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CENTURIA CAPITAL GROUP Annual Report 2016

Aug 17, 2016

64677_rns_2016-08-17_131621ec-0b40-4250-af9a-2672841ebf57.pdf

Annual Report

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CENTURIA�CAPITAL�LIMITED����������

AND�CONTROLLED�ENTITIES�

A.B.N.�22�095�454�336��

CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

The�directors�present�their�report�together�with�the�consolidated�financial�statements�of�the�Group� comprising�Centuria�Capital�Limited�(the�‘Company’),�and�its�controlled�entities�for�the�financial�year�ended� 30�June�2016�and�the�auditor’s�report�thereon.�

The�Company�is�the�head�entity�of�the�Centuria�Capital�Limited�Group,�its�shares�are�listed�on�ASX�Limited� under�the�code�“CNI”.�

Directors�

The�directors�of�the�Company�at�any�time�during�or�since�the�end�of�the�financial�year�are:�

Name,qualificationsand Experience,specialresponsibilitiesandotherdirectorships
independencestatus
MrGarryS.Charny,BA.LL.B GarrywasappointedtotheBoardon23February2016,andappointedas
Chairman ChairmanoftheBoardon30March2016.GarryisalsoChairmanofthe
NominationandRemunerationCommitteeandamemberoftheAudit,Risk
IndependentNon�Executive
Director
ManagementandComplianceCommittee.
GarryistheManagingDirectorandfounderofWolseleyCorporate,an
Australiancorporateadvisoryandinvestmenthouse.Hehashadbroad
experienceinbothlistedandunlistedcompaniesacrossadiverserangeof
sectorsincludingproperty,retail,technologyandmedia.
MrRogerW.Dobson,LL.B, RogerwasappointedtotheBoardin2007andwasChairmanuntilhis
LL.M retirementon30March2016.HewasalsoChairmanoftheNominationand
IndependentNon�Executive
Director
RemunerationCommitteeandamemberoftheAudit,RiskManagement
andComplianceCommittee.
MrPeterJ.Done,B.Comm, PeterwasappointedtotheBoardin2007andistheChairmanoftheAudit,
FCA RiskManagementandComplianceCommittee.Heisalsoamemberofthe
IndependentNon�Executive
Director
NominationandRemunerationCommitteeandtheInvestmentCommittee.
PeterwasapartnerofKPMGfor27yearsuntilhisretirementinJune2006.
Hehasextensiveknowledgeinaccounting,auditandfinancialmanagement
inthepropertydevelopmentandfinancialservicesindustries,corporate
governance,regulatoryissuesandBoardprocessesthroughhismanysenior
roles.
MrJohnR.SlaterDip.FS(FP), JohnwasappointedtotheBoardin2013havingbeenanadvisertothe
FFin CenturiaLifeFriendlySocietyInvestmentCommitteessince2011.
IndependentNon�Executive JohnwasaseniorexecutiveintheKPMGFinancialServicespracticefrom
Director 1989to1999andactedasStatedirectoroftheBrisbanepractice.Hehas
alsoservedontheInvestmentCommitteesofKPMGFinancialServices,
BerkleyGroupandByronCapital.
In2008,JohnfoundedboutiqueFinancialAdvisoryfirmRivieraCapitaland
hasawealthoffinancialservicesexperience.
JohnisalsoamemberoftheAudit,RiskManagementandCompliance
CommitteeandtheNominationandRemunerationCommittee.

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Mr�John�E.�McBain ,�Dip.� John�was�a�founding�director�and�major�shareholder�in�boutique�property� Urban�Valuation� funds�manager�Century�Funds�Management,�which�was�established�in�1999� and�was�acquired�by�Over�Fifty�Group�in�July,�2006.�He�joined�the�Over�Fifty� Chief�Executive�Officer� Group�Board�on�10�July,�2006�and�was�appointed�Chief�Executive�Officer�in� 2008.�In�2011�the�company�was�renamed�Centuria�Capital.�

John�is�also�a�director�of�QV�Equities�Limited,�a�licensed�investment�company� listed�on�the�ASX.�

Prior�to�forming�Century,�in�1990�John�founded�Hanover�Group,�a�specialist� property�investment�consultancy�and�in�1995�he�formed�Waltus� Investments�Australia,�a�dedicated�property�fund�manager.�John�formerly� held�senior�positions�in�a�number�of�property�development�and�property� investment�companies�in�Australia,�New�Zealand�and�the�United�Kingdom.��

John�holds�a�Diploma�in�Urban�Valuation�(University�of�Auckland).�

Mr�Jason�C.�Huljich ,�B.�Comm� Jason�was�appointed�to�the�Board�in�2007.��

Executive�Director� As�CEO�–�Unlisted�Property�Funds,�Jason�is�responsible�for�providing� strategic�leadership�and�ensuring�the�effective�operation�and�growth�of� Centuria’s�unlisted�property�portfolio.�Jason�has�been�involved�in�the� unlisted�property�sector�in�Australia�since�1996�and�has�considerable� expertise�in�investment�property�selection,�fund�feasibility�and�funds� management.��

Jason�is�the�President�of�the�National�Executive�Committee�of�the�Property� Funds�Association�of�Australia,�the�peak�industry�body�representing�the� $125�billion�direct�property�investment�industry.� Mr�Nicholas�R.�Collishaw ,� Nicholas�was�appointed�CEO�–�Listed�Property�Funds�at�Centuria�Property� SAFin,�FAAPI,�FRICS� Funds�on�1�May,�2013.� Executive�Director� Prior�to�this�role,�Nicholas�held�the�position�of�CEO�and�Managing�Director� at�the�Mirvac�Group.�During�his�time�at�Mirvac�(2005�2012),�Nicholas�was� responsible�for�successfully�guiding�the�business�through�the�GFC�and� implementing�a�strategy�of�sustained�growth�for�the�real�estate� development�and�investment�company.�During�Nicholas’�30�year�career,�he� has�held�senior�positions�with�James�Fielding�Group,�Paladin�Australia,� Schroders�Australia�and�Deutsche�Asset�Management.�He�has�extensive� experience�in�all�major�real�estate�markets�in�Australia�and�investment� markets�in�the�United�States,�United�Kingdom�and�the�Middle�East.� Nicholas�is�Deputy�Chair�of�the�UNSW�Built�Environment�Advisory�Council.�

The�above�named�directors�held�office�during�the�entire�financial�year�and�up�to�the�date�of�this�report,�unless� otherwise�noted.��

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Directors'�meetings�

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

Director
Board
Meetings
Director
Board
Meetings
Director
Board
Meetings
Audit,Risk,
Management&
Compliance
CommitteeMeetings
Audit,Risk,
Management&
Compliance
CommitteeMeetings
Nomination&
Remuneration
CommitteeMeetings
Nomination&
Remuneration
CommitteeMeetings
A B A B A B
G.Charny 11 11 1 1 1 1
R.W.Dobson 12 14 2 4 2 2
P.J.Done 21 23 6 6 3 3
J.R.Slater 22 23 6 6 3 3
J.E.McBain 23 23 # # # #
J.C.Huljich 22 23 # # # #
N.R.Collishaw 23 23 # # # #

A�–�Number�of�meetings�attended�

  • B�–�Number�of�meetings�held�during�the�time�the�director�held�office�during�the�year�� #��–�Not�a�member�of�the�committee�

Directors’�interests�

The�following�table�sets�out�each�director’s�relevant�interest�in�shares�in�the�Company�as�at�the�date�of�this� report.���

Directors NumberofFullyPaid
OrdinaryShares
G.Charny 1,627
P.J.Done 500,000
J.R.Slater 1,700,000
J.E.McBain(i) 4,604,549
J.C.Huljich(i) 2,342,715
N.R.Collishaw(i) 850,051

(i)�These�directors�have�also�been�granted�Performance�Rights�as�detailed�in�the�Remuneration�Report.��

Directors�hold�ordinary�interests,�with�equal�rights�to�other�shareholders.�

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Company�secretary�

Mr�James�Lonie�was�appointed�Company�Secretary�on�14�August�2015.���James�is�a�partner�in�the�Sydney� office�of�HWL�Ebsworth�Lawyers�and�has�extensive�financial�services�experience�with�a�particular�focus�on:�

  • funds�management�including�advising�on�licensing�issues;�

  • general�securities/corporate�transactions�and�advice;�and�

  • mergers�and�acquisitions�including�off�market�takeover�bids,�schemes,�capital�reductions�and�buy�backs� and�in�preparing�and�negotiating�offer,�disclosure�and�shareholder�meeting�documentation.�

James’�experience�includes�addressing�regulatory�and�compliance�issues�relating�to,�and�documenting� transactions�and�investment�vehicles�regulated�by,�the�Corporations�Act.��

James�graduated�from�Sydney�University�and�holds�a�Bachelor�of�Arts,�a�Bachelor�of�Laws�and�a�Masters�of� Laws.�

Mr�Matthew�Coy�was�the�previous�Company�Secretary,�appointed�on�21�October�2009�and�resigned�effective� 14�August�2015.���

Principal�activities�

The�principal�activities�of�the�Group�during�the�financial�year�were�the�marketing�and�management�of� investment�products�(including�friendly�society�investment�bonds�and�property�investment�funds),� management�of�Over�Fifty�Guardian�Friendly�Society�Limited�and�management�of�a�reverse�mortgage�lending� portfolio.

There�were�no�significant�changes�in�the�nature�of�the�activities�of�the�Group�during�the�financial�year.�

Operating�and�financial�review�

The�Group�recorded�a�consolidated�statutory�net�profit�after�tax�for�the�year�of�$12.1�million�(FY15�$8.6� million).�Underlying�net�profit�after�tax�was�$10.4�million�(FY15�$6.3�million).�Underlying�net�profit�after�tax� is�the�statutory�net�profit�after�tax�adjusted�for�changes�in�the�fair�value�of�financial�instruments�and� significant�items�of�a�non�recurring�nature.��

ReconciliationofStatutoryProfittoUnderlyingProfit FY16 FY15
$million
$million
StatutoryProfitaftertax
12.123
8.561
Lessnon�recurringitems:
Unrealisedgainonfairvaluemovementsinderivatives
5.493
1.148
Impairmentchargesinrelationtoseedcapitalvaluations
(2.779)
(1.795)
Accountinggainsonsaleofnon�coreassets
5.194
Unrealisedprofitonnon�coreinvestment(netofcosts)
0.990
Taximpactoftheabove
(1.998)
(2.266)
UnderlyingProfitaftertax
10.417
6.280

Operational�highlights�for�the�year�at�a�divisional�level�were�as�follows:�

Property�Funds�Management�

  • Underlying�net�profit�after�tax�of�$11.8�million�was�up�97%�on�the�prior�year�(FY15:�$6.0�million).�Earnings� growth�was�driven�by�growth�in�fee�income�due�to�some�a�number�of�significant�acquisitions�and� divestments�during�the�year.�

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

  • The�following�acquisitions�were�completed�during�the�year;�

  • 203�Pacific�Highway,�St�Leonards���acquired�in�December�2015�as�a�co�investment�between� Centuria’s�unlisted�funds�and�the�Centuria�Metropolitan�REIT�for�$86�million.��

  • Australian�Technology�Park,�Eveleigh�(ATP)�–�a�$104�million�stake�in�ATP�was�purchased�in�April� 2016�by�an�unlisted�fund.�

  • During�the�year�the�Group�also�realised�value�of�its�existing�portfolio�via�the�following�assets�sales;�

  • 175�Castlereagh�Street,�Sydney�–�acquired�by�an�unlisted�fund�in�2013�for�$56�million,�the�Group� completed�the�sale�of�the�asset�for�$98.0�million�in�December�2015.�

  • 80�Waterloo�Road�and�16�Byfield�Street,�North�Ryde�(“Macquarie�Park”)�–�acquired�for�$25.3� million�in�2001�&�2002,�the�Group�completed�the�sale�of�the�assets�for�$101�million

Investment�Bonds�Division�

  • The�Group’s�key�focus�continues�to�be�on�growing�Funds�Under�Management�(“FUM”)�through�creating� new�and�innovative�products�that�meet�market�demand,�prudent�investment�decision�making�and� maintaining�informative�and�regular�policyholder�communication.��

  • Underlying�net�profit�after�tax�of�the�division�was�$2.5�million�compared�with�$3.4�million�for�the�prior� year�as�a�result�of�newer�funds�having�lower�fees�than�the�older�capital�guaranteed�funds.�

  • The�number�of�primary�policy�holders�under�administration�continued�to�steadily�increase�throughout� the�year�with�85,186�primary�policyholders�at�30�June�2016�(30�June�2015:�83,814).�

  • FUM�increased�modestly�during�the�year�–�up�from�$715.2�million�at�30�June�2015�to�$720�million�at�30� June�2016.�

Dividends�

Dividends�paid�or�declared�by�the�Company�during�the�current�financial�year�were:�

Declaredandpaidduringthe Declaredandpaidduringthe Centspershare Totalamount Datepaid
currentfinancialyear $’000
Final2015dividend 2.75 2,111 18September2015
Interim2016dividend 2.25 1,724 18March2016
Totalamount 5.00 3,835

Subsequent�to�year�end,�the�following�dividend�was�declared�by�the�directors.��The�financial�effect�of�this� dividend�has�not�been�brought�to�account�in�the�consolidated�financial�statements�for�the�year�ended�30� June�2016�and�will�be�recognised�in�subsequent�financial�reports.��

Declaredaftertheendofthe Declaredaftertheendofthe Centspershare Totalamount Datepayable
currentfinancialyear $’000
Final2016dividend 3.00 2,299 14September2016

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Events�subsequent�to�the�reporting�date�

a) Final�Dividend�

On�18�August�2016,�the�Company�declared�a�dividend�of�3.0�cents�per�share�franked�to�100%.��The�dividend� is�expected�to�be�paid�on�14�September�2016.�

b) Investment�in�GPT�Metro�Office�Fund�

In�May�2016,�the�group�announced�the�acquisition�of�a�12.6%�stake�in�GPT�Metro�Office�Fund�(GMF).�On�24� May�2016,�the�Group’s�subsidiary�Centuria�Property�Funds�Limited�(CPFL)�in�its�capacity�as�responsible�entity� of�the�Centuria�Metropolitan�REIT�(CMA)�submitted�a�non�binding�proposal�to�merge�CMA�and�GMF�via�a� trust�scheme.�This�was�followed�on�16�June�2016�with�a�takeover�bid�for�GMF�via�an�off�market�takeover.�At� the�same�time�the�Company�entered�into�a�number�of�agreements,�including�a�Facilitation�and�Property� Rights�Deed�with�the�GPT�Group.�On�1�August�2016,�GMF’s�Independent�Board�Committee�announced�its� support�for�a�competing�offer.�Also�on�1�August�2016,�CMA�announced�it�would�not�be�proceeding�with�its� offer�for�GMF.�As�at�the�date�of�this�report,�the�Group�retains�its�12.6%�interest�in�GMF.��

Other�than�the�matters�discussed�above,�there�has�not�arisen�in�the�interval�between�30�June�2016�and�the� date�hereof�any�item,�transaction�or�event�of�a�material�and�unusual�nature�likely,�in�the�opinion�of�the� directors�of�the�Company,�to�affect�significantly�the�operations�of�the�Group,�the�results�of�those�operations,� or�the�state�of�affairs�of�the�Group,�in�future�financial�years.

Likely�developments�

The�Group�continues�to�pursue�its�strategy�of�focusing�on�its�core�operations,�utilising�a�strengthened�balance� sheet�to�provide�support�to�grow�and�develop�these�operations.��

Further�information�about�likely�developments�in�the�operations�of�the�Group�and�the�expected�results�of� those�operations�in�future�financial�years�has�not�been�included�in�this�report�because�disclosure�of�the� information�would�be�likely�to�result�in�unreasonable�prejudice�to�the�Group.�

Environmental�regulation

The�Group’s�operations�are�not�subject�to�any�significant�environmental�regulation.�

Indemnification�of�officers�and�auditors�

The�Company�has�agreed�to�indemnify�all�current�and�former�directors�and�executive�officers�of�the�Company� and�its�controlled�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�officer�unless� the�liability�relates�to�conduct�involving�a�lack�of�good�faith.���

The�Company�has�agreed�to�indemnify�the�directors�and�executive�officers�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�Officers'�Liability�and�legal�expenses�insurance�contracts,�as�such�disclosure� is�prohibited�under�the�terms�of�the�contracts.�The�Company�has�not�otherwise,�during�or�since�the�end�of� the�financial�year,�except�to�the�extent�permitted�by�law,�indemnified�or�agreed�to�indemnify�an�officer�or� auditor�of�the�Company�or�any�related�body�corporate�against�a�liability�incurred�as�such�an�officer�or�auditor.

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Non�audit�services�

During�the�financial�year,�KPMG,�the�Group’s�auditor,�has�performed�services�in�addition�to�the�audit�and� review�of�the�financial�statements.��Details�of�amounts�paid�or�payable�to�KPMG�are�outlined�in�Note�20�to� the�financial�statements.�

The�directors�are�satisfied�that�the�provision�of�non�audit�services�during�the�year,�by�the�auditor�(or�by� another�person�or�firm�on�the�auditor's�behalf)�is�compatible�with�the�general�standard�of�independence�for� auditors�imposed�by�the�Corporations�Act�2001.�

The�directors�are�of�the�opinion�that�the�services�as�disclosed�in�the�financial�statements�do�not�compromise� the�external�auditor's�independence,�based�on�advice�received�from�the�Audit,�Risk�Management�&� 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.�

Lead�auditor's�independence�declaration

The�lead�auditor's�independence�declaration�is�set�out�on�page�22�and�forms�part�of�the�Directors’�Report�for� the�year�ended�30�June�2016.�

Rounding�of�amounts�to�the�nearest�thousand�dollars�

The�Group�is�an�entity�of�a�kind�referred�to�in�the�“ASIC�Corporations�(Rounding�in�Financial/Directors’� Report)�Instrument�2016/191”.�Amounts�in�the�Directors’�Report�and�Financial�Report�have�been�rounded� off,�in�accordance�with�that�Class�Order,�to�the�nearest�thousand�dollars,�unless�otherwise�indicated.�

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report���Audited�

This�Remuneration�Report,�which�forms�part�of�the�Directors'�Report,�sets�out�information�about�the� remuneration�of�the�Company’s�directors�and�its�senior�management�for�the�financial�year�ended�30�June� 2016.�The�prescribed�details�for�each�person�covered�by�this�report�are�detailed�under�the�following� headings:��

  • 1� Director�and�senior�management�details;��

  • 2� Remuneration�policy;��

  • 3� Relationship�between�the�remuneration�policy�and�company�performance;��

  • 4� Non�executive�director�remuneration;��

  • 5� Remuneration�of�executive�directors�and�senior�management;�

  • 6� Key�terms�of�employment�contracts;�and�

  • 7� Director�and�senior�management�equity�holdings�and�other�transactions.�

  • 1� Director�and�senior�management�details��

The�following�persons�acted�as�directors�of�the�Company�during�or�since�the�end�of�the�financial�year:��

  • Mr�G.�S.�Charny�(Independent�Chairman)�appointed�as�Independent�Director�23�February�2016�and� appointed�Chairman�30�March�2016.�

  • Mr�R.�W.�Dobson�(Independent�Chairman)�retired�30�March�2016�

  • Mr�P.�J.�Done�(Independent�Director)�

  • Mr�J.�R.�Slater�(Independent�Director)��

  • Mr�J.�E.�McBain�(Group�CEO���Centuria�Capital�and�Executive�Director)�

  • Mr�J.�C.�Huljich�(CEO�–�Unlisted�Property�Funds�and�Executive�Director)�

  • Mr.�N.�R.�Collishaw�(CEO���Listed�Property�Funds�and�Executive�Director)��

The�term�'senior�management'�is�used�in�this�remuneration�report�to�refer�to�the�following�persons�in� addition�to�the�directors�listed�above:�

  • Mr�S.�W.�Holt�(Chief�Financial�Officer),�appointed�4�May�2016.�

��

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

2���Remuneration�policy��

The�Company�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,�the�Company�must�be�able�to�attract,� motivate�and�retain�capable�individuals.�The�Company's�remuneration�policy�focuses�on�the�following:�

