CENTURIA CAPITAL GROUP - Annual Report 2009

rebuildin g protecting

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Annual Report 2009

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Servicing Australian communities for over 25 Years

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Over Fifty Group Limited

and Controlled Entities ABN 22 095 454 336 Annual Report for the year ended 30 June 2009

Contents
Chairman’s Letter	7
Chief Executive’s Overview	8
Stand Alone Corporate Performance	10
Directors’ Report	12
Remuneration Report	20
Auditor’s Independence Declaration	33
Corporate Governance Statement	34
Directors’ Declaration	39
Income Statement	40
Balance Sheet	41
Statement of Changes in Equity	42
Cash Flow Statement	44
Notes to the Financial Statements	45
ASX Additional Information	101
Independent Audit Report	102
Useful Information	105

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Annual Report 2009 1

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2 Annual Report 2009

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Meet Our People

Why are we different?

At OFG we have a highly motivated group of people with a wide set of skills. Some of the fi elds covered by our team include;

Some of the fi elds covered by our team include; In depth knowledge of Friendly Society and Property fund products Detailed property investment and property management knowledge Customer services specialists knowledge
In depth knowledge of Friendly Society and Property fund products
Detailed property investment and property management knowledge
Customer services specialists

• Specialised accounting teams dealing with Friendly Society, property trust and corporate accounting • Compliance with APRA, ASIC and ASX standards • Specialist Reverse Mortgage managers At OFG we promote a culture of hard work and a focus on the results of a team effort. This is a direct link to the “mutual” foundations of the Friendly Society and the deep relationships existing on the property fund side of the motivated business. Our shareholders and policyholders like to engage with our staff on a one-to-one basis and we encourage this. Being a little bit smaller can be a big advantage when our competitors don’t want to speak to their customers! specialised skills

Annual Report 2009 3

Our Services

Back to Our Core Activities

At OFG we place a special emphasis on returning to our core strengths and focussing on two main areas - our strong, stable Friendly Society management heritage and our Property Funds Management group which has signifi cant growth potential.

How the core businesses work together

highlight the need for good companies to develop strong, recurring cashfl ows.

In addition, a progressive company will always be trying to establish complimentary growth businesses and this is exactly what the Property Funds Management divisions (Century Funds Management and Eclipse Financial Group) provide.

The funds under management of the two core businesses are split pretty evenly - $780 million (Friendly Society) and $878 million (Property Funds Management) so each business has signifi cant scale and prominence in its respective niche.

Put simply, the restructuring of OFG over the past 18 months has all been aimed at eliminating wasteful spending and getting to the point where healthy profi ts fl ow from both the core businesses.

will show the benefi ts of all the hard work that has gone into making OFG more profi table and effi cient as the two core businesses generate profi ts alongside each other.

Evolving new products for you and your family

At OFG we want to make our stable of products relevant to you, your children or your grandchildren.

Our Friendly Societies have been serving Australians for nearly 30 years and our property funds managers for over 10 years. Our challenge is to honour our traditional investments and services but in addition to bring new offers to the market.

Property Funds Management

In the 2009 period we celebrated the acquisition of the remaining shareholding in the Eclipse Property Group, bringing property funds under management between Century and Eclipse to $880 million.

The property funds under management are all in unlisted trusts, not associated with OFG’s balance sheet and the OFG property subsidiaries act as the manager of each fund and earn fees for managing the fund and success fees if property investments out-perform.

It has been a frustrating period for Century and Eclipse as there have been few well-priced quality investment properties to buy. This appears to have changed as recently our staff have reported a number of good opportunities moving into fair value range.

Future for Property Funds Management

competitors in this space. We now need to ensure that as the recovery sets in we take advantage of our unique position. Growth in this division will come through organic direct acquisition of assets and acquisition of management rights in this space.

The medium term target is to increase property funds under management to $2 billion by FY2012. This is an ambitious target and is good evidence of our determination to retain a prominent position in this market niche.

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4 Annual Report 2009

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Friendly Societies

Imputation Bond

Funds under management are as follows;

The next bond to be lodged for approval will be an imputation bond which will only invest in high quality Australian shares in very large companies which have good dividend yields and a high level of franking credits. This product is a direct result of requests from policyholders who want us to invest in stable cashfl ows with the ability to minimise tax payable to even below

Over Fifty Group Friendly Society $580 million Guardian Friendly Society $200 million Total $780 million The traditional OFG Friendly Society has managed a rowth range of capital guaranteed and unitised friendly society bonds on behalf of our policyholders since 1980. g

Friendly Society thresholds.

The Guardian Friendly Society is run in cooperation with Policyholder Information Sessions listed funeral care provider, Invocare, and is responsible We intend to run regular policyholder information for investing funds invested through various pre-paid sessions throughout the year after the fi rst successful funeral agreements. briefi ngs in Sydney and Melbourne in July 2009, when 140 policy holders attended. ~~t u~~ nities Three important areas of focus At these briefi ngs, new products, investment switching ~~oppor~~

and general questions will be covered. In addition the General Manager of the Friendly Society – Terry Reid and our Investment Manager – Sean Webster addresses policyholders directly. Sean gives an economic briefi ng which is relevant to our members and it is a unique opportunity to question an extremely well qualifi ed economic specialist. evolving

1 Introducing our investments to a range of generations and ensuring everybody on the 110,000 contact list throughout the group is aware of these offers.
2 Encouraging loyalty with existing policyholders by introducing more relevant / tax effective investments.

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3 Increasing funds under management by introducing new products and services and marketing them to current and new potential customers.

Education Bonds We are in the fi nal stages of preparing an application to the regulator in respect of an OFG Education Bond. This bond will permit, for example, grand parents or parents to save in a tax sheltered environment specifi cally for a child’s education. Initial response from our policyholders has been encouraging and we believe it is a very complementary offer.

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5
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Other business areas

Reverse Mortgages

OFG currently holds a book of $220 million of reverse mortgages with 2900 borrowers. New reverse mortgages are no longer issued and the existing mortgage book is trading profi tably with an extremely low loan-to-value ratio around 20% which means there is minimal risk.

Over Fifty Insurance

This division now has over 30,000 policyholders who hold general, travel or vehicle insurance. Insurance is offered under a white-label agreement with multi national insurer Allianz.

Mortgageport

We hold a 50% interest in money manager and mortgage broker – Mortgageport Management Limited.

Mortgageport is professionally managed and operates in the residential mortgage manager market. It has a high quality $820 million mortgage book and enjoys in-house credit approval authority from two leading fi nance providers – Interstar and Adelaide Bank.

period.

We have eliminated several unnecessary expenses from the division and expect its performance to continue to improve this year.

Our Call Centre

Always ready to help

Our call centre is the “face” of our company

One of the most frequent comments we receive from our policyholders is how accessible OFG is.

Corey Adkins leads a team of highly motivated staff who are genuinely interested in outcomes for clients.

Once a query comes through every attempt is made to ensure that the policyholder has one single, unchanging point of contact for his or her query until it is resolved.

Ever sat on the phone for hours trying to speak to a person?

We know many of our policyholders are seniors, that does not mean they have forgotten what service means... neither have we.

Getting large seems to mean customers have to sit on the phone pushing digits and speaking to call centres all over the world who have no idea about the investment or product you wish to query.

At OFG you speak to a person who is trained to handle most of your likely queries and whom you can meet at policyholder briefi ngs or when you visit our offi ce!

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Our friendly Call Centre staff - 1300 50 50 50

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“People get a surprise when they get one of our people straight away and their query can be answered generally without the call being diverted to another member of staff”.

Corey Adkins Investor Services Team Leader

6 Annual Report 2009

CHAIRMAN’S LETTER

Dear Shareholders

more challenging for the Over Fifty Group of companies.

During the last year, your board of directors and senior executives have been focused on restructuring the group and we have had to make some diffi cult decisions, including letting go many of our staff and closing down or downsizing parts of the business. We have closely scrutinised every element of the group’s operations, dramatically reduced expenses and, I am very pleased to say, have the group well positioned to take advantage of what we expect to be improved economic conditions in Australia. Indeed for the fi rst time since I joined the board of Over Fifty Group in late 2007, our board meetings are now primarily focused on looking at ways and opportunities to profi tably expand our business and there is a real sense of optimism and excitement about the future for the group.

I wish to take this opportunity to thank my fellow directors, and especially John McBain and the rest of the senior executive team and all of our staff, for their absolute commitment and determination in getting the group through a diffi cult period. It is hard for me to imagine a more dedicated team of people and it really is particularly pleasing to see the turnaround n the group that has been achieved over the last year through their efforts. I expect that turnaround to become evident to you as this year progresses.

I look forward to seeing you at our annual general meeting in Melbourne on Thursday 29 October 2009.

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ROGER DOBSON Chairman

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Annual Report 2009 7

CHIEF EXECUTIVE’S OVERVIEW for year ended 30 June 2009

Dear Shareholder,

I have pleasure in reporting on the Over Fifty Group Limited, “OFG”, performance for the year ended 30 June 2009.

climate. Our team has made good, measurable progress towards our goals despite the prevailing economic conditions and whilst these conditions have been a distraction there has never been any doubt that the underlying revenue streams from core activities will see OFG through, and this is precisely what has occurred.

The prevailing economic conditions have affected all businesses and have impacted OFG, particularly the property division. However, because we believe fi nancial markets have stabilised and because shareholders wish us to be forward-looking you will not fi nd repeated references to the global downturn in this report. You want to know what we are doing to improve OFG’s performance.

but the one action that stands out in my mind relates to our staff. Staff numbers have dropped sharply from 100 to around 50 as we suspended or sold loss making activities and in May 2009 all the core 50 staff agreed to reduce salaries by 7.5% to 10% and cap increases until June 2010. I doubt if there is a better example of an executive team aligning its interests with shareholders and putting their shoulder to the wheel and I am extremely proud of the manner in which they have all conducted themselves.

In addition to the individual efforts of all our staff, I also want to thank divisional heads Jason Huljich and Terry Reid as well as our Chief Financial Offi cer, Matthew Coy for their dedication and hard work during what has been a testing period for everyone.

Financial Performance

Society benefi t funds with the results of the parent company.

As usual we have split out the affairs of the OFG parent company on page 10 of this report and it is these results which we believe are of most relevance. A more detailed version of these parent company results is available as a results briefi ng on our website www.overfi fty.com.au or you can request a mailed copy by calling the share registry on 1800 11 29 29.

The consolidated statutory accounts disclose a loss attributable to equity holders of the parent, of $12.854 million for the period but this included non-cash write downs and adjustments, the true underlying profi t of the company was $7.189 million.

A 75% increase in underlying profi t after tax between the fi rst and second half year periods in FY 09 ($2.5 million rising to $4.7 million)
A strong result from the Friendly Society management division ($10.3 million pre-tax)
Corporate expenses reduced by 28%
Corporate debt reduced by $4.3 million to $19.8 million (targeted to reduce to $10 million by end of FY10)

The group’s property division made a minor loss of $0.3 million for the fi rst time ever and it is anticipated that this division will be a strong profi t contributor in the current fi nancial period as it has recommenced property investment activities on behalf of its loyal investor base.

manager and mortgage broker Mortgageport Management came in ahead of budget for the year.

I want to touch on share price. Our share price fell substantially along with the whole market. Small listed companies fell further than larger companies such as those on the ASX 200 index. We have seen the OFG share price approximately double between April 2009 and early September 2009 and we are seeing higher trading volumes in the stock as the market begins showing an interest in how the OFG restructure takes shape. Clearly we believe the market undervalues OFG shares and part of our job is to explain the upside in the company to the analysts, fund managers and the public.

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8 Annual Report 2009

The Year Ahead

businesses - Friendly Society management and the Property Funds Management. This year is the fi rst time that the market will see the benefi ts of this strategy as the two revenue streams begin to support each other and the large reduction in recurring company expenses effectively becomes extra profi t.

We are beginning to receive more favourable reporting by the press and with market analysts and we have ensured that the market is aware of the progress we have made towards achieving our restructuring goals.

profi t guidance and dividend payments is a major priority of the board. We have undertaken to offer profi t guidance at or prior to this years AGM. The fi nancial report for the 6 months to December 2009 is very important as it will disclose for the fi rst time the benefi ts we have listed above.

Shareholders who are Friendly Society Policyholders

A great many of you are both shareholders and policyholders.

We know the stress that the current market turmoil has created and we have started what is to be a regular series of policyholder briefi ngs in Sydney and Melbourne to inform and assist you in relation to market trends, new products and detail the ongoing benefi ts of Friendly Society bonds – particularly the ability to switch between different types of bonds completely tax effectively.

I believe many policyholders have welcomed the conservative approach to managing your funds and very easy access to our senior executives and our investor services and investment management teams. Our fi rst seminars were attended by 140 policyholders and it was good to have a chance to discuss pure investment issues with you.

I have one very important message to you.

continue to consider your Friendly Society investment as long term as best you can. This has two important benefi ts;

Redeeming now in a 30 year low in investment markets is unlikely to maximise your return. Providing the recovery we see emerging takes hold, waiting will be to your advantage.
Maintaining the largest pool of funds within the Friendly Society increases returns to the OFG parent which will positively impact OFG’s bottom line and speed the return to normal dividend distributions, for example.

In other words, we would like you to think of your shareholding and your policy investment as having a linkage where both investments make a separate return to you in a different but complementary way.

In closing, I want to thank our chairman and my fellow directors for their support over a most arduous year. Our independent directors, Roger Dobson (Chairman), Deepak Gupta and Peter Done have given their time to me unstintingly over the year and it is in diffi cult periods such as those we have just experienced that the calibre and depth of experience of these individuals stands out.

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JOHN McBAIN Chief Executive Offi cer

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Annual Report 2009 9

STAND ALONE CORPORATE PERFORMANCE

Financial results

Balance Sheet and Cash Flow Statement, of the Over Fifty Friendly Society benefi t funds are included in the consolidated results of the corporate entities of the Over Fifty Group Limited. The following table provides an analysis of the Consolidated OFG Profi t and Loss attributable to shareholders, with the results of the benefi t funds stripped out.

periods via the spread of strong recurring income streams from the Friendly Society, Reverse Mortgages and the other smaller divisions. The achievement is particularly important given that Property Funds Management had its fi rst recorded trading loss in the ten year history of the division.

Shareholders can receive the more detailed results presentation by calling the registry on freecall 1800 11 29 29 or visiting the company website www.overfi fty.com.au.

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2009 2008
$000’s $000’s % Change
Normalised by major division
Property Funds Management (271) 4,304 -106.3%
Property Investments 774 319 142.6%
Reverse Mortgages 3,673 (1,456) 352.3%
Friendly Society 10,324 11,709 -11.8%
Commercial Mortgages 450 4,213 -89.3%
Corporate (5,265) (5,978) 11.9%
Other divisions 826 1,625 -49.2%
Underlying EBIT 10,511 14,736 -28.7%
Finance costs Corporate Debt (1,671) (1,526)
Tax (expense) reported 6,938 (1,882)
Tax (expense) on one off adjustments (8,589) (3,311)
Underlying NPAT 7,189 8,017 -10.3%
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Key points from the above table are:

of $271K (which on average over the past 3 fi nancial years 2006 – 2008 has been profi t of $5.458 million), the group’s Underlying NPAT of $7.2 million (being a reduction of $828,000 from the corresponding period) is a very pleasing result to the OFG Executive.
As a result of the suspension of issuing new reserve mortgage loans, the division has been restructured to appropriately manage the existing book of loans which should continue to produce a solid accounting profi t going forward.
During the period, the executive team examined and instigated many cost saving initiatives which will not have the impact of the full benefi t until 2009/2010 fi nancial year. These initiatives include consultants, marketing, outsourced services, staffi ng, personnel and staff remuneration reductions and freezing of remunerations until 30 June 2010.

program of review and ensuring adequate levels of reserving and write-offs refl ected at balance date.

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10 Annual Report 2009

one-off impairments and write-offs that have been incurred during the reporting period.

	2008 $000’s	% Change
Underlying NPAT 7,189	8,017	-10.3%
Loss on property revaluations (after Tax) (4,785) (2,513) Impairment in respect of parent company guarantee (after Tax) (5,090) - Net provision for doubtful debt on commercial mortgages (after Tax) (4,360) (4,398) Ineffective fair value of f nancial derivatives (after Tax) (1,934) - Impairment of investment in unlisted property trust (after Tax) (1,623) - Equity accounting for investment held in unlisted property trust (after Tax) (2,251) - Expenses of a one off corporate nature (after Tax) - (813) Write downof investment in Associate (after Tax) - (3,000)
Reported NPAT (12,854) (2,707) -374.9%

The write-down of the three on-balance sheet property assets of $4.8 million after tax.
An impairment in respect to a parent company guarantee provided to a group of “cash-out” unit holders in one of the property funds. This guarantee has been capped and there will be no further impairments in respect to this particular guarantee.
[A further write-off of $4.4 million after tax for bad debts was recorded in respect to the commercial loans. This practice ] of lending from the OFG group has been discontinued for the past 2 years and management is working through the remainder of loans to be collected.
$1.9 million after tax. These non-cash adjustments are effectively written back over time, as the hedge runs its full life.
Impairments and adjustments in respect to units held by the group in an unlisted property trust were recorded during the period amounting to $3.8 million after tax.

Funds under Management

Funds under management for the group reduced from $2.019 billion to $1.874 billion ($145 million or 7.2%) during the period as a result of:

Property disposals $16.0 million.
Property devaluations at 30 June 2009 by $27.0 million, refl ecting a reduction of 3.0%.
In the Friendly Society, a combination of redemptions (which was exacerbated also by the announcement by the Rudd Government’s guarantee on bank accounts in August 2008) and impairments on investment values in funds investing in Australian shares, managed funds and fi xed interest investments at 30 June 2009.

Considering the write-down in the major investment indices, the group result of a reduction of just 7.2%of Funds Under Management refl ects the stability and quality of the group’s underlying asset portfolio.

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Funds under Management
$2,500m
Reverse Mortgages
Property Trusts $2,019m $1,874m
$2,000m
Friendly Society $1,777m
$1,500m
$1,057m $1,137m
$1,000m
$500m
$0m
2005 2006 2007 2008 2009
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with Australian equities up 45%, US equities up 57.6% and Australian Real Estate Investment Trusts increasing 64.7%, all from their lows in March this year. This price appreciation has gone a long way to restoring the value of funds under management in the Friendly Society.

Forward looking

There are some very encouraging signs emerging, across all divisions, from the hard work performed by the OFG executive team over the past 12 months. In addition to the property acquisitions that are reappearing in the market, the core operation of the OFG group, over the six months to 30 June 2009, demonstrated a robust recurring earnings capability that will only be complimented once the Property Funds Management division begins acquiring property.

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Annual Report 2009 11

DIRECTORS’ REPORT

The Directors of Over Fifty Group Limited (Company) submit herewith the annual fi nancial report of the company for the fi nancial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Information about the directors and senior management

The names and particulars of the directors of the Company during or since the end of the fi nancial year are:

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Roger Dobson

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John McBain

Roger Dobson

Appointed 28 November 2007 LL.B, LL.M

Chairman, joined the Board in November 2007 in a non-executive capacity and is a senior partner of the law fi rm Henry Davis York. Roger is also the chairman of the nomination and remuneration committee. He is one of Australia’s leading banking and fi nance lawyers and acts primarily for the major Australian banks and other fi nancial institutions. He has extensive legal knowledge of the property funds management and fi nancial services industries, as well as corporate governance and regulatory issues.

John McBain

Appointed 4 April 2008 as CEO Dip. Urban Valuation

John was appointed CEO in April 2008. John is the founder of property funds manager, Century Funds Management, which was acquired by Over Fifty Group Limited in 2006. John is a director of subsidiaries Eclipse Property Group Limited, Century Funds Management and Over Fifty Mutual Friendly Society Limited and a director of an associated company Mortgageport Management.

In addition, John serves on the Investment Committees of both the Over Fifty Mutual Friendly Society and the Guardian Friendly Society. John originally qualifi ed in property valuation in New Zealand and from 1990 to 2006 was heavily involved in both commercial property consulting and the growth of the unlisted property fund market in Australia. Prior to 1990 John spent four years as managing director of a specialist commercial property investment company based in the United Kingdom.

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12 Annual Report 2009

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Jason Huljich

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Peter Done

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Deepak Gupta

Jason Huljich

Appointed 28 November 2007 B.Comm

Executive Director and General Manager, Property for Over Fifty Group, joined the Board in November 2007. He is also the Chief Executive Offi cer of Century Funds Management. Jason has been involved in investment property syndication in Australia since 1996 and has developed considerable expertise in investment property selection, syndicate feasibility and syndicate management.

Peter Done

Appointed 28 November 2007 B.Comm, FCA

Chartered Accountant, joined the Board in November 2007 in a non-executive capacity. Peter is the chairman of the audit committee of the Over Fifty Group Limited, Over Fifty Mutual Friendly Society Limited and the Over Fifty Guardian Friendly Society Limited, and is a member of the Friendly Society Investment Committees.

Peter was a partner of KPMG for 27 years until his retirement in June 2006. He has extensive knowledge in accounting, audit and fi nancial management in the property development and fi nancial services industries, corporate governance, regulatory issues and board processes through his many senior roles.

Deepak Gupta

Appointed 28 November 2007 BCA, MBA, Cert. Investment Analysis

Executive Director of Trustees Executors Limited, joined the Board in November 2007 in a nonexecutive capacity. He previously held various senior management positions in fi nancial services companies and is currently a director of Tourism Holdings Limited (NZ). Trustees Executors is New Zealand’s largest corporate trustee and fund services company with assets under supervision, management and administration of over A$36 billion.

Deepak is also a founding director of the Institute of Finance Professionals NZ Inc (INFINZ), the industry body for fi nance and investment professionals in New Zealand. Deepak worked at senior management level for major institutional investors in funds management and private equity investment and has been involved in a variety of private equity transactions.

Murray Grant (not pictured)

Appointed 4 April 2001 Resigned 29 October 2008 BVSc, MBA, FAICD

Chairman of the Investment and lending committees of the Over Fifty Group Limited, Over Fifty Mutual Friendly Society and the Over Fifty Guardian Friendly Society, joined the Board in April 2001 in a nonexecutive capacity. Murray is also an executive director of Chemvet Australia Pty Ltd, and holds or previously held various senior management positions in veterinary, pharmaceutical, rural and water industries. Mr Grant resigned from the Board in October 2008.

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Annual Report 2009 13

DIRECTORS’ REPORT (CONT.)

except for:

Mr Murray G. Grant - appointed 4 April 2001, resigned 29 October 2008.

Directors' shareholdings

The following table sets out each director's relevant interest in shares in OFG as at 30 June 2009.

	Over Fifty Group Limited	Over Fifty Group Limited
Directors		Fully paid ordinary shares Number
R.W. Dobson J.E. McBain J.C. Huljich P.J. Done D.K. Gupta Directors hold ordinary interests, with equal rights to other shareholders.		66,501 4,146,917 2,189,524 51,494 -

Remuneration of directors and senior management

Information about the remuneration of directors and senior management is set out in the remuneration report of this directors' report, which is on pages 20-32.

Company secretary

Mr Terry Reid, Chartered Accountant, has been the Company Secretary since December 2007. He is a member of the Institute of Chartered Accountants in Australia.

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14 Annual Report 2009

Corporate Structure

Over Fifty Group Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company has prepared a consolidated fi nancial report incorporating the entities it controlled during the fi nancial year, which are outlined in the following illustration of the Group's corporate structure. All entities are 100% owned unless otherwise stated.

