price of $3.47 38,900 —
On 2 April 2013 allotted 10,412, shares at an issue price of $4.22 10,412 —
On 13 June 2013 allotted 193,348, shares at an issue price of $10.692 ( see note 7 (j)) 193,348 —
On 24 October 2012, 920,425 shares were issued at $7.5008 as a result of a Dividend Reinvestment Plan. 920,425 —
On 26 April 2013, 337,617 shares were issued at $9.7316 as a result of a Dividend Reinvestment Plan. 337,617 —
On 27 April 2012, 453,519 shares were issued at $6.4075 as a result of a Dividend Reinvestment Plan. — 453,519
On 21 September 2011 allotted 420,850 shares at an issue price of $2.00 — 420,850
On 21 September 2011 allotted 279,250 shares at an issue price of $3.47 — 279,250
On 21 September 2011 allotted 60,600 shares at an issue price of $4.20 — 60,600
On 12 December 2011 allotted 40,566 shares at an issue price of $NIL — 40,566
On 12 December 2011 allotted 38,900 shares at an issue price of $3.47 — 38,900
On 12 December 2011 allotted 30,150 shares at an issue price of $4.20 — 30,150
On 12 December 2011 allotted 16,524 shares at an issue price of $4.22 — 16,524
total shares oN issue 58,148,980 55,999,095
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Ordinary shares have the right to receive dividends and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Of the total shares issued, 49,655 have restrictions whereby they cannot be disposed before 2 November 2014, except in the case where employees who own the shares, resign.

Of the total shares issued, 193,348 which were issued on 13 June 2013 as part of an acquisition, are in escrow and cannot be disposed for a period of 12 months from the date the shares were issued.

Nature and purpose of reserves

Asset revaluation reserve

The asset revaluation reserve was used to record movements in the revalued amounts of broker register acquired through step up acquisition of broking subsidiaries before 1 July 2009. From this date, fair value adjustments on business combinations are no longer recognised through the asset revaluation reserve but in the income statement. The reserve can only be used to pay dividends in limited circumstances. The current year amortisation expense relating to those step ups is transferred to retained earnings when the amortisation expense is charged to the profit and loss account.

Share based payment reserve

This reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration. Refer to note 18 for further details of these plans.

103 AUSTBROKERS 2013 ANNUAL REPORT

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Consolidated
2013 2012
$'000 $'000
22. ISSUED CAPITAL AND RESERVES (CONTINUED)
Non controlling Interests
Interest in:
Ordinary shares — —
Retained earnings 32,749 13,255
32,749 13,255
23. COMMITMENTS AND CONTINGENCIES
Finance lease and hire purchase commitments - Group as lessee
The Group has finance leases and hire purchase contracts for various items of plant and machinery. These leases have terms
of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.
Finance Lease and Hire Purchase Commitments
Payable
• Not later than one year 611 309
• Later than one year and not later than five years 659 522
• Later than five years — —
Minimum lease and hire purchase payments 1,270 831
Deduct: Future finance charges 107 83
preseNt value of miNimum lease aNd hire purchase paymeNts (refer Note 21) 1,163 748
Operating lease commitments - Group as lessee
The Group has entered into leases for premises, commercial leases on certain motor vehicles and fixed assets.
These leases have an average life of between 3 and 7 years with no renewal option included in the contracts.
There are no restrictions placed upon the lessee by entering into these leases.
Operating Lease Commitments: Non Cancellable
Operating leases contracted for but not capitalised in the financial statements
Payable
• Not later than one year 4,318 3,255
• Later than one year and not later than five years 8,569 8,099
• Later than five years — —
12,887 11,354
Operating lease commitments - Associates as lessee
Operating Lease Commitments: Non Cancellable
Operating leases contracted for but not capitalised in the financial statements
Payable
• Not later than one year 3,211 2,300
• Later than one year and not later than five years 7,388 5,172
• Later than five years 125 560
10,724 8,032
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auStBroKerS 2013 annuaL rePort 104

notes to the financial statements For the year ended 30 June 2013

		Consolidated
	2013	2012
	$'000	$'000
23. Commitments and ContingenCies (Continued)
Contingent liabilities
Estimates of the maximum amounts of contingent liabilities that may become payable:
Austbrokers Holdings Ltd has guaranteed loan facilities provided to associates in proportion to its shareholding.	2,081	2,050
Austbrokers Holdings Ltd has guaranteed lease facilities provided to associates in proportion to its shareholding. Austbrokers Holdings Ltd has provided indemnities to other shareholders of related entities and associates in relation to	205 2,286	205 2,255
guarantees given by those shareholders, to fnanciers of or lessors to entities in which Austbrokers has an equity interest.
At balance date no liability has arisen in relation to these indemnities.

Austbrokers Holdings Ltd has entered into agreements with various financiers and shareholders of related entities and associates, granting options to put shares held in related companies or associates to Austbrokers at market values current at the date of exercise of that option. These have been given in relation to shares in the related entity/ associate pledged by the borrower as security for funding provided to those shareholders in relation to the acquisition of those shares. See note 29(f).

