CENTURIA CAPITAL GROUP — Annual Report 2018

Aug 13, 2018

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Centuria Capital Group Financial Report for the year ended 30 June 2018

Centuria Capital Group comprises of Centuria Capital Limited ABN 22 095 454 336 (the 'Company') and its subsidiaries and Centuria Capital Fund ARSN 613 856 358 ('CCF') and its subsidiaries. The Responsible entity of CCF is Centuria Funds Management Limited ACN 607 153 588, AFSL 479 873, a wholly owned subsidiary of the Company.

Centuria Capital Group Financial Report - 30 June 2018

Contents

Contents
	Page
Directors' report	1
Directors and directors' interests	1
Company secretary	4
Principal activities	5
Significant changes in the state of affairs	5
Operating and financial review	5
Events subsequent to the reporting date	7
Audited remuneration report	9
Auditor's Independence Declaration	21
Consolidated financial statements	22
Independent auditor's report to the members	71
Additional stock exchange information	77

These consolidated financial statements are the financial statements of the consolidated entity consisting of Centuria Capital Limited and its subsidiaries. A list of material subsidiaries is included in note E2. The consolidated financial statements are presented in the Australian currency.

Centuria Capital Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Centuria Capital Limited Level 39, 100 Miller Street North Sydney NSW 2060

The consolidated financial statements were authorised for issue by the Directors on 14 August 2018. The Directors have the power to amend and reissue the consolidated financial statements.

Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are available at our Shareholder Centre on our website: www.centuria.com.au

Directors' report

The directors of Centuria Capital Limited (the 'Company') present their report together with the consolidated financial statements of the Company and its controlled entities (the 'Group') for the financial year ended 30 June 2018 and the auditor’s report thereon.

ASX listed Centuria Capital Group consists of the Company and its controlled entities including Centuria Capital Fund ('CCF'). The shares in the Company and the units in CCF are stapled, quoted and traded on the Australian Securities Exchange ('ASX') as if they were a single security under the ticker code 'CNI'.

Directors and directors' interests

Directors and directors' interests	Directors and directors' interests	Directors and directors' interests
Mr Garry S. Charny, BA. LL.B.Independent Non-Executive Director and Chairman
Experience and expertise	Garry was appointed to the Board on 23 February 2016 and appointed Chairman on 30 March 2016. He is Managing Director and founding principal of Wolseley Corporate, an Australian based corporate advisory and investment house which transacts both domestically and internationally. He has had a broad range experience in both listed and unlisted companies across a diverse range of sectors including property, retail, technology and media. He formerly practised as a barrister in the fields of commercial and equity.
Other directorships	Garry is Chairman of Wolseley Corporate. He is also Chairman of Spotted Turquoise Films, an international Film and Television company based in Sydney and Los Angeles. He is Chairman of Shero Investments, a Sydney based investment company.
Special responsibilities	Chairman of the Board Chairman of the Conflicts Committee Chairman of the Nomination and Remuneration Committee Member of the Audit, Risk Management and Compliance Committee
Interests in CNI	Ordinary stapled securities	237,314
Mr Peter J. Done, B.Comm, FCA.Independent Non-Executive Director
Experience and expertise	Peter was appointed to the Board on 28 November 2007. Peter was a partner of KPMG for 27 years until his retirement in June 2006. He has extensive knowledge in accounting, audit and financial management in the property development and financial services industries, corporate governance, regulatory issues and Board processes through his many senior roles.
Other directorships	None.
Special responsibilities	Chairman of the Audit, Risk Management and Compliance Committee Member of the Nomination and Remuneration Committee Member of the Investment Committee
Interests in CNI	Ordinary stapled securities	1,083,676

Centuria Capital Group 1 30 June 2018

Directors' report

Directors and directors' interests (continued)