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Over Fifty Group Limited
as at June 2009
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Over Fifty Group Limited
ABN: 22 095 454 336
Management LimitedABN: 11 086 553 639Century FundsAFSL: 231149 ABN: 47 007 108 509Capital Pty LtdOver Fifty Management Pty LtdOver Fifty FundsABN: 42 103 265 649 OFG LTP Pty LimitedABN: 64 006 731 504 Eclipse PropertyABN: 67 103 003 603Group Limited Friendly Society LimitedOver Fifty MutualABN: 79 087 649 054AFSL: 230867
Over Fifty InvestmentsABN: 84 100 169 186Pty Ltd Over Fifty SeniorsABN: 12 095 362 388Equity Release Pty Ltd Financial Planning ABN: 29 125 014 842Over Fifty Pty Ltd OFM NationalLeisure Trust Over Fifty InsuranceABN: 58 007 165 200Pty Ltd
50% ➤ Goods Fund No. 1Century Bulky Trust No.3 ‘Chisholm’OFM Direct Property
Mortgageport Senex Warehouse 21.21%
Management Trust No. 1 24.84%
Pty Ltd
ABN: 42 082 753 679
➤ Over Fifty Direct Benefit Funds
Property Trust 38.72%
6%
➤
➤
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Note: "------" represents partial ownership, " " represents 100% ownership.

Principal activities

The consolidated entity's principal activities being the Over Fifty Group Limited ("OFG") as the parent entity, and of its controlled entities, in the course of the fi nancial year, were the marketing and management of investment products (including Friendly Society investment bonds and property investment funds), general insurance through agency arrangements, mortgage lending and management, property investment and management of Over Fifty Guardian Friendly Society Limited.

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Annual Report 2009 15

DIRECTORS’ REPORT (CONT.)

Review of Operations

The consolidated net loss for the year is $12,413,000 (2008: loss $2,707,000) after providing for an income tax benefi t relating to shareholders of $6,938,000 (2008: income tax expense $1,882,000).

ordinary earnings (before write offs and impairments) is $7,189,000 (2008: $8,017,000).

The main sources of revenue were from the operations of the Over Fifty Mutual Friendly Society, Reverse Mortgages and the Property Funds Management divisions contributing up to 88% of the Group’s revenue.

Funds under management declined by 11% during the year to approximately $1.9 billion (2008: $2.1 billion).

Friendly Society

As at 30 June 2009, Over Fifty Mutual Friendly Society administered $781 million of Friendly Society benefi t funds and has continued to be a core activity of the Group since 1980. Over the past 2 years the OFG Executive and Management has strengthened its investment and operational staff strategically aimed at improving investment management capability and member communication and services.
The Friendly Society is in the process of providing a range of further investment products aimed at facilitating specifi c investment capability for rollover superannuation funds and education savings plans. A new PDS will shortly be available from the OFG website or by calling our Investor Services Team on 1300 50 50 50.

Property Funds Management

Property Funds Management (being the combination of both Century Funds Management Limited and Eclipse Property Group Limited) continue to be a major revenue contributor for the Group’s revenue and manages a portfolio of approximately $878 million. During the last fi nancial period, as a result of the downturn in the investment market, the division did not make any acquisition revenue which typically has always been a contributor to the Group’s revenue.
OFG continues to hold three properties on balance sheet, being part of the accommodation resort, Peppers The Sands Resort, in Torquay for $16.0 million, Moonah Links for $11.0 million and Chisholm Shopping Centre in Canberra for $19.0 million. All three assets have been impaired as at 30 June 2009 by a total of $6.837 million; being $2.068 million, $2.603 million and $2.166 million respectively. The Chisholm Shopping Centre has exchanged contracts at a selling price of $19.0 million and remains conditional as at 30 June 2009.
On 30 June 2009, OFG acquired the remaining 49% of Eclipse Property Group Ltd, thereby holding 100% as at balance date. The eventual fi nal purchase price will be determined at the completion of the Group fi nancial statements in September 2010, as the determinant is based upon the average of three years profi ts ending 30 June 2010. The Eclipse business manages funds with an aggregate $219 million funds under management.

Mortgage Businesses

Following the Board’s decision to suspend lending for new loans in July 2008, the Reverse Mortgages division has signifi cantly reduced its employed resources and is managing the existing portfolio of approximately 3,000 loans aggregating $215 million in value. As a result of the signifi cant reduction in operation and sales personnel, the division is contributing profi tably to the Group’s results. Financing from ANZ has been rolled over to March 2010.
50% associate Mortgageport continued to contribute profi tably to the Group’s result for the year. It has been impacted by the credit downturn, and subsequently its profi t contribution is down year on year with a decrease 45% to $374,000 (2008: $684,000).
In April 2007, OFG announced the closure of its commercial mortgage lending unit and continued to wind down its book.

Insurance/Financial Planning

The company has continued to successfully operate its insurance agency during the year. The company is committed to further growing this business which is demonstrating a strong and reliable reoccurring income stream with consistent annual growth.

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16 Annual Report 2009

Specifi c provisions and write-offs totalling $6.2 million to cover the expected non-recovery of mortgage advances relating to the commercial mortgage division which is currently being wound down.
Impairment for investment in unlisted property trust $2.3 million.
Ineffective fair value of fi nancial derivatives $2.8 million.
Fair value adjustments to the investment properties held on balance sheet that required a write-down of $6.8 million.
Equity accounted loss in unlisted property trust investments $3.2 million.
Impairment in respect to parent company guarantee $7.2 million.

Corporate governance practices

The Directors have, in striving to achieve the highest standards of corporate behaviour and accountability, complied with the principles and practices set out in the corporate governance statement contained in this annual report.

Other matters

In July 2007 the company was included in the ASX Equity Research Scheme. The program aims to deliver higher levels of stock liquidity in companies taking part in the program by creating higher levels of both retail and institutional investor awareness.
Further comments on the operations of the consolidated entity during the fi nancial year and of the results of its activities are set out elsewhere in the Annual Report.

Changes in state of affairs

consolidated entity during the fi nancial year other than as described in the notes to the fi nancial statements.

Subsequent events

face value that represents the difference between $1.00 per unit and an agreed written down value per unit of $0.36, as at 30 June 2009. The holders of the Notes are not entitled to request a conversion to equity (subsequent to shareholder approval), or otherwise receive cash, until February 2012.

OFG has entered into a conditional exchange of contracts for the sale of Chisholm Shopping Centre for a price of $19.0 million. The settlement date is set to occur by 15 October 2009, with OFG providing Vendor fi nance of $2.3 million for a period of 2 years. The condition precedent of the contract is the purchaser’s ability to raise equity by 28 August 2009.

Future developments

After a series of senior management personnel changes during the 12 month period, the Group has implemented both recurring cost saving initiatives as well as strategic key personnel appointments. The appointments include Mr Matthew Coy, to the position of Chief Financial Offi cer of OFG, previously Chief Financial Offi cer of OFG subsidiary company, Century Funds Management Limited (CFML); Mr Terry Reid to the position of General Manager Friendly Society and Company Secretary for OFG, previously Chief Financial Offi cer of OFG; Mr Howard Schmiede to Head of Finance at CFML, previously held the position of Chief Financial Offi cer at Austcorp; Mr Tom Power to Head of Retail Distribution at OFG and CFML, previously State Manager Sales, Qld - MLC, and Mr Sean Webster of OFG, previously an investment manager with over 15 years experience in the investment fraternity.

ability to capitalise upon the current dynamic investment market and the Group’s equity raising capability through a greater spread of larger sources from the investment community that will benefi t both the Friendly Society and property funds management businesses.

With a strong mix of business income derived from reliable recurring income streams, the board and senior management have growing optimism about the Group’s future performance. This is dependant upon a return to acquiring quality assets by Century Funds Management after a period of 2 years whereby the conditions were not suitable for acquisition, the introduction of a suite of new products within the Friendly Society aimed at providing its members greater fl exibility and choice, plus the strengthening of communication and education with its members, plus a signifi cant reduction of corporate debt, which is forecasted to occur during the subsequent period from a combination of operations and realisation of outstanding commercial mortgages.

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Annual Report 2009 17

DIRECTORS’ REPORT (CONT.)

Dividends

income tax rate was paid to the holders of fully paid ordinary shares on 3 October 2008.

entities against all liabilities to persons (other than the Company or a related body corporate) which arise out of the performance of their normal duties as a Director or Executive Offi cer unless the liability relates to conduct involving a lack of good faith. OFG has agreed to indemnify the Directors and Executive Offi cers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity and any resulting payments.

The Directors have not included details of the nature of the liabilities covered or the amount of premium paid in respect of the Directors' and Offi cers' Liability and Legal Expenses insurance contracts, as such disclosure is prohibited under the terms of the contracts.

indemnifi ed or agreed to indemnify an offi cer or auditor of the company or any related body corporate against a liability incurred as such an offi cer or auditor.

Directors' meetings

The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the fi nancial year and the number of meetings attended by each director (while they were a director or committee member).

	Board of directors	Board of directors	Audit, risk management & compliance committee	Audit, risk management & compliance committee	Investment & lending committee	Investment & lending committee	Nomination & remuneration committee	Nomination & remuneration committee
Directors	Held	Attended	Held	Attended	Held	Attended	Held	Attended
R.W. Dobson J.E. McBain J.C. Huljich P.J. Done M.G. Grant D.K. Gupta	12 9 7 4 - - 3 3 12 12 - - 12 12 - - 12 12 - - - - - - 12 11 7 7 12 10 3 3 4 3 2 2 4 4 - - 12 11 7 6 8 6 3 3

Note: J.E. McBain and J.C. Huljich are not members of the Audit, risk management & compliance committee.

R.W. Dobson and J.C. Huljich are not members of the Investment & Lending committee.

J.E. McBain and J.C. Huljich are not members of the Nomination & remuneration committee.

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18 Annual Report 2009

Non-audit services

Details of amounts paid or payable to the auditor for nonaudit services provided during the year by the auditor are outlined in note 23 to the fi nancial statements.

services, during the year, by the auditor (or by another person or fi rm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in note 23 to the fi nancial statements do not compromise the external auditor’s independence, based on advice received from the audit, risk management and compliance committee, for the following reasons:

all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.

Auditor’s independence declaration

The auditor’s independence declaration is included on page 102 of the annual report.

Rounding off of amounts

The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors’ report and the fi nancial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

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Annual Report 2009 19

REMUNERATION REPORT

This remuneration report, which forms part of the directors’ report, sets out information about the remuneration of Over Fifty Group Limited’s (“the Company”) directors and its senior management for the fi nancial year ended 30 June 2009. The prescribed details for each person covered by this report are detailed below under the following headings:

director and senior management details
remuneration policy
relationship between the remuneration policy and company performance
remuneration of directors and senior management
key terms of employment contracts.

Director and senior management details

The following persons acted as directors of the company during or since the end of the fi nancial year:

Mr R.W. Dobson (Chairman)

Mr P.J. Done (Independent director)

Mr M.G. Grant BVSc (Independent director, resigned 29 October 2008)

Remuneration policy

OFG recognises the important role people play in the achievement of its long-term objectives and as a key source of competitive advantage. To grow and be successful, OFG must be able to attract, motivate and retain capable individuals.

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

Competitive rewards are provided to attract and retain executive talent;
Remuneration is linked to performance so that higher levels of performance attract higher rewards;
Rewards to all staff but particularly executives are linked to the creation of value to shareholders;
The criteria used to assess and reward staff include fi nancial and non-fi nancial measures of performance;
The overall cost of remuneration is managed and linked to the ability of the company to pay; and
Severance payments due to the Chief Executive Offi cer on termination are limited to pre-established contractual arrangements which do not commit the Group to making any unjustifi ed payments in the event of non-performance.

Mr D.K. Gupta (Independent director)

Mr J.C. Huljich (Executive director)

Mr J.E. McBain

The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted, the named persons held their current position for the whole of the fi nancial year and since the end of the fi nancial year:

Mr M.J. Coy (Chief Financial Offi cer)

Mr D.B. Govey (Head of Assets)

Mr S.E. Harding (Head of Reverse Mortgages, resigned 30 June 2009)

Mr A.S. Bali (Development Executive)

Mr H.J. Schmiede (Head of Finance - Property, appointed 1 December 2008)

Mr T.D. Reid (Company Secretary and General Manager - Friendly Societies, appointed 1 October 2008)

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20 Annual Report 2009

Relationship between the remuneration policy and company performance

The main objective in rewarding the company executives for their performances is to ensure that shareholders' wealth is maximised through the company's continued growth moving forward. It is necessary to structure and strengthen this focus to drive this strategy so that they are aligned with the company's objectives and successes.

term and long-term incentive arrangements. The long-term incentives are based on OFG's performance for the year in reference to specifi c Earnings Per Share ("EPS") and Total Shareholder Return ("TSR") hurdles being met. The short-term incentives are based on the individual's performance in the preceding 12 months compared to pre-agreed goals.

Where senior management are remunerated with securities, the Remuneration Policy places no limitations to their exposure to risk in relation to the securities.

The targeted annual remuneration mix of each executive director and senior management personnel is outlined below;

*Executive director* Mr J.C. Huljich Mr J.E. McBain *Senior management* Mr M.J. Coy Mr D.B. Govey Mr A.S. Bali Mr H.J. Schmiede Mr T.D. Reid	% of total target annual remuneration	% of total target annual remuneration	% of total target annual remuneration
	f xed remuneration %	short term incentive remuneration %	long term incentive remuneration %
	74% 7% 19% 74% 7% 19% 74% 7% 19% 77% 8% 15% 77% 8% 15% 77% 8% 15% 77% 8% 15%

Target incentive remuneration refers to the incentive pay provided for meeting performance requirements. Actual incentive remuneration can vary for executive directors and senior management depending on the extent to which they meet performance requirements.

In accordance with the company's corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

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Annual Report 2009 21

REMUNERATION REPORT (CONT.)

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 calibre, whilst incurring a cost that is acceptable to shareholders.

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. An amount not exceeding the amount determined is then divided between the directors as agreed. Clause 63.2 of the Constitution provides an aggregate maximum amount of not more than $750,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers the fees paid to non-executive Directors of comparable companies when undertaking the annual review process and, where considered appropriate, advice from external consultants.

Each Director receives a fee for being a Director of Group companies and an additional fee is paid to the Chairman and to the Chairman of each Board Committee. The payment of the additional fees to each Chairman recognises the additional time commitment and responsibility associated with the position.

Senior Management and Executive Director Remuneration

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 interests of executives with those of stakeholders;
link rewards with the strategic goals and performance of the company ; and
ensure total remuneration is competitive by market standards.

Structure

regarding market levels of remuneration for comparable executive roles.

incentives. The proportion of fi xed and variable remuneration is established for each executive by the Chief Executive Offi cer after consultation with the Remuneration Committee. Table 2 details the fi xed and variable components for each executive.

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22 Annual Report 2009

Fixed Remuneration

Objective

Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefi ts including motor vehicles), as well as employer contributions to superannuation funds. This is reviewed annually by the Chief Executive Offi cer and the process consists of a review of company, business unit and individual performance as well as relevant comparative remuneration in the market. The same process is used by the Remuneration Committee when reviewing the fi xed remuneration of the Chief Executive Offi cer.

given the opportunity to receive their fi xed (primary) remuneration in a variety of forms including cash and salary sacrifi ce items such as motor vehicles, motor vehicle allowances and/or additional superannuation contributions. It is intended that the manner of payment chosen will be optimal without creating undue cost for the Group but always contained in their respective fi xed total remuneration.

Variable Remuneration

Under OFG’s Senior Management Remuneration Policy, long and short term performance incentives may be made under the Group’s bonus plans.

Short-term Incentives (“STI”)

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 available is set at a level so as to provide suffi cient incentive to the executive to achieve operational targets and such that the cost to the Group is reasonable in the circumstances.

Structure

Actual STI payments granted to each executive depend on the extent to which specifi c operating targets set at the beginning of the fi nancial year are met. The operational targets consist of a number of Key Performance Indicators (“KPIs”) covering both fi nancial and non-fi nancial measures of performance. Typically included are measures such as contribution to net profi t after tax, customer service, risk management, product management and leadership/team contribution. These measures were chosen as they represent the key drivers for short term success of the business and provide a framework for delivering long term value.

The Group has predetermined benchmarks that must be met in order to trigger payments under the STI scheme. On an annual basis, after consideration of performance against KPIs, an overall performance rating of each individual business unit and the individual performance of each executive is rated and these are taken into account when determining the amount, if any, of the short term incentive pool that is to be allocated to each executive. This process is normally completed within 2 months after the reporting date.

The aggregate of annual STI payments available to 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.

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Annual Report 2009 23

REMUNERATION REPORT (CONT.)

Short Term Incentive Employee Share Plan (the Plan)

establishment of the OFG Short Term Incentive Employee Share Plan (the Plan) to establish a method by which eligible employees may participate in the future growth and profi tability of the Company, and to assist in the recruitment, reward, retention and motivation of employees of the Company and its subsidiaries. The Plan and issue of shares under the Plan were approved at the 2006 AGM. This plan is separate to OFG’s Performance Rights Plan.

Under the Plan, there are no performance conditions, which allows the Board, in its discretion, to offer eligible employees fully paid ordinary shares in the Company (Shares) with a market value of up to $1,000 per employee per fi nancial year. Eligible employees include permanent full-time and part-time employees of OFG and its subsidiaries. Directors (whether executive or non-executive) cannot participate in the Plan unless specifi c approval is given by shareholders. Where Shares are issued under the plan during a year, their value is taken up in the fi nancial statements in employee benefi ts expense. There were no Shares issued under this plan during the current year.

Participants are restricted from selling, disposing of, encumbering or otherwise dealing with Shares issued under the Plan for a period of three years from the date the Shares were provided (Restriction Period) . If a participant ceases to be an employee of OFG or its subsidiaries during the Restriction Period, the restrictions on disposal will cease.

Under ASX Listing Rule 7.1 the Company may not issue or agree to issue equity securities which in aggregate exceed 15% of the Company’s fully paid issued share capital in any 12 month period without obtaining shareholder approval, unless an exception applies. ASX Listing Rule 7.2 exception 9 (as an exception to ASX Listing Rule 7.1) provides that issues of equities securities under an employee incentive scheme, such as the Plan, are not included when calculating this 15% limit if, no more than three years before the date of issue, shareholders approved the issue of securities under the employee incentive scheme as an exception to ASX Listing Rule 7.1.

Long-term Incentives (“LTI”)

At the 2003 AGM, OFG shareholders approved a Performance Rights Plan to which the long-term incentives relate. Under this plan, the Board has been given discretion in granting to employees rights to receive, in the future, a specifi ed number of ordinary shares. The number of shares to be delivered pursuant to the rights is subject to satisfying performance hurdles and time-related vesting conditions as detailed in Table 4 on page 29. If OFG achieves a target growth in EPS, or a TSR which matches or exceeds that of the ASX (excluding Property Trusts) Financial Accumulation index, the performance rights will convert into shares at the target date in the future as set out in Table 4. Performance will be tested at the end of four years measuring the average compound performance over the preceding four fi nancial years. The LTI plan was set up to reward all employees in a manner that aligns the elements of remuneration with the creation of shareholder wealth. Senior management have the potential to earn up to 15% or 19% of their total fi xed compensation in the form of a long term incentive.

The Group uses TSR and EPS as performance hurdles as it ensures an alignment between comparative shareholder return and reward for executives.

The performance rights will vest after 4 years as in Table 4 subject to meeting the performance hurdles described.

The allocation of rights under the plan is approved by the Board after recommendations by the Chief Executive Offi cer. The fi rst allocations under the Plan were granted in May 2006 (refer to page 30 of the remuneration report for details of the rights granted and the vesting dates if the performance hurdles are met).

The rights granted are valued by an external consultant in line with the requirements of Accounting Standard AASB 2. The Company then applies an estimation of the tenure risk associated with employees still being employed at the time the rights vest for those subject to TSR and EPS performance hurdles, and the probability of OFG attaining the required increase in EPS. The resultant value is charged to the profi t and loss evenly across the vesting period. The amounts calculated above relating to the executives are included in Table 2.

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24 Annual Report 2009

Group Performance

the global credit crisis, with OFG being no exception to that decline. OFG's resultant share price has fallen from $0.91 cents per share at 30 June 2008, to a low of $0.26 cents per share on 20 March 2009, to recover to $0.42 cents per share at 30 June 2009. OFG's consolidated statutory loss after tax for 2009 is $12.4 million and no dividends were paid or proposed for the year ended 30 June 2009.

Whilst the Group's operating earnings remained encouraging, the adversely impacted statutory result has resulted in the OFG directors, senior management and staff not being paid any short term incentives and not being granted any performance rights during the year. In addition to this, executive directors and senior management salaries have been decreased by 10%, with all other staff receiving a 7.5% decrease, during the later part of the 2009 fi nancial year. These cost saving measures, along with others implemented during the fi nancial year, were taken as a refl ection of OFG's need to reduce fi xed costs during the current diffi cult fi nancial market.

The tables below show the performance of the Group (as measured by its TSR) as compared to the ASX Financial (excluding Property Trusts) Accumulation Index and the consolidated entity's earnings and movements in shareholder wealth for the fi ve years to June 2009:

	TSR	TSR	TSR			EPS	EPS	EPS
	OFG	ASX Financial (ex Property Trusts)	LTI vesting conditions met/ not met			OFG cents/share	% Movement	LTI vesting conditions met/not met
					30/06/05 14.1 -26.56% Not met 30/06/06 14.0 -0.71% Not met 30/06/07 11.0 -21.43% Not met 30/06/08 -4.6 -141.82% Not met 30/06/09 -21.4 -365.22% Not met

OFG's overall objective is to reward senior management based on the company's performance and build on shareholder's wealth but this is subject to market conditions for the year. Table 1 below sets out summary information about the consolidated entity's earnings and movements in shareholder wealth for the fi ve years to June 2009:

Table 1: Summary of earnings:

30 June 2009 $'000	30 June 2008 $'000	30 June 2007 $'000	30 June 2006 $'000	30 June 2005 $'000
64,480 94,909 147,062 117,604 31,765 (19,527) (1,065) 11,378 10,904 9,287 (12,413) (2,707) 6,514 7,305 7,222
30 June 2009	30 June 2008	30 June 2007	30 June 2006	30 June 2005
$0.91 $2.22 $2.26 $2.04 $2.12 $0.42 $0.91 $2.22 $2.26 $2.04 0.0cps 5.0cps 5.0cps 5.0cps 5.0cps 0.0cps 3.0cps 6.0cps 6.0cps 6.0cps (21.4)cps (4.6)cps 11.0cps 14.0cps 14.0cps (21.4)cps (4.6)cps 11.0cps 14.0cps 14.0cps

(1) Fully franked at 30% corporate income tax rate.

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Annual Report 2009 25

REMUNERATION REPORT (CONT.) Remuneration of directors and senior management

Table 2: Remuneration for the year ended 30 June 2009:

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

Short-term employee benefi ts
Car Non-monetary
Salaries Fees Bonus allowance benefi ts
$ $ $ $ $
Directors
R.W. Dobson (non exec.) - 107,500 - - -
J.E. McBain (exec. dir) 348,006 - 34,000 20,000 -
J.C. Huljich (exec. dir) 248,458 - 15,000 20,000 -
P.J. Done (non exec.) - 74,000 - - -

M.G. Grant (resigned) - 24,667 - - -
- - - -
D.K. Gupta (non exec.) 49,000
Sub total 596,464 255,167 49,000 40,000 -
Senior management
M.J. Coy ** 252,599 - 25,000 - -
T.D. Reid *** 197,188 - 28,000 - -
D.B. Govey 197,675 - 15,000 - -
S.E. Harding 116,334 - - - -
A.S. Bali 196,175 - 37,968 - -
H.J. Schmiede 107,735 - - - -
Sub total 1,067,706 - 105,968 - -
Grand total 1,664,170 255,167 154,968 40,000 -
----- End of picture text -----**

M.G.Grant resigned on 29 October 2008.
*** T.D.Reid was appointed as the General Manager of Over Fifty Mutual Friendly Society on 1 October 2008.
**** S.E. Harding resigned on 30 June 2009.