24. auditors’ remuneration

24. auditors’ remuneration
Amounts received or due to Ernst & Young (Australia) for:
Audit of the fnancial statements	732,500	706,381
Other - including taxation services	101,014	163,958
Total	833,514	870,339
Amounts received or due to non Ernst & Young audit frms for:
Audit of the fnancial statements	408,238	295,332
Other assurance related services	18,390	13,640
Other - taxation services	93,975	87,419
Total	520,603	396,391
ToTal audiTors' remuneraTion	1,354,117	1,266,730

25. operating segments

26. subsequent events

On I July 2013, the Group acquired 50% of the voting shares in WRI Insurance Brokers Pty Ltd for approximately $4,500,000. The final purchase price includes a contingent consideration amount which is yet to be determined.

On 27 August 2013 the Directors of Austbrokers Holdings Ltd declared a final dividend on ordinary shares in respect of the 2013 financial year. The total amount of the dividend is $14,246,500 which represents a fully franked dividend of 24.5 cents per share. The dividend has not been provided for in the 30 June 2013 financial statements.

27. related party disClosures

(a) The following related party transactions occurred during the year:

(i) Transactions with related parties in parent, subsidiaries and associates.
Entities within the wholy owned group charge associates $3,523,586 (2012: $1,601,050) management fees for expenses incurred and services rendered.
Entities within the wholy owned group invest in trusts managed by related parties. These transactions are at normal commercial terms and conditions.

105 AUSTBROKERS 2013 ANNUAL REPORT

27. RELATED PARTy DISCLOSURES (CONTINUED)

(a) The following related party transactions occurred during the year: (continued)
(i) Transactions with related parties in parent, subsidiaries and associates. (continued)

Entities within the wholly owned group provide funds to other entities within the group. These funds are non-interest bearing and are repayable on demand. See note 9 for amounts receivables from related parties $915,840 (2012: $586,607) and note 19 for payables to related parties $967,027 (2012: $149,613).

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Consolidated
2013 2012
Entities within the wholly owned group have advanced funds to other related entities. $'000 $'000
Hallman & Associates Pty Ltd — 150,215
Hallman Family Trust — 13,068
Howard Insurance Brokers Pty Ltd 524,062 31,919
Austbrokers Aviation Pty Ltd 3,664 123,601
A & I Member Services Pty Ltd 7,730 7,425
Paul Hogan Family Trust 8,000 10,000
Patglide Pty Ltd — 231,044
Geebeejay Pty Ltd 23,470 16,660
Mishjola Pty Ltd 16,030 2,675
Longitude Insurance Pty Ltd 25,391 —
Angel Accident and Health Underwriting Agency Pty Ltd 234,601 —
Trinity Pacific underwriting Pty Ltd 39,527 —
Anthony Gallagher 28,115 —
Ammica Pty Ltd 5,250 —
915,840 586,607
Other payables - related entities
Fondalla Pty Ltd — 8,276
Interprac General Insurance Pty Ltd 136,809 —
Aust Re Brokers Pty Ltd 10 —
James Wiechman Pty Ltd ATF Wiechman Familly Trust 103,517 —
Peter Curtis Pty Ltd ATF Curtis Family Trust 94,807 —
Areten Pty Ltd 33,546 —
Tasman Underwriting Pty Ltd 31,025 —
The United Underwriting Unit Trust 442,739 —
SPFS Enterprises Pty Ltd ATF Salisbury Family Trust 124,574 141,337
967,027 149,613
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(ii) Transactions with other related parties.

Entities within the wholly owned group charge associated entities interest on interest bearing loans. Total interest charged for the period was $244,463 (2012: $201,147). The interest charged is on normal commercial terms and conditions.

Further loans have been advanced to members of the economic entity of $300,000 (2012: 1,910,000). Members of the economic entity have repaid loans issued by Austbrokers Services Pty Ltd totalling $30,000 (2012: $1,300,122) during the year. The balance outstanding at 30 June 2013 was $1,457,000 (2012: $1,346,043).

(iii) Transactions with directors and director-related entities.

Entities within the wholly owned group receive fees for arranging insurance cover for directors and/or director related entities. These transactions are at normal commercial terms and conditions.

A unit trust controlled by William Lachlan McKeough has a 25% interest in a broking business where the remaining 75% ownership is held by an Associate.

Other than disclosed above and in note 27 (c), there were no other transactions with director or directors related entities.

Information regarding outstanding balances at year end is included in notes 9, 10, 11, 13 and 19.

auStBroKerS 2013 annuaL rePort 106

notes to the financial statements For the year ended 30 June 2013

27. RELATED PARTy DISCLOSURES (CONTINUED)

(b) Details of Key Management Personnel (KMP)

The directors of the company in office during the year and until the date of signing this report are:

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|||
|---|---|
|David John Harricks|Director (non-executive)|
|Richard Anthony Longes|Chairman (non-executive)|
|Raymond John Carless|Director (non-executive)|
|Phillip Robert Shirriff|Director (non-executive)|
|Mark Peter Lister Searles (appointed 1 January 2013)|Director and Chief Executive Officer|
|William Lachlan McKeough (retired 31 December 2012)|Director and Chief Executive Officer|

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The following persons were the executives with the greatest authority for the planning, directing and controlling the activities of the consolidated entity during the financial year:

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|||
|---|---|
|M.P.L. Searles|Director and Chief Executive Officer|
|S.S. Rouvray|Chief Financial Officer and Company Secretary|
|F. Gualtieri|National Manager - Group Services and Support|
|F. Pasquini|General Manager - Acquisition and Development|
|G.J. Arms|General Manager - Equity Operations|

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(c) Shareholdings of Key Management Personnel

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Shares Shares
Balance at acquired disposed Balance at
Shares held in Austbrokers Holdings Limited at 30 June 2013 01-Jul-12 during year during year 30-Jun-13
Directors
R. A. Longes 109,168 4,447 — 113,615
P. R. Shirriff 100,000 — — 100,000
D. J. Harricks 27,000 — — 27,000
R. J. Carless 12,516 3,957 — 16,473
M. P. L. Searles — — — —
W.L. McKeough (retired 31 December 2012) 86,260 403,514 400,000 89,774
Executives
S.S. Rouvray 221,773 59,757 — 281,530
F. Gualtieri 50,000 90,415 85,121 55,294
F. Pasquini 30,229 41,742 36,100 35,871
G.J. Arms 92,249 16,067 17,500 90,816
total 729,195 619,899 538,721 810,373
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L. McKeough exercised 400,000 options during the period. The shares acquired were sold on the same day as the options were exercised.

S. Rouvray, F. Gualtieri, F. Pasquini and G. Arms exercised 59,757, 90,415, 41,136 and 16,067 options respectively during the period. Of the shares acquired by F. Gualtieri and F. Pasquini 85,121 and 36,100 were sold on the same day as the options were exercised.

107 AUSTBROKERS 2013 ANNUAL REPORT

27. RELATED PARTy DISCLOSURES (CONTINUED)

(c) Shareholdings of Key Management Personnel (continued)

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Shares Shares
Balance at acquired during disposed during Balance at
Shares held in Austbrokers Holdings Limited at 30 June 2012 01-Jul-11 year year 30-Jun-12
Directors
R. A. Longes 107,573 1,595 — 109,168
P. R. Shirriff 100,000 — — 100,000
D. J. Harricks 27,000 — — 27,000
R. J. Carless 10,451 2,065 — 12,516
W.L. McKeough 85,000 541,260 540,000 86,260
Executives
S.S. Rouvray 208,300 13,473 — 221,773
J. Howells — — — —
F. Gualtieri 50,000 — — 50,000
F. Pasquini 30,006 223 — 30,229
G.J. Arms 31,983 60,266 — 92,249
total 650,313 618,882 540,000 729,195
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540,000 options were exercised by L. McKeough during the period. The shares acquired were sold on the same day as the options were exercised.

All equity transactions with KMP’s other than those arising from the exercise of options granted as part of their remuneration, have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arms length.

(d) Compensation of Key Management Personnel by Category

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Consolidated
2013 2012
$ $
Short-Term 3,481,189 3,486,683
Post Employment 190,766 353,610
Other Long-Term 177,600 137,500
Termination Benefits — —
Share-based Payment 1,858,011 210,412
5,707,566 4,188,205
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auStBroKerS 2013 annuaL rePort 108

notes to the financial statements For the year ended 30 June 2013

27. RELATED PARTy DISCLOSURES (CONTINUED)

(e) Options granted as part of remuneration

			Fair value
			per option at	Exercise price
			grant date	per option
Year ended 30 June 2013	Granted No.	Grant Date	($) (note 18)	($) (note 18)	Expiry Date	First Exercise Date	Last Exercise Date
Executives
M.P.L. Searles	233,000	15-Jan-13	7.38	0.00	31-Dec-19	31-Dec-15	31-Dec-19
S.S. Rouvray	—	31-Oct-12	7.71	0.00	31-Oct-19	31-Oct-15	31-Oct-19
F. Gualtieri	5,713	31-Oct-12	7.71	0.00	31-Oct-19	31-Oct-15	31-Oct-19
F. Pasquini	6,130	31-Oct-12	7.71	0.00	31-Oct-19	31-Oct-15	31-Oct-19
G.J. Arms total	6,117 250,960	31-Oct-12	7.71	0.00	31-Oct-19	31-Oct-15	31-Oct-19

For options granted in the 2013, 2012 and 2011 financial years, where options are exercised within two years after the date the options vest, the shares cannot be disposed of prior to the expiry of the two year period from the date the options vested, except if employment is terminated.

The options issued to M. Searles were valued using the dividend yield method resulting in an option price of $7.38. Options issued on 31 October 2012 were valued using the volume weighted average share price for the 5 business days prior to the date the options were issued.

			Fair value
			per option at	Exercise price
			grant date	per option
Year ended 30 June 2012	Granted No.	Grant Date	($) (note 18)	($) (note 18)	Expiry Date	First Exercise Date	Last Exercise Date
Executives
S.S. Rouvray	12,582	31-Oct-11	6.28	0.00	31-Oct-18	31-Oct-14	31-Oct-18
F. Gualtieri	6,843	31-Oct-11	6.28	0.00	31-Oct-18	31-Oct-14	31-Oct-18
J. Howells	—	—	—	—	—	—	—
F. Pasquini	6,753	31-Oct-11	6.28	0.00	31-Oct-18	31-Oct-14	31-Oct-18
G.J. Arms	7,327	31-Oct-11	6.28	0.00	31-Oct-18	31-Oct-14	31-Oct-18
total	33,505

For options granted in the 2012 and 2011 financial year, where options are exercised within two years after the date the options vest, the shares cannot be disposed of prior to the expiry of the two year period from the date the options vested, except if employment is terminated.