Directors and directors' interests (continued)	Directors and directors' interests (continued)	Directors and directors' interests (continued)
Mr John R. Slater, Dip.FS (FP), F Fin.Independent Non-Executive Director
Experience and expertise	John was appointed to the Board on 22 May 2013 having been an adviser to the Centuria Life Friendly Society Investment Committees since 2011. John was a senior executive in the KPMG Financial Services practice from 1989 to 1999 and acted as State director of the Brisbane practice. He has also served on the Investment Committees of KPMG Financial Services, Berkley Group and Byron Capital. In 2008, John founded boutique Financial Advisory firm Riviera Capital, subsequently sold in 2016 and has a wealth of financial services experience.
Other directorships	None.
Special responsibilities	Member of the Audit, Risk Management and Compliance Committee Member of the Nomination and Remuneration Committee
Interests in CNI	Ordinary stapled securities	2,889,075
Ms Susan Wheeldon-Steele, MBA.Independent Non-Executive Director
Experience and expertise	Susan was appointed to the Board on 31 August 2016. Susan is the Head of Performance at Google where she works with major national and global companies to develop and deliver growth strategies that future proof and build clients’ businesses and brands in a constantly changing environment. She has previous experience in retail property asset management at AMP Capital Shopping Centres, as Head of Brand & Retail, responsible for delivering alternative revenue from 38 retail assets across Australia and New Zealand with combined annual sales in excess of $5 billion.
Other directorships	None.
Special responsibilities	Member of the Conflicts Committee
Interests in CNI	Ordinary stapled securities	Nil.

Centuria Capital Group 2 30 June 2018

Directors' report

Directors and directors' interests (continued)

Directors and directors' interests (continued)	Directors and directors' interests (continued)	Directors and directors' interests (continued)
Mr Nicholas R. Collishaw, SAFin, FAAPI, FRICS,[Non-Executive Director
Experience and expertise	Nicholas was appointed CEO - Listed Property Funds at Centuria Property Funds on 1 May 2013 and to the Board on 27 August 2013. Effective 1 January 2018, Nicholas resigned as CEO - Listed Property Funds and became a Non-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.
Other directorships	None.
Special responsibilities	CEO - Listed Property Funds- resigned 1 January 2018
Interests in CNI	Ordinary stapled securities	3,086,227
	Performance rights granted	858,811

Mr John E. McBain,Dip. Urban Valuation,Executive Director and Chief Executive Officer	Mr John E. McBain,Dip. Urban Valuation,Executive Director and Chief Executive Officer	Mr John E. McBain,Dip. Urban Valuation,Executive Director and Chief Executive Officer
Experience and expertise	John was a founding director and major shareholder in boutique property 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 Group Board on 10 July 2006 and was appointed Chief Executive Officer in 2008. In 2011 the company was renamed Centuria Capital. 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.
Other directorships	John is also a director of QV Equities Limited, a licensed investment company listed on the ASX.
Special responsibilities	Chief Executive Officer
Interests in CNI	Ordinary stapled securities	5,191,995
	Performance rights granted	1,495,515

Centuria Capital Group 3 30 June 2018

Directors' report

Directors and directors' interests (continued)

Mr Jason C. Huljich, B.	Comm.Executive Director and Head of Real Estate and Funds Management	Comm.Executive Director and Head of Real Estate and Funds Management
Experience and expertise	Jason was appointed to the Board on 28 November 2007. Jason leads Centuria’s Property Funds Management business, which is responsible for both listed and unlisted property funds, the property services business, property acquisition and disposal and special property and debt opportunities. In this role he provides strategic leadership, ensuring the effective operation of Centuria’s property business. He has extensive experience in the commercial property sector, with specialist skills in property investment and funds management. He is also the immediate past President of the Property Funds Association (PFA), which represents the $125 billion direct property investment body in Australia, and continues to serve on their national executive.
Other directorships	None.
Special responsibilities	Head of Real Estate and Funds Management
Interests in CNI	Ordinary stapled securities	5,186,039
	Performance rights granted	872,740

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	Board Meetings	Audit, Risk, Management & Compliance Committee Meetings	Audit, Risk, Management & Compliance Committee Meetings	Nomination & Remuneration Committee Meetings	Nomination & Remuneration Committee Meetings	Conflicts Committee meetings	Conflicts Committee meetings
	A	B	A	B	A	B	A	B
Mr Garry S. Charny Mr Peter J. Done Mr John R. Slater Ms Susan Wheeldon-Steele Mr Nicholas R. Collishaw Mr John E. McBain Mr Jason C. Huljich	24 24 24 24 24 24 24	24 22 23 22 23 23 20	6 6 6 # # # #	5 6 4 # # # #	4 4 4 # # # #	4 4 3 # # # #	6 # # 6 # # #	6 # # 6 # # #

A = Number of meetings attended

B = Number of meetings held during the time the Director held office during the year

= Not a member of committee

Company secretary

Anna Kovarik was appointed to the position of Company Secretary on 5 July 2018.

Anna holds a Masters of Information Technology, a BA (Hons) in Systems Management and was awarded a distinction in the Global Executive MBA program at the University of Sydney. She is qualified as a solicitor in both the UK and NSW and was a senior associate at Allens law practice in Sydney.

