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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 .
==> picture [75 x 52] intentionally omitted <==
KPMG
==> picture [118 x 76] intentionally omitted <==
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)�
���