109 AUSTBROKERS 2013 ANNUAL REPORT

27. related party disClosures (Continued)

(f) Option holdings of Key Management Personnel

						Total options at year end	Total options at year end
	Balance
	at beginning			Options	Balance at		Not
Options held at 30 June 2013	of period 01-Jul-12	Granted as Remuneration	Options Exercised	lapsed / forfeited	end of period 30-Jun-13	Vested / Exercisable	Vested / Not Exercisable
Director
W.L. McKeough	470,100	—	400,000	—	70,100	70,100	—
M. Searles	—	233,000	—	—	233,000	—	233,000
Executives
S.S. Rouvray	176,346	—	59,757	4,646	111,943	84,284	27,659
F. Gualtieri	108,588	5,713	90,415	2,521	21,365	588	20,777
J. Howells	37,855	—	34,322	2,864	669	669	—
F. Pasquini	94,353	6,130	41,136	2,398	56,949	36,012	20,937
G.J. Arms	35,538	6,117	16,067	2,693	22,895	628	22,267
ToTal	922,780	250,960	641,697	15,122	516,921	192,281	324,640

The outstanding options have an exercise price ranging from $3.47 for options issued in 2006 to $4.20 for options issued in 2007 financial year. All options outstanding for later years have an exercise price of zero.

During the current year a total of 271,320 zero priced options were issued (250,960 to Key Management Personnel).

W.L. McKeough, had 70,100 options outstanding at 30 June 2013. These are required to be exercised no later than 29 August 2013.

						Total options at year end	Total options at year end
	Balance
	at beginning			Options	Balance at		Not
Options held at 30 June 2012	of period 01-Jul-11	Granted as Remuneration	Options Exercised	lapsed / forfeited	end of period 30-Jun-12	Vested / Exercisable	Vested / Not Exercisable
Director
W.L. McKeough	1,010,100	—	540,000	—	470,100	470,100	—
Executives
S.S. Rouvray	182,108	12,582	13,473	4,871	176,346	133,200	43,146
G. Lambert	114,143	—	86,949	27,194	—	—	—
F. Gualtieri	107,030	6,843	—	5,285	108,588	85,121	23,467
J. Howells	40,857	—	—	3,002	37,855	28,307	9,548
F. Pasquini	90,077	6,753	—	2,477	94,353	71,553	22,800
G.J. Arms ToTal	154,212 1,698,527	7,327 33,505	120,356 760,778	5,645 48,474	35,538 922,780	10,412 798,693	25,126 124,087

The outstanding options have an exercise price ranging from $3.47 for options issued in 2006 to $4.22 for options issued in 2009 financial year. During the current year a total of 56,591 zero priced options were issued (33,505 to Key Management Personnel).

(g) No loans have been advanced to Key Management Personnel during the current year (2012: NIL).

auStBroKerS 2013 annuaL rePort 110

notes to the financial statements For the year ended 30 June 2013

28. PARENT ENTITy INFORMATION

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Consolidated
Information relation to Austbrokers Holdings Limited 2013 2012
$'000 $'000
Assets
Cash and cash equivalents 12,016 15,070
Current Assets 65,875 49,842
Non-current Assets 98,472 53,130
total assets 176,363 118,042
Liabilities
Current Liabilities 5,012 2,888
Non-current Liabilities — —
Interest bearing loans and borrowings 30,000 —
total liabilities 35,012 2,888
Net assets 141,351 115,154
Equity
Issued capital 90,586 76,036
Share based payments 5,173 3,873
Retained earnings 45,592 35,245
total shareholders equity 141,351 115,154
Profit for the year before income tax 28,670 15,463
Income tax (credit) (69) (271)
Net profit after tax for the period 28,739 15,734
Other comprehensive (expense) / income after income tax for the period — —
total compreheNsive iNcome after tax for the period 28,739 15,734
Profit for the year includes fair value adjustments to the carrying value of associates of $13,921,000
($12,630,000 for consolidated entity) on they day they became controlled entities.
Other information
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries or associates
Austbrokers Holdings Ltd has guaranteed loan facilities provided to associates in proportion to its shareholding. 2,081 2,050
Austbrokers Holdings Ltd has guaranteed lease facilities provided to associates in proportion to its shareholding. 205 205
2,286 2,255
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Contingent liabilities

Austbrokers Holdings Ltd has provided indemnities to other shareholders of related entities and associates in relation to guarantees given by those shareholders, to financiers of or lessors to entities in which Austbrokers has an equity interest. At balance date no liability has arisen in relation to these indemnities.

Austbrokers Holdings Ltd has entered into agreements with various financiers and shareholders of related entities and associates, granting options to put shares held in related companies or associates to Austbrokers at current market values. These have been given in relation to shares pledged as security for funding provided to those shareholders in relation to the acquisition of those shares. See note 29(f).