Prior to joining Centuria, Anna held the position of Group Risk Manager at Mirvac Group and was previously Head of Group Insurance for AMP and General Counsel and Company Secretary at AMP Capital Brookfield.

Mr James Lonie held the position of company secretary from 16 June 2017 until his resignation on 5 July 2018.

Centuria Capital Group 4 30 June 2018

Directors' report

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 as well as direct interest in property funds and other liquid investments.

Significant changes in the state of affairs

Significant changes in the state of affairs of the Group during the financial year, in addition to the operating and financial review below were as follows:

• Contributed equity attributable to Centuria Capital Group increased by $95,705,000 from $247,995,000 to $343,700,000 as a result of equity raisings and vesting of rights under the Employee share scheme. Details of changes in contributed equity are disclosed in Note C10 to the consolidated financial statements.

• On 11 September 2017, the Group issued Tranche 2 of 7% fixed rate secured notes to the value of $23,000,000. These notes mature on 21 April 2021 along with $100,000,000 of fixed and floating rate secured notes which were issued during the year ended 30 June 2017.

• The Group increased its stake in Centuria Metropolitan REIT by 2.7% to 11.4% and Centuria Industrial REIT by 3.8% to 19.5%.

• The Group acquired a 9.3% strategic stake in Propertylink Group (PLG).

Operating and financial review

The Group recorded a consolidated statutory net profit after tax for the year of $56,190,000 (2017: $26,295,000). Statutory net profit after tax has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, which comply with International Financial Reporting Standards.

The Group recorded an operating profit after tax of $45,087,000 (2017: $15,489,000). Operating profit after tax excludes non-operating items such as transaction costs and fair value movements.

The statutory net profit after tax includes a number of items that are not operating in nature, the table below provides a reconciliation from statutory profit to operating profit.

Reconciliation of statutory profit to operating profit Statutory profit after tax Less non-operating items: Unrealised loss/(gain) on fair value movements in derivatives, property and investments Corporate restructure & transaction costs Impairment charges in relation to seed capital valuations Profit attributable to controlled property funds Eliminations between the operating and non-operating segment Tax impact of above non-operating adjustments Operating profit after tax

2018 $'000 2017 $'000 56,190 26,295 (8,604) (4,434) 230 2,749 380 190 (8,061) (10,934) 5,761 2,643 (809) (1,020)

45,087 15,489

Centuria Capital Group 5 30 June 2018

Directors' report

Operating and financial review (continued)

Operating profit after tax provides an assessment of performance of the Group aligned with the reporting to the Group’s CEO for resource allocation purposes.

Operational highlights for the key segments were as follows:

Segment		Operating profit after tax$'000	Operating profit after tax$'000	Increase/ (Decrease) $'000	Increase/ (Decrease) %	Highlights
		2018	2017
Property Funds Management		34,221	11,041	23,180	210	(a)
Investment Bonds Division		3,473	2,648	825	31	(b)
Co-Investments		11,717	5,423	6,294	116	(c)

(a) Property Funds Management

For the year ended 30 June 2018, Property Funds Management operating profit after tax of $34,221,000 was higher than the prior year ending 30 June 2017 by $23,180,000 primarily due to the impact of performance fees of $25,830,000 earned in the current year on the sale of 10 Spring Street property.

Excluding the after tax impact of performance fees the Property Funds Management segment profit increased by $15,330,000 or 52% reflecting the growth in assets under management (AUM) in addition to the contribution arising from the 360 Capital transaction that occurred part way during the prior year.

Operational highlights for the year included:

• Increase in recurring Property Funds Management fees of $12,935,000 or 67% from $19,265,000 for the year ended 30 June 2017 to $32,200,000 for the year ended 30 June 2018

• 27% increase in Unlisted AUM from $1.5 billion as at 30 June 2017 to $1.9 billion as at 30 June 2018

• 40% increase in Listed AUM from $1.5 billion as at 30 June 2017 to $2.1 billion as at 30 June 2018

• Centuria Industrial REIT acquired four properties with a total value of $78.4 million

• Centuria Metropolitan REIT acquired four properties with a total value of $210.9 million

• Performance fees of $25,830,000 earnt on the sale of 10 Spring St property

• Establishment of three Unlisted Property Funds:

• July 2017: Centuria Sandgate Road Fund ($106 million)

• March 2018: Centuria Geelong Office Fund ($115 million)

• July 2018: Centuria 80 Grenfell Street Fund ($185 million, 50% unlisted fund and 50% partnership with The Lederer Group).