  • Ensuring�competitive�rewards�are�provided�to�attract�and�retain�executive�talent;�

  • Linking�remuneration�to�performance�so�that�higher�levels�of�performance�attract�higher�rewards;�

  • Aligning�rewards�of�all�staff,�but�particularly�executives,�to�the�creation�of�value�to�shareholders;�

  • Making�sure�the�criteria�used�to�assess�and�reward�staff�include�financial�and�non�financial�measures�of� performance;�

  • Ensuring�the�overall�cost�of�remuneration�is�managed�and�linked�to�the�ability�of�the�Company�to�pay;� and�

  • Ensuring�severance�payments�due�to�the�Chief�Executive�Officer�on�termination�are�limited�to�pre� established�contractual�arrangements�which�do�not�commit�the�Group�to�making�any�unjustified� payments�in�the�event�of�non�performance.�

3���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.�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.�

Under�the�remuneration�policy,�senior�management's�remuneration�includes�a�fixed�remuneration� component,�short�term�and�long�term�incentive�arrangements.�The�long�term�incentives�are�based�on�the� Company‘s�performance�for�the�year�in�reference�to�specific�Earnings�per�Share�(EPS)�hurdles�and�Key� Strategic�Goals�being�met.�The�Group‘s�remuneration�is�directly�related�to�the�performance�of�the�Group� through�the�linking�of�short�and�long�term�incentives�to�these�financial�measures.�

The�short�term�incentives�are�based�on�the�individual's�performance�in�the�preceding�12�months�compared� to�pre�agreed�goals.�

Where�senior�management�is�remunerated�with�shares,�the�Remuneration�Policy�places�no�limitations�to� their�exposure�to�risk�in�relation�to�the�shares.�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.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

4���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.�

Directors'�Fees

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.�

5���Remuneration�of�executive�directors�and�senior�management�

Objective

The�Company�aims�to�reward�executives�with�a�level�and�mix�of�remuneration�commensurate�with�their� position�and�responsibilities�within�the�Company�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.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

Structure

In�determining�the�level�and�make�up�of�executive�remuneration,�the�CEO�and�Board�have�regard�to�market� levels�of�remuneration�for�comparable�executive�roles.��

Remuneration�packages�include�a�mix�of�fixed�and�variable�remuneration�and�short�and�long�term� performance�based�incentives.��The�proportion�of�fixed�and�variable�remuneration�is�established�for�each� executive�by�the�CEO�after�consultation�with�the�Nomination�&�Remuneration�Committee.�While�the� allocation�may�vary�from�period�to�period,�the�table�below�details�the�approximate�fixed�and�variable� components�for�the�executives.�

%ofTotalTargetAnnualRemuneration %ofTotalTargetAnnualRemuneration
Fixedremuneration Variableremuneration
Executivedirectors
MrJ.E.McBain 80% 20%
MrJ.C.Huljich 80% 20%
MrN.R.Collishaw 80% 20%
Seniormanagement
MrS.W.Holt 80% 20%

(a)�� Fixed�Remuneration�

Fixed�remuneration�consists�of�base�remuneration�(which�is�calculated�on�a�total�cost�basis�and�includes�any� FBT�charges�related�to�employee�benefits�including�motor�vehicles),�as�well�as�employer�contributions�to� superannuation�funds.��This�is�reviewed�annually�by�the�CEO�and�the�Nomination�&�Remuneration� Committee.�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�Nomination�&� Remuneration�Committee�when�reviewing�the�fixed�remuneration�of�the�CEO.�

The�CEO�and�senior�management�are�given�the�opportunity�to�receive�their�fixed�(primary)�remuneration�in� a�variety�of�forms�including�cash�and�salary�sacrifice�items�such�as�motor�vehicles,�motor�vehicle�allowances� and/or�additional�superannuation�contributions.���

(b)�� Variable�Remuneration�

Under�the�Company’s�Senior�Management�Remuneration�Policy,�long�and�short�term�performance� incentives�may�be�made�under�the�Company’s�incentive�plans.�These�are�discussed�further�below.�

(i)�� Short�term�Incentives�(STI)�

The�objective�of�the�STI�program�is�to�link�the�achievement�of�the�Group's�operational�and�financial�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�sufficient�incentive�to�the�executive�to�achieve�operational� targets�and�such�that�the�cost�to�the�Group�is�reasonable�in�the�circumstances.��

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

At�the�Board’s�absolute�discretion,�employees�may�be�provided�with�the�opportunity�to�receive�an�annual,� performance�based�incentive,�either�in�the�form�of�cash�or�the�issue�of�shares�in�the�Company,�or�a� combination�of�both.��

During�the�current�financial�year,�the�Company�issued�Nil�(FY15�320,000)�ordinary�shares�to�employees�in� addition�to�cash�bonuses�provided�to�employees.�

�(ii)�� Long�term�incentive�(LTI)�

The�Company�has�an�Executive�Incentive�Plan�(“LTI�Plan”)�which�forms�a�key�element�of�the�Company’s� incentive�and�retention�strategy�for�senior�executives�under�which�Performance�Rights�(“Rights”)�are�issued.�

The�primary�objectives�of�the�Plan�include:�

  • focusing�executives�on�the�longer�term�performance�of�the�Group�to�drive�long�term�shareholder�value� creation;�

  • ensure�executive�remuneration�outcomes�are�aligned�with�shareholder�interests,�in�particular,�the� strategic�goals�and�performance�of�the�Group;�and�

  • ensure�remuneration�is�competitive�and�aligned�with�general�market�practice�by�ASX�listed�companies.

Rights�issued�under�the�LTI�Plan�are�issued�in�accordance�with�the�thresholds�approved�at�the�2013�AGM.��

A�summary�of�the�key�terms�of�the�Performance�Rights�are�set�out�below.�

Term Detail
PerformanceRights EachRightisarighttoreceiveafullypaidordinaryshareintheCompany
(“Rights”) (“Share”),subjecttomeetingthePerformanceConditions.
UponmeetingthePerformanceConditions,theRightsvestandSharesare
allocated.
Rightsdonotcarryarighttovoteortodividendsor,ingeneral,arightto
participateinothercorporateactionssuchasbonusissues.
Vestingconditions TheRightswillvesttotheextentthattheboarddeterminesthat:

ThePerformanceConditionsthatapplytotheRightsweresatisfied;
and

TheemployeewascontinuouslyemployedbytheCompanyuntilthe
endofthePerformancePeriod.
Vestingdate ThedateonwhichtheBoarddeterminestheextenttowhichthe
PerformanceConditionsaresatisfiedandtheRightsvest.
PerformanceConditions ThePerformanceConditionssetoutintheLTIPlanrelateto:

GrowthinEarningsPerShare(“EPShurdle”);

Growthinpropertyandfriendlysocietyfundsundermanagement
(“GrowthinFUMHurdle”);and

AbsoluteTotalShareholderReturnPerformance(“AbsoluteTSR
Hurdle”).

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

There�have�been�three�tranches�of�Rights�granted�under�the�LTI�plan�to�date:�

Tranche GrantDate PerformancePeriod
1 1January2014 1July2013to30June2016
2 1February2015 1July2014to30June2017
3 1February2016 1July2015to30June2018

The�Performance�Conditions�and�their�associated�weighting�applicable�to�each�tranche�is�summarised�in�the� following�table:��

EPS�Hurdle�

The�percentage�of�Rights�subject�to�the�EPS�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(70%) Tranches2and3(45%)
Maximum%or 12.5%orgreater 100% 10%orgreater 100%
above
Betweenthreshold Morethan7.5%, Pro�ratabetween Morethan6%, Pro�ratabetween
%andmaximum% lessthan12.5% 50%to100% lessthan10% 50%to100%
Morethan4%, Pro�ratabetween
lessthan6% 25%to50%
Threshold% 7.5% 50% 4% 25%
Lessthanthe Lessthan7.5% 0% Lessthan4% 0%
threshold%

The�Board�has�discretion�to�adjust�the�EPS�performance�hurdle�to�ensure�that�participants�are�neither� advantaged�nor�disadvantaged�by�matters�outside�managements’�control�that�affect�EPS�(for�example,�by� excluding�one�off�non�recurrent�items�or�the�impact�of�significant�acquisitions�or�disposals).�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

Growth�in�FUM�Hurdle�

The�percentage�of�Rights�subject�to�the�Growth�in�FUM�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(15%) Tranches2and3(15%)
Maximum%or 25%orgreater 100% 18%orgreater 100%
above
Betweenthreshold Morethan15%, Pro�ratabetween Morethan14%, Pro�ratabetween
%andmaximum% lessthan25% 50%to100% lessthan18% 50%to100%
Morethan10%, Pro�ratabetween
lessthan14% 25%to50%
Threshold% 15% 50% 10% 25%
Lessthanthe Lessthan15% 0% Lessthan10% 0%
threshold%

Absolute�TSR�Hurdle�

The�percentage�of�Rights�subject�to�the�Absolute�TSR�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(15%) Tranches2and3(40%)
Maximum%or 18%orgreater 100% 18%orgreater 100%
above
Betweenthreshold Morethan12%, Pro�ratabetween Morethan15%, Pro�ratabetween
%andmaximum% lessthan18% 50%to100% lessthan18% 50%to100%
Morethan12%, Pro�ratabetween
lessthan15% 25%to50%
Threshold% 12% 50% 12% 25%
Lessthanthe Lessthan12% 0% Lessthan12% 0%
threshold%

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Rights�Granted��

The�following�Rights�were�granted�to�key�management�personnel.��

Employee No.ofRights VestingConditions Fairvalueat
Granted GrantDate
Tranche1
(grantdateof1January2014)
MrJ.E.McBain 376,903 EPSHurdle $0.73
80,765 FUMGrowthHurdle $0.73
80,765 AbsoluteTSRGrowthHurdle $0.18
MrJ.C.Huljich 231,837 EPSHurdle $0.73
49,679 FUMGrowthHurdle $0.73
49,680 AbsoluteTSRGrowthHurdle $0.18
MrN.R.Collishaw 231,837 EPSHurdle $0.73
49,679 FUMGrowthHurdle $0.73
49,680 AbsoluteTSRGrowthHurdle $0.18
Total 1,200,825
Tranche2
(grantdateof1February2015)
MrJ.E.McBain 216,496 EPSHurdle $0.81
72,165 FUMGrowthHurdle $0.81
192,441 AbsoluteTSRGrowthHurdle $0.28
MrJ.C.Huljich 135,000 EPSHurdle $0.81
45,000 FUMGrowthHurdle $0.81
120,000 AbsoluteTSRGrowthHurdle $0.28
MrN.R.Collishaw 135,000 EPSHurdle $0.81
45,000 FUMGrowthHurdle $0.81
120,000 AbsoluteTSRGrowthHurdle $0.28
MrM.J.Coy 60,037 EPSHurdle $0.81
20,012 FUMGrowthHurdle $0.81
53,366 AbsoluteTSRGrowthHurdle $0.28
MrD.B.Govey 44,270 EPSHurdle $0.81
14,757 FUMGrowthHurdle $0.81
39,350 AbsoluteTSRGrowthHurdle $0.28
Otherexecutives 233,564 EPSHurdle $0.81
77,855 FUMGrowthHurdle $0.81
207,613 AbsoluteTSRGrowthHurdle $0.28
Total 1,831,926

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

During�the�year�ended�30�June�2016,�the�following�rights�lapsed�due�to�the�resignation�of�the�relevant� employee:�

Tranche2–lapsedgrants
(grantdateof1February2015)
MrM.J.Coy 60,037 EPSHurdle $0.81
20,012 FUMGrowthHurdle $0.81
53,366 AbsoluteTSRGrowthHurdle $0.28
MrD.B.Govey 44,270 EPSHurdle $0.81
14,757 FUMGrowthHurdle $0.81
39,350 AbsoluteTSRGrowthHurdle $0.28
Otherexecutives 94,143 EPSHurdle $0.81
31,381 FUMGrowthHurdle $0.81
83,683 AbsoluteTSRGrowthHurdle $0.28
Total 440,999
Tranche3
(grantdateof1February2016)
MrJ.E.McBain 216,496 EPSHurdle $0.87
72,165 FUMGrowthHurdle $0.87
192,441 AbsoluteTSRGrowthHurdle $0.19
MrJ.C.Huljich 135,000 EPSHurdle $0.87
45,000 FUMGrowthHurdle $0.87
120,000 AbsoluteTSRGrowthHurdle $0.19
MrN.R.Collishaw 135,000 EPSHurdle $0.87
45,000 FUMGrowthHurdle $0.87
120,000 AbsoluteTSRGrowthHurdle $0.19
Otherexecutives 317,976 EPSHurdle $0.87
105,993 FUMGrowthHurdle $0.87
282,645 AbsoluteTSRGrowthHurdle $0.19
Total 1,787,715

Subject�to�the�Boards’�overriding�discretion,�unvested�Rights�lapse�upon�the�earliest�of�ceasing�employment,� corporate�restructuring,�divestment�of�a�material�business�or�subsidiary,�change�of�control,�clawback�and� lapse�for�fraud�and�breach,�failure�to�satisfy�the�Performance�Conditions�and�the�7[th] �anniversary�of�the�date� of�the�grant.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)�

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

The�Company’s�overall�objective�is�to�reward�senior�management�based�on�the�Company's�performance�and� build�on�shareholders'�wealth�but�this�is�subject�to�market�conditions�for�the�year.�The�table�below�sets�out� summary�information�about�the�Group's�earnings�for�the�past�five�years.�

5�Year�Summary�

30June 30June 30June 30June 30June
2016 2015 2014 2013 2012
$’000 $’000 $’000 $’000 $’000
Netprofitaftertax 12,123 8,561 9,078 7,338 1,967
Sharepriceatstartofyear $0.93 $0.80 $0.82 $0.42 $0.57
Sharepriceatendofyear $1.05 $0.93 $0.80 $0.82 $0.42
Interimdividend 2.25cps 2.0cps 1.25cps 1.25cps 1.25cps
Finaldividend 3.00cps 2.75cps 1.50cps
Basicearningspershare 15.8cps 11.0cps 11.6cps 9.4cps 2.5cps
Dilutedearningspershare 15.1cps 10.8cps 11.6cps 9.4cps 2.5cps

Remuneration�for�the�year�ended�30�June�2016�

Short�termemployeebenefits Short�termemployeebenefits Short�termemployeebenefits Post
employment
benefits
Otherlong�
termbenefits
Share�based
payments
Total
Salaries
$
Fees
$
Bonus
$
Superannuation
$
LongService
Leave
$
$ $
Directors
G.Charny �53,308
�5,064��58,372
R.W.Dobson �113,400
�10,773
��124,173
P.J.Done �129,600
�12,312
��141,912
J.R.Slater �97,200
�9,005��106,205
J.E.McBain 621,000�375,00024,00030,947257,6681,308,615
J.C.Huljich 530,692�250,00019,30817,763159,857977,620
N.R.Collishaw(i) 530,692�110,00019,308
�159,857819,857
Sub�total 1,682,384393,508735,00099,77048,710577,3823,536,754
Seniormanagement
S.W.Holt 66,576�20,0003,218��89,794
Sub�total 66,576�20,0003,218��89,794
Grandtotal 1,748,960393,508755,000102,98848,710577,3823,626,548

(i) As�part�of�his�employment�agreement,�Mr�Collishaw�is�entitled�to�receive�a�one�off�$500,000�incentive� payment�upon�successful�listing�of�a�listed�property�fund�once�the�fund�reaches�$500�million�of�assets� under�management.�Mr�Collishaw�is�not�currently�entitled�nor�has�any�remuneration�been�paid�in� relation�to�this�incentive.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)

5���Remuneration�of�executive�directors�and�senior�management�(continued)�

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.��

Remuneration�for�the�year�ended�30�June�2015�

Short�termemployeebenefits Short�termemployeebenefits Short�termemployeebenefits Post
employment
benefits
Otherlong�
termbenefits
Share�based
payments
Total
Salaries
$
Fees
$
Bonus
$
Superannuation
$
LongService
Leave
$
$ $
Directors
R.W.Dobson �140,000
�13,300
��153,300
P.J.Done �120,000
�11,400
��131,400
J.R.Slater �90,000
�8,550��98,550
J.E.McBain 541,199�150,00024,00011,549215,387942,134
J.C.Huljich 490,431�100,00018,78310,505133,298753,018
N.R.Collishaw(i) 493,716�100,00018,783
�133,298745,797
Sub�total 1,525,346350,000350,00094,81722,054481,9832,824,199
Seniormanagement
M.J.Coy(ii) 359,967��18,7837,13745,248431,136
D.B.Govey 321,286�30,00025,0007,14419,610403,040
Sub�total 681,253�30,00043,78314,28264,858834,176
Grandtotal 2,206,599350,000380,000138,60036,336546,8413,658,376

(i) As�part�of�his�employment�agreement,�Mr�Collishaw�is�entitled�to�receive�a�one�off�$500,000�incentive� payment�upon�successful�listing�of�a�listed�property�fund�once�the�fund�reaches�$500�million�of�assets� under�management.�Mr�Collishaw�is�not�currently�entitled�nor�has�any�remuneration�been�paid�in� relation�to�this�incentive.�

(i) Mr�Coy�was�awarded�20,000�shares�during�the�year�as�a�short�term�incentive�in�recognition�of�the� achievement�of�a�strategic�objective�of�the�Group�to�monetise�a�large�portion�of�the�reverse�mortgage� portfolio.�The�expense�is�included�in�the�share�based�payment�amount�disclosed�in�the�table�above.�

6���Key�terms�of�employment�contracts�

CEO

Mr�John�McBain,�was�appointed�as�CEO�of�the�Company�in�April�2008.��He�is�also�an�executive�director�of�the� Company.�Mr�McBain�is�employed�under�contract.�The�summary�of�the�major�terms�and�conditions�of�Mr� McBain's�employment�contract�are�as�follows:�

  • Fixed�Compensation�plus�superannuation�contributions;��

  • Car�parking�within�close�proximity�to�the�Company’s�office;�

  • Eligible�to�participate�in�the�bonus�program�determined�at�the�discretion�of�the�Board;��

  • The�Company�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;�and��

  • The�Company�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.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

Remuneration�Report�–�Audited�(continued)

7���Director�and�senior�management�equity�holdings�and�other�transactions�

Other�executives�(standard�contracts)

All�executives�are�employed�under�contract.�The�Company�may�terminate�the�executive's�employment� agreement�by�providing�between�1�and�6�months�written�notice�or�providing�payment�in�lieu�of�the�notice� period�(based�on�the�Total�Fixed�Compensation�package).��

�(a)� Director�and�senior�management�equity�holdings

Set�out�below�are�details�of�movements�in�fully�paid�ordinary�shares�held�by�directors�and�senior� management�as�at�the�date�of�this�report.�

Numberofshares Balanceat
SharesPurchased/
Shares
Balanceat
1July
IssuedasPartof
Sold
30June
Remuneration
2016
G.Charny �1,627�1,627
P.J.Done 500,000��500,000
J.R.Slater 1,630,00070,000�1,700,000
J.E.McBain 4,600,0404,509�4,604,549
J.C.Huljich 2,342,715��2,342,715
N.R.Collishaw 850,051��850,051
2015
R.W.Dobson 997,728201,614�1,199,342
P.J.Done 400,000100,000�500,000
J.R.Slater 1,402,297227,703�1,630,000
J.E.McBain 4,590,2869,754�4,600,040
J.C.Huljich 2,387,715�(45,000) 2,342,715
N.R.Collishaw 850,051��850,051
M.J.Coy 583,31137,360�620,671
D.B.Govey 715,272��715,272

(b)� Transactions�with�key�management�personnel

As�a�matter�of�Board�policy,�all�transactions�with�directors�and�director�related�entities�are�conducted�on� arms�length�commercial�or�employment�terms.�

During�the�financial�year,�the�following�transactions�occurred�between�the�Company�and�key�management� personnel:�

  • Wolseley�Corporate�Pty�Ltd,�a�related�party�of�G.�Charny,�was�paid�$88,000�(inclusive�of�GST)�for� corporate�advisory�fees.�

  • Henry�Davis�York,�a�related�party�of�R.�Dobson,�was�paid�$16,374�(inclusive�of�GST)�(2015:�$806,856)�for� legal�consultancy�fees.�

  • Mr�J.�R.�Slater�(personally)�and�Riviera�Capital�Pty�Ltd,�a�related�party�of�Mr.�Slater,�were�paid�a�total�of� $141,840�(inclusive�of�GST)�(2015:�$141,643)�for�consultancy�services.�

���

DIRECTORS’�REPORT� FOR�THE�YEAR�ENDED�30�JUNE�2016

This�Director’s�Report�is�signed�in�accordance�with�a�resolution�of�the�Directors.�

==> picture [142 x 103] intentionally omitted <==

==> picture [126 x 86] intentionally omitted <==

G.�Charny� Chairman�

P.�J.�Done

Director� Chairman���Audit,�Risk�Management�&�� Compliance�Committee�������������

Sydney�

18�August�2016

���

ABCD

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Centuria Capital Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been:

  • (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

  • (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [89 x 61] intentionally omitted <==

KPMG

==> picture [137 x 88] intentionally omitted <==

Nigel Virgo Partner

Sydney

18 August 2016

22

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under (“KPMG International”), a Swiss entity. Professional Standards Legislation

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

CONSOLIDATED�STATEMENT�OF�COMPREHENSIVE�INCOME�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

2016
2015
2016
2015
Note
$'000
$'000
Profitattributabletoshareholders
Revenue
6(a)
46,009
37,201
Gainsonsalesofnon�coreassets
6(b)

5,194
Unrealisedgainarisingfromfairvaluemovementsof
derivativefinancialinstruments
23(c)(iv)
5,493
1,148
Expenses
(29,252)
(24,930)
Financecosts
8
(2,707)
(3,890)
Note
$'000
$'000
Profitbeforetaxattributabletoshareholders
Incometaxexpense(i)
9(a)
Benefitfunds
19,543
14,723
(7,420)
(6,162)
RevenueattributabletoBenefitFunds(ii)
16(a)
20,927
22,015
ExpensesattributabletoBenefitFunds(ii)
16(a)
(19,578)
(20,395)
IncometaxexpenserelatingtoBenefitFunds(i),(ii)
16(a)
(1,349)
(1,620)
Benefitfundscontributiontoprofit,netoftax


Profitaftertaxfortheperiod
12,123
8,561

12,123
8,561
Othercomprehensiveincome:
Gainoncashflowhedgestakentoequity

54
Incometaxexpenseonothercomprehensiveincome

(16)
Othercomprehensiveincomefortheyear(netoftax)

38
Totalcomprehensiveincomefortheperiod
12,123
8,599
Profitattributableto:
OwnersoftheCompany
12,303
8,566
Non�controllinginterests
(180)
(5)
12,123
8,561
Totalcomprehensiveincomeattributableto:
OwnersoftheCompany
12,303
8,604
Non�controllinginterests
(180)
(5)
12,123
8,599
12,123
8,599
Earningspershare
Fromcontinuingoperations:
Basic(centspershare)
10
15.8
11.0
Diluted(centspershare)
10
15.1
10.8

(i) Total�consolidated�income�tax�expense�including�the�benefit�funds�is�$8.8�million�(FY15:�$7.8�million).�

(ii) A�subsidiary�of�the�Company,�Centuria�Life�Limited�(CLL),�is�a�friendly�society�in�accordance�with�the� Life�Insurance�Act�1995�(“the�Act”).�The�funds�operated�by�CLL,�and�any�trusts�controlled�by�those� funds,�are�treated�as�statutory�funds�in�accordance�with�the�Act.�These�statutory�funds�are�required� to�be�consolidated�in�accordance�with�accounting�standards�and�are�shown�separately�from� shareholder�funds�in�the�financial�statements.�

Notes�to�the�consolidated�financial�statements�are�included�on�pages�27�to�70.

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

CONSOLIDATED�STATEMENT�OF�FINANCIAL�POSITION�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

30June2016 30June2015
Note $'000 $'000
ASSETS
Cashandcashequivalents 22(a) 13,157 25,487
Tradeandotherreceivables 11 19,656 8,619
Assetsclassifiedasheldforsale 21(d)(iii) 1,040
Prepayments 1,054 797
Incometaxreceivable 9(b) 1,804
Financialassetsatfairvalue 12 47,194 5,456
Propertyheldfordevelopment 35,716 23,011
Reversemortgagesatfairvalue 12 51,561 43,754
Plantandequipment 863 1,134
Deferredtaxassets 9(c) 819
Intangibleassets 13 53,025 53,025
222,226 164,945
Assetsinrespectofbenefitfundpolicyholders 16(b) 353,528 386,401
TOTALASSETS 575,754 551,346
LIABILITIES
Tradeandotherpayables 14 9,190 6,343
Provisions 1,155 1,264
Borrowings 15 59,951 20,912
Interestrateswapatfairvalue 23(c)(iv) 20,778 17,576
Incometaxpayable 9(b) 985
DeferredtaxLiability 9(c) 2,500
94,559 46,095
LiabilitiesinrespectofBenefitFundspolicyholders 16(b) 353,528 386,401
TOTALLIABILITIES 448,087 432,496
NETASSETS 127,667 118,851
EQUITY
Contributedequity 17 88,058 88,112
Retainedearnings 28,452 19,982
Share�basedpaymentreserve 1,459 784
EquityattributabletoequityholdersoftheCompany 117,969 108,878
Non�controllinginterests 9,698 9,973
TOTALEQUITY 127,667 118,851

The�consolidated�financial�statements�include�the�financial�position�of�the�Benefit�Funds�of�Centuria�Life� Limited�(refer�to�the�footnote�on�page�23).�

Notes�to�the�consolidated�financial�statements�are�included�on�pages�27�to�70.

���

Contributed
equity
Retained
earnings
Cashflow
hedge
reserve
Share�
based
payment
reserve
Attributableto
equityholders
oftheparent
Non�
controlling
interests
Totalequity
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Balanceat30June2014
89,167
14,151
(38)
164
103,444

103,444
Profitfortheyear

8,566


8,566
(5)
8,561
Othercomprehensiveincomefortheperiod


38

38

38
Totalcomprehensiveincomefortheperiod

8,566
38

8,604
(5)
8,599
AcquisitionofsubsidiarywithNCI





9,978
9,978
Share�basedpayment



620
620

620
Employeesharescheme
284



284

284
Dividendspaid

(2,735)


(2,735)

(2,735)
Sharebuy�back/sharescancelled
(1,339)



(1,339)

(1,339)
Balanceat30June2015
88,112
19,982

784
108,878
9,973
118,851

8,566
38

8,604
(5)
8,599





9,978
9,978



620
620

620
284



284

284

(2,735)


(2,735)

(2,735)
(1,339)



(1,339)

(1,339)
88,112
19,982

784
108,878
9,973
118,851
88,112
19,982

784
108,878
9,973
118,851

12,303


12,303
(180)
12,123

12,303


12,303
(180)
12,123





(95)
(95)



675
675

675
57



57

57

(3,833)


(3,833)

(3,833)
(111)
(111)

(111)
88,058
28,452

1,459
117,969
9,698
127,667
Notestotheconsolidatedfinancialstatementsareincludedonpages27to70.
Balanceat1July2015
Profitfortheyear
Totalcomprehensiveincomefortheperiod
FundEstablishmentcosts
Share�basedpayment
Employeesharescheme
Dividendspaid
Sharebuy�back/sharescancelled
Balanceat30June2016

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

CONSOLIDATED�STATEMENT�OF�CASH�FLOWS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

2016 2015
Note $'000 $'000
Cashflowsfromoperatingactivities
Managementfeesreceived 25,310 29,734
Rent,trustdistributionsandotherincomereceived 1,275 2,392
Paymentstosuppliersandemployees (21,771) (25,424)
Interestreceived 1,089 776
Paymentsforpropertyheldfordevelopment (12,705) (23,011)
Incometaxpaid (3,199) (6,819)
(10,001) (22,352)
BenefitFundsnetcashusedinoperatingactivities (35,572) (27,855)
Netcashusedinoperatingactivities 22(b) (45,573) (50,207)
Cashflowsfrominvestingactivities
BenefitFundsnetcashprovidedbyinvestingactivities 90,903 5,408
Paymentsforplantandequipment (59) (539)
Acquisitionofinvestmentsinmanagedfunds (38,574) (6,154)
Netproceedsfromsaleofinsurancesubsidiary 4,873
Netcashprovidedbyinvestingactivities 52,270 3,588
Cashflowsfromfinancingactivities
Paymentforshares(buy�back)/issued (111) (1,339)
Collectionsfromreversemortgageholders 3,446 12,994
Repaymentofborrowings(reversemortgages) (1,503) (8,395)
Interestpaidonreversemortgageborrowings (2,208) (3,765)
Proceedsfrompartialsaleofreversemortgageloanportfolio 126,566
Repaymentofborrowingsonsaleofreversemortgagesloanportfolio (94,864)
Repaymentofborrowings(corporate) (12,000)
Proceedsfromborrowings(corporate) 26,750
Proceedsfromborrowings(development) 13,792 9,609
Proceedsfromnon�controllinginterests 9,696
Dividendspaid (3,833) (2,735)
Financingcostspaidoncorporateborrowings (28) 776
Netcashprovidedbyfinancingactivities 36,304 36,543
Net(decrease)/increaseincashandcashequivalents 43,001 (10,076)
Cashandcashequivalentsatthebeginningofthefinancialyear 41,324 51,400
84,325 41,324
Lesscashattributabletobenefitfunds 16(b) 71,168 15,838
Cashandcashequivalentsattributabletoshareholdersat30June 22(a) 13,157 25,487

Notes�to�the�consolidated�financial�statements�are�included�on�pages�27�to�70.

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

1.� General�information�

Centuria�Capital�Limited�(the�‘Company’)�is�a�public�company�listed�on�the�Australian�Stock�Exchange�(trading� under�the�symbol�CNI),�incorporated�and�operating�in�Australia.�These�consolidated�financial�statements� comprise�the�Company�and�its�controlled�entities�(together�referred�to�as�the�‘Group’).�

The�Company�is�a�for�profit�entity�and�its�principal�activities�are�the�marketing�and�management�of� investment�products�(including�friendly�society�investment�bonds�and�property�investment�funds),� management�of�Over�Fifty�Guardian�Friendly�Society�Limited�and�management�of�a�reverse�mortgage�lending� portfolio.�

The�Company�is�required�by�AASB�10� Consolidated�Financial�Statements� to�recognise�the�assets,�liabilities,� income,�expenses�and�equity�of�the�Benefit�Funds�of�its�subsidiary,�Centuria�Life�Limited�(the�“Benefit� Funds”).�The�assets�and�liabilities�of�the�Benefit�Funds�do�not�impact�the�net�profit�after�tax�or�the�equity� attributable�to�the�shareholders�of�the�Company�and�the�shareholders�of�the�Company�have�no�rights�over� the�assets�and�liabilities�held�in�the�Benefit�Funds.

The�Company’s�registered�office�is�Level�39,�100�Miller�Street,�Sydney�NSW�2060.�

2.� Basis�of�accounting�

The�consolidated�financial�statements�are�general�purpose�financial�statements�which�have�been�prepared� in�accordance�with�Australian�Accounting�Standards�(AASBs)�adopted�by�the�Australian�Accounting�Standards� Board�(AASB)�and�the� Corporations�Act�2001 .�The�consolidated�financial�statements�comply�with� International�Financial�Reporting�Standards�(IFRS)�adopted�by�the�International�Accounting�Standards�Board� (IASB).�They�were�authorised�for�issue�by�the�directors�on�18�August�2016.�

3.� Basis�of�preparation�

The�financial�statements�have�been�prepared�on�the�basis�of�historical�cost,�except�for�derivative�financial� instruments,�financial�assets�at�fair�value�through�profit�and�loss�and�other�financial�assets,�which�have�been� measured�at�fair�value�at�the�end�of�each�reporting�period.�Cost�is�based�on�the�fair�values�of�the� consideration�given�in�exchange�for�assets.�All�amounts�are�presented�in�Australian�dollars,�which�is�the� company’s�functional�currency,�unless�otherwise�noted.��

The�Company�is�an�entity�of�a�kind�referred�to�in�the�“ASIC�Corporations�(Rounding�in�Financial/Directors’� Report)�Instrument�2016/191”.�Amounts�in�the�consolidated�financial�statements�have�been�rounded�off,�in� accordance�with�that�Class�Order,�to�the�nearest�thousand�dollars,�unless�otherwise�indicated.�

4.� Use�of�judgements�and�estimates�

In�preparing�these�consolidated�financial�statements,�management�has�made�judgements,�estimates�and� assumptions�that�affect�the�application�of�accounting�policies�and�the�reported�amounts�of�assets�and� liabilities,�income�and�expenses.�The�judgements,�estimates�and�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�estimates�are� recognised�prospectively.�

�(i)�� Key�judgements

Information�about�critical�judgements�in�applying�accounting�policies�that�have�the�most�significant�effect�on� the�amounts�recognised�in�the�financial�statements�is�included�in�the�following�notes:�

  • Note�13�–�Intangible�Assets�

  • Note�23�–�Financial�Instruments�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

5.� Operating�Segments�

The�Group�has�four�reportable�segments.��These�reportable�segments�are�the�divisions�used�to�report�to�the� Group's�CEO�and�Board�for�the�purpose�of�resource�allocation�and�assessment�of�performance.���

The�operations�of�the�reportable�segments�are:�

  • Property�Funds�Management:�management�of�listed�and�unlisted�property�funds�through�Centuria� Property�Funds�Limited�and�Centuria�Strategic�Property�Limited.�

  • Investment�Bonds:�management�of�the�Benefit�Funds�of�Centuria�Life�Limited�and�management�of�the� Guardian�Over�Fifty�Friendly�Society�Limited.��The�Benefit�Funds�include�a�range�of�financial�products,� including�single�and�multi�premium�investments.�

  • Reverse�Mortgages:�management�of�a�reverse�mortgage�lending�portfolio.�

  • Corporate:�includes�returns�from�investment�activities.�

The�accounting�policies�of�reportable�segments�are�the�same�as�the�Group's�accounting�policies.��

Following�is�an�analysis�of�the�Group's�revenue�and�results�by�reportable�segment�in�a�format�consistent�with� that�presented�to�the�Group’s�CEO�and�Board.

thatpresentedtotheGroup’sCEOandBoard. thatpresentedtotheGroup’sCEOandBoard. thatpresentedtotheGroup’sCEOandBoard.
Property
Funds
Management
Investment
Bonds
Reverse
Mortgages
Corporate
Group
Financialyearended30June2016
$'000
$'000
$'000
$'000
$'000
Revenue
Interest,dividendsanddistributionrevenue 1011742,3181,8794,472
Feeincome
29,5389,513�7539,126
Commissions,otherincomeandgains
7831172,2852,411
Totalsegmentrevenue
29,7169,7182,3354,23946,009
Underlyingprofitbeforetax
16,9114,677(260) (5,489) 15,839
Underlyingprofitaftertax
11,8232,516(182) (3,740) 10,417
29,7169,7182,3354,23946,009
16,9114,677(260) (5,489)
**11,8232,516(182) (3,740) **
15,839
10,417
ReconciliationtoStatutoryProfitaftertax
Taximpactofabove
StatutoryProfitaftertax
11,823
(263)
3,663
(3,100)
Additionalsegmentinformation
Financecosts
(15) (2) (1,949) (741)
Employeebenefitsexpense
(8,966) (1,418) (174) (3,820)
Impairmentofrelatedpartyreceivable
�(2,779) ��
Unrealisedgainsoffairvaluemovementsinderivatives
Impairmentchargesinrelationtoseedcapitalvaluations
Unrealisedgainsonnon�coreinvestments(netofcosts)
5,493
(2,779)
990
(1,998)
12,123
(2,707)
(14,378)
(2,779)

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

5.� Operating�Segments�(continued)�

5.
OperatingSegments(continued)
Property Investment Reverse **Insurance ** Corporate Group
Funds Bonds Mortgages
Management
Financialyearended30June2015 $'000 $'000 $'000 $'000 $'000 $'000
Revenue
Interest,dividendsanddistributionrevenue 139 213 5,194 838 6,384
Feeincome 20,324 9,856 30,180
Commissions,otherincomeandgains 154 9 402 287 4,979 5,831
Totalsegmentrevenue 20,617 10,078 5,596 287 5,817 42,395
Underlyingprofitbeforetax 8,774 5,803 777 244 (5,422) 10,176
Underlyingprofitaftertax 5,977 3,420 612 170 (3,899) 6,281
ReconciliationtoStatutoryProfitaftertax
Unrealisedgainsoffairvaluemovementsinderivatives 1,148
Impairmentchargesinrelationtoseedcapitalvaluations (1,795)
Accountinggainsonsaleofnon�coreassets 5,194
Taximpactofabove (2,266)
StatutoryProfitaftertax 5,977 1,261 1,416 170 (263) 8,561
Additionalsegmentinformation
Financecosts (113) 415 (3,662) 48 (578) (3,890)
Employeebenefitsexpense (8,360) (969) (230) (2,905) (12,464)
Impairmentofrelatedpartyreceivable (2,218) (2,218)

6.� Revenue�

(a)�� Group�revenue�(excluding�Benefit�Funds)

Interestrevenue�fromreversemortgages
Interestrevenue�fromothersources
Distributionrevenue
Managementfeesfrompropertyfunds
Salesfees
Incentivefees
Propertyacquisitionfees
ManagementfeesfromBenefitFunds
Unrealisedgainonlistedinvestment
Otherincome
2016
2015
$'000
$'000
2,3005,144
1,089776
1,083464
9,5419,161
1,1433,880
15,8134,741
3,0412,542
9,5139,856
2,232�
254637
46,00937,201

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

(b)�� Gains�on�sale�of�non�core�assets�

b)
Gainsonsaleofnon�coreassets
GainonsaleofOverFiftyInsurancePtyLtd
Gainonsaleofreversemortgageloanportfolio
2016
2015
$'000
$'000
�4,873
�321
�5,194

In�October�2014,�the�Group�announced:

  • the�sale�of�its�subsidiary,�Over�Fifty�Insurance�Pty�Ltd�for�$5.2�million;�and�

  • the�sale�of�a�large�portion�of�its�reverse�mortgage�portfolio,�releasing�$31.7�million�cash�to�the�Group� (before�transaction�costs�and�taxation).�The�Group�sold�its�variable�rate�reverse�mortgages�with�a�balance� of�$124.4�million�and�retained�a�$27.0�million�portfolio�of�fixed�rate�reverse�mortgages.�

7.� Expenses�

2016 2015
$'000 $'000
Employeebenefits 14,378 12,464
Impairmentofrelatedpartyreceivable 2,779 2,218
Rentalexpense(operatingleases) 806 760
Depreciationandamortisation 330 341

8.� Finance�costs�

8.
Financecosts
Corporateworkingcapitalfacility
Reversemortgagefacility
Unwindingofdiscount)onnon�currentrelatedpartyreceivable
Otherfinancecosts
2016
2015
$'000
$'000
730473
1,9493,662
�(423)
28178
2,707
3,890

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

9.� Income�taxes�

The�Company�is�the�head�entity�of�the�tax�consolidated�group,�which�includes�Centuria�Life�Limited�and�the� Benefit�Funds.�As�a�result�of�tax�consolidation,�the�Company�recognises�current�tax�related�receivables�and� corresponding�payables�from�its�subsidiaries�and�the�Benefit�Funds.��

The�tax�rate�used�in�the�reconciliation�following�is�the�corporate�tax�rate�of�30%�payable�by�Australian� corporate�entities�on�taxable�profits�under�Australian�tax�law.�There�has�been�no�change�in�the�corporate�tax� rate�when�compared�with�the�previous�reporting�period.�

(a)�� Income�tax�recognised�in�profit�or�loss��

a)
Incometaxrecognisedinprofitorloss
2016 2015
$'000 $'000
Profitbeforetax 19,543 14,723
Incometaxexpensecalculatedat30% 5,863 4,417
Add/(deduct)taxeffectofamountswhicharenot
deductible/(assessable)
�Non�allowableexpenses�seedcapitalimpairment 834 665
�Non�allowableexpenses�other 723 1,091
�Adjustmentstocurrenttaxinrelationtoprioryears (11)
Incometaxexpense 7,420 6,162
Currenttaxexpenseinrespectofthecurrentyear 4,100 5,444
Adjustmentstocurrenttaxinrelationtoprioryears (11)
4,100 5,433
Deferredtaxexpenserelatingtotheoriginationandreversalof 3,320 729
temporarydifferences
Incometaxexpense 7,420 6,162
b)
Currenttaxassetsandliabilities
2016 2015
$'000 $'000
Currenttaxassets/(liabilities)attributableto:
BenefitFunds 841 1,998
Shareholders (1,826) (194)
(985) 1,804

(b)�� Current�tax�assets�and�liabilities�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

9.� Income�taxes�(continued)�

�(c)�� Deferred�tax�balances�

(c)
Deferredtaxbalances
Financialyearended30June2016 Opening
balance
Chargedto
income
Utilised
Closing
Balance
$'000
$'000
$'000
$'000
Deferredtaxassets
Provisions
Financialderivatives
Capitallosses
Deferredtaxliabilities
Accruedincome
Deferredcapitalgainonfinancialassets
Prepayments
Fairvaluemovementsinmortgageassets
1,211584�1,795
3,396(666) �2,730
92
111�203
(525) (1,984) �(2,509)
(25)
(669) �(694)
(75)
69
�(5)
(3,255) (765) �(4,020)
819(3,320) �(2,500)
Financialyearended30June2015 Opening
balance
Chargedto
income
Utilised
Closing
Balance
Restated
Restated
$'000
$'000
$'000
$'000
Deferredtaxassets
Provisions
Financialderivatives
Capitallosses
Deferredtaxliabilities
Accruedincome
Deferredcapitalgainonfinancialassets
Prepayments
Fairvaluemovementsinmortgageassets
Other
1,211��1,211
3,719(323) �3,396
2,258(111) (2,055) 92
�(525) �(525)
(189) 164�(25)
(171) 96
�(75)
(3,208) (47)
�(3,255)
(17)
17
3,603(729) (2,055) 819

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

10.
Earningspershare
Basicearningspershare
Dilutedearningspershare
2016
2015
$'000
$'000
15.8
11.0
15.1
10.8

The�earnings�used�in�the�calculation�of�basic�and�diluted�earnings�per�share�is�the�profit�for�the�year� attributable�to�owners�of�the�Company�as�reported�in�the�Consolidated�Statement�of�Comprehensive�Income.