111 AUSTBROKERS 2013 ANNUAL REPORT

29. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Group’s principal financial instruments comprise receivables, mortgages, cash and short-term deposits, payables, finance leases, overdrafts, interest bearing loans and borrowings and bank overdrafts.

The Group manages its exposure to key financial risks, including interest rate and foreign currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security.

The Group does not enter into derivative transactions nor has any significant foreign currency transactions.

The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board Audit and Risk Management Committee, supported by a Management Committee, under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below.

Risk exposures and Responses

(a) Credit Risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, intercompany receivables, mortgages, trade and other receivables. Although there is a concentration of cash and cash equivalents held with a major bank, credit risk is not considered significant.

The company’s exposure to credit risk is concentrated in the financial services industry with parties which are considered to be of sufficiently high credit quality. There are no financial assets which are past due or impaired.

Receivable balances are monitored on a ongoing basis with the result that the Group’s exposure to bad debts is not significant.

Insurance Broking Account receivables

Receivables include amounts due from policyholders in respect of insurances arranged by controlled entities. Insurance brokers 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 Group’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 experience.

The Group’s assets and liabilities include amounts due from policyholders and amounts due to underwriters from broking activities. Due to the reasons disclosed above, these assets and liabilities have been excluded from the Group’s credit risk analysis. The net difference between the assets and liabilities relate to the undrawn commission and fee income brought to account in revenue. This amount has been deducted from amounts payable on broking/ underwriting agency operations.

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Consolidated
2013 2012
$'000 $'000
Assets and liabilities relating to Insurance Broking Account
Amounts due from customers on broking/ underwriting agency operations 137,664 106,917
Cash held on trust 112,610 74,859
Amounts payable on broking/underwriting agency operations (220,115) (162,079)
Undrawn income (30,159) (19,697)
Net receivables iNcluded iN iNsuraNce brokiNg accouNt — —
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Financial assets

The Group’s exposure to credit risk in relation to financial assets arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets. There is no significant concentration of risks within the Group as cash and cash equivalents are invested amongst a number of financial institutions to minimise the risk of defaults by counterparties.

auStBroKerS 2013 annuaL rePort 112

notes to the financial statements For the year ended 30 June 2013

29. FINANCIAL INSTRUMENTS (CONTINUED)

(a) Credit Risk (continued)

Financial assets (continued)

Cash and cash equivalents are deposited with Australian Banks. The majority of trade receivables are expected to be collected within 90 days. The remainder of the financial assets are to related entities or entities that have a relationship to our associates and are either on call or where loans have a fixed maturity date, are secured by fixed and floating charges (see note 10). At 30 June 2013, all financial assets were neither past due nor impaired.

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Consolidated
2013 2012
$'000 $'000
Financial assets
Cash and cash equivalents 38,083 40,743
Trade and other receivables 18,382 9,791
Related party receivables 916 587
Mortgages - related entities 1,457 1,346
Mortgages - other 259 —
Other receivables 424 255
59,521 52,722
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The amount for trade and other receivables included in the table above excludes insurance broking account receivables.

(b) Liquidity Risk

The company’s objective is to maintain adequate cash to ensure continuity of funding and flexibility in its day-to-day operations.

The company reviews its cash flows weekly and models expected cash flows for the following 12 to 24 months (updated monthly) to ensure that any stress on liquidity is detected, monitored and managed, before risks arise.

To monitor existing financial assets and liabilities as well as enable an effective controlling of future risks, the Group has established comprehensive risk reporting that reflects expectations of management of expected settlement of financial assets and liabilities.

The Group’s main borrowing facilities are provided by St George Bank, although some controlled entities have arranged borrowing facilities with other banks. The terms of these arrangements have been disclosed in Note 21 “Interest bearing loans and borrowings”. It is the Group’s policy that Austbrokers Holdings Limited’s own facilities become current no less than 13 months from balance date. Where facilities are within this timeframe, the Group will arrange to have new facilities in place in the year the borrowing repayments become current. At 30 June 2013 there were $9,437,000 of borrowings that are due to be repaid within 12 months (2012: $682,000) which relate to finance facilities in respect of recently acquired controlled entities which were negotiated before these entities were acquired. These finance facilities are in the process of being renegotiated to extend their terms.

The company considers the maturity of its financial assets and projected cashflows from operations to monitor liquidity risk.

Liquidity risk arises in the event that the financial assets/liabilities are not able to be realised/settled for the amounts disclosed in the accounts on a timely basis.

113 AUSTBROKERS 2013 ANNUAL REPORT

29. FINANCIAL INSTRUMENTS (CONTINUED)

(b) Liquidity Risk (continued)

The table below reflects all contractually fixed pay-outs and receivables for settlement, repayments and interest resulting from recognised financial assets and liabilities. Cash flows for financial assets and liabilities without a fixed amount or timing are based on the conditions existing at 30 June 2013 with comparatives based on conditions existing at 30 June 2012.

The table summarises the maturity profile of the Groups financial assets and financial liabilities based on contractual undiscounted payments.