(b) Investment Bonds Management

For the year ended 30 June 2018, the Investment Bonds Management segment increased its operating profit after tax by $825,000 or 31% to $3,473,000.

The Investment Bonds Management business delivered net overall AUM growth to $0.9 billion across its product range representing a 12.5% increase in AUM from prior year.

Centuria's Investment Bonds Management business is the fourth largest friendly society/insurance bond issuer in Australia.

Centuria Capital Group 6 30 June 2018

Directors' report

Operating and financial review (continued)

(c) Co-Investments

For the year ended 30 June 2018, the Co-Investments segment operating profit after tax increased by $6,294,000 or 116% reflecting a $127 million increase in co-investment holdings across listed and unlisted investments including various Funds managed by the Group.

With an increase in recurring investment revenue from $6,068,000 for the year ended 30 June 2017 to $20,705,000 for the year ended 30 June 2018 the Co-investments segment has contributed to improvement in the Group’s overall recurring revenue which increased by 77% compared to the prior year. The Co-investments segment has contributed over 20% of the Group's total operating revenue for the year ended 30 June 2018.

The Co-investments of $278 million as at 30 June 2018 included a $124.3 million or a 19.48% stake in Centuria Industrial REIT as well as we as a $68.6 million or 11.39% stake in the Centuria Metropolitan REIT and a $59.3 million or 9.28% stake in PropertyLink Group (PLG).

The operating profit after tax for the Co-investments segment represents the distributions and returns generated from those investments after the applicable financing costs.

Earnings per security (EPS)

Earnings per security (EPS)
Basic EPS (cents/security) Diluted EPS (cents/security)	2018 2017 Operating Statutory Operating Statutory
	16.3 19.8 10.3 11.5 14.9 18.1 10.1 11.4

Dividends and Distributions

Dividends and distributions paid or declared by the Group during the current financial year were:

	Cents.	Cents.	Total amount	Date
Dividends/distributions paid during the year	per security .		$'000	paid/payable
Final 2017 dividend (100% franked)	2.4		5,453	24 August 2017
Final 2017 Trust distribution (66% tax deferred)	2.8		6,361	24 August 2017
Interim 2018 dividend (100% franked)	1.7		5,184	31 January 2018
Interim 2018 Trust distribution (estimated 60% tax
deferred)	2.4		7,314	31 January 2018
Dividends/distributions declared during the year
Final 2018 dividend (100% franked)	1.0		3,048	27 July 2018
Final 2018 Trust distribution (estimated 60% tax
deferred)	3.1		9,449	27 July2018
Total amount	13.4	.	36,809

Events subsequent to the reporting date

There has not arisen in the interval between 30 June 2018 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, that would 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.

Centuria Capital Group 7 30 June 2018

Directors' report

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.

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 F4 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.

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 21.

Rounding of amounts

The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ Report and financial statements. Amounts in the Directors’ Report and financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated.

Centuria Capital Group 8 30 June 2018

Directors' report

Audited remuneration report

The remuneration report provides information about the remuneration arrangements for key management personnel (KMP), which includes Non-executive Directors and the Group’s most senior management, for the year to 30 June 2018.

The report is structured as follows:

• Details of KMP covered in this report

• Remuneration policy and link to performance

• Remuneration of executive directors and senior management

• Key terms of employment contracts

• Non-executive director remuneration

• Director and senior management equity holdings and other transactions

Details of KMP covered in this report

The following persons are considered KMP of the Company during or since the end of the most recent financial year:

year:
Name	Role
Mr Garry S. Charny	Independent Non-Executive Director and Chairman
Mr Peter J. Done	Independent Non-Executive Director
Mr John R. Slater	Independent Non-Executive Director
Ms Susan Wheeldon-Steele	Independent Non-Executive Director
Mr Nicholas R. Collishaw	Non-Executive Director
Mr John E. McBain	Executive Director and Chief Executive Officer
Mr Jason C. Huljich	Executive Director and Head of Real Estate and Funds Management
Mr Simon W. Holt	Chief Financial Officer

The term 'senior management' is used in this remuneration report to refer to the executive directors and the Chief Financial Officer.

Remuneration policy and link to performance

The Group 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 Group must be able to attract, motivate and retain capable individuals. The Group'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 senior management, 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 Group 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.

The main objective in rewarding the Group's senior management for their performances is to ensure that shareholders' wealth is maximised through the Group's continued growth. It is necessary to structure and strengthen this focus to drive this strategy so that they are aligned with the Group'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 Group's performance for the year in reference to specific Earnings per Security (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 and non-financial measures.