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

Theweightedaveragenumberofordinarysharesusedinthecalculationofbasic
shareisasfollows:
anddilutedearningsper
2016
2015
No.'000
No.'000
Weightedaveragenumberofordinaryshares(basic) 76,65077,855
Weightedaveragenumberofordinaryshares(diluted)(i) 80,11579,024

(i) The�weighted�average�number�of�ordinary�shares�used�in�the�calculation�of�diluted�earnings�per�share�is�determined�as�if�30� June�2016�was�the�end�of�the�performance�period�of�the�grants�of�Rights�under�the�LTI�plan.�All�Rights�that�would�have�vested� if�30�June�2016�was�the�end�of�the�performance�period�are�deemed�to�have�been�issued�at�the�start�of�the�financial�year�in� accordance�with�the�applicable�accounting�standard.�

11.� Trade�and�other�receivables�

11.
Tradeandotherreceivables
2016 2015
$'000 $'000
Amountowingbyrelatedentities(current)(refertoNote21(d)(i)) 18,853 8,384
Sundrydebtors(current) 803 235
19,656 8,619

The�Group�does�not�hold�any�collateral�or�other�credit�enhancements�over�these�balances�nor�does�it�have�a� legal�right�of�offset�against�any�amounts�owed�by�the�Group�to�the�counterparty.��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

12.� Financial�assets�

12.
Financialassets
2016 2015
$'000 $'000
Financialassetsatfairvalue
Unittrusts(current) 40,516 26
Unittrusts(relatedparty)(non�current)(refertoNote21(d)(ii)) 6,678 5,430
47,194 5,456
Reversemortagesatfairvalue
Reversemortgagereceivables(i) 26,507 26,552
Reversemortgages(hedgeditemfairvalueadjustment)(refertoNote23(c)(iv))(i) 25,054 17,202
Reversemortgagesatfairvalue 51,561 43,754

(i) Whilst�some�mortgages�are�likely�to�be�repaid�during�the�next�12�months,�Centuria�does�not�control�the�repayment�date�and� accordingly�all�amounts�are�treated�as�non�current.�

13.� Intangible�assets�

13.
Intangibleassets
Goodwill(non�current) 2016
2015
$'000
$'000
53,025
53,025

There�was�no�movement�in�the�carrying�value�of�goodwill�during�the�current�or�prior�reporting�period.��

Goodwill�is�solely�attributable�to�the�Property�Funds�Management�business�with�recoverability�determined� by�a�value�in�use�calculation�using�profit�and�loss�projections�covering�a�five�year�period,�with�a�terminal� value�determined�after�5�years.�

The�key�assumptions�used�in�the�value�in�use�calculations�for�the�property�funds�management�cash� generating�unit�are�as�follows:�

Revenue:� Revenues�in�2017�are�based�on�the�budget�for�FY2017�and�are�assumed�to� increase�at�a�rate�of�7.5%�(2015:�7.5%)�per�annum�for�the�years�2017�2020.�The� directors�believe�this�is�a�prudent�and�achievable�growth�rate�based�on�past� experience.�

Expenses:� Expenses�in�2017�are�based�on�the�budget�for�FY2017�and�are�assumed�to� increase�at�a�rate�of�5.0%�(2015:�5.0%)�per�annum�for�the�years�2017�2020.�The� directors�believe�this�is�an�appropriate�growth�rate�based�on�past�experience.� Post�tax�discount�rate:� Discount�rates�are�determined�to�calculate�the�present�value�of�future�cash� flows.�A�pre�tax�rate�of�10.68%�(2015:�11.24%)�is�applied�to�cash�flow� projections.�In�determining�the�appropriate�discount�rate,�regard�has�been�given� to�relevant�market�data�as�well�as�Company�specific�inputs.�

Terminal�growth�rate:� Beyond�2020,�a�growth�rate�of�3%�(2015:�3%),�in�line�with�long�term�economic� growth,�has�been�applied�to�determine�the�terminal�value�of�the�asset.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

13.� Intangible�assets�(continued)�

Sensitivity�to�changes�in�assumptions

As�at�30�June�2016,�the�estimated�recoverable�amount�of�goodwill�relating�to�the�property�funds� management�business�exceeded�its�carrying�amount�by�$49.7�million�(2015:�$15.3�million).�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:�

Revenue Pre�tax
growthrate discount Expenses
(average) rate growthrate
Assumptionsusedinvalueinusecalculation 7.50% 10.68% 5.00%
Raterequiredforrecoverableamounttoequalcarrying 2.40% 18.10% 11.33%

14.� Trade�and�other�payables�

14.
Tradeandotherpayables
2016 2015
$'000 $'000
Sundrycreditors(current)(i) 3,391 2,120
Accruedexpenses(current) 4,958 2,225
TaxpayabletoBenefitFunds(current)(refertoNote16(b)) 841 1,998
9,190 6,343

(i) Sundry�creditors�are�non�interest�bearing�liabilities,�payable�on�commercial�terms�of�7�to�60�days.���

15.� Borrowings�

15.
Borrowings
2016 2015
$'000 $'000
Corporateworkingcapitalfacility(current) 26,750
Developmentfacility(current) 23,401 9,609
Reversemortgagebillfacilitiesandnotes�secured(non�current) 9,800 11,303
59,951 20,912

(a)�� Terms�and�conditions�

The�terms�and�conditions�relating�to�the�above�facilities�are�set�out�below.��

(i)� Corporate�working�capital�facility�

The�Company�entered�into�a�new�revolving�cash�advance�facility�with�National�Australia�Bank�during�the� reporting�period�to�replace�its�previous�working�capital�facility.�As�at�30�June�2016,�the�total�facility�limit�was� $30.0�million�(including�$3.25�million�of�bank�guarantees).�$5.0�million�of�the�facility�matures�30�November� 2016,�with�the�remaining�$25.0�million�due�to�mature�28�February�2017.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

15.� Borrowings�(continued)�

(a)�� Terms�and�conditions�(continued)�

(ii)� Development�facility���secured�

Centuria�Belmont�Road�Management�Pty�Limited�has�entered�into�a�facility�agreement�with�Commonwealth� Bank�of�Australia.�The�facility�is�$38.75�million�across�three�tranches,�maturing�31�August�2017.��The�facility� is�recourse�only�to�the�underlying�property�assets�of�the�Belmont�Road�Development�Fund.�

�(iii)� Reverse�mortgage�bill�facilities�and�notes�–�secured��

At�reporting�date,�the�Group�has�$9.8�million�(30�June�2015:�$11.3�million)�non�recourse�notes�on�issue�to� the�ANZ,�secured�over�the�remaining�reverse�mortgages�held�in�Senex�Warehouse�Trust�No.1�(a�subsidiary�of� the�Group)�maturing�on�30�September�2017.��

The�facility�limit�is�$15.0�million�(30�June�2015:�$18.0�million)�and�is�reassessed�every�6�months�with�a�view� to�reducing�the�facility�in�line�with�the�reduction�in�the�reverse�mortgage�book.��Under�the�facility�agreement,� surplus�funds�(being�mortgages�repaid�(including�interest)�less�taxes,�administration�expenses�and�any�hedge� payments)�are�required�to�be�applied�against�the�facility�each�month.��During�the�year�ended�30�June�2016,� $1.5�million�surplus�funds�have�been�applied�against�the�facility�(30�June�2015:�$8.4�million).��

(b)�� Available�facilities�

The�Group�has�access�to�the�following�lines�of�credit[(i)] :�

TheGrouphasaccesstothefollowinglinesofcredit(i):
2016 2015
$'000 $'000
Corporateworkingcapitalfacility 26,750 12,000
Amountusedatreportingdate 26,750
Amountunusedatreportingdate 12,000
Reversemortgagebillfacilitiesandnotes(secured) 15,000 18,000
Amountusedatreportingdate 9,800 11,303
Amountunusedatreportingdate 5,200 6,697

(i) Excludes�the�undrawn�portion�of�the�development�facility.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

16.� Policyholders’�funds

Policyholder�liabilities�for�benefit�funds,�other�than�the�Funeral�Benefit�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�each�fund�is�the�unvested�policyholder�benefit�liabilities�(or�surplus).�Each� year’s�bonus�declaration�results�in�a�movement�from�unvested�policyholder�benefit�liabilities�to�the�vested� policy�liability.�The�bonus�rate�is�limited�to�ensure�that�the�amount�vesting�is�no�more�than�the�distributable� portion�of�unvested�policyholder�benefit�liabilities.�

For�the�Funeral�Benefit�Fund,�the�policyholder�liability�has�been�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�benefits�(pre�bonus)�plus�the�present�value�of�future�bonuses.��Following�declaration�of�the� bonus,�there�would�then�be�no�surplus�under�this�arrangement.��

The�main�variables�that�determine�the�bonus�rate�for�a�Benefit�Fund�are�the�value�of�the�net�assets�of�each� benefit�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�benefit�fund�over�the�liabilities�after�meeting�the� prudential�capital�requirements�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�specified�fee�transfers�from�the�funds�to�cover�expenses.��All�remaining�assets� are�to�be�used�to�provide�benefits�to�members.��

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

Transactions�with�the�benefit�funds�are�shown�gross�on�the�basis�that�the�shareholders�of�the�company�do� not�have�access�nor�are�exposed�to�the�revenue,�expenses,�assets�and�liabilities�of�the�benefit�funds�other� than�the�requirement�to�maintain�capital�in�the�Centuria�Capital�Guaranteed�Bond�fund�and�the�Income� Accumulation�Fund.�

(a)�� Contribution�to�profit�or�loss�of�benefit�funds�

Income
Interestanddividends
Realisedgains
Unrealisedgains/(losses)
Premiums(DiscretionaryParticipationFeaturesonly)
Otherincome
Expenses
Claims(DiscretionaryParticipationFeaturesonly)
Netmovementinpolicyholderliabilities
Managementfeeexpense
Baddebts�mortgageloans
Profitbeforetax
Incometaxexpense
Profitaftertaxattributabletobenefitfunds
2016
2015
$'000
$'000
11,15211,414
6823,784
3,3302,500
5,7624,315
12
20,92722,015
41,70536,559
(29,539) (26,265)
7,1997,735
2132,366
19,57820,395
1,3491,620
(1,349) (1,620)
��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

16.� Policyholders’�funds�(continued)�

The�composition�and�balances�of�the�assets�and�liabilities�held�by�the�Benefit�Funds�are�as�follows:�

(b)�� Benefit�fund�policyholder’s�assets�and�liabilities�

2016 2015
$'000 $'000
Cash 71,168 15,838
Tradeandotherreceivables 3,971 11,184
Financialassetsatfairvalue 277,548 357,381
Incometaxreceivable 841 1,998
Totalassets 353,528 386,401
Tradeandotherpayables 27
Policyholders'funds(i) 349,878 382,914
Deferredtaxliabilities 3,623 3,487
Totalliabilities 353,528 386,401

(i) Included�within�policyholders'�funds�at�30�June�2016�is�$35.2�million�(30�June�2015:�$25.2�million)�of�reserves�of�which�$6.2� million�(30�June�2015:�$6.2�million)�is�seed�capital�repayable�to�Centuria�Life�Limited.�This�seed�capital�receivable�by�Centuria� Life�Limited�has�been�impaired�and�discounted�to�present�value.��The�carrying�value�of�the�receivable�in�the�books�of�Centuria� Life�Limited�(and�therefore�the�Group)�at�30�June�2016�is�$0.4�million�(30�June�2015:�$2.8�million).

(c)�� Movement�in�benefit�fund�policyholder’s�funds

(c)
Movementinbenefitfundpolicyholder’sfunds
2016 2015
$'000 $'000
BonusRatedBenefitFunds(withDiscretionaryParticipation
Features)
Openingbalance 297,513 328,616
Movementinseedcapital 370
Applicationsreceived 5,762 4,315
Redemptionspaid (41,705) (36,559)
Currentperiodincome 1,303 771
Closingbalance 262,873 297,513
UnitisedBenefitFunds(withnonDiscretionaryParticipation
Features)
Openingbalance 85,401 80,661
Applicationsreceived 17,186 5,472
Redemptionspaid (20,681) (5,909)
Currentperiodincome 5,099 5,177
Closingbalance 87,005 85,401
Totalpolicyholders'funds 349,878 382,914

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

16.� Policyholders’�funds�(continued)�

(d)� Guarantees�to�Benefit�Fund�policyholders�

Centuria�Life�Limited�(CLL)�provides�a�guarantee�to�policyholders�of�two�of�its�Benefit�Funds,�Centuria�Capital� Guaranteed�Bond�Fund�and�Centuria�Income�Accumulation�Fund�as�follows:��

"If,�when�CLL,�in�right�of�the�Bonds,�is�required�under�the�Bond�rules�to�pay�Policy�Benefits�to�a�Policy�Owner� as�a�consequence�of�the�termination�of�the�Bond�or�the�Maturity�or�Surrender�of�a�Policy,�and�CLL�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),�CLL�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."���

No�provision�has�been�raised�in�respect�of�these�guarantees�at�this�time�for�the�following�reasons:�

  • The�funds�follow�an�investment�strategy�that�is�appropriate�for�the�liabilities�of�the�fund.�The�Fund�cannot� alter�their�investment�strategy�without�the�approval�of�the�members�and�APRA,�following�a�report�from� the�Appointed�Actuary;��

  • The�funds�must�meet�the�Capital�Adequacy�standards�of�APRA�which�results�in�additional�reserves�being� held�within�the�funds�to�enable�the�funds�to�withstand�a�"shock"�in�the�market�value�of�assets.�If�the� Funds�can�withstand�a�shock�in�asset�values�and�still�meet�their�liabilities�from�their�own�reserves,�then� this�further�reduces�the�likelihood�of�the�Funds�calling�on�the�guarantee�provided;�and�

  • CLL�also�continues�to�meet�the�ongoing�capital�requirements�set�by�APRA.�

17.� Issued�Capital��

17.
IssuedCapital
2016
2015
$'000
$'000
No.ofShares
$'000
No.ofShares
$'000
Balanceatbeginningoffinancialyear 76,756,92988,11278,130,76489,167
Employeesharescheme �57�284
Sharebuy�back/sharescancelled (125,230) (111) (1,373,835) (1,339)
Balanceatendoffinancialyear 76,631,69988,05876,756,92988,112

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.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

18.� Dividends��

18.
Dividends
Recognisedamounts
Interimdividend(fullyfranked)
Finaldividend(fullyfranked)
Cents
pershare
Total
$'000
Cents
pershare
Total
$'000
2016
2015
2.25(i)
1,724
2.00(iii) 1,563
2.75(ii)
2,109
1.50(iv) 1,172
5.00(ii) 3,833
3.50(ii) 2,735

(i) The�Company�declared�an�interim�dividend�in�respect�of�the�year�ended�30�June�2016�of�2.25�cents�fully�franked�to�100%�with� a�record�date�of�26�February�2016�which�was�paid�on�18�March�2016.�

(ii) The�Company�declared�a�final�dividend�in�respect�of�the�year�ended�30�June�2015�of�2.75�cents�fully�franked�to�100%.��The�final� dividend�had�a�record�date�of�28�August�2015�and�was�paid�on�18�September�2015.�

(iii) The�Company�declared�an�interim�dividend�in�respect�of�the�year�ended�30�June�2015�of�2.00�cents�fully�franked�to�100%�with� a�record�date�of�5�March�2015�which�was�paid�on�26�March�2015.�

(iv) The�Company�declared�a�final�dividend�in�respect�of�the�year�ended�30�June�2014�of�1.50�cents�fully�franked�to�100%.��The�final� dividend�had�a�record�date�of�12�September�2014�and�was�paid�on�29�October�2014.�

�(a)�� Franking�credits�

(a)
Frankingcredits
Frankingcreditsavailableat30%(2015:30%)are:
Amountoffrankingcreditsavailabletoshareholdersofthe
Companyforsubsequentfinancialyears(i)
2016
2015
$'000
$'000
8,4177,704

(i) Before�taking�into�account�the�impact�of�the�dividend�declared�on�18�August�2016.�

19.� Commitments�and�contingencies�

Operating�leases�

The�Group�has�commercial�leases�with�respect�to�its�Sydney�and�Melbourne�office�premises.�

Future�minimum�rentals�payable�under�operating�leases�are�as�follows:�

2016 2015
$'000 $'000
Notlongerthan1year 770 739
Longerthan1yearandnotlongerthan5years 1,769 2,539
2,539 3,278

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

20.� Remuneration�of�auditors�

Amounts�received�or�due�and�receivable�by�KPMG:�

AmountsreceivedordueandreceivablebyKPMG:
2016 2015
$'000 $'000
Auditandreviewofthefinancialreport 381 361
InvestigatingAccountsReportinrespectofCenturiaMetropolitanREIT 300
Otherservices(i) 93 630
Taxationservices 96 72
570 1,363

(i) Other�advisory�services�in�the�prior�year�include�costs�incurred�for�services�provided�in�relation�to�the�sale�of�the�insurance� agency�and�a�large�portion�of�the�variable�rate�reverse�mortgage�portfolio.��Refer�to�Note�6(b)�for�further�details.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