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Consolidated
2013 2012
$'000 $'000
Financial assets
Due not later than 6 months 308,248 233,427
6 months to not later than one year 859 658
Later than one year and not later than five years 688 413
— —
Later than five years
309,795 234,498
Financial Liabilities
Due not later than 12 months (263,527) (182,550)
Later than one year and not later than five years (42,753) (33,384)
— —
Later than five years
(306,280) (215,934)
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The Group’s liquidity risk relating to amounts receivable/ payable from broking operations have been included in the table above, although trust cash and amounts due from insurance broking account receivables/broking account payables are not available to meet operating expenses/business obligations other than for payments to underwriters and/or repayments to policyholders. Should policyholders not pay, the insurance policy is cancelled by the insurer and a credit given against the amount due. The Group’s liquidity risk in relation to these receivables is limited to commissions and fees charged.

The risk implied from the values shown in the table, reflects a balanced view of cash inflows and outflows. Lease liabilities, trade payables and other financial liabilities mainly originate from the financing of assets used in the Group’s ongoing operations such as plant and equipment and investments in working capital, e.g. trade receivables and deferred payments on broker acquisitions.

auStBroKerS 2013 annuaL rePort 114

notes to the financial statements For the year ended 30 June 2013

29. FINANCIAL INSTRUMENTS (CONTINUED)

(c) Fair Values of recognised assets and liabilities

Set out below is a comparison by category of the carrying value and the fair value of all the Group’s financial instruments.

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Carrying value Fair value
2013 2012 2013 2012
$'000 $'000 $'000 $'000
Financial assets
Cash and cash equivalents 150,693 115,602 150,693 115,602
Trade and other receivables 156,046 116,841 156,046 116,841
Related party receivables 916 587 916 587
Mortgages - related entities 1,457 1,346 1,457 1,346
Mortgages - other 259 — 259 —
Loan with associated entities 424 122 424 122
total fiNaNcial assets 309,795 234,498 309,795 234,498
Financial liabilities
Loans and other borrowings (52,885) (34,514) (52,932) (34,948)
Trade and other payables and accruals (253,395) (181,420) (253,395) (181,420)
total fiNaNcial liabilities (306,280) (215,934) (306,327) (216,368)
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Market values have been used to determine the fair value of securities. The fair value of loans and notes and other financial assets has been calculated using market interest rate.

The Group’s fair value of recognised assets and liabilities above include trust cash and amounts relating to receivables/ payables from broking operations, although trust cash and amounts due from insurance broking account receivables/broking account payables are not available to meet operating expenses/ business obligations other than for payments to underwriters and/or repayments to policyholders.

(d) Market Risk

Interest rate risk

The Group’s exposure to interest rate movements relates to cash and cash equivalents held by the Group and the Group’s long-term debt obligations. To manage interest rate risk, interest rates on borrowings are fixed for a period depending on market conditions. This risk is minimal as the Group holds cash received from policyholders to pay insurers in excess of the amount of borrowings and therefore the group has a hedge against interest rate rises. Mortgage loans generally have interest rate resets every six months. In the event of interest rate rises, a net increase in interest revenue will occur due to cash and cash equivalents exceeding borrowings.

The main risk to the Group is in relation to interest rate reductions which will decrease the net income earned on cash and cash equivalents held. The cash held to pay insurers must be held in prescribed investments (Australian bank accounts or deposits) and as such will be subject to market interest rate fluctuations. The Group has at balance date, the following mix of financial assets and liabilities exposed to Australian variable interest rate risk.

115 AUSTBROKERS 2013 ANNUAL REPORT

29. FINANCIAL INSTRUMENTS (CONTINUED)

(d) Market Risk (continued)

Interest rate risk (continued)

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Consolidated
2013 2012
$'000 $'000
Financial assets
Cash and cash equivalents (including trust account balance) 150,693 115,602
Mortgages - related entities 1,457 1,346
Mortgages - other 259 —
total financial assets 152,409 116,948
Financial liabilities
Loans and other borrowings (22,074) (3,309)
Net exposure to iNterest rate movemeNts 130,335 113,639
----- End of picture text -----

Borrowings fixed for a period greater than 12 months have been excluded from the table above.

The Group’s policy is to maintain a component of long term borrowings at fixed interest rates, determined six monthly or annually, which are carried at amortised cost and it is acknowledged that exposure to fluctuations in fair value is a by-product of the Group’s policy. Of the total current and non current interest bearing loans and borrowings totalling $52.9 million (2012:$34.5 million), $30.8 million (2012: $30.7 million) have been fixed for periods greater than 12 months at rates ranging from 5.35% to 6.6%. See note 21 for full details of terms and conditions.

The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing and the term for fixing interest rates.

The following sensitivity analysis is based on the interest rate exposures in existence at year end. The sensitivity for 2012 has been prepared on an equivalent basis.

At year end, had interest rates moved as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows:

have been afected as follows:
		Post tax profts	Impacts directly to Equity
		Higher/ (lower		Higher/ (lower
Judgements of reasonably possible movements	2013	2012	2013	2012
	$'000	$'000	$'000	$'000
Consolidated
+1.0% (100 basis points) (2012 +1.5% (150 basis points))	912	1,194	—	—
-0.75% (75 basis points) (2012 -0.75% (75 basis points))	(685)	(596)	—	—

The net increase in consolidated profits in respect of interest rate rises is due to the net positive impact of interest bearing assets being greater than borrowings.