* H.J. Schmiede was appointed as the Head of Finance - Property on 1 December 2008.

No directors or senior management person appointed during the period received a payment as part of his or her consideration for agreeing to hold the position.

Bonuses

28 August 2008 except for T.D. Reid and J.E. McBain which were paid on 1 December 2008.

resulted in 100% of the bonus amount being forfeited by each executive director and senior management personnel for the current fi nancial year.

Valuation of options and participating rights

There were no rights granted to senior management during 2009.

Directors fees (including Directors Retirement Fund)

The aggregate directors fees paid in 2009 were $263,272 (2008: $381,177).

The past practice of providing for a directors retirement fund, in addition to directors fees, has been discontinued during the period.

All OFG staff

During the period all OFG staff received a minimum of 7.5% reduction in their remuneration as well as forfeiting all performance bonuses, with senior management receiving a 10% reduction in their remuneration. In addition, all staff remuneration has been frozen until 30 June 2010.

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26 Annual Report 2009

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

Post employment benefi ts Share-based payment Termination benefi ts Total
Directors Participating
Superannuation Retirement Fund rights Options Termination Payments
$ $ $ $ $ $
9,675 - - - - 117,175
36,180 - - - - 438,186
25,511 - - - - 308,969
6,660 - - - - 80,660
2,220 8,105 - - - 34,992
- - - - -
49,000
80,246 8,105 - - - 1,028,982
24,984 - - - - 302,583
19,060 - 3,355 - - 247,603
17,659 - - - - 230,334
10,117 - - - - 126,451
21,073 - - - - 255,216
- - - -
9,622 117,357
102,515 - 3,355 - - 1,279,544
182,761 8,105 3,355 - - 2,308,526
----- End of picture text -----

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Annual Report 2009 27

REMUNERATION REPORT (CONT.)

Table 3: Remuneration for the year ended 30 June 2008:

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

Short-term employee benefi ts
Bonus Non-monetary
Salaries Fees * Car allowance benefi ts
$ $ $ $ $
Directors
R.W. Dobson - 63,682 - - -
J.E. McBain 301,102 - - 20,000 -
J.C. Huljich 230,457 - - 20,000
P.J. Done - 43,837 - - -
M.G. Grant - 74,000 - - -
D.K. Gupta - 29,027 - - -
M.G. Chessell - 44,473 - - -
C.R. Martin * 207,913 - 37,500 - -
W.J. Forster - 26,477 - - -
M.A. Gray - 23,994 - - -
R.R. Offi cer - 23,994 - - -
Sub total 739,472 329,484 37,500 40,000 -
Senior management
T.D. Reid 185,675 - 20,000 - -
D.B. Govey 140,950 - - - -
S.E. Harding 30,463 - - -
M.J. Coy 178,003 - - - -
A.S. Bali 174,167 - - - -
C.A. Jones ** 123,199 - 30,000 - -
A. Nicu ** 146,716 - 20,000 - -
Sub total 979,173 - 70,000 - -
Grand total 1,718,645 329,484 107,500 40,000 -
----- End of picture text -----**

C.R. Martin resigned on 1 February 2008 but under his contractual employment obligation, was required to give 6 months notice. Remuneration from 1 February to 30 June 2008 - $148,509 - not included in amount above. Upon his resignation, all eligible options had not met their hurdles and lapsed.
** C.A. Jones resigned on 30 November 2007. A. Nicu resigned on 24 April 2008.
*** Participating rights granted as part of remuneration have been valued using an adjusted form of the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo Simulation analysis. The Monte Carlo simulation option pricing model has been modifi ed to incorporate an estimate of the probability of achieving the TSR hurdle.
* The short-term executive bonuses relate to 2007. The bonuses for 2008 have not been paid or allocated. ** S.E. Harding was appointed on 23 April 2008.

Bonuses

Cash bonuses granted during the year to the above senior management were paid on 13 September 2007. This was relating to the annual performance appraisal for the 2007 year.

Valuation of options and participating rights

The value of rights granted at the grant date in 2008 to T. Reid and C. Jones are $116,250.

The participating rights and options lapsed during the year for C. Martin, C. Jones and A. Nicu. Had these not lapsed/ forfeited, the fair value would have been $211,500 for C.Martin, $21,597 for C. Jones and nil for A. Nicu. Because the vesting conditions would not have been met at the time of lapsing, the fair value of the options/participating rights would be nominal.

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28 Annual Report 2009


	Post employment benef ts		Share-based payment		Termination benef ts	Total
	Superannuation $ Directors Retirement Fund $ Participating rights * $ Options $ Termination Payments $ $ 5,731 - - - - 69,413 25,617 - - - - 346,719 23,593 274,050 3,945 - - - - 47,782 6,660 22,463 - - - 103,123 - - - - - 29,027 4,003 10,388 - - - 58,864 22,087 - (17,362) (161,748) - 88,390 2,383 6,360 - - - 35,220 2,160 5,804 - - 31,958 2,160 6,678 - - - 32,832
98,339 51,693 (17,362) (161,748) - 1,117,378
	16,848 - 3,744 - - 226,267 12,686 - - - - 153,636 2,742 - - - - 33,205 16,020 - - - - 194,023 15,675 - - - - 189,842 11,140 - (16,747) - 145,600 293,192 13,605 - (6,486) - - 173,835
88,716 - (19,489) - 145,600 1,264,000
	187,055	51,693	(36,851)	(161,748)	145,600	2,381,378

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Annual Report 2009 29

REMUNERATION REPORT (CONT.)

Performance Rights plan

Details to the plan are set out above under "Long-term Incentives (LTI)".

The proportion of Rights that vest is cumulative over the vesting period disclosed in Table 5 which will be determined by the Company's performance measured in terms of EPS and TSR, ranked against the ASX Financial (excluding Property Trusts) Accumulation Index.

Table 4:

Earnings Per Share (EPS) performance criteria

EPS is based on normalised operating earnings before tax. The EPS performance hurdle and subsequent percentages of the Rights that become exercisable depend on the following vesting scale:

If OFG achieves less than 10% growth in EPS per annum, no Rights vest.
If OFG achieves 10% growth in EPS or greater, 70% of Rights vest.
If OFG achieves 11% growth in EPS or greater, 80% of Rights vest.
If OFG achieves 12% growth in EPS or greater, 90% of Rights vest.
If OFG achieves 13% growth in EPS or greater, 100% of Rights vest.

Total Shareholders Return (TSR) Performance criteria

The TSR performance hurdles and percentages of the Rights that become exercisable upon meeting the performance hurdle are as follows:

If TSR rank is less than the index, no Rights vest.
If TSR rank is equal to or greater than the index, all Rights vest.

Fair market value

Fair market value is the price that would be negotiated at the valuation dates in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm's length.

were in existence. The fair market value of the Rights at the valuation dates are set out below:

Tranche	Grant date	Rights fair value including market hurdle (TSR)	Rights fair value (EPS)	Vesting date	Expiry date
1 26 May 2006 $1.32 $1.27 $1.18 $1.13 $1.11 $2.22 30 June 2007 26 May 2011 2 26 May 2006 $2.12 30 June 2008 26 May 2011 3 26 May 2006 $2.03 30 June 2009 26 May 2011 4 1 July 2006 $1.88 30 June 2010 30 June 2011 5 1 July 2007 $1.85 30 June 2011 30 June 2012

The valuation approach employed is an adjusted form of the Black–Scholes Option Pricing Model (BSM) that includes a Monte Carlo Simulation analysis that incorporates an estimate of the probability of achieving the TSR hurdle.

The Monte Carlo model is based on the assumption that share price movements are log normally distributed, a similar assumption that underpins the BSM.

The BSM takes into account the following factors:

The Rights have no exercise price;
The time to expiry for the Rights accords with their respective vesting dates;
The price of the underlying shares at grant date ($2.22);
The expected volatility of the share price (25%);
The dividend yield expected on the shares (4.7%); and
The risk-free interest rate for the life of the Rights (6.43%).

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30 Annual Report 2009

Table 5: During the current year, the following performance rights were on issue :

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Rights
fair value
% of
Rights including
compensation
fair market
% of for the year
No. granted value hurdle Vested grant consisting
Name Tranche EPS TSR Grant date EPS TSR No. % forfeited of options
T.D. Reid Tranche 2 10,141 10,141 26 May 2006 $2.12 $1.27 nil nil 100%
Tranche 3 10,723 10,723 26 May 2006 $2.03 $1.18 nil nil 100%
Tranche 4 6,637 6,637 1 July 2006 $1.88 $1.13 - - -
Tranche 5 10,511 10,511 1 July 2007 $1.85 $1.11 - - - 2%
Total 38,012 38,012
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Table 6: During the current year, the following rights were held as part of remuneration:

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No. Granted
No. at Lapsed/ Balance at Not
Name Tranche beginning EPS TSR Exercised forfeited end Exercisable vested
T.D. Reid Tranche 2 20,282 - - - (20,282) - - -
Tranche 3 21,446 - - - (21,446) - - -
Tranche 4 13,274 - - - - 13,274 - 13,274
Tranche 5 21,022 - - - - 21,022 - 21,022
Total 76,024 - - - (41,728) 34,296 - 34,296
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Annual Report 2009 31

REMUNERATION REPORT (CONT.)

Key terms of employment contracts

Current CEO

Mr John McBain, was appointed as CEO of Over Fifty Group Limited (OFG) on 4 April 2008. He is also an executive director of OFG. Mr McBain is employed under contract and no changes have been made on the employment contract since his appointment as CEO. The current employment contract commenced on 10 July 2006 and terminates on 9 July 2010, at which time OFG may choose to commence negotiations to enter into a new employment contract with Mr McBain.

During the period, Mr McBain received a 10% reduction in his remuneration as well as forfeiting all his performance bonuses. His remuneration has been frozen at its current level until 30 June 2010.

The summary of the major terms and conditions of Mr McBain's employment contract are as follows:

Mr McBain receives Fixed Compensation plus Superannuation contributions.
Mr McBain is entitled to a motor vehicle allowance and can elect to apply a portion of his salary as a motor vehicle allowance. For the year ending 30 June 2009, Mr McBain elected to allocate from his total salary amount $20,000 (2008: $20,000) to his motor vehicle allowance.
Mr McBain is eligible to participate in the bonus program which will be determined at the discretion of the company. This is calculated as a percentage of the total fi xed compensation for the previous fi nancial year. To be eligible he must remain in offi ce following the end of the relevant fi nancial year.
OFG may terminate this employment contract by providing 6 months written notice or provide payment in lieu of the notice period. Any payment in lieu of notice will be based on the Total Fixed Compensation Package.
OFG may terminate the employment contract at any time without notice if serious misconduct has occurred. When termination with cause occurs the CEO is only entitled to remuneration up to the date of termination.

Other executives (standard contracts)

All executives are employed under contract. The company may terminate the executive's employment agreement by providing 1- 6 months written notice or providing payment in lieu of the notice period (based on the Total Fixed Compensation package). Upon a participant's termination of employment with OFG, the unvested and vested performance rights of the participant will be dealt with as specifi ed in the table below.

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Type of termination Unvested rights Vested rights
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Type of termination	Unvested rights	Vested rights

Redundancy or retrenchment	Lapse after 12 months from date of termination of employment. Rights retain ability to be tested and if theybecome vested, exercisable.	Lapse after 60 days from the date termination of employment takes effect.
Special circumstances (Death or disability)	Lapse	Lapse after 180 days from the date termination of employment takes effect.
Dismissal for serious misconduct(eg. Fraud)	Lapse	Lapse from the date termination of employment takes effect.
Termination in any other instance(eg. Resignation)	Lapse	Lapse from the date termination of employment takes effect.

On behalf of the Board

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R.W. DOBSON Chairman

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P.J. DONE Director Chairman - Audit, Risk Management and Compliance Committee

Sydney 20 August 2009

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32 Annual Report 2009

AUDITOR’S INDEPENDENCE DECLARATION

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Annual Report 2009 33

CORPORATE GOVERNANCE STATEMENT

by the ASX Corporate Governance Council (the Council) as underlying good corporate governance and outlines the approach of Over Fifty Group Limited (OFG) to each of the principles.

As recognised by the Council, corporate governance is the system by which companies are directed and managed. It infl uences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimised. There is no single model of good corporate governance. At OFG, corporate governance will evolve with our changing circumstances and will be tailored to meet those circumstances.

PRINCIPLE 1: Lay solid foundations for management and oversight

The role of the Board

The Board of Directors is responsible for setting the strategic direction and establishing the policies of OFG. It is responsible for overseeing the fi nancial position, and for monitoring the business and affairs of OFG on behalf of the shareholders, by whom the directors are elected and to whom they are accountable. It also addresses issues relating to internal controls and approaches to risk management. It ensures that there are processes in place to conform to legal requirements and corporate governance standards and that risk exposures are adequately managed.

For full details of the role of the Board please refer to our Board Charter, a link to which is contained under the Corporate Governance page of our website.

Delegation to Senior Executives

Executives is to manage OFG in accordance with the direction given by the Board.

The CEO’s responsibilities include:

formulating and reviewing, with the Board, the vision and strategy for OFG;
developing actions and plans to achieve the vision and implement the strategy and to report to the Board on the progress against those plans;
appointing a management team and negotiating terms and conditions of their employment; and
approving the remuneration levels of all staff.

Performance Review of Senior Executives

The performance of the CEO is reviewed periodically by the Nomination and Remuneration Committee and the Board. This assessment is made against pre-determined criteria including Key Performance Indicators relating to OFG’s performance as determined in OFG’s Strategic Plan.

Performance reviews of Senior Executives are carried out by the CEO who reports the fi ndings to the Nomination and Remuneration Committee. The CEO conducts the reviews each year by comparing performance against agreed measures, evaluating any effi ciencies or improvements during the course of the year and deciding upon targets for next year.

PRINCIPLE 2: Structure the board to add value

Directors

The Directors’ Report in the Annual Report contains details of the directors’ skills, experience and education. It also states the date the individual director was appointed to the board, their status as non-executive or executive directors and the committees on which they sit. The directors seek to ensure the Board consists of directors with an appropriate range of experience, skill, knowledge and vision to enable it to operate OFG’s business with excellence. The number of directors is limited by OFG’s constitution to a minimum of 5 and a maximum of 13. The Board considers that the ideal size is 5 to 8 directors.

Currently the Board consists of 5 directors. Three of the fi ve directors, namely Roger Dobson, Peter Done and Deepak Gupta are considered to be independent as per independence criteria set out in the Board Charter. The three independent directors do not have relationships with OFG which affect their independent status, such as substantial shareholdings or direct employment.

They do not provide material professional consultancy services, they are not a material supplier or customer and they do not have a material contractual relationship with OFG or other group member except as a director. Our CEO, John McBain and Jason Huljich are executive directors. Directors are required to disclose at each Board meeting any interests that may affect their independence. Independent directors reconfi rm their independent status to the board by way of a written confi rmation on an annual basis.

Directors are selected and appointed in accordance with documented procedures. For full details on the procedures for the selection and appointment of directors please see our policy, a link to which is contained under the Corporate Governance page of our website.

Chairman

OFG’s chairman, Roger Dobson is considered to be an independent director for the reasons given above. There is a clear division of responsibility at the head of the company as the roles of chairman and the CEO are not performed by the same person. The Board Charter also provides that the chairman shall be an independent non-executive director. A Statement of Position Authority is in place for the CEO which details the responsibilities and authorities for that position.

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34 Annual Report 2009

Nomination and Remuneration Committee

The Nomination and Remuneration Committee formulates criteria for appointment of directors to the Board, identifi es potential candidates and recommends remuneration of directors and senior management. Appointments to the Board are made on the understanding that a minimum of one term of three years and a maximum of three terms (9 years) will be served. A link to the charter of the Nomination and Remuneration Committee can be found on the Corporate Governance page of our website.

Annual review of Board composition to ensure that the necessary skills are represented, together with the appropriate continuity and balance;
Assessment of the effectiveness and composition of Board committees;
Regular evaluation of the performance of the CEO;
Recommending remuneration for non-executive directors;
Recommending a competitive remuneration and reward program for the CEO and other senior management; and
Ensuring that other human resource management programs, including performance assessment programs, are in place.

The Nomination and Remuneration Committee consists of 3 directors, all of whom are independent and is chaired by an independent director. Details of membership of the Nomination and Remuneration Committee including meeting attendance are set out at the end of the Corporate Governance Statement. Each director’s skills, experience, expertise and period of service is contained in the Directors’ Report.

Board Performance

The Board reviewed and assessed its performance for the 2008/09 fi nancial year. Detailed consideration was given to the following areas:

The Board’s composition;
The operations and effectiveness of the Board and its Committees;
Decision making processes, including agendas, frequency of meetings and content of papers;

Continuing education to update and enhance director knowledge is seen as an important factor in ensuring optimum performance by each director. This year, continuing education opportunities included training sessions in a subsidiary company’s bond products.

Clause 5 of the Board Charter gives directors the authority to seek professional advice as considered necessary in the performance of its duties at OFG’s expense. The directors also have full access to the company secretary to assist them to carry out their role.

Re-election of Directors

The Company’s constitution stipulates that a number of directors not exceeding one-third of their number should retire by rotation at each annual general meeting (AGM). A director must offer themself for re-election at the third AGM since their election or re-election, unless they have served three terms at which time the director must retire from the board. The CEO, if also a director, is not subject to the retirement by rotation process, and is not included when calculating the number of directors required to retire by rotation.

PRINCIPLE 3: Promote ethical and responsible decision-making

Code of Conduct

The Board has established a Directors and Employee Code of Conduct that sets the standard by which all offi cers and employees of the Company are to conduct themselves in the course of their duties. Potential breaches of the Code of Conduct can be reported to management, the Audit, Risk Management & Compliance Committee or an external auditor using the guide outlined in OFG’s Whistleblower Policy. A link to the Code of Conduct can be found under the Corporate Governance page of our website.

Trading in OFG’s Securities

The Board has established a policy concerning trading in the Company’s securities by directors, offi cers and employees. The policy prohibits Directors and employees trading in OFG shares if they are aware of any price sensitive information regarding the shares and also, at nominated times when a ‘black-out period’ is imposed. A link to OFG’s Directors & Staff Share Trading Policy can be found under the Corporate Governance page of our website.

Communications between the Board and executives;
Determination of company strategy; and
The Board’s policies for board renewal.

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Annual Report 2009 35

CORPORATE GOVERNANCE STATEMENT (CONT.)

PRINCIPLE 4: Safeguard integrity in fi nancial reporting

Audit, Risk Management and Compliance Committee

Our Audit, Risk Management & Compliance Committee consists of three non-executive directors, has a majority of independent directors and is chaired by an independent chair who is not the chair of the OFG Board. All members are fi nancially literate holding fi nancial or accounting qualifi cations and have professional experience in a fi nancial or accounting related fi eld. The Committee chairman, Peter Done is a chartered accountant with over 40 years of experience. Deepak Gupta has 20 years experience in the fi nancial services and investment management industry. The third member of the committee, Roger Dobson is the senior partner in the banking and fi nance practice at the legal fi rm in which he works. The Committee meets quarterly with the external and internal auditors of the Group present. Detail of the Audit, Risk Management & Compliance Committee members names, appointment date, status, qualifi cations and meeting attendance is set out a the end of this Corporate Governance Statement.

Charter

The Board has formulated an Audit, Risk Management & Compliance Committee Charter, a link to which is contained under the Corporate Governance page of our website.

PRINCIPLE 5: Make timely and balanced disclosure

The Board has established written policies and procedures on information disclosure. The focus of these procedures is to effect OFG’s commitment to:

Comply with the general and continuous disclosure principles contained in the ASX Listing Rules and the Corporations Act;
Prevent the selective or inadvertent disclosure of price sensitive information;
Ensure that shareholders and the market are provided with full and timely information about its activities; and
Ensure that all market participants have equal opportunity to receive externally available information issued by OFG.

Responsibility for compliance with OFG’s continuous disclosure obligations rests with the Company Secretary. Price sensitive information is publicly released through the ASX before disclosing it to analysts or others outside the Group. Information is posted on OFG’s website as soon as reasonably practicable after the stock exchange confi rms an announcement has been made, with the aim of making the information accessible to the widest audience.

PRINCIPLE 6: Respect the rights of shareholders

OFG aims to provide prompt, accurate and accessible information to its shareholders. It has established a Communications Policy detailing steps to be taken to achieve this objective, a copy of which can be viewed under the Corporate Governance page of our website. The main mechanisms through which OFG communicates with its shareholders are:

The Annual and Half-year Financial Reports;
Announcements made to the ASX;
Notices and explanatory memoranda of annual general meetings (AGMs);
The Annual General Meeting; and
OFG’s website

OFG’s website forms an important part of the strategy for communicating with shareholders. OFG’s website has a shareholders page which includes share details, company reports, company announcements and press releases (including copies of any signifi cant presentations made to analysts or a template of such presentations), and items relating to AGMs.

In designing notices and explanatory statements/ memoranda of AGMs, OFG gives consideration to the guidelines given by the ASX Corporate Governance Council in its Principles of Good Corporate Governance and Best Practice Recommendations.

At the time of providing a notice of meeting and explanatory memoranda for the AGM a form is provided for shareholders to mail back to OFG if they wish to raise any issues. At the AGM, the Company will, where appropriate, endeavour to address issues raised by shareholders in these forms. During the course of the AGM the fl oor is opened for questions.

A summary of our Continuous Disclosure Policy can be found under the Corporate Governance page of our website.

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36 Annual Report 2009

PRINCIPLE 7: Recognise and manage risk

The OFG Board has established a Risk Management Framework for the Group, a summary of which can be viewed under the Corporate Governance page of our website. Risk management is an integral part of the governance of OFG and is one of the main responsibilities of the Board and Senior Management. The Board is ultimately responsible for approving and reviewing OFG’s Risk Management Framework. The monitoring and management of risk on an ongoing basis is the responsibility of management as represented by the heads of the respective business units of OFG.

At OFG, managing risk is a continuous process for both Management and the Board. OFG’s comprehensive risk management framework requires a detailed annual business risk review, which seeks to defi ne all the major risks that could prevent or impact the Company from achieving its objectives. This review has been completed for this fi nancial year and the Board has accepted management’s report that material business risks have been managed effectively.

The management of risk is then continually addressed during the year at the business unit level. Periodically, an external audit fi rm is engaged to review the effectiveness of OFG’s risk management framework. Combined with this, is an embedded compliance culture to ensure OFG meets the requirements of the Australian Securities and Investments Commission for conducting a fi nancial services business and operating managed investment schemes. A robust compliance framework has been implemented which requires the business to monitor its activities and those of its outsourced service providers. The compliance function at OFG reports directly to the Audit, Risk Management & Compliance Committee and the Board.

An internal audit function has also been established with a focus on OFG’s control environment. The annual internal audit plan is determined having regard to the risk profi le of the business arising from the annual business risk review.

The Audit, Risk Management & Compliance Committee has the following risk management responsibilities:

Assessing risks arising from the Group’s operations and ensuring the adequacy of measures taken to moderate those risks;
Reviewing and assessing the effectiveness of the Group’s Risk Management Framework and internal control practices and ensure there is a continuous process for the management of signifi cant risks throughout the Group; and
Monitoring compliance with the Company’s Risk Management Framework.

Quarterly risk management reporting is provided to the Audit, Risk Management and Compliance Committee by management.