21.� Related�party�transactions�

�(a)��� Equity�interests�in�related�parties�

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

Nameofsubsidiary Countryof
incorporation
Ownershipinterest
2016
2015
%
%
CenturiaCapitalLimited
Australia
100%
100%
OverFiftyCapitalPtyLtd
Australia
100%
100%
CenturiaLifeLimited
Australia
100%
100%
OverFiftySeniorsEquityReleasePtyLtd
Australia
100%
100%
OverFiftyInvestmentsPtyLtd
Australia
100%
100%
OFMDirectPropertyTrustNo.2"Dominion"
Australia
100%
100%
OverFiftyFundsManagementPtyLtd
Australia
100%
100%
OFMDirectPropertyTrustNo.3Chisholm
Australia
100%
100%
NationalLeisureTrust
Australia
100%
100%
OFMBluegumsLeisureTrust
Australia
100%
100%
SenexWarehouseTrustNo.1
Australia
100%
100%
CenturiaPropertyFundsLimited
Australia
100%
100%
CenturiaStrategicPropertyLimited
Australia
100%
100%
CenturiaInvestmentHoldingsPtyLimited
Australia
100%
100%
CenturiaInvestmentManagementServicesPtyLtd
Australia
100%
100%
CenturiaInvestmentServicesPtyLimited
Australia
100%
100%
CenturiaPropertyServicesPtyLimited
Australia
100%
100%
CenturiaSPCWestGosfordPtyLtd
Australia
0%
100%
CenturiaSPVPtyLimited
Australia
0%
100%
CenturiaBulkyGoodsSPVPtyLimited
Australia
0%
100%
Centuria4�8WoodvilleStreetPtyLimited
Australia
0%
100%
Centuria100BennelongRoadPtyLimited
Australia
0%
100%
Centuria110PacificHighwayPtyLimited
Australia
0%
100%
Centuria519CrossKeysRoadPtyLimited
Australia
0%
100%
CenturiaOpportunityFund2PtyLimited
Australia
100%
100%
Centuria601BourkeStreetPtyLimited
Australia
0%
100%
Centuria339MilitaryRoadPtyLtd
Australia
0%
100%
CenturiaDPFPtyLtd
Australia
0%
100%
CenturiaEmployeeShareFundPtyLtd
Australia
100%
100%
StrategicPropertyHoldingsPtyLtd
Australia
0%
100%
StrategicPropertyHoldingsNo3PtyLimited
Australia
0%
100%
StrategicPropertyHoldingsNo.5PtyLtd
Australia
0%
100%
StrategicPropertyHoldingsNo.7PtyLimited
Australia
100%
100%
30ANomineesPtyLtd
Australia
0%
100%
CenturiaCapitalPrivateLimited
Singapore
100%
100%
BelmontRoadManagementPtyLimited
Australia
100%
100%
BelmontRoadDevelopmentPtyLimited
Australia
100%
100%
CenturiaBelmontRoadDevelopmentFund
Australia
27%
27%
CenturiaSpecialOpportunitiesFund
Australia
100%
0%

All�subsidiaries�with�a�0%�ownership�interest�as�at�30�June�2016�were�deregistered�during�the�year.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

21.� Related�party�transactions�(continued)�

(b)� Transactions�with�key�management�personnel

As�a�matter�of�Board�policy,�all�transactions�with�directors�and�director�related�entities�are�conducted�on� arms�length�commercial�or�employment�terms.�

During�the�financial�year,�the�following�transactions�occurred�between�the�Company�and�key�management� personnel:�

  • Wolseley�Corporate�Pty�Ltd,�a�related�party�of�G.�Charny,�was�paid�$88,000�(inclusive�of�GST)�for� corporate�advisory�fees.�

  • Henry�Davis�York,�a�related�party�of�R.�Dobson,�was�paid�$16,374�(inclusive�of�GST)�(2015:�$806,856)�for� legal�consultancy�fees.�

  • Mr�J.�R.�Slater�(personally)�and�Riviera�Capital�Pty�Ltd,�a�related�party�of�Mr.�Slater,�were�paid�a�total�of� $141,840�(inclusive�of�GST)�(2015:�$141,643)�for�consultancy�services.�

(c)�� Transactions�with�other�related�parties�

Management�fees�are�charged�to�related�parties�in�accordance�with�the�respective�trust�deeds�and� management�agreements.��

2016
2015
$'000
$'000
Managementfees:
CenturiaLifeLimitedBenefitFunds
7,199
7,735
OverFiftyGuardianFriendlySociety
2,314
2,121
PropertyfundsmanagedbyCenturia
29,538
20,324
39,051
30,180
39,051
30,180

(i)� Terms�and�conditions�of�transactions�with�related�parties�

Investments�in�property�trusts�and�benefit�funds�held�by�certain�directors�and�director�related�entities�are� made�on�the�same�terms�and�conditions�as�all�other�persons.�Directors�and�director�related�entities�receive� the�same�returns�on�these�investments�as�all�other�investors�and�policyholders.�

The�Company�and�its�related�parties�entered�into�transactions,�which�are�insignificant�in�amount,�with� directors�and�their�director�related�entities�in�their�domestic�dealings�and�are�made�in�arm's�length� transactions�at�normal�market�prices�and�on�normal�commercial�terms.��

The�Group�pays�some�expenses�on�behalf�of�related�entities�and�receives�a�reimbursement�for�these� payments.��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

21.� Related�party�transactions�(continued)�

(d)��� Related�party�balances��

The�following�balances�were�outstanding�at�the�end�of�the�financial�period�between�the�Group�and�other� related�parties:�

(i)� Trade�and�other�receivables�

(i)
Tradeandotherreceivables
2016
2015
$'000
$'000
MonthlymanagementfeesowingfromBenefitFunds
561
630
MonthlymanagementfeesowingfromPropertyTrusts
923
673
Acquisitionfee,loanreceivableandcostrecoveriesowingfrom
Centuria8CentralAvenueFundNo.2

3,534
SalesFeereceivableOpportunityFundNo.2
9,600

ReceivablefromCenturiaZenithFund
7,072

ReceivablefromOverFiftyGuardianFriendlySocietyLimited
216
191
DistributionreceivablefromCenturiaMetropolitanREIT
110
106
Presentvalueof$5.800mseedcapitalinvestmentinCenturia
IncomeAccumulationFund

2,779
Short�termloanreceivablefromPropertyTrust

101
Presentvalueof$0.370mseedcapitalinvestmentinCenturia
CapitalGuaranteedBondFund
370
370
18,853
8,384

�(ii)� Financial�assets�carried�at�fair�value�through�profit�or�loss�

The�following�table�details�related�party�investments�carried�at�fair�value�through�profit�and�loss.�

FinancialassetsheldbytheGroup
CenturiaOpportunityFund2
CenturiaMetropolitanREIT
Centuria19CorporateDriveFund
CenturiaATPFund
CenturiaDiversifiedDirectPropertyFund
CenturiaAustralianPropertyandMortgageBondFund
Centuria2WentworthStreetFund
CenturiaAustralianSharesBond
CenturiaBalancedBond
CenturiaHighGrowthBond
FinancialassetsheldbytheBenefitFunds
CenturiaBalancedBond
CenturiaMetropolitanREIT
Centuria8AustraliaAvenueFund
CenturiaGrowthBondFund
CenturiaMetropolitanREIT
2016 2016 2015 2015
$'000
Fair
value
%
Unitsheld
Ownership
$'000
Fair
value
%
Unitsheld
Ownership
503
141,531
0.69%
5,544
2,590,837
2.17%
74
75,452
0.48%
500
500,000
0.81%


0.00%


0.00%

18
0.00%
22
10,000
0.22%
17
9,821
0.11%
18
10,000
0.27%
6,678
764
357,143
0.30%
1,327
1,458,635
7.69%
10,142
4,739,200
3.97%
146
141,531
0.69%

5,231
2,539,382
2.13%



0.00%



0.00%

0
3,765
0.01%

1
395
0.03%



0.00%

20
10,000
0.22%

15
9,000
0.13%

17
10,000
0.28%
5,430

736
357,143
0.30%

1,3071,458,635
7.69%

9,7634,739,200
3.98%

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

21.� Related�party�transactions�(continued)�

(d)��� Related�party�balances�(continued)�

(iii)�� Assets�classified�as�held�for�sale�

During�the�prior�reporting�period�the�Company�acquired�100%�of�the�acquisition�units�in�Centuria�2� Wentworth�Street�Fund�(“the�Fund”)�to�seed�the�Fund�and�enable�the�acquisition�of�the�underlying� investment�property.�

Acquisition�units�rank�equally�with�Ordinary�Units,�except�that�the�proceeds�from�the�allotment�of�Ordinary� Units�may�be�used�to�redeem�any�Acquisition�Units.�

As�at�30�June�2015,�the�Company�held�1,040,018�Acquisition�Units�which�were�value�at�$1,040,018.�

All�Acquisition�Units�in�the�Fund�(except�for�18�units�to�be�retained)�were�redeemed�on�1�July�2015.��

22.� Notes�to�the�statement�of�cash�flows�

(a)�� Reconciliation�of�cash�and�cash�equivalents�

For�the�purposes�of�the�statement�of�cash�flows,�cash�and�cash�equivalents�includes�cash�on�hand�and�in� banks.�Cash�and�cash�equivalents�at�the�end�of�the�reporting�period�as�shown�in�the�statement�of�cash�flows� are�reconciled�to�the�related�items�in�the�statement�of�financial�position�as�follows:�

Cashandcashequivalents 2016
2015
$'000
$'000
13,157
25,487

Included�in�cash�and�cash�equivalents�attributable�to�shareholders�is�$7.2�million�(2015:�$9.6�million)�relating� to�amounts�held�by�Centuria�Life�Limited�and�Senex�Warehouse�Trust�No.1�which�is�not�readily�available�for� use�by�the�Group.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

22.� Notes�to�the�statement�of�cash�flows�(continued)�

  • (b)�� Reconciliation�of�profit�for�the�period�to�net�cash�flows�from�operating�activities�
Profitfortheyear
Add(deduct)non�cashitems:
Depreciationandamortisation
Impairmentofrelatedpartyreceivable
Share�basedpaymentexpense
Grossproceedsondisposals
Fairvaluegainoninterestrateswap
Lossondisposalofproperty,plantandequipment
Fairvaluegainonunittrusts
Interestrevenue�fromreversemortgages
Interestexpense�reversemortgagefacility
Unwindingofdiscountonnon�currentrelatedpartyreceivable
Unrealisedforeignexchangeloss
Changesinnetassetsandliabilities:
(Increase)/decreaseinassets:
Tradereceivables
Prepayments
InvestmentinAssociates
Decreaseindeferredincometaxassets
Propertyheldfordevelopment
Increase/(decrease)inliabilities:
Tradeandotherliabilities
Taxprovision
IncreaseinDeferedTaxLiability
Provisions
Policyholderliability
Netcashflowsusedinoperatingactivities
2016
2015
$'000
$'000
12,1238,561
330341
2,7792,218
732904
�(7,050)
(5,493) (1,148)
�95
(2,219) (57)
(2,300) (5,144)
1,9493,662
�(423)
28178
(13,816) (17)
(256) (313)
�668
2,6231,507
(12,705) (23,011)
4,004(3,403)
(172) �
2,500�
(109) 79
(35,572) (27,855)
(45,573) (50,207)

23.� Financial�instruments�

These�consolidated�results�comprise�the�assets�and�liabilities�of�the�Group,�including�the�Benefit�Funds�as� required�by�AASB�10� Consolidated�Financial�Statements .�The�assets�and�liabilities�of�the�Benefit�Funds�do�not� impact�the�net�profit�after�tax�or�the�equity�attributable�to�the�shareholders�of�the�Company�and�the� shareholders�of�the�Company�have�no�rights�over�the�assets�and�liabilities�held�in�the�Benefit�Funds.��As�a� result,�this�note�does�not�include�disclosures�in�respect�of�those�financial�assets�and�liabilities�held�by�the� Benefit�Funds�(as�set�out�in�Note�16).�

The�only�risk�to�the�shareholders�of�the�Company�in�respect�to�the�Benefit�Funds�is�limited�to�capital� reserving.��Centuria�Life�Limited,�(CLL),�being�a�subsidiary�of�the�Company,�acts�in�the�capacity�of�manager� for�two�capital�guaranteed�benefit�funds�as�described�in�Note�16(c).�To�mitigate�the�risk�of�these�guarantees� being�called�upon,�the�Benefit�Funds�set�aside�prescribed�reserving�which�is�determined�upon�a�“1�in�400� year�event”�stress�testing�scenario.�The�reserving�calculations�are�performed�by�an�independent�actuary� appointed�by�CLL.��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)

The�Benefit�Funds�at�30�June�2016�have�set�aside�the�requisite�reserving�as�determined�by�the�investment�profile� of�the�two�respective�funds.�If�the�required�reserving�under�the�“Capital�Adequacy�Test”�increases,�CLL�may�be� required�to�inject�additional�seed�capital.�

Seed�capital�is�later�repaid�to�CLL�when�reserving�is�returned�to�a�normal�sustainable�level.�The�expected�recovery� of,�or�future�injection�of,�seed�capital�into�the�Society’s�Benefit�Funds�is�dependent�on�the�underlying�performance� of�the�Funds’�assets.�

(a)�� Management�of�financial�instruments�

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.�

CLL�has�also�established�an�Investment�Committee.�The�Investment�Committee’s�function�is�to�manage�and� oversee�the�Benefit�Fund�investments�in�accordance�with�the�investment�objectives�and�framework.� Specifically,�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.�

The�Group�is�exposed�to�a�variety�of�financial�risks�as�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�financial�performance.�These�policies�may�include�the�use�of�certain�financial�derivative� instruments.�

The�Group�outsources�the�investment�management�of�the�Benefit�Funds�to�specialist�investment�managers,� who�provide�services�to�the�Group,�co�ordinate�access�to�domestic�and�international�financial�markets,�and� manage�the�financial�risks�relating�to�the�operations�of�the�Group�in�accordance�with�an�investment�mandate� set�out�in�the�Group's�constitution�and�the�Benefit�Funds'�product�disclosure�statements.�The�Benefit�Funds'� investment�mandates�are�to�invest�in�equities�and�fixed�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�to�manage�interest�rate�risk�and�not�for�speculative�purposes�in�any� situation.�Hedging�is�put�in�place�where�the�Group�is�either�seeking�to�minimize�or�eliminate�cash�flow� variability,�i.e.,�converting�variable�rates�to�fixed�rates,�or�changes�in�the�fair�values�of�underlying�assets�or� liabilities,�i.e.,�to�convert�fixed�rates�to�variable�rates.�

Derivative�financial�instruments�of�the�Benefit�Funds,�consolidated�into�the�financial�statements�of�the�Group� under�AASB�10� Consolidated�Financial�Statements ,�are�used�only�for�hedging�of�actual�or�anticipated� exposures�relating�to�investments.�The�use�of�financial�derivatives�in�respect�of�Benefit�Funds�is�governed�by� the�Fund's�investment�policies,�which�provide�written�principles�on�the�use�of�financial�derivatives.�

(b)�� Capital�risk�management�

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

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

(b)�� Capital�risk�management�(continued)

The�Group's�capital�structure�consists�of�net�debt�(borrowings,�offset�by�cash�and�cash�equivalents)�and� equity�of�the�Group�(comprising�issued�capital,�reserves�and�retained�earnings).

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�Centuria�Life�Limited�are�regulated� by�APRA�and�the�Management�Fund�of�the�Society�has�a�minimum�Prescribed�Capital�Amount�(PCA)�that� must�be�maintained�at�all�times.�It�is�calculated�monthly�and�these�results�are�reported�to�the�Board�each� month.��The�current�level�of�share�capital�of�Centuria�Life�Limited�meets�the�PCA�requirements.�

In�addition,�Centuria�Property�Funds�Limited�and�Centuria�Strategic�Property�Limited�have�AFSL�licences�so� as�to�operate�registered�property�trusts.��Regulations�require�these�entities�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.�

Operating�cash�flows�are�used�to�maintain�and,�where�appropriate,�expand�the�Group's�funds�under� management�as�well�as�to�make�the�routine�outflows�of�tax,�dividends�and�repayment�of�maturing�debt.�The� Group�reviews�regularly�its�anticipated�funding�requirements�and�the�most�appropriate�form�of�funding� (capital�raising�or�borrowings)�depending�on�what�the�funding�will�be�used�for.�

The�capital�structure�of�the�Benefit�Funds�(and�management�fund)�consists�of�cash�and�cash�equivalents,�bill� facilities�and�mortgage�assets.��The�Benefit�Funds�also�hold�a�range�of�financial�assets�for�investment�purposes� including�investments�in�unit�trusts,�equity�and�floating�rate�notes.�The�Investment�Committee�aims�to�ensure� that�there�is�sufficient�capital�for�possible�redemptions�by�unit�holders�of�the�Benefit�Funds�by�regularly� monitoring�the�level�of�liquidity�in�each�fund.�

The�Benefit�Funds�have�no�restrictions�or�specific�capital�requirements�on�the�application�and�redemption�of� units.�The�Benefit�Fund's�overall�investment�strategy�remains�unchanged�from�the�prior�year.�

(c)�� Fair�value�of�financial�instruments�

(i)�� Valuation�techniques�and�assumptions�applied�in�determining�fair�value�

The�fair�values�of�financial�assets�and�financial�liabilities�with�standard�terms�and�conditions�and�traded�on� active�liquid�markets�are�determined�with�reference�to�quoted�market�prices�(includes�listed�redeemable� notes,�bills�of�exchange,�debentures�and�perpetual�notes).�

The�fair�values�of�other�financial�assets�and�financial�liabilities�(excluding�derivative�instruments)�are� determined�in�accordance�with�generally�accepted�pricing�models�based�on�discounted�cash�flow�analysis� using�prices�from�observable�current�market�transactions�and�dealer�quotes�for�similar�instruments.�Discount� rates�are�determined�based�on�market�rates�applicable�to�the�financial�asset�or�liability.�

The�valuation�technique�used�to�determine�the�fair�value�of�the�Group's�reverse�mortgage�loan�book�is�as� follows:��

  • the�weighted�average�reverse�mortgage�holders’�age�is�79�years;�

  • the�future�cash�flows�calculation�is�related�to�borrowers'�mortality�rates�and�mortality�improvements.� The�data�is�sourced�from�mortality�tables�provided�by�the�actuary;��

  • fixed�or�variable�interest�rates�charged�to�borrowers�are�used�to�project�future�cash�flows;�

  • a�redemption�rate,�which�is�based�on�historical�loan�redemption�experience,�applies�to�future�cash�flow� forecast;�and�

  • year�end�yield�curve�is�used�to�discount�future�cash�flows�back�to�30�June�2016�to�determine�the�fair� value.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

(c)�� Fair�value�of�financial�instruments�(continued)�

(ii)�� Valuation�techniques�and�assumptions�applied�in�determining�fair�value�of�derivatives�

The�fair�values�of�derivative�instruments�are�calculated�using�quoted�prices.�Where�such�prices�are�not� available,�discounted�cash�flow�analysis�is�performed�using�the�applicable�yield�curve�for�the�duration�of�the� instruments�for�non�optional�derivatives,�and�option�pricing�models�for�optional�derivatives.�

The�valuation�technique�used�to�determine�the�fair�value�of�the�Fixed�for�Life�interest�rate�swaps�is�as� follows:�

  • the�weighted�average�reverse�mortgage�holders’�age�is�79�years;�

  • the�expected�future�cash�flows�in�relation�to�the�swaps�are�based�on�reverse�mortgage�borrowers'� expected�life�expectancy�sourced�from�mortality�tables�provided�by�the�actuary;�and�the�difference� between�the�fixed�swap�pay�rates�and�forward�rates�as�of�30�June�2016�is�used�to�calculate�the�future� cash�flows�in�relation�to�the�swaps;�and�year�end�yield�curve�plus�a�credit�margin�is�used�to�discount� future�cash�flows�back�to�30�June�2016�to�determine�the�fair�value.�

(iii)�� Fair�value�measurements�recognised�in�the�statement�of�financial�position�

The�following�table�shows�the�carrying�amounts�and�fair�values�of�financial�assets�and�financial�liabilities,� including�their�levels�in�the�fair�value�hierarchy�for�financial�instruments�measured�at�fair�value.���

The�table�provides�an�analysis�of�financial�instruments�that�are�measured�subsequent�to�initial�recognition� at�fair�value,�grouped�into�Levels�1�to�3�based�on�the�degree�to�which�the�fair�value�is�observable.�

  • Level�1�fair�value�measurements�are�those�derived�from�quoted�prices�(unadjusted)�in�active�markets�for� identical�assets�or�liabilities.�

  • Level�2�fair�value�measurements�are�those�derived�from�inputs�other�than�quoted�prices�included�within� Level�1�that�are�observable�for�the�asset�or�liability,�either�directly�(i.e.�as�prices)�or�indirectly�(i.e.�derived� from�prices).�

  • Level�3�fair�value�measurements�are�those�derived�from�valuation�techniques�that�include�inputs�for�the� asset�or�liability�that�are�not�based�on�observable�market�data�(unobservable�inputs).�

There�were�no�transfers�between�Level�1,�2�and�3�in�the�period.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

  • (c)�� Fair�value�of�financial�instruments�(continued)�

(iii)�� Fair�value�measurements�recognised�in�the�statement�of�financial�position� (continued)

Measurement
basis
Fairvalue
hierarchy
30June2016
Financialassets
Cashandcashequivalents
Amortisedcost
Notapplicable
Tradeandotherreceivables
Amortisedcost
Notapplicable
Financialassetsatfairvalue
Fairvalue
Level1
Financialassetsatfairvalue
Fairvalue
Level2
Reversemortgagesatfairvalue
Fairvalue
Level3
Financialliabilities
Tradeandotherpayables
Amortisedcost
Notapplicable
Borrowings
Amortisedcost
Notapplicable
Interestrateswaps
Fairvalue
Level3
Carrying
amount
Fair
value
$'000
$'000
13,15713,157
19,65619,656
5,5445,544
41,65041,650
51,56151,561
131,568131,568
8,3498,349
59,95159,951
20,77820,778
89,07889,078
Measurement
basis
Fairvalue
hierarchy
30June2015
Financialassets
Cashandcashequivalents
Amortisedcost
Notapplicable
Tradeandotherreceivables
Amortisedcost
Notapplicable
Carrying
amount
Fair
value
$'000
$'000
25,48725,487
8,6198,619
Assetsclassifiedasheldforsale
Fairvalue
Level2
1,0401,040
Financialassetsatfairvalue
Fairvalue
Level1
5,4565,456
Reversemortgagesatfairvalue
Fairvalue
Level3
43,75443,754
84,35684,356
Financialliabilities
Tradeandotherpayables
Amortisedcost
Notapplicable
Borrowings
Amortisedcost
Notapplicable
Interestrateswaps
Fairvalue
Level3
4,3454,345
20,91220,912
17,57617,576
42,83342,833

The�Group�determines�Level�2�fair�values�for�financial�assets�and�liabilities�without�an�active�market�based� on�broker�quotes�and�other�observable�market�data.�Level�2�fair�values�for�simple�over�the�counter� derivatives�are�also�based�on�broker�quotes.�Those�quotes�are�tested�for�reasonableness�by�discounting� expected�future�cash�flows�using�market�interest�rates�for�a�similar�instrument�at�the�measurement�date.� Fair�values�reflect�the�credit�risk�of�the�instrument�and�include�adjustments�to�take�account�of�the�credit�risk� of�the�entity�and�counterparty�where�appropriate.�

Set�out�below�is�a�reconciliation�of�Level�3�fair�value�movements�of�financial�assets�and�liabilities.��The�Level� 3�financial�asset�held�by�the�Group�is�the�fair�value�of�the�reverse�mortgage�receivables�attributable�to� interest�rate�risk.��The�Level�3�financial�liability�held�by�the�Group�is�the�fixed�for�life�interest�rate�swaps.���

These�two�items�are�designated�in�a�fair�value�hedging�relationship,�with�the�fair�value�movements�on�the� swaps,�offset�by�the�fair�value�movements�attributable�to�interest�rate�risk�in�the�mortgage�receivables�(refer� to�Note�23(c)(iv).��However,�as�the�Group�has�only�designated�the�fair�value�movements�attributable�to� interest�rate�risk�in�the�hedging�relationship,�any�other�fair�value�movements�impact�the�profit�and�loss� directly,�such�as�movements�attributable�to�credit�risk.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

  • �(c)�� Fair�value�of�financial�instruments�(continued)�

  • (iv)� Reconciliation�of�Level�3�fair�value�measurements�of�financial�assets�and�liabilities��

(iv)
ReconciliationofLevel3fairvaluemeasurementsoffinancialassetsandliabilities
(iv)
ReconciliationofLevel3fairvaluemeasurementsoffinancialassetsandliabilities
Reverse
mortgages
fairvalue
Interest
rateswaps
atfairvalue
Total
Yearended30June2016
$'000
$'000
$'000
Balanceat1July2015
17,202
(17,576)
(374)
Totalgainsinprofitorloss:
Accruedinterest
114
(957)
(843)
Attributabletointerestraterisk
7,738
(7,738)

Attributabletocreditrisk

5,493
5,493
Balanceat30June2016
Yearended30June2015
25,054
(20,778)
4,276
$'000
$'000
$'000

(v)� Significant�assumptions�used�in�determining�fair�value��

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�flow�analysis�using�the�applicable�yield�curve�out� to�20�years,�with�the�yield�curve�at�20�years�employed�as�the�best�proxy�for�subsequent�rates�due�to�non� observable�market�data.�

Mortality�rates�for�males�and�females�have�been�assumed�to�be�consistent�with�2013�Life�Tables.�Mortality� improvements�of�3%�p.a.�are�assumed�starting�at�age�70.�The�improvement�factor�tapers�down�to�1%�p.a.�at� age�90�and�then�zero�at�age�100.�Joint�life�mortality�is�calculated�based�on�last�death�for�loans�with�joint� borrowers.�53%�of�reverse�mortgage�loan�portfolio�consists�of�joint�lives.��

Adjusting�the�yield�curve�by�an�increase/(decrease)�of�100�basis�points�as�at�30�June�2016�would�cause�the� fair�value�of�the�50�year�swaps�to�(decrease)/increase�by�$(4,686,814)/$5,587,039�(2015:� ($781,885)/$943,428).�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

  • (c)�� Fair�value�of�financial�instruments�(continued)�

  • (v)� Significant�assumptions�used�in�determining�fair�value�(continued)�

Additionally,�the�valuations�have�been�calculated�with�an�assumption�of�deaths�(as�opposed�to�early� voluntary�repayment)�of�mortgagees�during�the�life�of�the�interest�rate�swaps.�The�swap�agreements�provide� that�in�the�event�of�death�of�a�mortgagee�there�is�no�further�cost�associated�with�the�prepayment.��

Accordingly,�the�assumption�on�the�number�of�deaths�and�timing�of�such�deaths�will�impact�the�valuation.�If� the�assumption�of�the�death�rate�was�to�increase/(decrease)�by�10%,�the�fair�value�of�fixed�for�life�swaps�at� 30�June�2016�would�(decrease)/increase�by�$(781,885)/$943,428�(2015:�$(665,804)/$813,657).��

�(d)�� Credit�risk�

Credit�risk�refers�to�the�risk�that�a�counterparty�will�default�on�its�contractual�obligations�resulting�in�financial� loss�to�the�Group.�The�Group�has�adopted�a�policy�of�only�dealing�with�creditworthy�counterparties�and� obtaining�sufficient�collateral�or�other�security,�where�appropriate,�as�a�means�of�mitigating�risk�of�financial� loss�from�default.�The�credit�risk�on�financial�assets�of�the�Group�and�the�parent�recognised�in�the�statement� of�financial�position�is�generally�the�carrying�amount,�net�of�allowance�for�impairment�loss.���

Concentration�of�risk�may�exist�when�the�volume�of�transactions�limits�the�number�of�counterparties.���

(i)� Credit�risk�of�reverse�mortgages�

Concentration�of�credit�risk�in�relation�to�reverse�mortgage�loans�is�minimal,�as�each�individual�reverse� mortgage�loan�is�secured�by�an�individual�residential�property.�The�loan�is�required�to�be�paid�off�from�the� proceeds�of�disposal�of�the�secured�property�after�the�borrower's�death.�

Individual�property�valuations�are�conducted�at�least�every�3�years�in�accordance�with�financier's� requirements.�At�30�June�2016,�the�highest�loan�to�value�ratio�(LVR)�of�a�loan�in�the�reverse�mortgage�loan� book�is�82%�(2015:�74%),�and�there�are�only�41�out�of�247�(2015:�32�out�of�263)�reverse�mortgage�loans� where�the�LVR�is�higher�than�50%.��

There�are�no�reverse�mortgage�loans�that�are�impaired.��

(ii)�� Credit�risk�on�other�financial�assets�

Credit�risk�on�other�financial�assets�such�as�investments�in�floating�rate�notes,�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� rating�agencies.�The�exposure�of�credit�risk�in�respect�of�financial�assets�is�minimal.�

The�Group�does�not�have�any�significant�credit�risk�exposure�to�any�single�entity�in�other�financial�assets�or� any�group�of�counterparties�having�similar�characteristics.��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

(e)�� Liquidity�risk��

The�Group's�approach�to�managing�liquidity�is�to�ensure�that�it�will�always�have�sufficient�liquidity�to�meet� its�liabilities.��

The�liquidity�risk�is�managed�for�the�Group�at�a�corporate�level.��Bank�account�balances�across�all�entities,� current�and�future�commitments,�and�expected�cash�inflows�are�reviewed�in�detail�when�the�monthly�cash� flow�projection�is�prepared�for�management�purposes�and�presented�to�the�Board�at�its�regular�monthly� meetings.���By�comparing�the�projected�cash�flows�with�the�assets�and�liabilities�shown�in�the�individual�and� consolidated�statements�of�financial�position,�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�inflows�plus�liquidity�on�hand,�may�not�be�sufficient�in� the�near�term�to�meet�cash�outflow�requirements,�including�repayment�of�borrowings,�a�decision�can�be� made�to�carry�out�one�or�more�of�the�following:�

  • renegotiate�the�repayment�terms�of�the�borrowings;�

  • sell�assets�that�are�held�on�the�statement�of�financial�position;�and/or�

  • undertake�an�equity�raising.

This,�combined�with�a�profitable�business�going�forward,�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�the�prior�year.�

The�following�tables�summarise�the�Group's�remaining�contractual�maturity�for�its�non�derivative�financial� liabilities�with�agreed�repayment�periods.�The�tables�have�been�drawn�up�based�on�the�undiscounted�cash� flows�of�financial�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�flows.�To�the�extent�that�interest�flows�are�at�floating� rate,�the�undiscounted�amount�is�derived�from�interest�rate�curves�at�the�end�of�the�reporting�period.�

The�policy�holders�in�the�Benefit�Funds�are�able�to�redeem�their�policies�at�any�time�and�the�Benefit�Funds� are�therefore�exposed�to�the�liquidity�risk�of�meeting�policyholders'�withdrawals�at�any�time.�The�Investment� Committee�aims�to�ensure�that�there�is�sufficient�capital�for�possible�redemptions�by�policyholders�of�the� Benefit�Funds�by�regularly�monitoring�the�level�of�liquidity�in�each�fund.�

OnDemand Lessthan3
months
3monthsto
1year
1�5years 5+years Total
$'000 $'000 $'000 $'000 $'000 $'000
Non�derivativefinancialliabilities
Consolidated
2016
Borrowings 26,850 23,851 9,250 59,951
Otherpayables 8,349 8,349
Total 35,199 23,851 9,250 68,300
2015
Borrowings 1,040 2,724 17,962 21,725
Otherpayables 4,345 4,345
Total 5,384 2,724 17,962 26,070

The�following�table�summarises�the�maturing�profile�of�derivative�financial�liabilities.�The�table�has�been� drawn�up�based�on�the�undiscounted�net�cash�flows�on�the�derivative�instruments�that�settle�on�a�net�basis.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

(e)�� Liquidity�risk�(continued)�

OnDemand
Lessthan3
months
3monthsto
1year
1�5years
5+years
Total
$'000
$'000
$'000
$'000
$'000
$'000
Derivativefinancialliabilities
Consolidated
2016
Interestrateswaps



48,405
48,405
Total
2015
Interestrateswaps
Total




48,405
48,405




45,552
45,552




45,552
45,552

(f)�� Market�risk

Market�risk�is�the�risk�that�the�fair�value�or�future�cash�flows�of�a�financial�instrument�will�fluctuate�because� of�changes�in�market�prices.��Market�risk�comprises�interest�rate�risk�and�price�risk.��Due�to�the�nature�of� assets�held�by�the�Group�(excluding�the�Benefit�Funds),�there�is�an�asset�and�liability�management�process� which�determines�the�interest�rate�sensitivity�of�the�statement�of�financial�position�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�Benefit�Funds�by�outsourcing�its�investment�management.�The�Investment� Manager�manages�the�financial�risks�relating�to�the�operations�of�the�Benefit�Funds�in�accordance�with�an� investment�mandate�set�out�in�the�Benefit�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.�

(i)�� Interest�rate�risk�management

The�Group�is�exposed�to�interest�rate�risk�because�entities�in�the�Group�borrow�funds�at�floating�interest� rates.�Management�of�this�risk�is�evaluated�regularly�and�interest�rate�swaps�are�used�accordingly.�

The�tables�below�detail�the�Group's�interest�bearing�financial�assets�and�liabilities.�

2016 Weighted
average
effective
interest
rate
**Variablerate ** Fixedrate Total
% $'000 $'000 $'000
Financialassets
Cashandcashequivalents
1.51%
13,157

13,157
Reversemortgagereceivables
8.75%
1,130
25,377
26,507
Totalfinancialassets
14,287
25,377
39,664
Financialliabilities
Borrowings
4.12%
(59,951)

(59,951)
Totalfinancialliabilities
(59,951)

(59,951)
Netinterestbearingfinancial(liabilities)/assets
(45,664)
25,377
(20,287)
14,287
25,377
39,664
(59,951)

(59,951)
(59,951)

(59,951)
(45,664)
25,377
(20,287)

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

  • 23.� Financial�instruments�(continued)�

  • (f)�� Market�risk�(continued)�

(i)�� Interest�rate�risk�management�(continued)

2015 Weighted
average
effective
interest
rate
Variablerate Fixedrate Total
% $'000 $'000 $'000
Financialassets
Cashandcashequivalents
2.06%
9,771
15,717
25,488
Reversemortgagereceivables
8.72%
1,664
24,888
26,552
Totalfinancialassets
11,435
40,605
52,040
Financialliabilities
Borrowings
3.82%
(20,912)

(20,912)
Totalfinancialliabilities
(20,912)

(20,912)
Netinterestbearingfinancial(liabilities)/assets
(9,477)
40,605
31,128
(20,912)

(20,912)
(9,477)
40,605
31,128

(ii)�� Interest�rate�swap�contracts�

Under�interest�rate�swap�contracts,�the�Group�agrees�to�exchange�the�difference�between�fixed�and�floating� rate�interest�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�fixed�rate�financial�assets�held�and�the�cash� flow�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�profit�and�loss.�

Averagecontractedrate Averagecontractedrate Notionalprincipal
Fairvalue
Notionalprincipal
Fairvalue
Notionalprincipal
Fairvalue
Notionalprincipal
Fairvalue
2016 2015 2016 2015 2016 2015
Payfixedforfloatingcontractsdesignatedas
effectiveinfairvaluehedge
% % $'000 $'000 $'000 $'000
50yearsswapscontracts 7.47%
7.48%
11,913
12,745
(20,778)
(17,576)
11,913
12,745
(20,778)
(17,576)

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

23.� Financial�instruments�(continued)�

(f)�� Market�risk�(continued)�

(iii)�� Interest�rate�sensitivity�

The�sensitivity�analysis�below�has�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�financial�year�and� held�constant�throughout�the�reporting�period,�in�the�case�of�financial�assets�and�financial�liabilities�that�have� variable�interest�rates.�A�100�basis�point�(1%)�increase�or�decrease�represents�management's�assessment�of� the�reasonably�possible�change�in�interest�rate.�

At�reporting�date,�if�variable�interest�rates�had�been�100�(2015:�100)�basis�points�higher�or�lower�and�all�other� variables�were�held�constant,�the�impact�to�the�Group�would�have�been�as�follows:�

EffectOn
Changein
variable
Profitaftertax
2016
2015
$'000
$'000
Consolidated
Interestraterisk
Consolidated
Interestraterisk
+1%
�1%
(2,196)
(1,117)
2,647
1,410

The�methods�and�assumptions�used�to�prepare�the�sensitivity�analysis�have�not�changed�in�the�year.�The� sensitivity�analysis�takes�into�account�interest�earning�assets�and�interest�bearing�liabilities�attributable�to� the�shareholders�only,�and�does�not�take�into�account�the�bank�bill�facility�margin�changes.�

24.� Key�management�personnel�compensation��

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

2016
2015
$ $
Short�termemployeebenefits
2,897,468
2,936,599
Post�employmentbenefits
102,988
138,600
Otherlong�termemploymentbenefits
48,710
36,336
Share�basedpayments
577,382
546,841
3,626,548
3,658,376
3,626,548
3,658,376

Detailed�information�on�key�management�personnel�is�included�in�the�Remuneration�Report.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

25.� Share�based�payment�arrangements�

(a)�� Description

The�Company�has�an�Executive�Incentive�Plan�(“LTI�Plan”)�which�forms�a�key�element�of�the�Company’s� incentive�and�retention�strategy�for�senior�executives�under�which�Performance�Rights�(“Rights”)�are�issued.�

Each�employee�receives�ordinary�shares�of�the�Company�on�vesting�of�the�performance�rights.�No�amounts� are�paid�or�payable�by�the�recipient�on�receipt�of�the�performance�rights�or�on�vesting.�The�performance� rights�carry�neither�rights�to�dividends�nor�voting�rights�prior�to�vesting.�

It�is�expected�that�future�annual�grants�of�performance�rights�will�be�made,�subject�to�the�Board’s� determination�of�the�overall�performance�of�the�Company�and�market�conditions.�The�vesting�of�any� performance�rights�awarded�will�be�subject�to�attainment�of�appropriate�performance�hurdles�and�on�the� basis�of�continuing�employment�with�the�Company.�

Performance�rights�granted�under�the�plan�carry�no�dividend�or�voting�rights.�All�plans�are�equity�settled.�

The�primary�objectives�of�the�Plan�include:�

  • focusing�executives�on�the�longer�term�performance�of�the�Group�to�drive�long�term�shareholder�value� creation;�

  • ensure�executive�remuneration�outcomes�are�aligned�with�shareholder�interests,�in�particular,�the� strategic�goals�and�performance�of�the�Group;�and�

  • ensure�remuneration�is�competitive�and�aligned�with�general�market�practice�by�ASX�listed�companies.