Equity securities price risk

Equity securities price risk arises from investments in equity securities. The group does not invest in listed equity securities or derivatives.

At year end, the Group had no material exposure to equities other than to shares in associated entities and controlled entities and therefore has no exposure to price risk that has not already been reflected in the financial statements. The Group tests for impairment annually and reviews all investments at least half yearly. The methodology for testing for impairment is shown in note 17. Other than shown below, there were no impaired investments at balance date (2012 : NIL). At 30 June 2013, an impairment charge totalling $629,000 relating to the carrying value of an associate was recognised and was shown as an expense in the income statement. This amount was partly offset against a reduction in a contingent consideration payment for the same associate totalling $569,466, that was no longer required and was credited to the income statement.

auStBroKerS 2013 annuaL rePort 116

notes to the financial statements For the year ended 30 June 2013

29. FINANCIAL INSTRUMENTS (CONTINUED)

(e) Capital Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt if required.

The Group monitors capital on the basis of the gearing ratio. The debt to equity ratio is calculated as total borrowings divided by total equity and borrowings.

During 2013, the Group’s strategy was to maintain a gearing ratio of not greater than 30% which was unchanged from 2012. The gearing ratio has changed marginally due to the increase in borrowings resulting from the consolidation of newly acquired entiities. These entities had borrowing totalling $8.5 million which are now included in the total borrowing of the consolidated entity.

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||||
|---|---|---|
|Consolidated|
|The gearing ratios at 30 June were as follows;|2013|2012|
|$'000|$'000|
|Debt to equity ratio|
|Interest bearing loans and borrowings (see note 21)|52,885|34,514|
|total equity|230,398|172,290|
|total equity aNd borroWiNgs|283,283|206,804|
|Debt / Equity plus Borrowings Ratio|18.7%|16.7%|

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(f) Put Option

The Group has assisted certain security holders in associates and controlled entities to acquire their interest in those entities by entering into agreements to grant their financier an option to put to the Group any such securities held as security for the loan. The impact of this agreement is to enable those security holders to secure funding which may not have been otherwise available or which may have been available at a higher cost. This option can only be exercised by the financier in the event of a default by the borrower under the relevant loan agreement, where such default has not been remedied. Under the agreements the shares are to be acquired by the Group at fair value at the time the option is exercised. As the agreements stipulate that the securities are to be acquired at fair value, the put options have a nil value.

117 AUSTBROKERS 2013 ANNUAL REPORT

directors’ declaration

For the year ended 30 June 2013

In accordance with a resolution of the directors of Austbrokers Holdings Limited, I state that:

In the opinion of the directors:
(a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2.2; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable
(d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2013.

On behalf of the Board

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M P L Searles Director

Sydney, 27 August 2013

auStBroKerS 2013 annuaL rePort 118

Independent auditor’s report

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Ernst & Young Tel: +61 2 9248 5555 680 George Street Fax: +61 2 9248 5959 Sydney NSW 2000 Australia ey.com/au GPO Box 2646 Sydney NSW Australia 2001

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUSTBROKERS HOLDINGS LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Austbrokers Holdings Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2.2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.

Opinion

In our opinion:

(a) the financial report of Austbrokers Holdings Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 43 to 50 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Austbrokers Holdings Limited for the year ended 30 June 2013, complies with section 300A of the Corporations Act 2001.

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Ernst & Young

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Paul Harris Partner Sydney, 27 August 2013

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation.

119 AUSTBROKERS 2013 ANNUAL REPORT

aSX additional information

For the year ended 30 June 2013

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 10th September 2013.

(a) Distribution of equity securities

Ordinary share capital

58,148,980 fully paid ordinary shares are held by 1,848 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
193,348 ordinary shares are held in escrow until 12th June 2014.
49,655 ordinary shares issued on exercise of options under the Senior Executive Option Plan are held in escrow in accordance with the Plan.

Options

667,853 options are held by 13 individual option holders.
Options do not carry a right to vote.

The number of shareholders, by size of holding, in each class are:

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Fully paid ordinary shares Options
1 – 1000 627 —
1,001 – 5,000 825 —
5,001 – 10,000 228 3
10,001 – 100,000 155 8
100,001 and over 21 2
1,856 13
holdiNg less thaN a marketable parcel 56 —
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(b) Substantial shareholders