The CEO and CFO have declared in writing to the Board for both the half-year and full-year fi nancial statements that

the declaration provided 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 all material respects in relation to fi nancial reporting risks.

PRINCIPLE 8: Remunerate fairly and responsibly

Nomination and Remuneration Committee

The Nomination and Remuneration Committee consists of three directors, all of whom are independent and is chaired by an independent director. Detail of membership of the Nomination and Remuneration Committee including meeting attendance is set out at the end of this Corporate Governance Statement.

Remuneration related responsibilities of the Nomination and Remuneration Committee include:

Recommending fees for directors;
Recommending a competitive remuneration and reward program for the CEO and other senior management; and
Ensuring that other human resource management programs, including performance assessment programs and incentive schemes, are in place.

OFG recognises the important role people play in the achievement of its long-term objectives and as a key determinant of competitive advantage. To grow and be successful, OFG must be able to attract, motivate and retain capable individuals.

Senior Executive remuneration structure

The key principles that underpin OFG’s Senior Executive Remuneration Policy are:

competitive rewards are provided to attract and retain executive talent;
remuneration is linked to performance so that higher levels of performance attract higher rewards;
rewards to all staff but particularly executives are linked to the creation of value to shareholders;
the criteria used to assess and reward staff include fi nancial and non-fi nancial measures of performance;
the overall cost of remuneration is managed and linked to the ability of the company to pay, and
severance payments due to the CEO on termination are limited to pre-established contractual arrangements which do not commit the Group to making any unjustifi ed payments in the event of non-performance.

The remuneration policy assists OFG to achieve its business strategy and objectives. OFG recognises that, while remuneration is a key factor in recruiting the right people, it is not the only factor. OFG values and its ability to provide interesting and challenging career opportunities, also play an important role.

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Annual Report 2009 37

CORPORATE GOVERNANCE STATEMENT (CONT.)

Non-executive director remuneration structure

The Board has established a policy relating to the remuneration of non-executive directors. OFG pays non-executive directors fees at a level which is suffi cient to attract individuals with the appropriate skills, and to fairly reimburse those directors for services provided. Non-executive directors’ remuneration does not include incentive schemes or performance related payments.

Executive directors are paid a salary commensurate with their position and responsibilities and at a level which attracts high calibre executives with appropriate skills and experience. Executive directors also participate in OFG’s long-term and shortterm incentive plans.

Further information regarding director and senior executive remuneration can be found in the remuneration Report.

Addendum : Board Committee detail

Nomination and Remuneration Committee

Changes during 2008/09 year: Murray Grant retired as a committee member and Mr Deepak Gupta was appointed to the Committee.

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Current member appointment Meetings Meetings
name date Status Qualifi cations held attended
Independent
Roger Dobson 22-Jan-08 LLB, LLM 3 3
Chair
Peter Done 22-Jan-08 Independent [B.Comm(Accntg), ] 3 3
FCA
Deepak Gupta 25-Nov-08 Independent BCA, MBA 3 3
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Audit, Risk Management & Compliance Committee

Changes during 2008/09 year: Murray Grant retired as a committee member.

Current member name	appointment date	Status	Qualif cations	Meetings held	Meetings attended
Peter Done 17-Dec-07 Independent Chair B.Comm(Accntg), FCA 7 7 Roger Dobson 17-Dec-07 Independent LLB, LLM 7 4 Deepak Gupta 17-Dec-07 Independent BCA, MBA 7 6

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38 Annual Report 2009

DIRECTORS’ DECLARATION for the year ended 30 June 2009

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the fi nancial position and performance of the company and the consolidated entity; and
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Board

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R.W. DOBSON Chairman Sydney 20 August 2009

P.J. DONE Director Chairman - Audit, Risk Management and Compliance Committee

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Annual Report 2009 39

INCOME STATEMENT for the fi nancial year ended 30 June 2009

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Consolidated Parent
2009 2008 2009 2008
Note $'000 $'000 $'000 $'000
Continuing operations
Revenue 3(i) 79,298 106,808 6,902 23,787
Applications for bonus funds 15,259 11,219 - -
Other income 3(ii) 3,078 2,822 378 -
Other expenses 3(ii) (30,315) (26,624) 4 5
Share of (loss) / profi t in associate 12 (2,840) 684 - -
Employee benefi ts expense 5(a) (7,431) (8,331) (2,192) (1,445)
Finance costs 4 (21,546) (15,454) (2,018) (1,966)
Administration and management fees 5(b) (18,565) (22,488) (4) -
Redemption expense 5(c) (100,114) (92,528) - -
Net movement in policy liabilities - benefi t funds 5 91,910 74,000 - -
Mortgage advance provisioning 5(b) (9,335) (11,724) (56) -
Depreciation expense (546) (348) (243) (268)
Advertising and marketing expense (1,141) (1,915) (216) (295)
Rental expense - operating leases (707) (585) (481) (436)
Consulting and professional fees (2,720) (4,271) (989) (2,897)
Impairment of investments in subsidiaries - - - (2,598)
Impairment in respect of parent company guarantee (7,271) - (7,271) -
Impairment of investments in associates 12 (2,318) (3,000) - -
Impairment of investments in associates - carried at cost - - (7,425) -
Impairment for the non recoverable loans in subsidiaries - - (2,425) (11,132)
Revaluation of investment property assets 5(b) (6,837) (3,590) - -
General and administration expenses 5(b) (3,074) (4,225) (1,426) (655)
(Loss) / profi t before tax (25,215) 450 (17,462) 2,100
Income tax benefi t/(expense) relating to shareholders 6,938 (1,882) 6,122 2,239
Income tax benefi t/(expense) relating to benefi t funds 5,706 (721) - -
Total Income tax benefi t/(expense) 6 12,644 (2,603) 6,122 2,239
(Loss) / profi t for the year from continuing operations (12,571) (2,153) (11,340) 4,339
Discontinued operations
Profi t / (loss) for the year from discontinued operations 26 158 (554) - (782)
(Loss) / profi t for the year from continuing and
(12,413) (2,707) (11,340) 3,557
discontinuing operations
Attributable to:
Equity holders of the parent (12,854) (2,707) (11,340) 3,557
Minority interest 441 - - -
(12,413) (2,707) (11,340) 3,557
Earnings per share
From continuing and discontinued operations:
Basic (cents per share) 7 (21.4) (5.0) - -
Diluted (cents per share) 7 (21.4) (5.0) - -
From continuing operations:
Basic (cents per share) 7 (21.6) (4.0) - -
Diluted (cents per share) 7 (21.6) (4.0) - -
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The Consolidated result aggregates the fi nancial results of the Over Fifty Mutual Friendly Society Benefi t Funds and the Over Fifty Group corporate entities (refer to Note 2(a)). The above Income Statement should be read in conjunction with the accompanying notes.

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40 Annual Report 2009

BALANCE SHEET as at 30 June 2009

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Consolidated Parent
2009 2008 2009 2008
Note $'000 $'000 $'000 $'000
Assets
Cash and cash equivalents 25 28,285 20,472 526 2,647
Trade and other receivables 8 5,792 13,980 40,999 50,799
Income tax receivable 6 13,560 - 1,682 2,050
Financial assets at fair value through profi t and loss 9 556,767 687,636 127 2,666
Derivative fi nancial assets 9 - 2,147 - -
Other fi nancial assets 9 224,118 220,946 61,757 60,068
Investment property 11 27,000 51,278 - -
Investment property - held for sale 11 19,000 - - -
Investment in associates - equity method 12 13,162 5,602 - -
Plant & equipment 13 1,345 1,745 1,003 1,154
Deferred tax assets 6 16,088 9,365 4,200 393
Intangible assets 14 52,571 47,182 - -
Other assets 10 2,651 2,512 46 395
Total Assets 960,339 1,062,865 110,340 120,172
Liabilities
Trade and other payables 15 6,097 7,940 342 399
Borrowings 16 254,991 251,172 19,830 24,000
Policyholders funds 19 594,022 700,599 - -
Derivative fi nancial liabilities 18 12,409 6,305 - -
Income tax payable 6 - 2,056 - -
Other liabilities 17 14,382 2,139 8,121 1,029
Total Liabilities 881,901 970,211 28,293 25,428
Net Assets 78,438 92,654 82,047 94,744
Equity
Contributed equity 20 89,045 88,511 89,045 88,511
Reserves 20 (3,984) 755 8 103
Retained earnings/(Accumulated losses) 20 (6,623) 8,027 (7,006) 6,130
Equity attributable to equity holders of the parent 78,438 97,293 82,047 94,744
Minority interest - 115 - -
Put option held by minority interest - (4,754) - -
Total Equity 78,438 92,654 82,047 94,744
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The Consolidated result aggregates the fi nancial results of the Over Fifty Mutual Friendly Society Benefi t Funds and the Over Fifty Group corporate entities (refer to Note 2(a)). The above Balance Sheet should be read in conjunction with the accompanying notes.

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Annual Report 2009 41

STATEMENT OF CHANGES IN EQUITY for the fi nancial year ended 30 June 2009

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CONSOLIDATED
Issued Retained Cash fl ow Long term
capital earnings hedge incentive
reserve plan reserve
$'000 $'000 $'000 $'000
Balance at 1 July 2007 87,783 16,418 229 292
Benefi t earned from share transfer - 792 - -
Gain/(loss) on cash fl ow hedges - - 422 -
Net income recognised directly in equity - 792 422 -
Profi t for the period - (2,707) - -
Total recognised income and expense - (1,915) 422 -
Shares issued for purchase of Eclipse Property Group Limited 728 - - -
Minority interest share of Eclipse Property Group Limited - - - -
Put option held by minority interest - - - -
Executive share-based incentives - - - (189)
Payment of dividends (note 21) - (6,476) - -
Balance at 30 June 2008 88,511 8,027 651 103
Balance at 1 July 2008 88,511 8,027 651 103
Benefi t earned from share transfer
Gain/(loss) on cash fl ow hedges - - (4,643) -
Net income recognised directly in equity - - (4,643) -
Profi t for the period - (12,854) - -
Total recognised income and expense - (12,854) (4,643) -
Issue of share capital Dividend Reinvestment Plan 534 - - -
Acquisition of minority interest share of Eclipse Property Group Limited - - - -
Expiry of put option held by minority interest - - - -
Executive share-based incentives - - - (95)
Payment of dividends (note 21) - (1,796) - -
Balance at 30 June 2009 89,045 (6,623) (3,992) 8
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The Consolidated result aggregates the fi nancial results of the Over Fifty Mutual Friendly Society Benefi t Funds and the Over Fifty Group corporate entities (refer to Note 2(a)). The above Statement of Changes of Equity should be read in conjunction with the accompanying notes.

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42 Annual Report 2009

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PARENT

Attributable to equity holders of the parent Minority interest Total $'000 $'000 $'000 104,722 - 104,722 792 - 792 422 - 422 1,214 - 1,214 (2,707) - (2,707) (1,493) - (1,493) 728 - 728 - 115 115 - (4,754) (4,754) (189) - (189) (6,476) - (6,476)	Attributable to equity holders of the parent Minority interest Total $'000 $'000 $'000 104,722 - 104,722 792 - 792 422 - 422 1,214 - 1,214 (2,707) - (2,707) (1,493) - (1,493) 728 - 728 - 115 115 - (4,754) (4,754) (189) - (189) (6,476) - (6,476)	Attributable to equity holders of the parent Minority interest Total $'000 $'000 $'000 104,722 - 104,722 792 - 792 422 - 422 1,214 - 1,214 (2,707) - (2,707) (1,493) - (1,493) 728 - 728 - 115 115 - (4,754) (4,754) (189) - (189) (6,476) - (6,476)	Issued capital Retained earnings Cash f ow hedge reserve Long term incentive plan reserve Total $'000 $'000 $'000 $'000 $'000 87,783 8,259 - 292 96,334	Issued capital Retained earnings Cash f ow hedge reserve Long term incentive plan reserve Total $'000 $'000 $'000 $'000 $'000 87,783 8,259 - 292 96,334	Issued capital Retained earnings Cash f ow hedge reserve Long term incentive plan reserve Total $'000 $'000 $'000 $'000 $'000 87,783 8,259 - 292 96,334	Issued capital Retained earnings Cash f ow hedge reserve Long term incentive plan reserve Total $'000 $'000 $'000 $'000 $'000 87,783 8,259 - 292 96,334	Issued capital Retained earnings Cash f ow hedge reserve Long term incentive plan reserve Total $'000 $'000 $'000 $'000 $'000 87,783 8,259 - 292 96,334
			- 792 - - 792 - - - - -
			- 792 - - 792 - 3,557 - - 3,557
			- 4,349 - - 4,349 728 - - - 728 - - - - - - - - - - - - - (189) (189) - (6,476) - - (6,476)
97,292	(4,639)	92,653	88,511	6,130	-	103	94,744
97,292 (4,639) 92,653 - - (4,643) (4,643)			88,511 6,130 103 94,744 -
			- - - - -
(4,643) - (4,643) (12,854) 441 (12,413)			- - - - - - (11,340) - - (11,340)
(17,497) 441 (17,056) 534 - 534 - (115) (115) - 4,754 4,754 (95) - (95) (1,796) (441) (2,237)			- (11,340) - - (11,340) 534 - - - 534 - - - - - - - - - - - - - (95) (95) - (1,796) - - (1,796)
78,438	-	78,438	89,045	(7,006)	-	8	82,047

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Annual Report 2009 43

CASH FLOW STATEMENT for the fi nancial year ended 30 June 2009

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Consolidated Parent
2009 2008 2009 2008
Note $'000 $'000 $'000 $'000
Cash fl ows from operating activities
Interest received 14,155 44,428 116 211
Dividends received 654 - 459 23,254
Rent, Trust distributions and other income received 29,464 48,605 1,293 1,824
Management fees received 27,767 25,201 - -
Redemption paid from bonus funds (100,114) (92,528) - -
Redemption paid from unit linked funds (17,810) (18,724) - -
Applications received by unit linked funds 3,143 8,133 - -
Applications received by bonus funds 15,259 11,219 - -
Payments to suppliers and employees (44,604) (74,964) 122 2,744
Income tax paid (11,629) (15,578) (2,108) (954)
Net cash provided by/(used in) operating activities 25 (83,715) (64,208) (118) 27,079
Cash fl ows from investing activities
Interest payments on mortgage loans (11,487) (10,732) - -
Payments for investment properties (1,558) (19,795) - -
Payments for plant and equipment (135) (1,558) (92) (1,977)
Proceeds from disposal of plant and equipment 1 - - -
Proceeds from sale of investments 158 - - -
Acquisition of subsidiaries net of cash acquired 29 128 (2,877) (100) -
Proceeds from investment in other fi nancial assets 16,355 37,112 - (1,204)
Payment for investment in associated entities (350) - (350) -
Other investments 84,664 (73,602) - (19,729)
Net cash (used in)/provided by investing activities 87,776 (71,452) (542) (22,910)
Cash fl ows from fi nancing activities
Proceeds from issue of equity securities - 728 - 728
Loans from/(to) related entities 2,423 1,875 4,505 (8,397)
Proceeds from borrowings 26,112 109,850 - 11,200
Repayment of borrowings (22,987) - (4,170) -
Dividends and distributions paid (1,796) (6,480) (1,796) (6,480)
Net cash provided by/(used in) fi nancing activities 3,752 105,973 (1,461) (2,949)
Net increase/(decrease) in cash and cash equivalents 7,813 (29,687) (2,121) 1,220
Cash and cash equivalents at the beginning of the fi nancial year 20,472 50,159 2,647 1,427
Cash and cash equivalents at the end of the fi nancial year 25 28,285 20,472 526 2,647
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The above Cash Flow Statement should be read in conjunction with the accompanying notes.

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44 Annual Report 2009

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

1. General information

Over Fifty Group Limited (the Company) is a public company listed on the Australian Stock Exchange (trading under the symbol ‘OFG’), incorporated in Australia and operating in Australia.

Principal place of business Level 30, Level 30 367 Collins Street 367 Collins Street Melbourne VIC 3000 Melbourne VIC 3000 Tel: 1300 50 50 50 Tel: 1300 50 50 50

The entity’s principal activities are the marketing and management of investment products, general insurance through agency arrangements, mortgage lending and management and property investment.

Statement of compliance

2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

the Group.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the fi nancial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’).

Basis of preparation

assets and fi nancial liabilities which have been valued at fair value through the income statement. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the fi nancial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

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Annual Report 2009 45

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Going concern

activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

For the year ended 30 June 2009, the Group incurred a consolidated net loss after tax of $12,413,000 (2008: loss $2,707,000) mainly as a result of the provision for the redemption guarantee provided to unit holders of Century Bulky Goods Fund No.1 (CBGF#1), property revaluation decrements, unrealised loss on fair value of fi nancial derivatives and impairments on the commercial loan book.

and operating after tax profi t before non-cash and signifi cant items.

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Consolidated
2009 2008 2007
$'000 $'000 $'000
Net (loss) / profi t attributable to equity holders of OFG Limited (12,854) (2,707) 6,514
Specifi c non-cash items and signifi cant items:
Loss on property revaluations 6,837 3,590 (3,856)
Impairment in respect of parent company guarantee 7,271 - -
Net provision for doubtful debt on commercial mortgages 6,228 6,284 3,786
Ineffective fair value of fi nancial derivatives 2,763 - -
Impairment of investment in unlisted property trust 2,318 - -
Equity accounting for investment held in unlisted property trust 3,215 - -
Expenses of a one off corporate nature - 1,161 1,000
Write down of investment in Associate - 3,000 -
Tax effect on specifi c non-cash and signifi cant items (8,589) (3,311) (279)
Operating after tax profi t (before non-cash and signifi cant items) 7,189 8,017 7,165
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Management has renewed OFG’s working capital facility with the National Australia Bank to 28 February 2010. During the year ended 30 June 2009, OFG has reduced its working capital facility by $4.1 million. OFG management are currently in discussions with National Australia Bank to refi nance the facility by a further 12 months.

Management has, subsequent to 30 June 2009, entered into a Notes Subscription Deed with the Unit Holders that held Cash Out Units that were guaranteed by OFG for $1.00 per unit. There were 11.1 million units that have a guarantee provided at a face value per note of $0.64. Management has agreed with these unit holders to satisfy its guarantee obligation through the issuance of a convertible note for a term of 3 years with a quarterly coupon payable at 7.82% p.a.

After taking into account all available information, the Directors have concluded that there are reasonable grounds to believe:

The Group will be able to pay its debts as and when they fall due; and

The directors have formed this view based on a number of factors including:

The Group’s net asset position attributable to members of $78,438,000;
The underlying performance of the Group’s business being management of the Friendly Society business, property funds management, insurance agency, the commercial loan book and the reverse mortgage business;
There have been no defaults on the payment of interest or principal;
Terms are set with the National Australia Bank to OFG’s next review on 28 February 2010; and
Agreement has been made with the unit holders in CBGF#1 who elected to redeem their units and they have executed a Notes Subscription Deed for settlement of the cash out guarantee.

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46 Annual Report 2009

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods.

(i) Critical judgements in applying the entity’s accounting policies

There are no critical judgements in applying the entity’s accounting policies for the year ended 30 June 2009.

(ii) Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year:

Impairment of goodwill

The Group determines whether goodwill with an indefi nite useful life 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 with an indefi nite useful life is allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill are discussed in note 14.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using an adjusted form of the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo Simulation analysis, using the assumptions detailed in note 32.

Useful lives of plant and equipment

As described in note 2(j), the Group reviews the estimated useful lives of plant and equipment at the end of each annual reporting period. During the fi nancial year, the directors determined that the useful lives to be 3-15 years. There has been no change in prior years.

Investment property

The Group engages an accredited valuer to fair value its property investments.

Employee entitlements

Estimation by management is applied when determining the following key assumptions used in the calculation of long service leave at balance sheet date:

future increases in wages and salaries;
future on cost rates; and
experience of employee departures and period of service.

Commercial mortgages

Commercial mortgages held are reviewed on an individual basis and tested for their recoverability and impaired accordingly.

Valuation of Fixed For Life loans within the reverse mortgage portfolio

Actuarial forecasts are prepared recording the fair value of fi xed for life loans undertaken by borrowers within the reverse mortgage portfolio. Assumptions include future market interest rates and mortality when recording the present value of these loans.

instruments

As described in note 27, management uses their judgment in selecting an appropriate valuation technique for fi nancial instruments not quoted in an active market. For derivative fi nancial instruments, assumptions are made based on quoted market rates adjusted for specifi c features of the instrument. The estimation of fair value for unlisted instruments includes some assumptions not supported by observable market prices or rates.

Note 27 (h) describes the assumptions used for the valuation technique in assessing the fair value of the 50 year swaps.

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Annual Report 2009 47

NOTES TO THE FINANCIAL STATEMENTS (CONT.) for the fi nancial year ended 30 June 2009

Actuarial methods and assumptions

A Financial Condition Report is being prepared by the Society’s Appointed Actuary, Mr Guy Thorburn. This report covers benefi t fund liabilities and prudential reserves. The effective date of the report is 30 June 2009.

determined in accordance with the methods and assumptions disclosed in this Financial Condition Report.

Benefi t Fund, are valued using the accumulation method and are equal to the contributions made by members, net of fees, together with bonus additions to date. The balance of the fund is the unvested policyholder benefi t liabilities (or surplus). Each year’s bonus declaration results in a movement from unvested policyholder benefi t liabilities to the vested policy liability. The bonus rate is subject to the amount vesting being no more than the distributable portion of unvested policyholder benefi t liabilities.

taken to be the value of assets of the fund net of other liabilities less the value of the current period bonus. This liability represents the present value of guaranteed benefi ts (pre bonus) plus the present value of future bonuses. Following declaration of the bonus, there would then be no surplus under this arrangement. The Society currently expects to deduct 1.50% of the fund’s assets from investment earnings for expense allowances. It has been assumed that interest will be earned in future years at rates after tax suffi cient at least to meet this level of expense.

The main variables that determine the bonus rate for a benefi t fund are the value of the net assets of each benefi t fund at the end of the year, the amounts standing to the credit of each investment account through the previous year and the investment return (net of fees and taxes where applicable) earned by the fund throughout the year. The excess of the net assets of the benefi t fund over the liabilities after meeting the prudential standards is the surplus that is generally able to be distributed to members as a bonus.

There is no provision in the funds’ rules for any surplus to be transferred to the Management Fund. The Management Fund receives specifi ed fee transfers from the funds to cover expenses. All remaining assets are to be used to provide benefi ts to members. Hence there is no profi t and consequently, no need for a profi t carrier.

Changes in economic conditions and demographics will alter the unallocated surplus. The Capital Requirements, as set by APRA, are designed to ensure there is suffi cient unallocated surplus to cover the effect of these changes.

Adoption of new and revised Accounting Standards

In the current year, the Company and Group have adopted the new and revised Standards issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below.

(a) Basis of consolidation

fi nancial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries) (referred to as the ‘Group’ in these fi nancial statements). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

OFG as prescribed by AASB 1038 Life Insurance Contracts, in its consolidated fi nancial statements, is required to recognise the assets, liabilities, income, expenses and equity of the benefi t funds, which it manages. The assets and liabilities of the Benefi t Funds do not impact the Net profi t after tax of the equity holders of OFG.

issue and administration of contracts governed under the Life Insurance Act 1995 (Life Act). For the purposes of the fi nancial statements these are classifi ed as either benefi t funds with discretionary participation features (bonus funds) or benefi t funds without discretionary participation features (unit linked funds).

Within the bonus funds, annual bonus rates are declared by the company with guidance of the Appointed Actuary and within the restrictions pursuant to the Life Act; this is considered a Discretionary Participation Feature (DPF) and cause these funds to meet the defi nition of life insurance contracts under AASB 1038 Life Insurance Contracts.