Rights�issued�under�the�LTI�Plan�are�issued�in�accordance�with�the�thresholds�approved�at�the�2013�AGM.��

There�have�been�three�tranches�of�Rights�granted�under�the�LTI�plan�to�date:�

Tranche GrantDate PerformancePeriod
1 1January2014 1July2013to30June2016
2 1February2015 1July2014to30June2017
3 1February2016 1July2015to30June2018

The�following�table�summarises�the�number�of�rights�granted�for�each�tranche:�

Tranche #ofrightsgranted #ofrightslapsed #ofrightsoutstanding
1 1,200,825 1,200,825
2 1,831,926 440,999 1,390,927
3 1,787,715 1,787,715

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

25.� Share�based�payment�arrangements�(continued)�

(a)�� Description�(continued)

The�Performance�Conditions�and�their�associated�weighting�applicable�to�each�tranche�is�summarised�in�the� following�table:��

EPS�Hurdle�

The�percentage�of�Rights�subject�to�the�EPS�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(70%) Tranches2and3(45%)
Maximum%or 12.5%orgreater 100% 10%orgreater 100%
above
Betweenthreshold Morethan7.5%, Pro�ratabetween Morethan6%, Pro�ratabetween
%andmaximum% lessthan12.5% 50%to100% lessthan10% 50%to100%
Morethan4%, Pro�ratabetween
lessthan6% 25%to50%
Threshold% 7.5% 50% 4% 25%
Lessthanthe Lessthan7.5% 0% Lessthan4% 0%
threshold%

The�Board�has�discretion�to�adjust�the�EPS�performance�hurdle�to�ensure�that�participants�are�neither� advantaged�nor�disadvantaged�by�matters�outside�managements’�control�that�affect�EPS�(for�example,�by� excluding�one�off�non�recurrent�items�or�the�impact�of�significant�acquisitions�or�disposals).�

Growth�in�FUM�Hurdle�

The�percentage�of�Rights�subject�to�the�Growth�in�FUM�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(15%) Tranches2and3(15%)
Maximum%or 25%orgreater 100% 18%orgreater 100%
above
Betweenthreshold Morethan15%, Pro�ratabetween Morethan14%, Pro�ratabetween
%andmaximum% lessthan25% 50%to100% lessthan18% 50%to100%
Morethan10%, Pro�ratabetween
lessthan14% 25%to50%
Threshold% 15% 50% 10% 25%
Lessthanthe Lessthan15% 0% Lessthan10% 0%
threshold%

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

25.� Share�based�payment�arrangements�(continued)�

(a)�� Description�(continued)

Absolute�TSR�Hurdle�

The�percentage�of�Rights�subject�to�the�Absolute�TSR�Hurdle�that�vest,�if�any,�will�be�determined�as�follows:�

Compound PortionofRights Compound PortionofRights
AnnualGrowth thatvest AnnualGrowth thatvest
Rate Rate
Tranche1(15%) Tranches2and3(40%)
Maximum%or 18%orgreater 100% 18%orgreater 100%
above
Betweenthreshold Morethan12%, Pro�ratabetween Morethan15%, Pro�ratabetween
%andmaximum% lessthan18% 50%to100% lessthan18% 50%to100%
Morethan12%, Pro�ratabetween
lessthan15% 25%to50%
Threshold% 12% 50% 12% 25%
Lessthanthe Lessthan12% 0% Lessthan12% 0%
threshold%

�(b)�� Measurement�of�fair�values�

The�fair�value�of�the�rights�was�calculated�using�a�binomial�tree�valuation�methodology�for�the�Rights�with� non�market�vesting�conditions�and�a�Monte�Carlo�simulation�for�the�Rights�with�market�vesting�conditions.�����

The�inputs�used�in�the�measurement�of�the�fair�values�at�grant�date�of�the�rights�were�as�follows:�

Tranche1 Tranche2 Tranche3
Expectedvestingdate 31August2016 31August2017 31August2018
Sharepriceatthegrantdate $0.80 $0.91 $0.96
Expectedlife 2.7years 2.6years 2.6years
Volatility 25% 25% 20%
Riskfreeinterestrate 2.85% 1.94% 1.85%
Dividendyield 3.4% 4.3% 5.4%

The�following�table�sets�out�the�fair�value�of�the�rights�at�the�respective�grant�date:�

Performancecondition Tranche1 Tranche2 Tranche3
EPS $0.73 $0.81 $0.87
GrowthinFUM $0.73 $0.81 $0.87
AbsoluteTSR $0.18 $0.28 $0.19

During�the�year,�share�based�payment�expenses�were�recognised�of�$0.675�million�(FY15�$0.620�million).�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

26.� Parent�entity�disclosure�

As�at,�and�throughout�the�current�and�previous�financial�year,�the�parent�entity�of�the�Group�was�Centuria� Capital�Limited.�

2016
2015
Resultofparententity $'000
$'000
Profitfortheperiod 3,399843
Totalcomprehensiveincomefortheyear
Financialpositionofparententityatyearend
Totalassets
Totalliabilities
Totalequityoftheparententitycomprisingof:
Sharecapital
Share�basedincentivereserve
Profitsreserve
Retainedearnings
Totalequity
3,399
843
118,938
87,316
34,213
2,610
88,033
88,146
1,459 784
2,601 2,601
(7,368) (6,825)
84,725
84,706

27.�� Events�subsequent�to�the�reporting�date�

�(a)�� Final�Dividend�

On�18�August�2016,�the�Company�declared�a�dividend�of�3.00�cents�per�share�franked�to�100%.��The�dividend� is�expected�to�be�paid�on�14�September�2016.�

(b)�� Investment�in�GPT�Metro�Office�Fund�

In�May�2016,�the�group�announced�the�acquisition�of�a�12.6%�stake�in�GPT�Metro�Office�Fund�(GMF).�On�24� May�2016,�the�Group’s�subsidiary�Centuria�Property�Funds�Limited�(CPFL)�in�its�capacity�as�responsible�entity� of�the�Centuria�Metropolitan�REIT�(CMA)�submitted�a�non�binding�proposal�to�merge�CMA�and�GMF�via�a� trust�scheme.�This�was�followed�on�16�June�2016�with�a�takeover�bid�for�GMF�via�an�off�market�takeover.�At� the�same�time�the�Company�entered�into�a�number�of�agreements,�including�a�Facilitation�and�Property� Rights�Deed�with�the�GPT�Group.�On�1�August�2016,�GMF’s�Independent�Board�Committee�announced�its� support�for�a�competing�offer.�Also�on�1�August�2016,�CMA�announced�it�would�not�be�proceeding�with�its� offer�for�GMF.�As�at�the�date�of�this�report,�the�Group�retains�its�12.6%�interest�in�GMF.��

Other�than�the�matters�discussed�above,�there�has�not�arisen�in�the�interval�between�30�June�2016�and�the� date�hereof�any�item,�transaction�or�event�of�a�material�and�unusual�nature�likely,�in�the�opinion�of�the� directors�of�the�Company,�to�affect�significantly�the�operations�of�the�Group,�the�results�of�those�operations,� or�the�state�of�affairs�of�the�Group,�in�future�financial�years.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�

The�Group�has�consistently�applied�the�following�accounting�policies�to�all�periods�presented�in�these� consolidated�financial�statements.�

(a) Basis�of�consolidation�

The�consolidated�financial�statements�incorporate�the�financial�statements�of�the�Company�and�entities� controlled�by�the�Company�(subsidiaries).�The�Group�controls�an�entity�when�it�is�exposed�to,�or�has�rights� to,�variable�returns�from�its�involvement�with�the�entity�and�has�the�ability�to�affect�those�returns�through� its�power�over�the�entity.�The�financial�statements�of�subsidiaries�are�included�in�the�consolidated�financial� statements�from�the�date�on�which�control�commences�until�the�date�on�which�control�ceases.��

The�Company�is�required�by�AASB�10� Consolidated�Financial�Statements� to�recognise�the�assets,�liabilities,� income,�expenses�and�equity�of�the�benefit�funds�of�its�subsidiary,�Centuria�Life�Limited�(the�“Benefit�Funds”).� The�assets�and�liabilities�of�the�Benefit�Funds�do�not�impact�the�net�profit�after�tax�or�the�equity�attributable� to�the�shareholders�of�the�Company�and�the�shareholders�of�the�Company�have�no�rights�over�the�assets�and� liabilities�held�in�the�Benefit�Funds. The�Company�has�majority�representation�on�the�Board�of�the�Over�Fifty� Guardian�Friendly�Society�Limited�(Guardian).�However,�as�Guardian�is�a�mutual�organisation,�the�Company� has�no�legal�rights�to�Guardian's�net�assets,�nor�does�it�derive�any�benefit�from�exercising�its�power�and� therefore�does�not�control�Guardian.���

Intra�group�balances�and�transactions,�and�any�unrealised�income�and�expenses�arising�from�intra�group� transactions,�are�eliminated�in�preparing�the�consolidated�financial�statements.�This�excludes�transactions� with�the�Centuria�Life�Limited�benefit�funds.�Transactions�with�the�benefit�funds�continue�to�be�shown�gross� on�the�basis�that�the�shareholders�of�the�company�do�not�have�access�nor�are�exposed�to�the�revenue,� expenses,�assets�and�liabilities�of�the�benefit�funds�other�than�the�requirement�to�maintain�capital�in�the� Centuria�Capital�Guaranteed�Bond�fund�and�the�Income�Accumulation�Fund.�

�Unrealised�gains�arising�from�transactions�with�equity�accounted�investees�are�eliminated�against�the� investment�to�the�extent�of�the�Group’s�interest�in�the�investee.�Unrealised�losses�are�eliminated�in�the�same� way�as�unrealised�gains,�but�only�to�the�extent�that�there�is�no�evidence�of�impairment.�

(b) Business�combinations�

Acquisitions�of�subsidiaries�and�businesses�are�accounted�for�using�the�acquisition�method�when�control�is� transferred�to�the�Group.�The�consideration�for�each�acquisition�is�measured�at�the�aggregate�of�the�fair� values�(at�the�date�of�acquisition)�of�assets�given,�liabilities�incurred�or�assumed,�and�equity�instruments� issued�by�the�Group�in�exchange�for�control�of�the�acquiree.�Acquisition�related�costs�are�recognised�in�profit� or�loss�as�incurred.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(c) Goodwill�

Goodwill�arising�in�a�business�combination�is�recognised�as�an�asset�at�the�date�that�control�is�achieved�(the� acquisition�date).�Goodwill�is�measured�as�the�excess�of�the�sum�of�the�consideration�transferred,�the�amount� of�any�non�controlling�interests�in�the�acquiree,�and�the�fair�value�of�the�acquirer�previously�held�equity� interest�in�the�acquiree�(if�any)�over�the�net�of�the�acquisition�date�amounts�of�the�identifiable�assets� acquired�and�the�liabilities�assumed.�Goodwill�is�reviewed�for�impairment�at�least�annually.�For�the�purpose� of�impairment�testing,�goodwill�is�allocated�to�each�of�the�Group’s�cash�generating�units�expected�to�benefit� from�the�synergies�of�the�combination.�Cash�generating�units�to�which�goodwill�has�been�allocated�are�tested� for�impairment�annually,�or�more�frequently�when�there�is�an�indication�that�the�unit�may�be�impaired.�If�the� recoverable�amount�of�the�cash�generating�unit�is�less�than�its�carrying�amount,�the�impairment�loss�is� allocated�first�to�reduce�the�carrying�amount�of�any�goodwill�allocated�to�the�unit�and�then�to�the�other� assets�of�the�unit�pro�rata�on�the�basis�of�the�carrying�amount�of�each�asset�in�the�unit.�An�impairment�loss� recognised�for�goodwill�is�not�reversed�in�a�subsequent�period.�On�disposal�of�a�subsidiary,�the�attributable� amount�of�goodwill�is�included�in�the�determination�of�the�profit�or�loss�on�disposal.�

(d) Investments�in�associates��

An�associate�is�an�entity�over�which�the�Group�has�significant�influence�and�that�is�neither�a�subsidiary�nor� an�interest�in�a�joint�venture.�Significant�influence�is�the�power�to�participate�in�the�financial�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�financial�statements�using�the� equity�method�of�accounting,�except�when�the�investment�is�classified�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�initially�carried�in�the�consolidated�statement�of� financial�position�at�cost�and�subsequently�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.�

(e) Goods�and�services�tax���

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

  • 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�

  • for�receivables�and�payables�which�are�recognised�inclusive�of�GST.�

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

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

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(f) Revenue�

Revenue�is�measured�at�the�fair�value�of�the�consideration�received�or�receivable�to�the�extent�it�is�probable� that�the�economic�benefits�will�flow�to�the�Group�and�the�revenue�can�be�reliably�measured.�

(i) Management�fees�

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

(ii) Distribution�revenue�

Dividend�revenue�from�investments�is�recognised�when�the�shareholder’s�right�to�receive�payment�has�been� established�(provided�that�it�is�probable�that�the�economic�benefits�will�flow�to�the�Group�and�the�amount� of�revenue�can�be�measured�reliably).�

(iii) Interest�revenue�

Interest�revenue�is�accrued�on�a�time�basis,�by�reference�to�the�principal�outstanding�using�the�effective� interest�rate�method.�

(iv) Property�acquisition�fees,�sale�and�performance/incentive�fees� Property�acquisition�fees�are�recognised�when�an�investment�property�has�been�acquired�in�a�fund�managed� by�the�Group.�

Sales�and�performance/incentive�fees�derived�from�managed�funds�are�recognised�upon�satisfaction�of�all� conditions�precedent�to�the�sale�of�an�investment�property�and�when�significant�risks�and�rewards�have� transferred.�

(v)� Commission�and�application�fee�income�

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

(vi)� Sale�of�development�properties�

Revenue�from�the�sale�of�apartments�is�recognised�at�the�fair�value�of�the�consideration�receivable�when�the� significant�risks�and�rewards�of�ownership�have�been�transferred�to�the�purchaser�and�where�there�is�no� continuing�management�involvement,�which�normally�coincides�with�settlement�of�the�contract�for�sale.�

(g) Finance�costs��

The�groups�finance�costs�include:�

  • Interest�expense;�

  • The�net�gain�or�loss�on�hedging�instruments�that�are�recognised�in�profit�or�loss;�and�

  • The�unwinding�of�the�discount�on�the�non�current�receivables.�

Interest�expense�is�recognised�using�the�effective�interest�method.�

(h) Taxation�

Income�tax�expense�represents�the�sum�of�the�tax�currently�payable�and�deferred�tax.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(i)� Current�tax�

The�tax�currently�payable�is�based�on�taxable�profit�for�the�year.�Taxable�profit�differs�from�profit�as�reported� in�the�consolidated�profit�or�loss�because�of�items�of�income�or�expense�that�are�taxable�or�deductible�in� other�years�and�items�that�are�never�taxable�or�deductible.�The�Group's�liability�for�current�tax�is�calculated� using�tax�rates�that�have�been�enacted�or�substantively�enacted�by�the�end�of�the�reporting�period.

�(ii)� Deferred�tax�

Deferred�tax�is�recognised�on�temporary�differences�between�the�carrying�amounts�of�assets�and�liabilities� in�the�financial�statements�and�the�corresponding�tax�bases�used�in�the�computation�of�taxable�profit.��

Deferred�tax�liabilities�are�generally�recognised�for�all�taxable�temporary�differences.�Deferred�tax�assets�are� generally�recognised�for�all�deductible�temporary�differences�to�the�extent�that�it�is�probable�that�taxable� profits�will�be�available�against�which�those�deductible�temporary�differences�can�be�utilised.��

Deferred�tax�liabilities�are�not�recognised�if�the�temporary�difference�arises�from�the�initial�recognition�of� goodwill�or�from�the�initial�recognition�(other�than�in�a�business�combination)�of�other�assets�and�liabilities� in�a�transaction�that�affects�neither�the�taxable�profit�nor�the�accounting�profit.�

Deferred�tax�liabilities�are�recognised�for�taxable�temporary�differences�associated�with�investments�in� subsidiaries�and�associates,�and�interests�in�joint�ventures,�except�where�the�Group�is�unable�to�control�the� reversal�of�the�temporary�difference�and�it�is�probable�that�the�temporary�difference�will�not�reverse�in�the� foreseeable�future.�Deferred�tax�assets�arising�from�deductible�temporary�differences�associated�with�such� investments�and�interests�are�only�recognised�to�the�extent�that�it�is�probable�that�there�will�be�sufficient� taxable�profits�against�which�to�utilise�the�benefits�of�the�temporary�differences�and�they�are�expected�to� reverse�in�the�foreseeable�future.�

The�carrying�amount�of�deferred�tax�assets�is�reviewed�at�the�end�of�each�reporting�period�and�reduced�to� the�extent�that�it�is�no�longer�probable�that�sufficient�taxable�profits�will�be�available�to�allow�all�or�part�of� the�asset�to�be�recovered.�

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

Deferred�tax�assets�and�liabilities�are�offset�when�there�is�a�legally�enforceable�right�to�set�off�current�tax� assets�against�current�tax�liabilities�and�when�they�relate�to�income�taxes�levied�by�the�same�taxation� authority�and�the�Group�intends�to�settle�its�current�tax�assets�and�liabilities�on�a�net�basis.�

(iii)� Tax�consolidation�

The�Company�and�all�its�wholly�owned�Australian�resident�entities�are�part�of�a�tax�consolidated�group�under� Australian�taxation�law.�The�Company�is�the�head�entity�in�the�tax�consolidated�group.�Tax�expense/benefit,� deferred�tax�liabilities�and�deferred�tax�assets�arising�from�temporary�differences�of�the�members�of�the�tax� consolidated�group�are�recognised�in�the�separate�financial�statements�of�the�members�of�the�tax� consolidated�group�using�a�'stand�alone'�approach�based�on�the�allocation�specified�in�the�tax�funding� arrangement.��

The�Benefit�Funds�are�part�of�the�tax�consolidated�group,�and�they�are�allocated�a�share�of�the�income�tax� liability�attributable�to�Centuria�Life�Limited�equal�to�the�income�tax�liability�that�would�have�arisen�to�the� Benefit�Funds�had�they�been�stand�alone.���

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(iv)� Current�and�deferred�tax�for�the�period�

Current�and�deferred�tax�are�recognised�as�an�expense�or�income�in�profit�or�loss,�except�when�they�relate� to�items�that�are�recognised�outside�profit�or�loss�(whether�in�other�comprehensive�income�or�directly�in� equity),�in�which�case�the�tax�is�also�recognised�outside�profit�or�loss,�or�where�they�arise�from�the�initial� accounting�for�a�business�combination.�In�the�case�of�a�business�combination,�the�tax�effect�is�included�in�the� accounting�for�the�business�combination.�

(i) 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�insignificant�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�statement�of�financial�position.�

(j) Financial�assets�

All�financial�assets�are�recognised�and�derecognised�on�trade�date�where�the�purchase�or�sale�of�a�financial� asset�is�under�a�contract�whose�terms�require�delivery�of�the�financial�asset�within�the�timeframe�established� by�the�market�concerned,�and�are�initially�measured�at�fair�value�plus�transaction�costs,�except�for�those� financial�assets�classified�as�at�fair�value�through�profit�or�loss,�which�are�initially�measured�at�fair�value.��

(i)�� Effective�interest�method�

The�effective�interest�method�is�a�method�of�calculating�the�amortised�cost�of�a�debt�instrument�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�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� debt�instrument,�or�(where�appropriate)�a�shorter�period,�to�the�net�carrying�amount�on�initial�recognition.�

(ii)� Financial�assets�at�fair�value�through�profit�and�loss�

Financial�assets�are�classified�as�financial�assets�at�fair�value�through�profit�or�loss�when�the�financial�asset�is� either�held�for�trading�or�it�is�designated�as�at�fair�value�through�profit�or�loss.�

Financial�assets�at�fair�value�through�profit�and�loss�are�stated�at�fair�value,�with�any�gains�or�losses�arising� on�remeasurement�recognised�in�profit�or�loss.�The�net�gain�or�loss�recognised�in�profit�or�loss�incorporates� any�dividend�or�interest�earned�on�the�financial�asset�and�is�included�in�the�statement�of�comprehensive� income.�

(iii)� Other�financial�assets�

Other�financial�assets�include�reverse�mortgage�loans.�Reverse�mortgage�loans�are�held�directly�at�amortised� cost�using�the�effective�interest�method�except�for�commercial�mortgage�loans�held�by�the�Benefit�Funds� which�are�measured�at�fair�value�through�profit�and�loss.�An�allowance�for�impairment�loss�is�made�at�year� end�for�specific�amounts�when�there�is�objective�evidence�that�collection�of�the�full�amount�is�no�longer� probable.�Bad�debts�are�written�off�when�identified.���

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(iv)� Derecognition�of�financial�assets�

The�Group�derecognises�a�financial�asset�only�when�the�contractual�rights�to�the�cash�flows�from�the�asset� expire,�or�it�transfers�the�financial�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�financial�asset,�the�Group�continues�to�recognise�the�financial� asset�and�also�recognises�a�collateralised�borrowing�for�the�proceeds�received.�

�(v)� Impairment�of�financial�assets�

Financial�assets,�other�than�those�at�fair�value�through�profit�and�loss,�are�assessed�for�indicators�of� impairment�at�the�end�of�each�reporting�period.��Financial�assets�are�considered�to�be�impaired�where�there� is�objective�evidence�that,�as�a�result�of�one�or�more�events�that�occurred�after�the�initial�recognition�of�the� financial�asset,�the�estimated�future�cash�flows�of�the�investment�have�been�affected.�

When�an�event�occurring�after�the�impairment�was�recognised�causes�the�amount�of�impairment�loss�to� decrease,�the�decrease�in�impairment�loss�is�reversed�through�the�profit�and�loss.�

(vi)� Loans�and�receivables�

Trade�receivables,�loans�and�other�receivables�that�have�fixed�or�determinable�payments�that�are�not�quoted� in�an�active�market�are�classified�as�'loans�and�receivables'.��Loans�and�receivables�are�measured�at�amortised� cost�using�the�effective�interest�method�less�impairment.�

(k) Leasing�

Leases�are�classified�as�finance�leases�when�the�terms�of�the�lease�transfer�substantially�all�the�risks�and� rewards�of�ownership�to�the�lessee.�All�other�leases�are�classified�as�operating�leases.�

�(i)� Group�as�a�lessee�

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�benefits�from� the�leased�asset�are�consumed.��

�(ii)� Lease�incentives�

Lease�incentives�received�to�enter�into�operating�leases�are�recognised�as�a�liability.�The�aggregate�benefit� of�incentives�is�recognised�as�a�reduction�of�rental�expense�on�a�straight�line�basis,�except�where�another� systematic�basis�is�more�representative�of�the�time�pattern�in�which�economic�benefits�from�the�leased�asset� are�consumed.�Lease�incentives�granted�as�part�of�operating�leases�are�recognised�as�a�reduction�of�rental� income�on�a�straight�line�basis�over�the�life�of�the�lease.�

(l) Employee�benefits�

A�liability�is�recognised�for�benefits�accruing�to�employees�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.���

Contributions�to�defined�contribution�retirement�benefit�plans�are�recognised�as�an�expense�when� employees�have�rendered�service�entitling�them�to�the�contributions.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(l) Employee�benefits�(continued)�

(i)� Short�term�employee�benefits�

Liabilities�recognised�in�respect�of�short�term�employee�benefits,�are�measured�at�their�nominal�values�using� the�remuneration�rate�expected�to�apply�at�the�time�of�settlement.�

(ii)� Long�term�employee�benefits�

Liabilities�recognised�in�respect�of�long�term�employee�benefits,�are�measured�as�the�present�value�of�the� estimated�future�cash�outflows�to�be�made�by�the�Group�in�respect�of�services�provided�by�employees�up�to� reporting�date.��

�(iii)� Share�based�payment�transactions

Equity�settled�share�based�payments�to�employees�and�others�providing�similar�services�are�measured�at�the� fair�value�of�the�equity�instruments�at�the�grant�date.�

The�fair�value�determined�at�the�grant�date�of�the�equity�settled�share�based�payments�is�expensed�on�a� straight�line�basis�over�the�vesting�period,�based�on�the�Group’s�estimate�of�equity�instruments�that�will� eventually�vest.�At�the�end�of�each�reporting�period,�the�Group�revises�its�estimate�of�the�number�of�equity� instruments�expected�to�vest.�The�impact�of�the�revision�of�the�original�estimates�with�respect�to�non�market� vesting�conditions,�if�any,�is�recognised�in�profit�for�the�year�such�that�the�cumulative�expense�reflects�the� revised�estimate,�with�a�corresponding�adjustment�to�the�equity�settled�employee�benefits�reserve.�

Equity�settled�share�based�payment�transactions�with�parties�other�than�employees�are�measured�at�the�fair� value�of�the�goods�and�services�received,�except�where�that�fair�value�cannot�be�estimated�reliably,�in�which� case�they�are�measured�at�the�fair�value�of�the�equity�instruments�granted,�measured�at�the�date�the�entity� obtains�the�goods�or�the�counterparty�renders�the�service.�

(m) Financial�liabilities�and�equity�instruments�issued�by�the�Group��

(i)� Classification�as�debt�or�equity

Debt�and�equity�instruments�are�classified�as�either�financial�liabilities�or�as�equity�in�accordance�with�AASB� 132� Financial�Instruments .�

(ii)� Equity�instruments�

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�recognised�at�the�proceeds�received,� net�of�direct�issue�costs.

(iii)�� Other�financial�liabilities

Other�financial�liabilities,�including�borrowings�and�trade�and�other�payables,�are�initially�measured�at�fair� value,�net�of�transaction�costs.�

Other�financial�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�financial�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�financial�liability,�or�(where�appropriate)�a�shorter�period,�to�the�net�carrying�amount� on�initial�recognition.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS� FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(n) Derivative�financial�instruments��

The�Group�enters�into�derivative�financial�instruments�such�as�interest�rate�swaps�to�manage�its�exposure�to� interest�rate�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�period.�The�resulting�gain�or�loss�is�recognised� in�profit�or�loss�immediately�unless�the�derivative�is�designated�and�effective�as�a�hedging�instrument,�in� which�event,�the�timing�of�the�recognition�in�profit�or�loss�depends�on�the�nature�of�the�hedge�relationship.�

�(i)� 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� flows�of�the�hedged�item.���

The�Group�designates�certain�derivatives�as�either�hedges�of�fair�value�of�recognised�assets�or�liabilities�(fair� value�hedges)�or�hedges�of�highly�probable�forecast�transactions�(cash�flow�hedges).�

(ii)� Cash�flow�hedge�

The�effective�portion�of�changes�in�the�fair�value�of�derivatives�that�are�designated�and�qualify�as�cash�flow� hedges�is�recognised�in�other�comprehensive�income.�The�gain�or�loss�relating�to�the�ineffective�portion�is� recognised�immediately�in�profit�or�loss,�and�is�included�in�the�other�expenses�or�other�income�line�item.� Amounts�previously�recognised�in�other�comprehensive�income�and�accumulated�in�equity�are�reclassified� to�profit�or�loss�in�the�periods�when�the�hedged�item�is�recognised�in�profit�or�loss,�in�the�same�line�of�the� statement�of�comprehensive�income�as�the�recognised�hedged�item.�However,�when�the�forecast�transaction� that�is�hedged�results�in�the�recognition�of�a�non�financial�asset�or�a�non�financial�liability,�the�gains�and� losses�previously�accumulated�in�equity�are�transferred�from�equity�and�included�in�the�initial�measurement� of�the�cost�of�the�non�financial�asset�or�non�financial�liability.�Hedge�accounting�is�discontinued�when�the� Group�revokes�the�hedging�relationship,�when�the�hedging�instrument�expires�or�is�sold,�terminated,�or� exercised,�or�when�it�no�longer�qualifies�for�hedge�accounting.�Any�gain�or�loss�accumulated�in�equity�at�that� time�remains�in�equity�and�is�recognised�when�the�forecast�transaction�is�ultimately�recognised�in�profit�or� loss.�When�a�forecast�transaction�is�no�longer�expected�to�occur,�the�gain�or�loss�accumulated�in�equity�is� recognised�immediately�in�profit�or�loss.

(iii)� Fair�value�hedge�

Changes�in�the�fair�value�of�derivatives�that�are�designated�and�qualify�as�fair�value�hedges�are�recorded�in� profit�or�loss�immediately,�together�with�any�changes�in�the�fair�value�of�the�hedged�asset�or�liability�that�are� attributable�to�the�hedged�risk.�The�change�in�the�fair�value�of�the�hedging�instrument�and�the�change�in�the� hedged�item�attributable�to�the�hedged�risk�are�recognised�in�the�line�of�the�statement�of�comprehensive� income�relating�to�the�hedged�item.�

Hedge�accounting�is�discontinued�when�the�Group�revokes�the�hedging�relationship,�the�hedging�instrument� expires�or�is�sold,�terminated,�or�exercised,�or�when�it�no�longer�qualifies�for�hedge�accounting.�The�fair�value� adjustment�to�the�carrying�amount�of�the�hedged�item�arising�from�the�hedged�risk�is�amortised�to�profit�or� loss�from�that�date.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(o) Product�classification�

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

(i)� Insurance�contracts�

Insurance�contracts�are�those�containing�significant�insurance�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�significant.�Once�a�contract�has�been�classified�as�an�insurance�contract,�it�remains�an�insurance�contract� for�the�remainder�of�its�lifetime,�even�if�the�insurance�risk�reduces�significantly�during�the�period.�

�(ii)� Investment�contracts�

Contracts�not�considered�insurance�contracts�are�classified�as�investment�contracts.�The�accounting� treatment�of�investment�contracts�depends�on�whether�the�investment�has�a�Discretionary�Participation� Feature.��A�Discretionary�Participation�Feature�(DPF)�means�a�contractual�right�to�receive,�as�a�supplement� to�guaranteed�benefits,�additional�benefits:�

  • (a) that�are�likely�to�be�a�significant�portion�of�the�total�contractual�benefits;��

  • (b) whose�amount�or�timing�is�contractually�at�the�discretion�of�the�issuer;�and�

  • (c) that�are�contractually�based�on:�

  • the�performance�of�a�specified�pool�of�contracts�or�a�specified�type�of�contract;�

  • realised�and/or�unrealised�investment�returns�on�a�specified�pool�of�assets�held�by�the�issuer;�or�

  • the�profit�or�loss�of�the�Company,�fund�or�other�entity�that�issues�the�contract.��

Applications�and�redemptions�on�investment�contracts�with�a�DPF�are�accounted�for�through�profit�or�loss.� The�gross�change�in�the�liability�to�these�policyholders�for�the�period,�which�includes�any�participating� benefits�vested�in�policyholders�and�any�undistributed�surplus�attributed�to�policyholders,�is�also�recognised� through�profit�or�loss.��

Applications�and�redemptions�on�investment�contracts�without�a�DPF�are�accounted�for�through�the� statement�of�financial�position�as�a�movement�in�policyholder�liabilities.�Distributions�on�these�contracts�are� charged�to�profit�or�loss�as�a�movement�in�the�policyholder�liability.�Premiums�and�claims�relating�to�the� investment�component�are�accounted�for�as�a�deposit�through�the�statement�of�financial�position.�

(p) Policyholders'�funds�

Assets�and�liabilities�held�by�the�Benefit�Funds�are�included�in�the�statement�of�financial�position�of�the� Group.�

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.��In�accordance�with�the�rules�of�the�funds,�any�remaining�surplus�is�attributed�to�the� policyholders�of�the�fund.��In�accordance�with�applicable�accounting�standards,�applications�to�these�funds� are�recorded�as�income,�redemptions�from�these�funds�and�amounts�distributable�to�policyholders�are� recorded�as�expenses.��

The�policyholders'�funds�liability�for�unit�linked�funds�is�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��

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

NOTES�TO�THE�CONSOLIDATED�FINANCIAL�STATEMENTS�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

28.� Significant�accounting�policies�(continued)�

(p)� Policyholders'�funds� �(continued)�

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.���

Claims�incurred�in�respect�of�the�Benefit�Funds�represent�investment�withdrawals�(redemptions)�and�are� recognised�as�a�reduction�in�policyholder�liabilities.��Redemptions�in�respect�of�bonus�funds�are�also�disclosed� as�an�expense�as�set�out�above.��

Benefit�Fund�expenses�which�are�directly�attributable�to�an�individual�policy�or�product�are�allocated�directly� to�the�benefit�fund�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.�

(q) Property�held�for�development�

Properties�held�for�development�in�the�ordinary�course�of�business�are�carried�at�the�lower�of�cost�and�net� realisable�value.�Cost�includes,�where�applicable,�the�cost�of�acquisition,�construction,�interest,�rates,�taxes� and�other�expenses�directly�related�to�the�development.�

(r) New�Accounting�Standards�and�Interpretations�

AASB�9�Financial�Instruments �and�the�relevant�amending�standards�are�effective�for�annual�reporting�periods� beginning�on�or�after�1�January�2018.�AASB�9�will�be�mandatory�for�the�Group’s�30�June�2019�financial� statements.�

AASB�9�is�a�new�Standard�which�will�replace�AASB�139� Financial�Instruments:�Recognition�and�Measurement .�

AASB�9�includes�revised�guidance�on�the�classification�and�measurement�of�financial�instruments,�however� it�carries�over�the�existing�derecognition�requirements�from�AASB�139.�

The�Group�is�currently�considering�the�financial�impact�of�this�accounting�standard�change.�

AASB�15�Revenue�from�Contracts�with�Customers �and�the�relevant�amending�standards�are�effective�for� annual�reporting�periods�beginning�on�or�after�1�January�2018.�AASB�15�will�be�mandatory�for�the�Group’s� 30�June�2019�financial�statements.�

AASB�15�establishes�a�single�comprehensive�model�for�entities�to�use�in�accounting�for�revenue�arising�from� contracts�with�customers.�AASB�15�will�replace�AASB�118� Revenue,�AASB�111�Construction�Contracts� and�the� related�Interpretations�when�it�becomes�effective.�The�model�features�a�contract�based�five�step�analysis�of� transactions�to�determine�whether,�how�much�and�when�revenue�is�recognised.�

The�Group�is�currently�considering�the�financial�impact�of�this�accounting�standard�change.�

AASB�16�Leases �is�effective�for�annual�reporting�periods�beginning�on�or�after�1�January�2019.�Early� application�is�permitted,�provided�the�new�revenue�standard,�AASB�15,�has�been�applied,�or�is�applied�at�the� same�date�as�AASB�16.�

The�Group�is�currently�considering�the�financial�impact�of�this�accounting�standard�change.�

���

CENTURIA�CAPITAL�LIMITED�AND�CONTROLLED�ENTITIES�

DIRECTORS’�DECLARATION�

FOR�THE�YEAR�ENDED�30�JUNE�2016�

In�the�opinion�of�the�directors�of�Centuria�Capital�Limited:�

  • (a) the�consolidated�financial�statements�and�notes�that�are�set�out�on�pages�23�to�70�and�the� Remuneration�Report�set�out�on�pages�9�to�20�in�the�Directors’�report,�are�in�accordance�with�the� Corporations�Act�2001 ,�including:��

  • (i) giving�a�true�and�fair�view�of�the�Group’s�financial�position�as�at�30�June�2016�and�of�its� performance,�as�represented�by�the�results�of�its�operations,�changes�in�equity�and�its�cash� flows,�for�the�financial�year�ended�on�that�date;�and�

  • (ii) complying�with�Australian�Accounting�Standards�and�the� Corporations�Regulations�2001 ;�and�

  • (b) there�are�reasonable�grounds�to�believe�that�the�Group�will�be�able�to�pay�its�debts�as�and�when�they� become�due�and�payable.�

The�directors�have�been�given�the�declarations�required�by�Section�295A�of�the�Corporations�Act�2001�from� the�chief�executive�officer�and�chief�financial�officer�for�the�financial�year�ended�on�30�June�2016.�

The�directors�draw�attention�to�Note�2�to�the�consolidated�financial�statements,�which�includes�a�statement� of�compliance�with�International�Financial�Reporting�Standards.�

Signed�in�accordance�with�a�resolution�of�the�directors.�

For�and�on�behalf�of�the�Board��

==> picture [118 x 86] intentionally omitted <==

==> picture [126 x 86] intentionally omitted <==

G.�Charny� Chairman�

P.�J.�Done�

Director�

Chairman���Audit,�Risk�Management�&�Compliance�Committee�

Sydney�� 18�August�2016�

���

ABCD

Independent auditor’s report to the members of Centuria Capital Limited

Report on the financial report

We have audited the accompanying financial report of Centuria Capital Limited (the Company) and its controlled entities (the Group), which comprises the consolidated statement of financial position as at 30 June 2016, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 28 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 2, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control . An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

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

72

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under (“KPMG International”), a Swiss entity. Professional Standards Legislation

ABCD

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor’s opinion

In our opinion:

  • (a) The financial report of Centuria Capital Limited is in accordance with the Corporations Act 2001 , including:

  • (i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

  • (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

  • (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2.

Report on the remuneration report

We have audited the Remuneration Report included in pages 9 to 20 of the directors’ report for the year ended 30 June 2016. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Centuria Capital Limited for the year ended 30 June 2016, complies with Section 300A of the Corporations Act 2001 .

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KPMG

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Nigel Virgo

Partner

Sydney

18 August 2016

73

ADDITIONAL�STOCK�EXCHANGE�INFORMATION� AS�AT�10�AUGUST�2016�

Additional�information�required�by�the�ASX�Limited�Listing�Rules�and�not�disclosed�elsewhere�in�this�report� is�set�out�below.�

Distribution�of�holders�of�ordinary�shares���

Numberof Numberofordinary
holders shares
1�1,000 849 430,554
1,001�5,000 4,784 11,711,651
5,001�10,000 825 5,631,556
10,001�100,000 637 16,210,603
100,001andover 69 42,647,335
7,164 76,631,699
Holdinglessthanamarketableparcel 447 131,715

On�market�share�buy�back�

The�company�bought�back�125,230�shares�(2015;�1,373,835�shares)�during�the�current�financial�year.��All�of� the�shares�bought�back�were�settled�by�30�June�2016.��

Substantial�shareholders�

Substantialshareholders
�������������������� ��������
����������
RBCINVESTORSERVICESAUSTRALIANOMINEESPTYLIMITED 7,743,495
JPMORGANNOMINEESAUSTRALIALIMITED 5,548,594
RESOLUTEFUNDSMANAGEMENTPTYLTD 4,283,440

Top�20�Shareholders�

Top20Shareholders
Ordinary Shares
Number Percentage
RBCINVESTORSERVICESAUSTRALIANOMINEESPTYLIMITED 7,743,495 10.10
JPMORGANNOMINEESAUSTRALIALIMITED 5,548,594 7.24
RESOLUTEFUNDSMANAGEMENTPTYLTD 4,283,440 5.59
PARITAIPTYLIMITED 2,044,266 2.67
AVANTEOSINVESTMENTSLIMITED<2412987JRSWJHA/C> 1,700,000 2.22
NATIONALEXCHANGEPTYLTD 1,401,563 1.83
AVANTEOSINVESTMENTSLIMITED<1259738PARSONSA/C> 1,107,822 1.45
AVANTEOSINVESTMENTSLIMITED<1703553JOHNSONA/C> 1,063,608 1.39
NATIONALNOMINEESLIMITED 1,005,125 1.31
STERLINGGRACECAPITALMANAGEMENTLP 802,550 1.05
STERLINGGRACEINTERNATIONALLLC 802,550 1.05
AVANTEOSINVESTMENTSLIMITED<2469707NSLATERA/C> 800,000 1.04
BRYSHAWMANAGEMENTPTYLTD 765,051 1.00
PHILIPCAIRNSDIXON+JACQUELINEPATRICIADIXON+STEPHENTHOMASWRIGHT 750,000 0.98
MRROGERWILLIAMDOBSON 748,651 0.98
VEXDATPTYLTD 714,390 0.93
STRATEGICVALUEPTYLTD 526,818 0.69
NATIONALEXCHANGEPTYLTD 500,000 0.65
MRSROSINAANNABLAKE 405,658 0.53
STRATEGICVALUEPTYLTD 403,805 0.53
33,117,386 43.23

Voting�rights

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

���

CORPORATE�DIRECTORY�

Contact�Us�

Shareholder�Enquiries�call:��1800�11�29�29� Investor�Enquiries�call:���������1300�50�50�50� www.centuria.com.au

Head�Office�

Level�39,�100�Miller�Street� Sydney�NSW�2060� Call� 1300�50�50�50� Fax� (02)�9460�2960� [email protected]

Shareholder�Enquiries�

Centuria�Capital�Limited,� Share�Registry,� GPO�Box�2975� Melbourne�VIC�3001� Call�� 1800�11�29�29�

Friendly�Society�Investor�Enquiries�

Centuria�Life�Limited,� Level�32,�120�Collins�Street� Melbourne�VIC�3000 Call� 1300�50�50�50� [email protected]

Company�Secretary�

James�Lonie� Level�39,�100�Miller�Street� Sydney�NSW�2060� Call� (02)�8923�8910� Fax� (02)�9460�2960�

Mail�to�

Centuria�Capital�Limited� Reply�Paid�695,�Melbourne�VIC�8060� (no�stamp�required)�

���