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Fully paid
Ordinary shareholders Number Percentage
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(b) Substantial shareholders Ordinary shareholders	Number	Fully paid Percentage
QBE Insurance Group Limited (20/12/11)	7,469,201	13.45
National Australia Bank Limited (11/10/12)	5,147,109	9.18
Invesco Australia Limited (26/07/13)	3,547,835	6.10
Benelong Funds Management Group Limited (03/09/13)	2,677,115	5.21
Westpac Banking Corporation / BT Investment Management Limited (04/09/13)	2,985,829	5.13
Allianz Australia Insurance Limited (27/08/07)	2,557,000	5.01
(c) Twenty largest holders of quoted equity securities
National Nominees Limited	11,955,341	20.63
Citicorp Nominees Pty Limited	11,333,138	19.55
J P Morgan Nominees Australia Limited	9,004,085	15.54
HSBC Custody Nominees (Australia) Ltd	5,821,025	10.04
BNP Paribas Noms Pty Ltd (DRP)	2,507,901	4.33
Aust Executor Trustees SA Ltd (Tea Custodians Limited)	1,677,243	2.89
BNP Paribas Nominees Pty Ltd ACF Pengana (DRP A/C)	1,618,816	2.79
Mirrabooka Investments Limited	1,050,000	1.81
Milton Corporation Limited	1,024,795	1.77
Masfen Securities Limited	689,772	1.19
UBS Wealth Management Australia Nominees Pty Ltd	605,796	1.05
Citicorp Nominees Pty Limited (Colonial First State Inv A/c)	349,314	0.60
Bond Street Custodians Limited (Ganes Value Growth A/C)	281,616	0.49
Mrs Gaeleen Enid Rouvray	271,773	0.47
Suncorp Custodian Services Pty Limited (SGAEAT)	260,951	0.45
SIB Holdings Pty Ltd (SIB UNIT A/C)	254,882	0.44
Markey Investments Pty Ltd (TA Markey & Co Staf RF A/C)	191,984	0.33
HSBC Custody Nominees(Australia) Limited	187,116	0.32
Equity Trustees Limited (SGH IC2E)	172,312	0.30
Gemnet Pty Ltd (Richard Longes Super Fund)	113,615	0.20

auStBroKerS 2013 annuaL rePort 120

annuaL GeneraL meetInG

The Annual General Meeting of Austbrokers Holdings Limited will be held at: The Sofitel Sydney Wentworth 61-101 Phillip Street Sydney NSW 2000 on Wednesday 20th November 2013 at 10.00am.

121 AUSTBROKERS 2013 ANNUAL REPORT

aBn 60 000 000 715

CorPorate InFormatIon

This annual report covers the consolidated entity comprising Austbrokers Holdings Limited and its subsidiaries. The Group’s functional and presentation currency is AUD ($).

A description of the Group’s operations and of its principal activities is included in the operating and financial review in the Directors’ report on pages 39-42.

Directors

R.A. Longes (Chairman) M. P. L. Searles (Chief Executive Officer)

R. J. Carless

D.J. Harricks P.R. Shirriff

Company Secretary

S.S. Rouvray

Registered Office and Principal Place of Business

Level 21 111 Pacific Highway North Sydney, NSW 2060 Phone: 61 2 9935 2222

Share Register

Link Market Services Limited Level 12 680 George Street Sydney, NSW 2000 Phone: 1800 194 270 (Outside Australia + 61 2 8280 7209) Austbrokers Holdings Limited shares are listed on the Australian Securities Exchange (ASX)

Auditors

Ernst & Young 680 George Street Sydney, NSW 2000

auStBroKerS 2013 annuaL rePort 122

thIS PaGe haS Been LeFt BLanK

auStBroKerS 2013 annuaL rePort 124

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AI assistant

AUB GROUP LIMITED — Annual Report 2013

64456_rns_2013-09-26_7c244e71-ce25-4561-afac-24c1c50b986e.pdf

Austbrokers Annual Report 2013

STATEMENT Of PURPOSE

ViSiON & MiSSiON

Chairman’s Letter

Dear Shareholder

Board of Directors

OVER THE PAST yEAR, PARTNERSHiPS AND iNNOVATiON HAVE BEEN iMPORTANT STRATEGiC THEMES fOR AUSTBROKERS

phillip shirriff

Richard Longes Chairman

Non-Executive Director

mark searles Age 52 Chief Executive Officer & Managing Director (from January 2013)

Ray carless Age 58 Non-Executive Director

david harricks

Age 67

Non-Executive Director

Managing Director’s Report

i AM PLEASED TO REPORT TO

Operating Results

Balance Sheet

Dividend

insurance Broking Operations

A & i Member Services

Leading Products

Business Intelligence

Training & Education

Members’ Professional Indemnity Insurance Program

Commercial Access

Measurable Growth

The Austbrokers Family

act

VIctorIa

northern terrItory

new south wales

Queensland

western australIa

south australIa

tasmanIa

new ZeaLand

the driscoll family

austbrokers aeI transport

austbrokers central coast

austbrokers canberra

austbrokers ce mcdonald

austbrokers city state

austbrokers coast to coast

austbrokers financial solutions

austbrokers hcI

austbrokers phillips

austbrokers premier

austbrokers ntIb

austbrokers ncfs

austbrokers trade credit

adroit Insurance group

austbrokers terrace

austral risk services

fergusons Insurance brokers

carriers Insurance brokers

comsure Insurance brokers

citycover

Insurance advisernet australia

finsura

Insurics

InterrIsk

markey group

strathearn Insurance brokers

srg corporate

wrI Insurance brokers

rivers Insurance brokers & far north Insurance brokers

Acquisitions

New product lines and updates

Marketing

Austagencies Underwriting Agencies

latitude underwriting

dolphin underwriting

longitude Insurance

Austbrokers Business Centre

2. Online HR Management & Payroll

AUB GROUP LIMITED Annual Report 2013