The value of policyholders funds in the unit linked funds is solely dependent on the market valuation of the underlying assets, therefore, there is no discretionary participation feature and these funds do not meet the defi nition of life insurance contracts under AASB 1038 Life Insurance Contracts.

The Company derives fee income from the administration of the benefi t funds. For the purposes of this fi nancial report, holders of both bonus and unit linked funds are referred to as policyholders.

and transfer restrictions pursuant to the Life Act.

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48 Annual Report 2009

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identifi ed separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination.

OFG has majority representation on the Board of the Over Fifty Guardian Friendly Society Limited (“Guardian”). However, as Guardian is a mutual organisation, OFG has no legal rights to Guardian’s net assets and therefore does not control Guardian. It is, therefore, considered inappropriate to include Guardian in the consolidation.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities recognised, If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profi t or loss.

(b) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classifi ed as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profi t or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

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Annual Report 2009 49

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

(c) Investments in associates

An associate is an entity over which the Group has signifi cant infl uence and that is neither a subsidiary nor an interest in a joint venture. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these fi nancial statements using the equity method of accounting, except when the investment is classifi ed as held for sale, in which case it is accounted for in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments.

The Group’s investment in Mortgageport Management Pty Ltd, Century Bulky Goods Fund No.1 and Over Fifty Direct Property Trust is accounted for using the equity method of accounting in the consolidated fi nancial statements.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifi able assets, liabilities and contingent liabilities of the associate recognised at the date of the acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of the acquisition, after reassessment, is recognised immediately in profi t or loss. Where a group entity transacts with an associate of the Group, unrealised profi ts and losses are eliminated to the extent of the Group’s interest in the relevant associate.

(d) Goods and services tax

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

i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

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

on a gross basis. The GST component of cash fl ows arising from investing and fi nancing activities which is recoverable from, or payable to, the taxation authority is classifi ed within operating cash fl ows.

(e) Revenue

Revenue is measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefi ts will fl ow to the entity and the revenue can be reliably measured.

Management fees

Management fees are recognised on an accruals basis when OFG has the right to receive payment.

Dividend and interest revenue

Dividend revenue is recognised when the shareholders’ right to receive the payment is established.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount.

Rental income

Rental income arising on investment properties is accounted for on a straight-line basis over the lease term.

Property acquisition income

Property acquisition income is recognised when an investment property has been acquired in an established fund.

Commission and application fee income

All commissions and application fee income is recognised on an accruals basis when OFG has the right to receive the payment.

(f) Share-based payments

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details can be found in note 32.

ii. for receivables and payables which are recognised inclusive of GST.

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50 Annual Report 2009

(g) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profi t or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that suffi cient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profi t. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

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Annual Report 2009 51

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

(g) Income tax (cont.)

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

group, they are allocated a share of the income tax liability attributable to the Over Fifty Mutual Friendly Society Limited equal to the income tax liability that would have arisen to the Benefi t Funds had they been stand-alone.

Further information about the tax funding arrangement is detailed in note 6. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

(h) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignifi cant risk of changes in value and have a maturity of three months or less at the date of acquisition.

Bank overdrafts are shown within borrowings in the balance sheet.

Tax consolidation

The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law as of 1 July 2003. Over Fifty Group Limited is the head entity in the taxconsolidated group. Tax expense/benefi t, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate fi nancial statements of the members of the tax-consolidated group using a ‘stand-alone’ approach based on the allocation specifi ed in the tax funding arrangement.

The tax funding arrangement requires a notional current and deferred tax calculation for each entity as if it were a taxpayer in its own right, except that unrealised profi ts, distributions made and received and capital gains and losses and similar items arising on transactions within the tax-consolidated group are treated as having no tax consequences. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement.

(i) Financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those fi nancial assets classifi ed as at fair value through profi t or loss which are initially measured at fair value.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company fi nancial statements. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated fi nancial statements and the cost method in the Company fi nancial statements.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a fi nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the fi nancial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those fi nancial assets ‘at fair value through profi t or loss’.

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52 Annual Report 2009

value through profi t or loss - held for trading” where the fi nancial asset:

has been acquired principally for the purpose of selling in the near future;
instruments that the Group manages together and has a recent actual pattern of short-term profi t-taking; or
is a derivative that is not designated and effective as a hedging instrument.

fair value through profi t or loss - designated at initial recognition” where the fi nancial asset:

inconsistency (accounting mismatch);
is a part of a group of assets which is managed and performance is evaluated on a fair value basis in accordance with investment strategy; or
is a contract containing an embedded derivative.

are stated at fair value, with any resultant gain or loss recognised in profi t or loss. The net gain or loss recognised in profi t or loss incorporates any dividend or interest earned on the fi nancial asset. Fair value is determined in the manner described in note 27.

loans are held directly at amortised cost using the effective yield method except for mortage loans held by the Benefi t Fund’s which are measured at fair value through profi t and loss. An allowance for impairment loss is made at year end for specifi c amounts when there is objective evidence that collection of the full amount is no longer probable. Bad debts are written-off when identifi ed.

the contractual rights to the cash fl ows from the asset expire, or it transfers the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred fi nancial asset, the Group continues to recognise the fi nancial asset and also recognises a collateralised borrowing for the proceeds received.

Financial assets, other than those at fair value through profi t and loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that have occurred after initial recognition of the fi nancial asset the estimated future cash fl ows of the investment have been impacted.

Loans and receivables

Trade receivables, loans and other receivables that have fi xed or determinable payments that are not quoted in an active market are classifi ed as ‘loans and receivables’. Loans and receivables are measured at amortised cost using effective interest method less impairment.

Interest income is recognised by applying the effective interest rate.

(j) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation is provided on plant and equipment and is calculated on a straightline basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

The gain or loss arising on disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profi t or loss.

The following useful lives are used in the calculation of depreciation: Plant and equipment 3-15 years

(k) Non-current assets held for sale

as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classifi cation.

held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

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Annual Report 2009 53

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

(l) Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of the investment property are included in profi t or loss in the period in which they arise.

(m) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

in the period which they are incurred.

(n) Leased assets

the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classifi ed as operating leases.

Group as a lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Group as a lessee

Operating leases are novated motor vehicle leases that have been provided as part of salary packaging, and lease of offi ce premises.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.

Lease incentives

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefi ts of incentives are recognised as a reduction of rental expense on a straightline basis, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.

(o) Goodwill

Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently measured at its cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units, or groups of cashgenerating units, expected to benefi t from the synergies of the business combination. Cash-generating units or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

If the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (or groups of cashgenerating units), the impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or groups of cash-generating units) and then to the other assets of the cash generating units pro-rata on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cashgenerating units). An impairment loss recognised for goodwill is recognised immediately in profi t or loss and is not reversed in a subsequent period. On disposal of an operation within a cash-generating unit, the attributable amount of goodwill is included in the determination of the profi t or loss on disposal of the operation.

in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outfl ows to be made by the Group in respect of services provided by employees up to reporting date.

plans are expensed when employees have rendered service entitling them to the contributions.

In the event that lease incentives are granted as part of operating leases, the aggregate of such incentives are recognized as a reduction of rental income on a straight line basis over the life of the lease.

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54 Annual Report 2009

(q) Provisions

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

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.

Directors’ retirement fund

Provisions for directors’ retirement fund are recognised to compensate non-executive directors and are accrued for during their service period.

(r) Financial instruments issued by the Company

Debt and equity instruments

liabilities or as equity in accordance with the substance of the contractual agreement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

profi t or loss where the fi nancial liability is either held for trading or it is designated as at fair value through profi t or loss.

it has been incurred principally for the purpose of repurchasing in the near future; or
instruments that the Group manages together and has a recent actual pattern of short-term profi t-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

trading is designated as a fair value through profi t or loss upon initial recognition if:

measurement or recognition inconsistency that would otherwise arise; or
assets or fi nancial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis.

are stated at fair value, with any resultant gain or loss recognised in profi t or loss. The net gain or loss recognised in profi t or loss incorporates any interest paid on the fi nancial liability. Fair value is determined in the manner described in note 27.

initially measured at fair value, net of transaction costs. Other fi nancial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a fi nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the fi nancial liability, or, where appropriate, a shorter period.

such as interest rate swaps to manage its exposure to interest rate and equity price risk.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profi t or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profi t or loss depends on the nature of the hedge relationship.

Hedge accounting

At the inception of the hedge relationship the Group documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking the hedge. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in cash fl ows of the hedged item.

Note 27 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also detailed in the Statement of Changes in Equity.

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Annual Report 2009 55

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profi t or loss as part of other expenses or other income.

in the periods when the hedged item is recognised in profi t or loss in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-fi nancial asset or a non-fi nancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifi es for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profi t or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profi t or loss.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profi t or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profi t or loss from that date.

(t) Solvency and Capital Adequacy

Friendly Societies are required to hold prudential reserves over and above their policy liabilities, as a buffer against adverse experience and poor investment returns. The minimum level of reserves required to be held is laid down by the Life Insurance Act 1995 and accompanying actuarial standards. These standards are Actuarial Standard 2.03 and 3.03. These standards have been met as at 30 June 2009.

The accounting treatment of certain transactions varies depending on the nature of the contract underlying the transaction. The major contract classifi cations are insurance contracts and investment contracts.

Insurance contracts

risk at the inception, or those where at the inception of the contract there is a scenario with commercial substance where the level of insurance risk may be signifi cant. Once a contract has been classifi ed as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces signifi cantly during the period.

Investment contracts

Contracts not considered insurance contracts are classifi ed as investment contracts. The accounting treatment of investment contracts depends on whether the investment has a Discretionary Participation Feature (‘DPF’). DPF means a contractual right to receive, as a supplement to guaranteed benefi ts, additional benefi ts:

contractual benefi ts;
(b) whose amount or timing is contractually at the discretion of the issuer; and
(c) that are contractually based on:
contracts or a specifi ed type of contract;
(ii) realised and/or unrealised investment returns on a specifi ed pool of assets held by the issuer; or
entity that issues the contract.

Applications and redemptions on investment contracts with DPF are accounted for through the income statement. The gross change in the liability to these policyholders for the period, which includes any participating benefi ts vested in policyholders and any undistributed surplus attributed to policyholders, is recognised in the income statement.

Applications and redemptions on investment contracts without DPF are accounted for through the balance sheet as a movement in policyholder liabilities. Distributions on these contracts are charged to the income statement as a movement in the policyholder liability. Premiums relating to the investment

component are accounted for as a deposit through the balance sheet.

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56 Annual Report 2009

(v) Policyholders’ funds

labelled “policyholders’ funds” is shown in total liabilities in the Balance Sheet. Note 19 shows the movement in bonus funds (with DPF) and unit linked funds (without DPF).

The liability to bonus fund policyholders is closely linked to the performance and value of the assets (after tax) that back those liabilities. The fair value of such liabilities is therefore the same as the fair value of those assets after tax, on the basis charged to policyholders. In accordance with the rules of the funds, any remaining surplus is attributed to the policyholders of the fund. In accordance with AASB1038 Life Insurance Contracts applications to these funds are recorded as income, redemptions from these funds and amounts distributable to policyholders are recorded as expenses.

The policyholder funds liabilities for unit linked funds are equal to the number of units held, multiplied by the unit redemption price based on market value of the fund’s investments as at the valuation date. Applications to these funds are not recorded as income, redemptions from these funds are not recorded separately as expenses, but amounts distributable to policyholders are recorded as an expense. No guarantees are provided by the Society in respect of the unit linked funds.

reduction in policyholder liabilities. Redemptions in respect of bonus funds are also disclosed as an expense as set out above.

increase in policyholder liabilities. Applications in respect of bonus funds are also disclosed as revenue as set out above.

within which that class of business is conducted. The apportionment basis has been made in line with the principles set out in the Life Insurance Actuarial Standards Board (LIASB) Valuation Standard (Actuarial Standard AS1.04) and the apportionment is in accordance with Division 2 of Part 6 of the Life Act.

(w) Unit prices

holders of the fund, divided by the number of units on issue.

(x) Standards and Interpretations issued but not yet effective

yet effective.

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

Effective for annual Expected to be initially
reporting periods applied in the fi nancial
Standard beginning on or after year ending
----- End of picture text -----

AASB 101 ‘Presentation of Financial Statements’ (revised	1 January 2009	30 June 2010
September 2007), AASB 2007-8 ‘Amendments to
Australian Accounting Standards arising from AASB 101’
AASB 8 ‘Operating Segments’, AASB 2007-3	1 January 2009	30 June 2010
‘Amendments to Australian Accounting Standards arising
from AASB 8’
AASB 3 ‘Business Combinations’ (2008), AASB 127	AASB 3 (business	30 June 2010
‘Consolidated and Separate Financial Statements’ and	combinations occurring
AASB 2008-3 ‘Amendments to Australian Accounting	after the beginning of
Standards arising from AASB 3 and AASB 127’	annual reporting periods
	beginning 1 July 2009),
	AASB 127 and AASB
	2008-3 (1 July 2009)

There have been a number of new standards and interpretations for which the initial application is not expected to have any material impact on the fi nancial report of the Group and the Company.

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Annual Report 2009 57

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

3. Revenue

An analysis of the Group's revenue for the year, from both continuing and discontinued operations, is as follows:

Consolidated	Consolidated	Consolidated	Parent	Parent
2009 $'000		2008 $'000	2009 $'000	2008 $'000
20,099 17,424 13,733 26,996 17 334 19,622 29,132 1,707 2,483 14,729 16,159 4,376 4,912 4,396 2,670 619 6,698			125 212 - - 6,607 23,575 - - - - - - 30 - 140 - - -
79,298	106,808		6,902	23,787
(29,738) (726) (488) (26,281) - 389 (62) - (27) (6)			- - 4 5 - - - - - -
(30,315) (26,624) - - 1,717 1,648 270 878 - 26 1,091 270			4 5 365 - - - - - - - 13 -
3,078 2,822			378 -
(27,237)	(23,802)		382	5
1 7 1 7			- -
			- -
- -			- (782)

- - - 438 - 126 - 4			- (782) - - - - - -
- 568			- -
1	568		-	(782)

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58 Annual Report 2009

Consolidated	Consolidated	Consolidated		Parent	Parent
2009 $'000		2008 $'000		2009 $'000	2008 $'000
18,196 14,746 - -				1,709 1,525 - -
18,196 14,746 587 708 7,114 - (4,351) -				1,709 1,525 309 441 - - - -
3,350 708				309 441
21,546	15,454			2,018	1,966
6,134 6,991 72 494 (95) (188) 263 240 178 (18) 13 57 221 278 440 418 205 59				1,949 2,264 (30) 200 (95) (188) 47 66 40 (62) 21 15 17 146 188 185 55 (1,181)
7,431	8,331			2,192	1,445
167 280 471 543 535 599 490 430 510 349 177 125 215 406 119 1,153 390 340				58 61 293 12 160 42 407 313 510 349 1 - 119 172 (122) (294) - -
3,074	4,225			1,426	655
6,248 6,284			56 -
9,335 11,724 56 - 5,674 6,742 4 - 11,071 12,781 - - 1,820 2,965 - -
18,565	22,488		4		-

4. Finance costs

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Annual Report 2009 59

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000
(100,114) (92,528) - - 15,259 11,219 - - 4,618 17,424 - - (11,673) (10,115) - -
(91,910)	(74,000)	-	-
(4,973) 12,360 (2,321) (2,247) (3,115) 187 6 41
(8,088) 12,547 (2,315) (2,206) (4,732) (10,184) (3,807) (33)
(12,820)	2,363	(6,122)	(2,239)
(12,644) 2,603 (6,122) (2,239) (176) (240) - -
(12,820)	2,363	(6,122)	(2,239)
(25,233) (344) (17,462) 2,100 5,706 (721) - -
(19,527) (1,065) (17,462) 2,100 (5,858) (320) (5,239) 630 - - (1,978) (6,976) 1,277 1,775 1,089 4,066 (2,533) 187 6 41 (5,706) 721 - -
(12,820)	2,363	(6,122)	(2,239)

6. Income taxes

As a result of tax consolidation, OFG recognises current tax related receivables and corresponding payables from its subsidiaries and the benefi t funds. The amount is the net of tax provisions, deferred tax assets and deferred tax liabilities held by the benefi t funds. The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profi ts under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

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60 Annual Report 2009

Income tax recognised directly in equity

Income tax recognised directly in equity
	Consolidated		Parent
	2009 $'000	2008 $'000	2009 $'000	2008 $'000
The following current and deferred amounts were charged/(credited) directly to equity during the period:
Deferred tax
Arising on income and expenses taken directly to equity:
• Revaluations of f nancial instruments treated as cash f ow hedge	(1,991)	181	-	-
	(1,991)	181	-	-
Current tax assets and liabilities
Current tax assets
Tax refund receivable	13,560	2,050	1,682	2,050
Current tax liabilities
Income tax payable attributable to:
Parent entity	-	-	-	-
Entities in the tax-consolidated group	-	(4,106)	-	-
Income tax (payable)/receivable	13,560	(2,056)	1,682	2,050

Deferred tax balances

Deferred tax assets/(liabilities) arise from the following:

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Annual Report 2009 61

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

6.Income taxes (cont.)

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

Consolidated
Recycled
Opening Charged to Charged to from equity Acquisitions/ Closing
balance income equity to income disposals balance
2008 $'000 $'000 $'000 $'000 $'000 $'000
Temporary differences
Deferred tax asset
Deferred loss on fi nancial assets-benefi t fund 925 6,265 - - - 7,190
Post employment benefi ts 298 (4) - - - 294
Investment properties - 957 - - - 957
Provisions 1,951 (405) - - - 1,546
Software deduction 7 (7) - - - -
Other - (204) - - - (204)
Deferred tax (liability)
Deferred gain on fi nancial assets-benefi t fund (2,517) 2,020 (181) - - (678)
Investment properties (1,240) 1,165 - - - (75)
Prepayments (62) (128) - - - (190)
Software deduction - (2) - - - (2)
Interest rate swaps - (84) - - - (84)
Other - 611 - - - 611
(638) 10,184 (181) - - 9,365
Presented in the balance sheet as follows:
Deferred tax asset 9,783
Deferred tax (liability) (418)
9,365
Parent
Recycled
Opening Charged to Charged to from equity Acquisitions/ Closing
balance income equity to income disposals balance
2009 $'000 $'000 $'000 $'000 $'000 $'000
Temporary differences
Deferred tax asset
Deferred loss on fi nancial assets - 1,665 - - - 1,665
Post employment benefi ts 164 (164) - - - -
Provisions - 359 - - - 359
Future deductions under section 40-880 326 (326) - - - -
Cash out guarantees - 2,181 - - - 2,181
Deferred tax (liability)
Prepayments (94) 90 - - - (4)
Software deduction (2) 2 - - - -
Other (1) - - - - (1)
393 3,807 - - - 4,200
Presented in the balance sheet as follows:
Deferred tax asset 4,205
Deferred tax (liability) (5)
4,200
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62 Annual Report 2009

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Parent
Recycled
Opening Charged to Charged to Acquisitions/ Closing
from equity
balance income equity disposals balance
to income
$'000 $'000 $'000 $'000 $'000
2008 $'000
Temporary differences
Deferred tax asset
Post employment benefi ts 256 (92) - - - 164
Future deductions
- 326 - - - 326
under section 40-880
Deferred tax (liability)
Prepayments 12 (106) - - - (94)
Software deduction 7 (9) - - - (2)
Other - (1) - - - (1)
275 118 - - - 393
Presented in the balance sheet as follows:
Deferred tax asset 490
Deferred tax (liability) (97)
393
----- End of picture text -----

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Annual Report 2009 63

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

6. Income taxes (cont.)

Tax consolidation

Relevance of tax consolidation to the Group

The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Over Fifty Group Limited.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, Over Fifty Group Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are refl ected in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the wholly owned entities in the case of a default by Over Fifty Group Limited.

The tax-sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax-sharing agreement is that each member's liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.

Earnings per share Basic earnings per share From continuing operations From discontinued operations Total basic earnings per share Diluted earnings per share From continuing operations From discontinued operations Total diluted earnings per share Basic earnings per share	Consolidated	Consolidated
	2009 Cents per share	2008 Cents per share
	(21.6) 0.2	(3.7) (0.9)
	(21.4)	(4.6)
	(21.6) 0.2	(3.7) (0.9)
	(21.4)	(4.6)

7. Earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

Net (loss)/prof t Earnings used in the calculation of basic EPS Adjustments to exclude (prof t)/loss for the period from discontinued operations Earnings used in the calculation of basic EPS from continuing operations Weighted average number of ordinary shares for the purposes of basic earnings per share	2009 $'000	2008 $'000
	(12,854) (12,854) (158)
		(2,707) (2,707) 554
	(13,012)	(2,153)

	2009 No. '000	2008 No. '000
	60,142	58,870

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64 Annual Report 2009

Diluted earnings per share

The earnings used in the calculation of diluted earnings per share is as follows:

2009 $'000	2008 $'000
(12,854) (2,707)
(12,854) (2,707) (158) 554
(13,012)	(2,153)

2009 $'000	2008 $'000
60,142 58,870
60,142	58,870

Consolidated		Parent
2009 $'000	2008	2009	2008
	$'000	$'000	$'000
921 1,790 - - 4,871 12,190		51,220 61,827 (10,221) (11,132) - 104
5,792	13,980	40,999	50,799
Consolidated		Parent
2009 $'000	2008	2009	2008
	$'000	$'000	$'000
473 462 470 325 1,477 507		- - - - - -
2,420	1,294	-	-
- - - - - - - -		(11,132) - (8,988) (11,132) 6,563 - 3,336 -
-	-	(10,221)	(11,132)

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Annual Report 2009 65

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

9. Financial assets

Consolidated	Consolidated	Parent	Parent
2009	2008	2009 $'000	2008 $'000
$'000	$'000
98,802 142,698 84,777 57,337 326,505 424,167 - 2,685 46,683 60,749		- - 12 29 115 30 - 2,607 - -
556,767 687,636		127 2,666
- 1,215 - 932		- - - -
- 2,147 - - - - - 6,000		- - 7,560 - 54,037 53,908 - 6,000
- 6,000		61,597 59,908
214,998 200,405 9,120 15,227 - (686) - -		- - - - - - 160 160
224,118 214,946		160 160
780,885	910,729	61,884	62,734
556,767 687,636 - 2,147 224,118 220,946		127 2,666 - - 61,757 60,068
780,885	910,729	61,884	62,734

An allowance for impairment loss is recognised when there is objective evidence that a mortgage receivable is impaired. The movement in the allowance for impairment loss is as follows:

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008	2009 $'000	2008 $'000
	$'000
686 4,695 - 1,788 (686) (5,797)		- - - - - -
-	686	-	-

Consolidated		Parent
2009 $'000	2008	2009 $'000	2008 $'000
	$'000
302 21,976 18 5,322 43,474 30,161		- - - - - -
43,794	57,459	-	-

Although some mortgage loans have exceeded their maturity date, the directors believe that all mortgage loan balances are recoverable and not impaired.

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66 Annual Report 2009

10. Other assets

Prepayments (i)

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

Consolidated Parent
2009 2008 2009 2008
$'000 $'000 $'000 $'000
2,651 2,512 46 395
----- End of picture text -----

(i) Prepayments relate mainly to the upfront mortgage brokerage commissions for the reverse mortgages.

Consolidated	Consolidated	Consolidated	Parent	Parent	Parent
2009		2008	2009		2008
$'000		$'000	$'000		$'000
- - 19,643 - 1,523 - (2,166) - - -			- - - - - - - - - -
19,000	-		-	-
51,278 35,074 36 19,777 (4,671) (3,573) - - (19,643) -			- - - - - - - -
27,000	51,278		-	-

(i) The transfer from investment properties held at fair value to investment properties held for sale relates to the Chisholm property. Conditional exchange of contracts for sale was entered in July 2009. See subsequent events at Note 28.

Revaluations

The fair value of the Group’s investment property, except Chisholm in the ACT, at 30 June 2009 has been arrived at on the basis of valuation carried out by CB Richard Ellis, independent valuers that are not related to the group. CB Richard Ellis are members of the Australian Institute of Valuers, and they have appropriate qualifi cations and recent experience in the valuation of properties in the relevant locations. The valuation, which conforms to Australian Standards, was arrived at by reference to capitalization of net income, discounted cash fl ow analysis (10 years) at a rate of 9%, and direct comparison to market evidence of transaction prices for similar properties.

Fair value represents the amount at which the assets could be exchanged between a knowledgeable willing buyer and knowledgeable willing seller in an arm’s length transaction at the date of valuation, in accordance with Australian Valuation Standards. The direct operating expenses that generated the rental income during the period was $390,000 (2008: $340,000).

The Chisholm Shopping Centre property was valued based on the agreed sale price subsequent to the year ended 30 June 2009. OFG has entered into a conditional exchange of contracts for the sale of $19.0 million. The settlement date is set to occur by 15 October 2009, with OFG providing Vendor fi nance of $2.3m for a period of 2 years. The condition precedent of the contract is the purchaser's ability to raise equity by 28 August 2009.

The effective date of the revaluation was 30 June 2009.

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Annual Report 2009 67

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Investment accounted for using the equity method Consolidated 2009 $'000 2008 $'000 Mortgageport (i) 5,602 5,602 Century Bulky Goods Fund No.1 (ii) 5,099 - Over Fifty Direct Property Trust (iii) 2,461 - 13,162 5,602 Reconciliation of movement in investments accounted for using the equity method Balance at 1 July 5,602 8,412 Share of prof t/(loss) for the year (2,840) 684 2,762 9,096 Dividends (739) (494) Additions - paid in cash 350 - Additions - non cash 14,634 - Impairments (2,318) (3,000) Share of reserve (1,527) - Balance at 30 June 13,162 5,602	Consolidated	Consolidated
	2009 $'000	2008 $'000
	5,602 5,602 5,099 - 2,461 -
	13,162	5,602
	2,762 9,096 (739) (494) 350 - 14,634 - (2,318) (3,000) (1,527) -
	13,162	5,602

12. Investment accounted for using the equity method

(i) The Group has a 50% investment in Mortgageport Management Pty Limited, a wholesale residential mortgage origination and management company incorporated in Australia. Although the Group holds a 50% investment in Mortgageport, it does not control the company, and it is, therefore considered inappropriate to include Mortgageport as part of the consolidated group.

Financial position: Total assets Total liabilities Net Assets Group's share of associate's net assets Financial performance: Total revenue Total prof t/(loss) for the year Group's share of associate's prof t/(loss)	1,908 2,183 (652) (632)
	1,256 1,552
	628 776 4,116 5,391 749 1,949 374 684

There was no impairment relating to the investment in associate in the current year (PY: $3,000,000) and there were no capital commitments or other commitments relating to Mortgageport (the associate).

(ii) The Group has a 46% investment in Century Bulky Goods Fund No.1 (CBGF#1), an unlisted property fund which invests in bulky goods (large format retail) centres. Although the Group holds a 46% investment in CBGF#1, it does not control the voting rights and it is, therefore, considered inappropriate to include CBGF#1 as part of the consolidated group. OFG has elected to split account its investment in CBGF#1, that is, to equity account for the consolidated group's 21% investment and fair value account for the Income Accumulation Fund's 25% investment.

Summarised f nancial information in respect of the Group's associate is set out below: Financial position: Total assets 112,850 - Total liabilities (88,809) - Net Assets 24,041 - Group's share of associate's net assets 5,049 - Financial performance: Total revenue 10,603 - Total prof t/(loss) for the year (15,734) - Group's share of associate's prof t/(loss) (3,336) -	Summarised f nancial information in respect of the Group's associate is set out below: Financial position: Total assets 112,850 - Total liabilities (88,809) - Net Assets 24,041 - Group's share of associate's net assets 5,049 - Financial performance: Total revenue 10,603 - Total prof t/(loss) for the year (15,734) - Group's share of associate's prof t/(loss) (3,336) -	Summarised f nancial information in respect of the Group's associate is set out below: Financial position: Total assets 112,850 - Total liabilities (88,809) - Net Assets 24,041 - Group's share of associate's net assets 5,049 - Financial performance: Total revenue 10,603 - Total prof t/(loss) for the year (15,734) - Group's share of associate's prof t/(loss) (3,336) -
	24,041 -
	5,049	-
	10,603 - (15,734) - (3,336) -

There was an impairment relating to the investment in associate of $2,238,098 and there were no capital commitments or other commitments relating to CBGF#1 (the associate).

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68 Annual Report 2009

(iii) The Group has a 44% investment in Over Fifty Direct Property Trust (DPT), an unlisted property trust. Although the Group holds a 44% investment in DPT, it does not control the voting rights and it is, therefore, considered inappropriate to include DPT as part of the consolidated group. OFG has elected to split account its investment in DPT, that is, to equity account for the consolidated group's 5% investment and fair value account for the Income Accumulation Fund's 16% and Growth Bond Fund's 23% investment.

Total assets Total liabilities Net Assets Group's share of associate's net assets Financial performance: Total revenue Total prof t/(loss) for the year Group's share of associate's prof t/(loss)	108,994 - (63,964) -	108,994 - (63,964) -
	45,030 -
	2,252 - 13,205 - 2,191 -
	122	-

There was an impairment relating to the investment in associate of $79,445 and there were no capital commitments or other commitments relating to DPT (the associate).

Dividends received from associates

During the year, the Group received dividends of $373,888 (2008: $493,697) from Mortgageport Management Pty Limited, $176,584 (2008: Nil) from CBGF#1, and $188,542 (2008: Nil) from DPT.

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
3,203 1,789 1,756 562 135 1,497 92 1,194 (254) (93) - - 11 10 - -
3,095	3,203	1,848	1,756
(1,458) (1,041) (602) (322) 254 (69) - (12) (546) (348) (243) (268)
(1,750)	(1,458)	(845)	(602)

Consolidated		Parent
1,345		1,003
1,745		1,154

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Annual Report 2009 69

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Consolidated	Consolidated	Consolidated	Parent	Parent
2009 $'000		2008 $'000	2009 $'000	2008 $'000
47,182 - 5,389 - -	43,297 - - 148 - - 4,787 - - (1,050) - - - - -
52,571		47,182	-	-

14. Goodwill

(i) Goodwill acquired in relation to the acquisition of Eclipse Property Group Limited (Note 29).

OFG LTP Pty Ltd (formerly Lifetime Planning Pty Ltd). As a consequence, the carrying value of the goodwill was de-recognised.

of goodwill and determined that no impairment loss was to be charged for the 2009 fi nancial year (2008:nil).

The carrying amount of goodwill allocated to cash-generating units relates to the acquisitions of Century Funds Management in fi nancial year 2007 and Eclipse Property Group Ltd in 2008 (51%) and 2009 (49%).

Allocation of goodwill to cash-generating units

The carrying amount of goodwill was allocated to the following cash-generating units:

Property - Century Funds Management Ltd (i) 42,369 - Eclipse Property Group Limited (ii) 10,202 - Lifetime Planning - 52,571	42,369 - 4,787 - 26	42,369 - 4,787 - 26	42,369 - 4,787 - 26	42,369 - 4,787 - 26
		47,182	-	-

(i) Century Funds Management Ltd

The recoverable amount of the property unit has been determined based on a value in use calculation using Funds Under Management (FUM) projections and profi t and loss projections covering a fi ve-year period.

Key assumptions

The key assumptions used in the value in use calculations for the following cash-generating units are as follows:

Carrying amount: $42,369,082

Funds under management growth target: These targets are based on the anticipated growth in FUM.

Funds under advice (FUA) growth target:

Revenue balance:

Expenses balance:

Pre-tax discount Rate:

Terminal growth rate:

A growth rate of 10% (2008:10%) has been set over the 5 years. This is based on an assessment of published market forecasted FUM.

Revenues in 2010 are based on board approved budgets and there after are assumed to increase at a rate of 6.5% (2008:10%) per annum. This target rate incorporates both anticipated growth in sums invested and the market.

Expenses are assumed to increase at a rate of 3% (2008:4%) per annum.

money. A rate of 13.17% (2008:15%) is applied to cash fl ow projections. In determining the appropriate discount rate, regard has been given to the yield on a ten year bond at the beginning of the budgeted year.

A growth rate of 3% (2008:2%) has been applied to the calculation of the terminal value of the asset.

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70 Annual Report 2009

(ii) Eclipse Property Group Limited

Key assumptions

The key assumptions used in the value in use calculations for the following cash-generating units are as follows:

Carrying amount:	$10,202,140
Funds under management growth	These targets are based on the anticipated growth in FUM.
target:
Funds under advice (FUA) growth	A growth rate of 10% (2008:10%) has been set over the 5 years. This is based on
target:	an assessment of published market forecasted FUM.
Revenue balance:	Revenues in 2010 are based on board approved budgets and there after are
	assumed to increase at a rate of 6.5% (2008:10%) per annum. This target rate
	incorporates both anticipated growth in sums invested and the market.
Expenses balance:	Expenses are assumed to increase at a rate of 3% (2008:4%) per annum.
Pre-tax discount Rate:	Discount rates ref ect management's estimates of the time value of money. A rate
	of 13.17% (2008:15%) is applied to cash f ow projections. In determining the
	appropriate discount rate, regard has been given to the yield on a ten year bond
	at the beginning of the budgeted year.
Terminal growth rate:	A growth rate of 3% (2008:2%) has been applied to the calculation of the terminal
	value of the asset.

Sensitivity to changes in assumptions

As at 30 June 2009, the estimated recoverable amount of Century Funds Management and Eclipse Property Group Ltd exceeded their carrying value by $317,386 and $1,728,291 respectively. The table below shows the key assumptions used in the value in use calculation and the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value in both cases.

	Assumptions used in value	Assumptions used in value	Change required for carrying value to equal the recoverable amount 2011 - 2014	Change required for carrying value to equal the recoverable amount 2011 - 2014
	in use calculation 2011 - 2014

	Century Funds Management	Eclipse Property Group Limited	Century Funds Management	Eclipse Property Group Limited

	%	%	_Percentage points _	Percentage points
Revenue growth rate (average)	6.50	6.50	0.16	3.30
Pre-tax discount rate	13.17	13.17	0.08	1.61
Expensesgrowth rate	3.00	3.00	0.36	8.50

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
452 659 86 (101) 5,645 7,281 256 500
6,097	7,940	342	399

15. Trade and other payables

(i) GST is payable or recoverable either on a monthly or quarterly basis.

(ii) Sundry creditors are non-interest bearing and payable on commercial terms 7 to 60 days.

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Annual Report 2009 71

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
19,830 24,000 19,830 24,000 37 64 - - 195,147 188,236 - - 39,977 38,872 - -
254,991	251,172	19,830	24,000

16. Borrowings

Terms and conditions relating to the working capital facility and bill facilities above are:

Financing facilities:

(i) The NAB fl oating working capital facility of $19.8 million (2008:$24.0 million) at BBSY variable rate plus 3.5% has been fully drawn down. The facility is an amortising facility with $2.13 million forecasted to be amortised over the following 12 month period from operating cash fl ow. The facility has a renewal date of 28 February 2010.

Funds Management Ltd and Over Fifty Insurance Pty Ltd. There are also guarantees provided by Over Fifty Capital Pty Ltd, Over Fifty Mutual Friendly Society Limited (consisting of its management fund only to the extent that it does not impinge upon its APRA capital requirements), Over Fifty Senior Equity Release Pty Ltd, Over Fifty Funds Management Pty Ltd, Over Fifty Investments Pty Ltd, Over Fifty Insurance Pty Ltd and Century Funds Management Ltd.

(ii) 195.1 million (2008: $187.8 million) non-recourse notes on issue to ANZ secured over the mortgages held in the Senex Warehouse Trust No.1. The notes have a renewal date of 31 March 2010 or repayment of the underlying mortgage loans in the Trust. During the year, notes worth $25.7 million (2008:$75.0 million) were issued. The carrying amount of the mortgages are $213.2 million (2008:$197.9 million).
(iii) $15.8 million (2008:$15.3 million) bank bill maturing March 2010 at fl oating rate plus 0.85% usage and line fees payable quarterly in advance. This is a non-recourse loan secured over property situated at Chisholm Shopping Centre, Halley Street Chisholm, ACT. The fair value of the investment property at 30 June 2009 is $19.0 million (2008:$21.6 million).

OFG was in breach of the loan to valuation ratio and interest cover ratio on the loan with CBA relating to the Chisholm property at 30 June 2009. Accordingly, this loan has been classifi ed as current in the disclosure above and within the maturity table in Note 27. The bank has been notifi ed of the breach and has not taken any specifi c action.

Further to the recorded breach of the loan covenant, OFG marketed the property for sale and subsequent to 30 June 2009 has exchanged contracts at a price of $19.0 million. Contract will remain conditional until 29 August 2009.

(iv) $24.0 million (2008:$24.0 million) bank bill maturing March 2013 with a fi xed rate of 7.47% payable monthly in advance. This is secured over property at Moonah Links, Fingal, Vic and Pepper Sands Resort Torquay. The fair value of the investment property located Moonah Links is $11.0 million at 30 June 2009 (2008:$13.6 million). The fair value of the investment property located at Torquay at 30 June 2009 is $16.0 million (2008:$18.1 million).

During the period OFG's subsidiary, OFM National Leisure Trust, was in breach of the loan and valuation covenant on the loan with National Australia Bank relating to the two properties at Moonah Links and Torquay.

NAB has not taken any action as at the date of this report except for requesting OFG to place surplus funds from the properties operating cash fl ow, less fi nancing costs, into a cash offset account, which has been actioned. This loan is recourse only to the two subject properties. Accordingly, this loan has been classifi ed as a current liability in the disclosure above and within the maturity table in note 27.

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72 Annual Report 2009

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
19,830	24,000	19,830	24,000
39,977 38,872 - - 1,353 2,638 - -
240,000	275,000	-	-
195,147 188,236 - - 44,853 86,764 - -
240,000	275,000	-	-

Consolidated		Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
- 126 - 126 237 224 87 66 319 290 165 154 7,271 - 7,271 -
7,827	640	7,523	346

(i) Provision for Directors' retirement fund

The nature of the provision is to compensate the directors for their time and effort spent over the years serving as non executive directors. The timing of any outfl ows is determined by when a director resigns. All non executive directors who commenced prior to 30 June 2004 are eligible for the retirement fund payment, of which at 30 June 2008 this consisted of payments accrued on behalf of Mr M.G. Grant. During the current year, Mr M.G. Grant resigned from offi ce on 29 October 2008 and the retirement fund balance owing was paid in full. The past practice of providing for a directors retirement fund, in addition to directors fees, has been discontinued during the period.

(ii) Provision for long service leave

respect of services provided by employees up to the reporting date.

Consolidated	Consolidated	Consolidated	Parent	Parent	Parent
Provision for Directors' retirement fund $'000	Provision for long service leave $'000	Provision for annual leave $'000	Provision for Directors’ retirement fund $’000	Provision for long service leave $'000	Provision for annual leave $'000
488 138 405 - 86 (115) (362) - -			488 52 300 - 14 (146) (362) - -
126	224	290	126	66	154
- 13 - (126) - 29			- 21 11 (126) - -
-	237	319	-	87	165

calculated using the following assumptions:

Assumed rate of increase in wage and salary rates	Consolidated	Consolidated	Parent	Parent
	2009	2008	2009	2008
	3.0% 3.0% 3.0% 3.0%

The estimated long service leave provision has been calculated based on assumptions covering a 10 year period (2008:10 years).

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Annual Report 2009 73

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Consolidated	Consolidated	Parent	Parent
2009 $’000	2008 $’000	2009 $’000	2008 $’000
485 588 485 588 - 375 - - 537 536 113 95 5,533 - - -
6,555	1,499	598	683

17. Other liabilities (cont.)

(iii) Deferred consideration

The deferred consideration agreement relates to the acquisition of Eclipse Property Group Limited by OFG (see Note 29).

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
12,409 1,399 - - - 4,906 - -
12,409	6,305	-	-

(i) This is the put option agreement relating to the remaining 49% in the acquisition of Eclipse Property Group Limited by OFG (see Note 29).

Details about the entity's exposure to interest rate and credit risk can be found in Note 27 - Financial instruments.

Policyholders funds Bonus Rated Benef t Funds (with DPF) Opening balance Current period income Closing Balance Unitised Benef t Funds (no DPF) Opening balance Applications received Redemptions paid Current period income Distribution Closing Balance Total Policyholders Funds	Consolidated	Consolidated
	2009 $'000	2008 $'000
	574,490 638,375 (80,237) (63,885)
	494,253	574,490
	126,109 146,817 3,143 8,132 (17,810) (18,724) (11,673) (8,938) - (1,178)
	99,769	126,109
	594,022	700,599

19. Policyholders funds

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74 Annual Report 2009

statement and balance sheet and statement of cash fl ows. As a result, the benefi t funds' assets and liabilities are included in the Group's statements. The shareholders of the Group have no rights over the assets and liabilities held in the benefi t funds. The composition of the assets and liabilities balance is as follows:

Assets
Attributable to shareholders	364,311	359,539
Attributable to benef t fund policyholders	596,028	703,326
Total Assets	960,339	1,062,865
Liabilities
Attributable to shareholders	285,873	266,885
Attributable to benef t fund policyholders	596,028	703,326
Total Liabilities	881,901	970,211

cial statements of Over Fifty Mutual Friendly Society Limited. guarantee to policyholders of two of its benef t funds, Over cumulation Fund as follows: “If, when OFMFS in right of the to a Policy Owner as a consequence of the termination of the ermines that the sums to be paid to the Policy Owner from the the relevant Accumulation Account Balance, (or in the case ion Account Balance ), OFMFS guarantees to take all action ent Fund to the Policy Owner to ensure that the total sums tion, Maturity or Surrender equal the relevant Accumulation evant proportion thereof.” funds relating to these guarantees.	cial statements of Over Fifty Mutual Friendly Society Limited. guarantee to policyholders of two of its benef t funds, Over cumulation Fund as follows: “If, when OFMFS in right of the to a Policy Owner as a consequence of the termination of the ermines that the sums to be paid to the Policy Owner from the the relevant Accumulation Account Balance, (or in the case ion Account Balance ), OFMFS guarantees to take all action ent Fund to the Policy Owner to ensure that the total sums tion, Maturity or Surrender equal the relevant Accumulation evant proportion thereof.” funds relating to these guarantees.	cial statements of Over Fifty Mutual Friendly Society Limited. guarantee to policyholders of two of its benef t funds, Over cumulation Fund as follows: “If, when OFMFS in right of the to a Policy Owner as a consequence of the termination of the ermines that the sums to be paid to the Policy Owner from the the relevant Accumulation Account Balance, (or in the case ion Account Balance ), OFMFS guarantees to take all action ent Fund to the Policy Owner to ensure that the total sums tion, Maturity or Surrender equal the relevant Accumulation evant proportion thereof.” funds relating to these guarantees.	cial statements of Over Fifty Mutual Friendly Society Limited. guarantee to policyholders of two of its benef t funds, Over cumulation Fund as follows: “If, when OFMFS in right of the to a Policy Owner as a consequence of the termination of the ermines that the sums to be paid to the Policy Owner from the the relevant Accumulation Account Balance, (or in the case ion Account Balance ), OFMFS guarantees to take all action ent Fund to the Policy Owner to ensure that the total sums tion, Maturity or Surrender equal the relevant Accumulation evant proportion thereof.” funds relating to these guarantees.
Consolidated		Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
88,511 87,783 88,511 87,783 534 728 534 728
89,045	88,511	89,045	88,511

Fifty Capital Guaranteed Bond Fund and Over Fifty Income Accumulation Fund as follows: “If, when OFMFS in right of the Bonds is required under the Bond rules to pay Policy Benefi ts to a Policy Owner as a consequence of the termination of the Bond or the Maturity or Surrender of a Policy, and OFMFS determines that the sums to be paid to the Policy Owner from the Bonds shall be less than the amounts standing to the credit of the relevant Accumulation Account Balance, (or in the case of a partial surrender, the relevant proportion of the Accumulation Account Balance ), OFMFS guarantees to take all action within its control, including making payment from its Management Fund to the Policy Owner to ensure that the total sums received by the Policy Owner as a consequence of the termination, Maturity or Surrender equal the relevant Accumulation Account Balance, (or) in the case of a partial surrender, the relevant proportion thereof.”

There are $471,953,482 (2008:$549,410,343) of policyholder funds relating to these guarantees.

20. Issued capital and retained earnings

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Unless otherwise stated, 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 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.

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Annual Report 2009 75

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

20. Issued capital and retained earnings (cont.)

Issued capital and retained earnings (cont.)
(b) Movement in shares on issue Balance at beginning of f nancial year Issued during the year: Dividend Reinvestment Plan Share Issue (i) Balance at end of f nancial year	2009 2008
	No. of Shares	$'000 No. of Shares	$'000
	59,670,387 88,511 58,870,394 87,783 628,486 534 - - - - 799,993 728
	60,298,873	89,045 59,670,387	88,511

(i) On 30 June 2008, 799,993 shares were issued for the purchase of Eclipse Property Group Limited. Refer to note 29 for further details.

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
(3,992) 652 - - 8 103 8 103
(3,984)	755	8	103

Consolidated		Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
652 229 - - (6,634) 605 - - 1,990 (182) - -
(3,992)	652	-	-

Long term incentive plan reserve

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
103 292 103 292 (95) (189) (95) (189)
8	103	8	103

The long term incentive plan reserve is used to record the value of share-based payments provided to employees, including the CEO, as part of their remuneration. Refer to note 32 for further details of these plans.

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76 Annual Report 2009

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
8,027 16,418 6,130 8,259 (1,796) (6,476) (1,796) (6,476) (12,854) (2,707) (11,340) 3,557 - 792 - 792
(6,623)	8,027	(7,006)	6,130

2009 2008
Cents per share	Total $'000 Cents per share		Total $'000
- - 5.0 2,944 3.0 1,796 6.0 3,532
3.0	1,796	11	6,476

ended 30 June 2008.

The amount of franking credits available for the subsequent f nancial year are: • franking account balance as at 1 July at 30% (2008:30%) • increase/(decrease) in franking credits that will result from the payment of income tax payable/(refund) as at the end of the f nancial year Franking account balance at 30 June	Parent	Parent
	2009 $'000	2008 $'000
	2,792 4,030 (164) (1,238)
	2,628	2,792

franking credits or out of franking credits arising from income tax payable amount to $6,131,567.

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Annual Report 2009 77

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

22. Commitments and contingencies

Operating leases

Operating lease commitments – Group as lessee

4.3 years and 4.7 years with renewal options included in the contracts.

Future minimum rentals payable under operating leases are as follows:

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
770 619 - 2 3,034 2,714 - - - 549 - -
3,804	3,882	-	2

Operating lease commitments – Group as lessor

Operating leases relate to the investment properties owned by the Group with remaining lease terms of between 0.5 and 14.1 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Non-cancellable operating lease receivables

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
1,862 1,781 - - 7,047 7,179 - - 9,466 1,995 - -
18,375	10,955	-	-

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
544,695 319,750 345,030 167,500 63,000 23,760 - 4,620
607,695	343,510	345,030	172,120

23. Remuneration of auditors

The auditor of Over Fifty Group Limited is Deloitte Touche Tohmatsu (Australia).

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78 Annual Report 2009

24.Related party transactions

(a) Equity interests in related parties

Details of the percentage of ordinary shares held in subsidiaries are disclosed below:

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

Ownership interest
Country of 2009 2008
Name of subsidiary incorporation % %
----- End of picture text -----

Over Fifty Mutual Friendly Society Limited	Australia	100%	100%
Over Fifty Capital Pty Ltd	Australia	100%	100%
Over Fifty Seniors Equity Release Pty Ltd	Australia	100%	100%
Over Fifty Insurance Pty Ltd	Australia	100%	100%
Over Fifty Investments Pty Ltd	Australia	100%	100%
OFM Direct Property Trust No. 2 "Dominion"	Australia	100%	100%
Over Fifty Funds Management Pty Ltd	Australia	100%	100%
OFM Direct Property Trust No. 3 Chisholm	Australia	100%	100%
OFM National Leisure Trust	Australia	100%	100%
OFM Bluegums Leisure Trust	Australia	100%	100%
OFG LTP Pty Ltd (formerly Lifetime Planning Pty Ltd)	Australia	100%	100%
Century Funds Management Ltd	Australia	100%	100%
Over Fifty Financial Planning Pty Ltd	Australia	100%	100%
Eclipse Property Group Limited (i)	Australia	100%	51%

(i) On 30 June 2008, OFG purchased 51% of Eclipse Property Group Limited and the remaining 49% was purchased on 30 June 2009.

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Annual Report 2009 79

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

24.Related party transactions (cont.)

(b) Transactions with key management personnel

i. Key management personnel compensation

ii. Key management personnel equity holdings

Fully paid ordinary shares of Over Fifty Group Limited

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

Balance Balance
Balance at Granted as Net other Balance at at date of held
1 July Remuneration change 30 June resignation nominally
No. No. No. No. No. No.
----- End of picture text -----

	No.	No.	No.	No.	No.	No.
2009
R.W. Dobson	30,000	-	36,501	66,501	-	-
J.E. McBain	4,132,162	-	14,755	4,146,917	-	-
J.C. Huljich	2,104,302	-	85,222	2,189,524	-	-
P.J. Done	20,434	-	31,060	51,494	-	-
M.G. Grant	42,988	-	1,518	44,506	44,506	-
D.K. Gupta	-	-	-	-	-	-
M.J. Coy	349,082	-	16	349,098	-	-
T.D. Reid	3,482	-	-	3,482	-	-
D.B. Govey	397,984	-	6,963	404,947	-	-
S.E. Harding	-	-	-	-	-	-
A.S. Bali	-	-	-	-	-	-
H.J. Schmiede	-	-	-	-	-	-
2008
R.W. Dobson	-	-	30,000	30,000	-	-
J.E. McBain	4,081,247	-	50,915	4,132,162	-	-
J.C. Huljich	2,104,302	-	-	2,104,302	-	-
P.J. Done	-	-	20,434	20,434	-	-
M.G. Grant	42,988	-	-	42,988	-	-
D.K. Gupta	-	-	-	-	-	-
M.G. Chessell	88,369	-	-	-	88,369	-
C.R Martin	19,067	-	6,654	-	25,721	-
W.J. Forster	79,178	-	-	-	79,178	-
M.A. Gray	44,444	-	-	-	44,444	-
R.R. Off cer	13,280	-	(13,280)	-	-	-
T.D. Reid	3,482	-	-	3,482	-	-
M.J Coy	348,674	-	408	349,082	-	-
D.B. Govey	351,255	-	46,729	397,984	-	-
S.E. Harding	-	-	-	-	-	-
A.S. Bali	-	-	-	-	-	-
C.A. Jones	434	-	-	-	434	-
A. Nicu	434	-	-	-	434	-

All equity transactions with directors and executives other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm's length.

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80 Annual Report 2009

Share options of Over Fifty Group Limited

Share option holdings were only held by the former CEO, Mr C.R. Martin. All share options lapsed upon his resignation on 1 August 2008.

	Bal at 1 July No.	Granted as compensation No.	Exercised No.	Net other change No.	Bal at 30 June No.
2009 C.R Martin 1,100,000 - - (1,100,000) - 2008 C.R Martin 1,100,000 - - - 1,100,000

Long term incentive Plan of Over Fifty Group Limited

Performance will be tested at the end of four years measuring the average compound performance over the preceding four fi nancial years. The LTI plan was set up to reward all employees in a manner that aligns the elements of remuneration with the creation of shareholder wealth.

The rights granted are valued by an external consultant in line with the requirements of Accounting Standard AASB2. The Company then applies an estimation of the tenure risk associated with employees still being employed at the time the rights vest for those subject to TSR and EPS performance hurdles, and the probability of OFG attaining the required increase in EPS. The resultant value is charged to the profi t and loss evenly across the vesting period.

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Bal at Granted as Net other Bal at 30
1 July compensation Exercised change June
No. No. No. No. No.
----- End of picture text -----

2009
T.D. Reid	55,742	-	-	(21,446)	34,296
2008
C.R. Martin	50,246	-	-	(50,246)	-
C.A. Jones	73,665	31,818	-	(105,483)	-
T.D. Reid	55,002	21,022	-	(20,282)	55,742
A. Nicu	28,949	-	-	(28,949)	-

(iii) Other transactions with key management personnel of the Group

As a matter of Board policy, all transactions with Directors and Director-related entities are conducted on normal commercial or employee terms.

• Henry Davis York, a related party of R. Dobson, was paid $54,347 (2008:$162,238) for legal consultancy fees.

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Annual Report 2009 81

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

24. Related party transactions (cont.)

(c) Transactions with other related parties

Guardian Friendly Society Limited.

Aggregate investments in such funds Directors holding these investments are listed below: M.G. Grant (i)	Consolidated	Consolidated
	2009 $	2008 $
	- 17,943 - 17,943

(i) M.G. Grant resigned on 29 October 2008.

relevant legislation and benefi t fund rules.

Aggregate amounts received from related parties:

Management fees : Over Fifty Mutual Friendly Society Limited Benef t Funds Over Fifty Guardian Friendly Society Limited	Consolidated	Consolidated
	2009 $	2008 $
	875,521 1,222,113 182,651 34,627
	1,058,172	1,256,740

Where a management agreement is in place, management fees are charged to controlled entities in accordance with such agreements.

Terms and conditions of transactions with related parties

Directors and director-related entities received the same returns on these investments as other policyholders.

and their Director-related entities in their domestic dealings and are made in arm's length transactions both at normal market prices and on normal commercial terms. These are:

receipt of general insurance premiums; and

Over Fifty Group Limited pays some expenses on behalf of related entities and receives a reimbursement for these payments. No interest is received or paid on inter-entity balances.

Transactions between Over Fifty Group Limited and its related parties

Over Fifty Group Limited received dividends of $6,613,000 (2008:$24,800,000) from its subsidiaries.
During the year no interest was charged on intercompany balances.

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82 Annual Report 2009

in the Group's income statement and balance sheet and statement of cash fl ows. As a result, the benefi t funds' cash is included in the Group's statements with a corresponding amount included in liabilities. The shareholders of the Group have no rights over the cash held in the benefi t funds. The composition of the closing cash balance is as follows:

Attributable to shareholders Attributable to benef t fund policyholders Total	Consolidated	Consolidated
	30-Jun-09 $'000	30-Jun-08 $'000
	8,678 13,307 19,607 7,165
	28,285	20,472

(a) Reconciliation of cash and cash equivalents

and cash equivalents at the end of the fi nancial year as shown in the cash fl ow statement is reconciled to the related items in the balance sheet as follows:

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
28,285 20,452 526 2,647 - 20 - -
28,285	20,472	526	2,647

(b) Business disposed

are as follows:

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
- 600		- -
- 1,050 - 13 - (463)		- - - - - -
-	600	-	-
- 600		- -

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Annual Report 2009 83

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
(12,413) (2,707) (11,340) 3,557 546 418 244 280 (1,379) (3,316) (910) 11,132 (103) (188) (103) (188) 43,117 34,522 19,543 13,725 (1) 153 - 782 2,840 - - - (62) - - - 447 42 - - (6,938) (6,881) (4,172) (215) 1,134 (2,873) (93) 97 (16,424) (3,045) (368) (3,075) 7,257 6,356 (2,844) 1,502 306 (768) 163 (142) (2,631) (1,330) (152) (376) 7,166 - (86) - (106,577) (84,591) - -
(83,715)	(64,208)	(118)	27,079

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84 Annual Report 2009

26. Discontinued operations

(formerly Lifetime Planning Pty Ltd). The proceeds for these assets was $600,000. The sale allowed the company to concentrate capital and resources on its core activities.

The combined results of the discontinued operations which have been included in the income statement are as follows. The comparative profi t and cash fl ows from discontinued operations have been re-presented to include those operations classifi ed as discontinued in the current period:

Prof t for the year from discontinued operations: Revenue (note 3) Other income Expenses Loss on sale of business Employee benef ts expense Finance costs Advertising and marketing expense Rental expense Other expenses Prof t/(loss) before tax Attributable income tax expense Prof t/(loss) for the year from discontinued operations Cash f ows from discontinued operations: Net cash provided by/(used in) operating activities Net cash provided by/(used in) investing activities Net cash (used in)/provided by f nancing activities Net cash (used in)/provided by discontinued operations	Consolidated	Consolidated
	2009 $'000	2008 $'000
	1 445 - 123
	1 568 - (463) - (529) - (1) - (20) - (18)
	(19)	(331)

	(19) (1,362) (18) (794) 176 240
	158	(554)
	317 (267) - 31 (337) (722)
	(20)	(958)

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Annual Report 2009 85

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

27. Financial instruments

The OFG consolidated results comprise the assets and liabilities of both the OFG group and the benefi t funds. The shareholders of OFG are subject only to the risks and rewards of assets and liabilities in OFG and not those of the assets and liabilities held in the benefi t funds which are required to be aggregated in the fi nancial report as prescribed by AASB 1038 Life Insurance Contracts. Therefore, this note only addresses the fi nancial assets and fi nancial liabilities held directly on OFG’s balance sheet and not those assets and liabilities held by the benefi t funds.

The only risk to the shareholders of OFG, in respect to the benefi t funds, is limited to capital reserving. Over Fifty Mutual Friendly Society Limited (OFMFSL), being a subsidiary of OFG, acts in the capacity of manger for two capital guaranteed benefi t funds. To mitigate the risk of these guarantees being called upon, the benefi t funds set aside prescribed reserving which is determined upon a “1 in 400 year event” stress testing scenario. The reserving calculations are verifi ed by an independent actuary appointed by the Friendly Society. The Benefi t Funds at 30 June 2009 have set aside the requisite reserving as determined by the investment profi le of the two respective funds. If the required reserving under the “Capital Adequacy Test” needs increasing, in addition to the Funds assets that OFG holds, OFMFSL would be required to inject additional seed capital. Seed capital is later repaid to OFMFSL when reserving is returned to a normal sustainable level.

The Board is ultimately responsible for the Risk Management Framework of the Group.

The Group employs a cascading approach to managing risk, facilitated through delegation to specialist committees and individuals within the Group.

The Investment & Lending Committee’s function is to manage and oversee the Group’s investments in accordance with the investment objectives and framework as set down by the Board. Specifi cally, it has responsibility for setting and reviewing strategic asset allocations, reviewing investment performance, reviewing investment policy, monitoring and reporting on the performance of the investment risk management policy and performing risk management procedures in respect of the investments.

a result of its activities. These risks include market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s risk management and investment policies, approved by the Board, seek to minimise the potential adverse effects of these risks on the Group’s fi nancial performance. These policies may include the use of certain fi nancial derivative instruments.

The Group outsources the investment management to specialist investment managers, who provide services to the Group, co-ordinate access to domestic and international fi nancial markets, and manage the fi nancial risks relating to the operations of the Group in accordance with an investment mandate set out in the Group’s constitution and the benefi t funds product disclosure statements. The benefi t funds investment mandates are to invest in equities and fi xed interest securities via unit trusts, discount securities and may also invest in derivative instruments such as futures and options.

The Group uses interest rate swaps in two main areas other than the benefi t funds. The fi rst in relation to reverse mortgage fi xed rate loans offered to borrowers whereby a fi xed rate agreed with the swap provider at the time of entering the swap, while the Group is entitled to receive a variable rate equal to the 30-day Bank Bill Swap rate bid (BBSY) plus a facility margin. The objective of the hedge is to enter into interest rate derivative contracts to hedge fair value movements of fi xed for life reverse mortgage loans attributable to the interest rate risk, as well as hedging the Group’s exposure to variability in cash fl ows that is attributable to interest rate risk associated with its selected borrowings. Secondly in relation to borrowings for the on balance sheet investment properties to hedge against interest rate increases.

consolidated into the fi nancial statements of the Group under AIFRS, are used only for hedging of actual or anticipated exposures relating to investments. All fi nancial arrangements are backed up by cash or assets (as appropriate) with a fair value of at least equal to the notional value of the asset which underlies the fi nancial instrument. The Group does not enter into or trade fi nancial instruments for speculative purposes. The use of fi nancial derivatives is governed by the Fund’s investment policies, which provide written principles on the use of fi nancial derivatives.

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86 Annual Report 2009

adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of fi nancial asset and fi nancial liability are disclosed in note 2 to the fi nancial statements.

(c) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity balances. This overall strategy remains unchanged from 2008.

The Group’s capital structure consists of debt, which includes borrowings disclosed in note 16, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings which are all disclosed in note 20.

The Group carries on business throughout Australia, primarily through subsidiary companies that are established in the markets in which the Group operates. The operations of the Friendly Society are regulated by APRA and the Management Fund of the Society has a minimum Management Capital Requirement (“MCR”) that must be maintained at all times. It is calculated monthly and projected forward for the next six months and these results are reported to the Board each month. The current level of share capital of the Friendly Society means that for the foreseeable future the MCR will continue to be met with a substantial excess. In addition, one Group company, Century Funds Mangement Limited has AFSL licences so as to operate its registered property trusts. The regulations require the entity to hold a minimum net asset amount which is maintained by way of bank guarantees. Where necessary, the bank guarantees will be increased to ensure the net asset requirement is always met.

appropriate, expand the Group’s funds under management as well as to make the routine outfl ows of tax, dividends and repayment of maturing debt. The Group reviews regularly its anticipated funding requirements and from there decides what the most appropriate form of funding (capital raising or borrowings) which will depend on what the funding will be used for.

fund) consists of cash and cash equivalents, bill facilities and mortgage assets. The benefi t funds also hold a range of fi nancial assets for investment purposes including investments in unit trusts, equity and fl oating rate notes. The Investment and Lending Committee aims to ensure that there is suffi cient capital for possible redemptions by unit holders of the benefi t funds by maintaining a minimum of 15% of its total investments in cash and cash equivalents. The benefi t funds have no restrictions or specifi c capital requirements on the application and redemption of units. The benefi t fund’s overall investment strategy remains unchanged from the prior year.

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Annual Report 2009 87

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

27. Financial Instruments (cont.)

Consolidated	Consolidated	Parent	Parent
2009 $'000	2008 $'000	2009 $'000	2008 $'000
138 2,806 127 2,666 - 6,000 - 6,000 - 1,215 - - - 932 - - 237,428 249,398 37,120 55,194
237,566	260,351	37,247	63,860
- 6,305 - - - 232 - - 12,409 - - - 273,362 258,221 27,357 24,500
285,771	264,758	27,357	24,500

the credit risk of those liabilities. There is no difference between the carrying amount of the fi nancial liabilities and the amount the Group would be contractually required to pay at maturity to the holders of the obligations.

(e) Credit risk

the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining suffi cient collateral or other security where appropriate, as a means of mitigating risk of fi nancial loss from default. The credit risk on fi nancial assets of the Group and the parent recognised on the balance sheet is generally the carrying amount, net of allowance for impairment loss.

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88 Annual Report 2009

Concentration of risk may exist when the volume of transactions limits the number of counterparties. Concentration of credit risk in relation to mortgage loans is demonstrated by the following bands:

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

2009 2008
Loan balance Balance Balance
outstanding Number $'000 Number $'000
$ 0 - $ 250,000 1 200 0 -
$ 250,001 - $ 500,000 0 - 3 900
$ 500,001 - $ 1,000,000 3 2,400 4 2,730
$ 1,000,001 - plus 1 6,520 3 10,911
9,120 14,541
----- End of picture text -----

There are no mortgage loans that are past due and not impaired.

Credit risk on mortgage loans

Credit risk on mortgage loans is managed through prudential lending guidelines, appropriate mortgage security arrangements and loan default credit risk insurance, and are reviewed and approved by the risk management committee annually.

in fl oating rate note, standard discount securities and unit trusts is managed through strategic asset allocations with creditworthy counterparties and the on-going monitoring of the credit quality of investments, including the use of credit ratings issued by well known rated agencies.

minimal.

to any single entity or any group of counterparties having similar characteristics. No individual investment exceeds 5% of net assets at either 30 June 2009 or 30 June 2008.

Credit risk of the Parent

has provided loans to its subsidiaries. This risk is covered by recourse to the assets of the subsidiaries. The parent does not have any fi nancial assets that are past due and not impaired.

(f) Liquidity Risk

The Group’s approach to managing liquidity is to ensure that it will always have suffi cient liquidity to meet its liabilities. The unit holders in the benefi t funds are able to withdraw their units at any time and the benefi t funds are therefore exposed to the liquidity risk of meeting unit holders’ withdrawals at any time. The OFMFS Risk Management Statement has a requirement to maintain the benefi t funds’ cash holdings and liquid assets at a minimum of 15% of total assets.

schemes and unlisted management investment schemes are considered to be readily realisable. The benefi t funds other investments included investments in unlisted investments and fi rst mortgage loans, which are not traded in an organised market and which generally may be illiquid. As a result, there is a risk that the benefi t funds may not be able to liquidate all of these investments at their fair value in order to meet their liquidity requirements. The benefi t funds liquidity risks are managed in accordance with the funds investment strategies.

The liquidity risk is managed for the Group at a corporate level. The CFO regularly reviews the bank account balances across all entities, as well as current and future commitments and expected cash infl ows. This is reviewed in even more detail when the monthly cash fl ow projection is prepared for management purposes and presented to the Board at its regular monthly meetings. By comparing the projected cash fl ows with the assets and liabilities shown in the individual and consolidated balance sheets, which are also prepared on a monthly basis for management purposes and presented to the Board, liquidity requirements for the Group can be determined. Based on this review, if it is considered that the expected cash infl ows, plus liquidity on hand, may not be suffi cient in the near term to meet cash outfl ow requirements, including repayment of borrowings, a decision can be made to carry out one or more of the following:

re-negotiate the repayment terms of the borrowings
sell assets that are held on balance sheet
undertake an equity raising

should ensure that the Group continues to meet its commitments, including repayments of borrowings, as and when required.

The Group’s overall strategy to liquidity risk management remains unchanged from 2008.

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Annual Report 2009 89

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

27. Financial Instruments (cont.)

(f) Liquidity Risk (cont.)

based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group and the parent can be required to pay. The tables include both interest and principal cash fl ows.

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

Less than 3 months
3 months to 1 year 1 - 5 years 5+ years On Demand Total
$'000 $'000 $'000 $'000 $'000 $'000
Non-derivative fi nancial liabilities
Consolidated
2009
Borrowings 3,513 220,154 6 - 39,978 263,651
Accounts payable 5,567 - - - 7,271 12,838
Total 9,080 220,154 6 - 47,249 276,489
2008
Borrowings 16,244 25,654 262,757 - - 304,655
Accounts payable 7,281 - - - - 7,281
Total 23,525 25,654 262,757 - - 311,936
Less than 3 months
3 months to 1 year 1 - 5 years 5+ years On Demand Total
$'000 $'000 $'000 $'000 $'000 $'000
Non-derivative fi nancial liabilities
Parent
2009
Accounts payable 256 - - - 7,271 7,527
Borrowings 659 20,025 - - - 20,684
Total 915 20,025 - - 7,271 28,211
2008
Accounts payable 500 - - - - 500
Borrowings 459 24,306 - - - 24,765
Total 959 24,306 - - - 25,265
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on the undiscounted net cash fl ows on the derivative instruments that settle on a net basis. The parent does not hold any derivative instruments (2008: nil).

	Less than 3 months $'000	3 months to 1 year $'000	1 - 5 years $'000	5+ years $'000	On Demand $'000	Total $'000
Derivative f nancial liabilities Consolidated 2009 Interest rate swaps 262 847 2,830 17,278 - 21,217
Total	262	847	2,830	17,278	-	21,217
2008 Interest rate swaps - - - 64,681 - 64,681
Total	-	-	-	64,681	-	64,681

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90 Annual Report 2009

(g) Market risk

market prices. Market risk comprises of interest rate risk and price risk. Due to the nature of assets held by the parent and the Group (excluding the benefi t funds), there is an asset and liability management process which determines the interest rate sensitivity of the balance sheet and the implementation of risk management practices to hedge the potential effects of interest rate changes. The Group manages the market risk associated with its benefi t funds via outsourcing its investment management and the Investment Manager manages the fi nancial risks relating to the operations of the benefi t funds in accordance with an investment mandate set out in the benefi t funds constitution and product disclosure statement. There has been no change to the Group's exposure to market risks or the manner in which it manages and measures the risk.

Interest rate risk management

and lend funds at both fi xed and fl oating interest rates. The risk is managed by the Group by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defi ned risk appetite; ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.

funds to cash fl ow risk, whereas fi xed interest rate instruments expose the fund to fair value interest rate risk. Ultimately unit holders of the benefi t funds are exposed to this risk.

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Consolidated Parent
Weighted Weighted
average average
effective Variable Fixed effective Variable Fixed
interest rate rate rate Total interest rate rate rate Total
2009 % $'000 $'000 $'000 % $'000 $'000 $'000
Financial Assets
Cash and cash quivalents 3.35% 7,495 1,184 8,679 2.97% 186 340 526
Mortgage Loans 7.16% 167,926 56,192 224,118 - - - -
Total fi nancial assets 175,421 57,376 232,797 186 340 526
Financial liabilities
Borrowings 5.12% 246,869 8,122 254,991 6.65% 19,830 - 19,830
Total fi nancial liabilities 246,869 8,122 254,991 19,830 - 19,830
Net interest bearing
fi nancial assets/(liabilities) (71,448) 49,254 (22,194) (19,644) 340 (19,304)
Consolidated Parent
Weighted Weighted
average average
effective Variable Fixed effective Variable Fixed
interest rate rate rate Total interest rate rate rate Total
2008 % $'000 $'000 $'000 % $'000 $'000 $'000
Financial assets
Cash and cash equivalents 6.83% 20,472 - 20,472 6.50% 2,647 - 2,647
Discount Securities 7.94% - 57,337 57,337 - - - -
Floating Rate Notes 7.92% 142,698 - 142,698 - - - -
Mortgage loans 10.68% 169,321 46,311 215,632 - - - -
-
Total fi nancial assets 332,491 103,648 436,139 2,647 2,647
Financial liabilities
Borrowings 7.87% 247,172 4,000 251,172 7.65% 24,000 - 24,000
Total fi nancial liabilities 247,172 4,000 251,172 24,000 - 24,000
Net interest bearing -
fi nancial assets/(liabilities) 85,319 99,648 184,967 (21,353) (21,353)
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Annual Report 2009 91

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

27. Financial Instruments (cont.)

(g) Market risk (cont.)

Interest rate swap contracts

amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of fi xed rate fi nancial assets held and the cash fl ow exposures on the issued variable rate debt.

The following table details the notional principal amounts and remaining expiry of the Group's outstanding interest rate swap contracts as at reporting date. These swaps are at fair value through profi t and loss except for those designated and effective as cash fl ow hedge's in which case the fair value movements will be recorded in equity.

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Average Notional
Fair value
contracted rate principal amount
2009 2008 2009 2008 2009 2008
Consolidated % % $'000 $'000 $'000 $'000
Pay fi xed for fl oating contracts at fair value
through profi t or loss
Less than 1 year - 7.74% - 90,000 - 935
2 - 5 years - 7.47% - 24,000 - 280
50 years swaps contracts (i) - 7.51% - 18,505 - (1,399)
- 132,505 - (184)
Pay fi xed for fl oating contracts designated as
effective in fair value hedge
50 years swaps contracts (i) 7.50% - 23,326 - (8,513) -
23,326 - (8,513) -
Pay fi xed for fl oating contracts designated as
effective in cash fl ow hedges
Less than 1 year 6.87% 6.87% 6,116 2,180 (194) 34
1 - 2 years 7.08% 6.85% 4,426 5,508 (289) 170
2 - 8 years 7.52% 7.47% 39,084 20,118 (3,413) 728
49,626 27,806 (3,896) 932
72,952 160,311 (12,409) 748
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(i) Refer to Note 27(h) regarding the fair value of 50-year swap contracts

The objective of interest rate swap contracts, excluding the 50 year swap, in a hedge relationship is to match the cash fl ows obtained from the fi xed rate book to the fl oating funding obligations under the warehouse trust facility. This strategy is in accordance with the OFG Treasury Policy. The hedged item (being fl oating funding obligation) is expected to impact profi t or loss over the next six years (2008: seven years) following year-end where the Group has an interest rate exposure from fi xed rate reverse mortgages from customers at a fi xed rate for either the fi rst two, four or eight years of the loan.

and fi xed rate reverse loan mortgages are compounding.

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92 Annual Report 2009

Interest rate sensitivity

The sensitivity analyses below have been determined based on the parent and the Group's exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the fi nancial year and being held constant throughout the reporting period. A 100 basis point (1%) increase or decrease represents management's assessment of the reasonably possible change in interest rates.

and all other variables were held constant.

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Effect On
Change in variable Profi t after tax Other Reserves
2009 2008 2009 2008
$'000 $'000 $'000 $'000
Consolidated
Interest rate risk + 1% (462) 6,798 1,539 671
Parent
Interest rate risk + 1% (135) (149) - -
2009 2008 2009 2008
Change in variable $'000 $'000 $'000 $'000
Consolidated
Interest rate risk - 1% 443 (10,792) (1,605) (704)
Parent
Interest rate risk - 1% 135 149) - -
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The methods and assumptions used to prepare the sensitivity analysis have not changed in the year. The sensitivity analyses above take into account interest-earning assets and interestbearing liabilities attributable to the shareholders only.

Other price risk

Other price risk is the risk that the total value of investments will fl uctuate as a result of changes in market prices, whether caused by factors specifi c to an individual investment, its issuer or all factors affecting all instruments traded in the market. The benefi t funds have investments in unlisted managed investment schemes, which exposes it to price risk. Sensitivity of these amounts to other price risk impacts policyholder liabilities rather than profi t and other equity reserve attributable to shareholders.

determined as follows:

standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. The fair value of derivative instruments, are calculated using quoted prices. Where such prices are not available use is made of discounted cash fl ow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

measured at amortised cost approximate their fair value.

The objective of 50-year interest rate swap contracts in a hedge relationship is to hedge the exposure to changes in fair value of a recognised assets, being fi xed for life reverse mortgage loans, that is attributable to the interest rate risk and could affect profi t or loss. This strategy is in accordance with the OFG Treasury Policy.

The fair value of the 50 year reverse mortgage loans and 50 years swaps are calculated using a valuation technique based on assumptions that are not supported by prices from observable current market transactions in the same instrument and not based on available observable market data due to the illiquid nature of the instruments. Use is made of discounted cash fl ow analysis using the applicable yield curve out to 15 years, with the yield curve at 15 years employed as the best proxy for subsequent rates due to non-observable market data. Adjusting the yield curve after 15 years by an increase / (decrease) of 50 basis points as at 30 June 2009 would cause the fair value of the 50 year swaps to increase / (decrease) by $631,138/($664,545). (2008: by $2,372,304/($10,631,207)). Additionally, the valuations have been calculated with an assumption of no deaths (as opposed to early voluntary repayment) of mortgagees during the life of the interest rate swaps. However, the swap agreements provide that in the event of death of a mortgagee there is a nil cost prepayment option. Accordingly, the assumption on the number of deaths and timing of such deaths will impact the valuation. If the assumption of the death rate changes to 10% of mortgagees 10 years after the inception of the swaps, the fair value as at 30 June 2009 would increase by $297,000 (2008:$85,583).

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Annual Report 2009 93

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

28. Subsequent events

OFG had provided a cash out performance guarantee to unit holders in a trust managed by its subsidiary company, Century Funds Management Limited, as part of the stapling of 3 unlisted property trusts into one Fund (Century Bulky Goods Fund No.1), that guaranteed the redemption of up to 11.3 million units at a face value of $1.00 per unit. In exchange for cancelling this guarantee, the company entered into a Notes Subscription Deed, which these subject unit holders, whilst still maintaining their original units in the Fund, received a note that has a face value that represents the difference between $1.00 per unit and an agreed written down value per unit of $0.36, as at 30 June 2009. The holders of the Notes are not entitled to request a conversion to equity (subsequent to shareholder approval), or otherwise receive cash, until February 2012.

29. Acquisition of business

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Date of Proportion of shares Cost of acquisition
Name of businesses acquired Principal activity acquisition acquired (%) $’000
2009
Property funds
Eclipse Property Group Limited 30/06/09 49 5,633
management
2008
Property funds
Eclipse Property Group Limited 30/06/08 51 4,907
management
Eclipse Property Group Limited
2009 2008
Fair Fair
Book value on value on
value acquisition Book value acquisition
Net assets acquired $'000 $'000 $'000 $'000
Assets
Cash & cash equivalents 465 465 1,030 1,030
Trade & other receivables 1,152 1,152 1,253 1,253
Property plant and equipment 11 11 10 10
Deferred tax asset 22 22 21 21
Liabilities
Trade & other payables (1,205) (1,205) (2,079) (2,079)
Total fair value of net assets acquired 445 445 235 235
2009 : 49% thereof 218 218
2008 : 51% thereof 120 120
Goodwill on acquisition 5,415 4,787
5,633 4,907
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94 Annual Report 2009

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Consolidated Parent
2009 2008 2009 2008
Net cash fl ow on acquisition $'000 $'000 $'000 $'000
Total purchase consideration excluding contingent consideration 5,633 4,907 100 -
Less: Non-cash consideration: Shares issued - (728) - -
Less: Deferred consideration (5,533) (120) - -
Less: contingent consideration - (152) - -
Consideration paid in cash 100 3,907 100 -
Less: cash & cash equivalents acquired (228) (1,030) - -
Total cash (infl ow) / outfl ow (128) 2,877 100 -
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On 30 June 2009, OFG exercised its Call Option, under the Put & Call Option Deed dated 30 June 2008, over the remaining 49% of the Eclipse Property Group Limited's (EPGL). OFG acquired the initial 51% on 30 June 2008.

The exercising of the Call Option also required the parties entering into an Amending Deed, Share Sale Agreement and a Mortgage of Shares (security being EPGL).

Background

On 30 June 2008, OFG acquired 51% of EPGL for $4,798,361. The consideration was paid by $3,798,361 in cash and $727,994 via an issue of 799,993 in OFG ordinary shares plus consideration in cash for 51% respective share of the net tangible assets of EPGL.

OFG had a First Call Option expiring 31 December 2008, which would have enabled OFG to acquire EPGL for $5,201,639. Its Second Call Option gave OFG the right to acquire the remaining 49% for a calculated "share value" on or before 30 September 2010.

the $4,798,361.

The Put Option granted Vendors the option to require OFG to purchase the remaining 49% of EPGL shares on or before 30 September 2010 for the "share value" as calculated above.

Amending deed

On 30 June 2009, OFG entered into an Amending Deed with the Vendors of EPGL in order to make amendments to the Initial Share Sale Agreement and Put and Call Option Deed. These amendments were made in order to enable OFG to exercise its Call Option as at 30 June 2009 as detailed below.

Share Sale Agreement

On 30 June 2009, OFG exercised its Call Option and acquired the remaining 49% of issued shares of EPGL, thereby recording its interest in EPGL at 30 June 2009 as 100%. Consideration for the remaining shares is in two components.

An Initial Payment of $100,000 as part payment of the Purchase Price and further payments by 30 September 2010 being for both Net Tangible Assets and the Share Value less the Initial Payment as defi ned above.

Mortgage over Shares

September 2010, after the "share value" has been calculated, OFG mortgaged 75% of the issued ordinary shares in EPGL to the Mortgagee (Vendors) as security for the payment of the Secured Money (all moneys payable as calculated by the 'Share Value" as at 30 September 2010).

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Annual Report 2009 95

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

30. Segment information

Revenue is derived by the consolidated entity from the following product segments:

(b) Insurances - health and general insurance agency.
(c) Commercial Mortgages - provide funding and equity capital secured by mortgages.
(d) Property - acquire and hold properties for income and growth.
(e) Reverse Mortgages - provide funding and equity release.

Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable operating segment for the current year under review:

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Funds Commercial Reverse Consoli-
Parent Administration Insurances Mortgages Property Mortgages Elimination dated
2009 $'000 $’000 $'000 $'000 $'000 $'000 $'000 $’000
Continuing operations
Interest, dividends and
other investment income 6,732 33,493 8 772 179 18,908 (6,621) 53,471
Management, risk and 30 14,683 - 36 6,376 306 - 21,431
establishment fees
Rental income 140 - - - 4,256 - - 4,396
6,902 48,176 8 808 10,811 19,214 (6,621) 79,298
Discontinued operations
Interest, dividends and other
- 1 - - - - - 1
investment income
Management, risk and establishment fees - - - - - - - -
Rental income - - - - - - - -
- 1 - - - - - 1
Total revenue 6,902 48,176 8 808 10,811 19,214 (6,621) 79,298
Profi t/(loss) before tax (17,462) 5,018 470 (5,778) (2,369) 910 (6,004) (25,215)
Income tax benefi t 12,644
Profi t/(loss) on discontinued operations 158
Loss for the year (12,413)
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96 Annual Report 2009

The following is an analysis of the Group's revenue and results by reportable operating segment for the prior year under review:

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Funds Commercial Reverse Consoli-
Parent Administration Insurances Mortgages Property Mortgages Elimination dated
2008 $'000 $’000 $'000 $'000 $'000 $'000 $'000 $’000
Continuing operations
Interest, dividends and
otherinvestment income 23,787 56,235 11 2,776 99 14,231 (23,254) 73,885
Management, risk and - 18,148 - 2,213 9,817 75 - 30,253
establishment fees
Rental income - - - - 2,670 - - 2,670
23,787 74,383 11 4,989 12,586 14,306 (23,254) 106,808
Discontinued operations
Interest, dividends and
- 7 - - - - - 7
other investment income
Management, risk and
establiswhment fees - - - - - - - -
Rental income - 561 - - - - - 561
- 568 - - - - - 568
Total revenue 23,787 74,951 11 4,989 12,586 14,306 (23,254) 107,376
Profi t/(loss) before tax 2,100 10,103 547 (2,072) 1,033 (1,456) (9,805) 450
Income tax expense (2,603)
Profi t/(loss) on discontinued operations (554)
Profi t for the year (2,707)
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Segment assets and liabilities

The following is an analysis of the Group's assets and liabilities by reportable segment for the current year under review:

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Funds Commercial Reverse Consoli-
Parent Administration Insurances Mortgages Property Mortgages Elimination dated
2009 $'000 $’000 $'000 $'000 $'000 $'000 $'000 $’000
Segment assets 110,340 596,011 583 (4,411) 60,113 205,457 (7,754) 960,339
Segment liabilities (28,293) (595,094) (62) (193) (46,494) (213,592) 1,827 (881,901)
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The following is an analysis of the Group's assets and liabilities by reportable operating segment for the prior year under review:

2008	Parent $'000	Funds Administration $’000	Insurances $'000	Commercial Mortgages $'000	Property $'000	Reverse Mortgages $'000	Elimination $'000	Consoli- dated $’000
Segment assets 120,172 704,038 373 (535) 60,638 189,437 (11,258) 1,062,865 Segment liabilities (25,428) (704,594) (68) (582) (44,566) (196,124) 1,151 (970,211)

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Annual Report 2009 97

NOTES TO THE FINANCIAL STATEMENTS for the fi nancial year ended 30 June 2009

30. Segment information (cont.)

Other segment information

2009	Parent $'000	Funds Administration $’000	Insurances $'000	Commercial Mortgages $'000	Property $'000	Reverse Mortgages $'000	Elimination $'000	Consoli- dated $’000
Carrying value of investments accounted for using the equity method - 13,162 - - - - - 13,162 Depreciation and amortisation of segment assets 243 34 - - 9 255 5 546 Signif cant other non-cash expenses 12,804 - - 6,228 6,837 2,763 - 28,632
2008	Parent $'000	Funds Administration $’000	Insurances $'000	Commercial Mortgages $'000	Property $'000	Reverse Mortgages $'000	Elimination $'000	Consoli- dated $’000
Carrying value of investments accounted for using the equity method - 5,602 - - - - - 5,602 Depreciation and amortisation of segment assets 268 59 - - 9 12 - 348 Signif cant other non-cash expenses 1,161 - - 9,284 3,590 - - 14,035

Geographical information

The consolidated entity operates in one geographic region, Australia.

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98 Annual Report 2009

31. Key management personnel compensation

Details of key management personnel

R.W. Dobson (Chairman) appointed 28 November 2007
J.C. Huljich (Director, General Manager - Property division) appointed 28 November 2007
P.J. Done (Non-executive director) appointed 28 November 2007
M.G. Grant (Non-executive director) appointed 4 April 2001, resigned 29 October 2008
D.K. Gupta (Non-executive director) appointed 28 November 2007
T.D. Reid (Company Secretary, and General Manager - Friendly Societies) appointed 1 October 2008
D.B. Govey (Head of Assets)
A.S. Bali (Development Executive)
S.E. Harding (Head of Reverse Mortgages) appointed 23 April 2008, resigned 30 June 2009
H.J. Schmiede (Head of Finance - Property) appointed 1 December 2008

Key management personnel compensation

The aggregate compensation paid to key management personnel of the company and the Group is set out below:

	Consolidated	Consolidated	Parent	Parent
	2009	2008	2009	2008 $
	$	$	$
Short-term employee benef ts Post-employment benef ts Termination benef ts Share-based payment	2,114,305 2,195,629 190,866 238,748 - 145,600 3,355 (198,599)		1,334,564 1,702,509 123,452 194,367 - 145,600 - (198,599)
	2,308,526	2,381,378	1,458,016	1,843,877

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Annual Report 2009 99

32. Share-based payments

Performance rights plan

At the 2003 AGM, OFG shareholders approved a Performance Rights Plan to which the long-term incentives relate. Under this plan, the Board has been given discretion in granting to employees rights to receive, in the future, a specifi ed number of ordinary shares. The number of shares to be delivered pursuant to the rights is subject to satisfying performance hurdles and time-related vesting conditions as detailed in the table below. If OFG achieves a growth in Earnings Per Share ("EPS") and a Total Shareholder Return ("TSR") which matches or exceeds that of the ASX (excluding Property Trusts) Financial Accumulation index, the performance rights will convert into shares at the target date in the future as set out in the table below. Performance will be tested at the end of four years measuring the average compound performance over the preceding four fi nancial years. The LTI plan was set up to reward all employees in a manner that aligns the elements of remuneration with the creation of shareholder wealth.

The Group uses TSR and EPS as performance hurdles as it ensures an alignment between comparative shareholder return and reward for executives.

The performance rights will vest after 2 years as in the table below subject to meeting the performance hurdles described.

EPS performance criteria

EPS is based on normalised operating earnings before tax. The EPS performance hurdle and subsequent percentages of the rights that become exercisable depend on the following vesting scale:

If OFG achieves less than 10% growth in EPS per annum, no Rights vest.
If OFG achieves 10% growth in EPS or greater, 70% of Rights vest.
If OFG achieves 11% growth in EPS or greater, 80% of Rights vest.
If OFG achieves 12% growth in EPS or greater, 90% of Rights vest.
If OFG achieves 13% growth in EPS or greater, 100% of Rights vest.

TSR Performance criteria

The TSR performance hurdles and percentages of the Rights that become exercisable upon meeting the performance hurdle are as follows:

If TSR rank is less than the index, no Rights vest.
TSR rank is equal to or greater than the index, all Rights vest.

Full details of the number of performance rights issued, the vesting dates and the performance hurdles are detailed below:

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

No. of rights No. of rights
Tranche Grant date Vesting date EPS hurdles TSR hurdles
First 29 May 2006 30 June 2007 40,251 40,251
Second 29 May 2006 30 June 2008 100,212 100,212
Third 29 May 2006 30 June 2009 169,554 169,554
Fourth 1 July 2006 30 June 2010 109,734 109,734
Fifth 1 July 2007 30 June 2011 137,948 137,948
----- End of picture text -----

The following reconciles the outstanding performance rights granted under the performance rights plan at the beginning and end of the fi nancial year:

	2009	2008
Balance at beginning of the f nancial year 224,289 775,394 Granted during the f nancial year - 275,896 Forfeited during the f nancial year - (699,253) Expired during the f nancial year (69,635) (127,748)
Balance at end of the f nancial year	154,654	224,289

For assumptions used in valuing these rights refer to the Remuneration Report.

During the fi nancial year ended 30 June 2009, no performance rights were granted (2008:$275,896) due to the EPS and TSR performance criteria not being met.

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100 Annual Report 2009

ADDITIONAL STOCK EXCHANGE INFORMATION AS AT 9 SEPTEMBER 2009

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

Number of
Distribution of holders of equity securities Number of holders ordinary shares
1 - 1,000 14,466 6,523,084
1,001 - 5,000 7,681 17,025,437
5,001 - 10,000 1,006 6,805,577
10,001 - 100,000 420 8,339,013
100,001 and over 32 21,605,762
23,605 60,298,873
Holding less than a marketable parcel 13,292 5,439,180
Substantial shareholders
Number of
Ordinary shareholders
shares held
RBC Dexia Services Australia Nominees Pty Limited 5,045,000
Resolute Funds Management Pty Ltd 4,146,917
----- End of picture text -----

Twenty largest holders

Odi hhld	Ordinary Shares	Ordinary Shares
rnary sareoers	Number	Percentage
1. RBC Dexia Services Australia Nominees Pty Limited 2. Resolute Funds Management Pty Limited 3. Paritai Pty Limited 4. Prudential Nominees Pty Ltd 5. Vintage Capital Pty Ltd 6. Australian United Investment Company Limited 7. Anglo American Security Fund LP 8. Drake Associates LP 9. Sterling Grace Capital Management LP 10. Sterling Grace International LLC 11. Coorong Holdings Pty Ltd 12. Trust Company Superannuation Services Limited 13. HSBC Custody Nominees (Australia) Limited 14. Ross Elsom Nominees Pty Ltd 15. Citicorp Nominees Pty Limited 16. Vexdat Pty Ltd 17. Coy & Associates Consulting Services Pty Ltd 18. Avanteos Investments Limited <1703553 A/C> 19. ANZ Nominees Limited 20. Avanteos Investments Limited <2412987 A/C>	5,045,000 8.37% 4,146,917 6.88% 2,189,116 3.63% 1,400,000 2.32% 1,072,871 1.78% 652,770 1.08% 578,550 0.96% 578,550 0.96% 578,550 0.96% 578,550 0.96% 543,502 0.90% 536,586 0.89% 480,767 0.74% 444,532 0.80% 414,449 0.69% 404,496 0.67% 348,674 0.58% 250,000 0.41% 204,623 0.34% 200,245 0.33%
	20,648,748	34.24%

Restrictions on the sale of these shareholdings apply.

Voting rights

All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

On-market buy-back

There s no current on-market buy back

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Annual Report 2009 101

INDEPENDENT AUDIT REPORT

40 to 100.

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102 Annual Report 2009

20 to 32

Annual Report 2009 103

NOTES

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104 Annual Report 2009

USEFUL INFORMATION

Contact Us

Shareholder Enquiries call: 1800 11 29 29 Investor Enquiries call: 1300 50 50 50 www.overfi fty.com.au

Level 30, 367 Collins Street Melbourne VIC 3000 Call 1300 50 50 50 Fax (03) 9629 3397 enquiries@overfi fty.com.au

Shareholder Enquiries

Over Fifty Group Limited Share Registry c/o Link Market Services Level 1, 333 Collins Street Melbourne VIC 3000 Call 1800 11 29 29

Friendly Society Investor Enquiries

Over Fifty Mutual Friendly Society Limited Level 30, 367 Collins Street Melbourne VIC 3000 Call 1300 50 50 50 enquiries@overfi fty.com.au

Property Funds Management Enquiries

Century Funds Management Limited Level 23, 111 Pacifi c Highway North Sydney NSW 2060 Call (02) 8923 8923 Fax (02) 9460 2960 [email protected]

Mail to

Over Fifty Group Limited Reply Paid 5471, Melbourne VIC 8060 (no stamp required)

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Annual Report 2009 105

AI assistant

CENTURIA CAPITAL GROUP — Annual Report 2009

64677_rns_2009-09-29_f433aaf1-7146-4a32-bedd-14f5ac2c8b08.pdf

rebuildin g ~~protecting~~

Over Fifty Group Limited

Contents

Meet Our People

Why are we different?

Our Services

Back to Our Core Activities

How the core businesses work together

Evolving new products for you and your family

Property Funds Management

Future for Property Funds Management

Friendly Societies

Imputation Bond

Other business areas

Reverse Mortgages

Over Fifty Insurance

Mortgageport

Our Call Centre

Always ready to help

Our call centre is the “face” of our company

Ever sat on the phone for hours trying to speak to a person?

CHAIRMAN’S LETTER

Dear Shareholders

Financial Performance

The Year Ahead

Shareholders who are Friendly Society Policyholders

STAND ALONE CORPORATE PERFORMANCE

Financial results

Funds under Management

Forward looking

DIRECTORS’ REPORT

Information about the directors and senior management

Roger Dobson

Appointed 28 November 2007 LL.B, LL.M

John McBain

Appointed 4 April 2008 as CEO Dip. Urban Valuation

Jason Huljich

Appointed 28 November 2007 B.Comm

Peter Done

Appointed 28 November 2007 B.Comm, FCA

Deepak Gupta

Appointed 28 November 2007 BCA, MBA, Cert. Investment Analysis

Murray Grant (not pictured)

Appointed 4 April 2001 Resigned 29 October 2008 BVSc, MBA, FAICD

DIRECTORS’ REPORT (CONT.)

Directors' shareholdings

Remuneration of directors and senior management

Company secretary

Corporate Structure

Principal activities

DIRECTORS’ REPORT (CONT.)

Review of Operations

Friendly Society

Property Funds Management

Mortgage Businesses

Insurance/Financial Planning

Corporate governance practices

Other matters

Changes in state of affairs

Subsequent events

Future developments

DIRECTORS’ REPORT (CONT.)

Dividends

Directors' meetings

Non-audit services

Auditor’s independence declaration

Rounding off of amounts

REMUNERATION REPORT

Director and senior management details

Remuneration policy

Relationship between the remuneration policy and company performance

REMUNERATION REPORT (CONT.)

Non-Executive Director Remuneration

Objective

Structure

Senior Management and Executive Director Remuneration

Objective

CENTURIA CAPITAL GROUP Annual Report 2009

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