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

Centuria Capital Group 9 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration policy and link to performance (continued)

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 senior management depending on the extent to which they meet performance requirements.

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

Remuneration of senior management

Objective

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

• Reward senior management for company, business unit and individual performance against targets set by reference to appropriate benchmarks;

• Align the interests of senior management with those of stakeholders;

• Link rewards with the strategic goals and performance of the Group; and

• Ensure total remuneration is competitive by market standards.

Structure

In determining the level and make-up of senior management remuneration, the Chief Executive Officer 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 for senior management (excluding the Chief Executive Officer) is established by the Chief Executive Officer and the Nomination & Remuneration Committee. The proportion of fixed and variable remuneration for the Chief Executive Officer is established solely by the Nomination & Remuneration Committee. While the allocation may vary from period to period, the table below details the approximate fixed and variable components for senior management.

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Centuria Capital Group 10 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Structure (continued)

(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. For senior management excluding the Chief Executive Officer, this is reviewed annually by the Chief Executive Officer and the Nomination & Remuneration Committee. The process consists of a review of Group, 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 Chief Executive Officer.

Senior management are given the opportunity to receive their fixed 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 Group’s Senior Management Remuneration Policy, long and short-term performance incentives may be made under the Group’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 non-financial and financial targets with the remuneration received by senior management charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to senior management to achieve operational targets and such that the cost to the Group is reasonable in the circumstances.

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 Group, or a combination of both.

During the current financial year, the Group issued Nil (2017: Nil) ordinary securities to employees in addition to cash bonuses provided to employees.

(ii) Long-term Incentives (LTI)

The Group has an Executive Incentive Plan (“LTI Plan”) which forms a key element of the Group’s incentive and retention strategy for senior management 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 senior management 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 entities.

Rights issued under the LTI Plan are issued in accordance with the thresholds approved at the Annual General Meeting (AGM).

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

Centuria Capital Group 11 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Structure (continued)

Term	Detail
	Each Right is a right to receive a fully paid ordinary stapled security in the Group
Performance	("Security"), subject to meeting the Performance Conditions.
Rights ("Rights")	Upon meeting the Performance Conditions, the Rights vest and securities are allocated.
	Rights do not carry a right to vote or to dividends or, in general, a right to participate in other
	corporate actions such as bonus issues.
	The Rights will vest to the extent that the board determines that:
Vesting conditions	- The performance conditions that apply to the Rights were satisfied; and
	- The employee was continuously employed by the Company until the end of the
	Performance Period.
	The date on which the Board determines the extent to which the performance conditions are
Vesting date	satisfied and the Rights vest.
	The Performance Conditions set out in the LTI Plan relate to:
Performance	- Growth in Earnings Per Share ("EPS hurdle");
Conditions	- Growth in property and friendly society funds under management ("FUM Hurdle"); and
	- Absolute Total Securityholder Return Performance("Absolute TSR Hurdle").

Centuria Capital Group 12 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Structure (continued)

The Group currently operates three tranches of the Executive Incentive Plan (“Plan”) as below.

Tranche	Grant Date	Performance Period
3	1 February 2016	1 July 2015 to 30 June 2018
4	1 January 2017	1 July 2016 to 30 June 2019
5	1 November 2017	1 July2017 to 30 June 2020

The performance objectives for performance rights granted under Tranche 3 were met in full by 30 June 2018. As a result, these rights will vest on 31 August 2018.

EPS Hurdle

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

		Compound annual	Compound annual	Portion of Rights		Compound annual	Compound annual	Portion of Rights
	.	growth Rate		that vest	.	growth rate		that vest
	.		**Tranche 3 (45% **	of rights granted)	.		**Tranche 4(30% **	of rights granted)
Maximum % or
above	.	10%	orgreater	100%	.	10%	orgreater	100%
Between
threshold %
and maximum		More than 6%, less		Pro-rata between 50%		More than 6%, less		Pro-rata between 50%
%	.	than	10%	and 100%	.	than	10%	and 100%
		More than 4%, less		Pro-rata between 25%		More than 4%, less		Pro-rata between 25%
	.	than	6%	and 50%	.	than	6%	and 50%
Threshold %	.	4%		25%	.	4%		25%
Less than the
threshold %	.	Less than 4%		0%	.	Less than 4%		0%

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). Tranche 5 did not include an EPS hurdle.

FUM Hurdle

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

		Compound	Portion of		Compound	Portion of	Compound	Portion of
		annual	Rights that		annual	Rights that	annual	Rights that
	.	growth Rate	vest	.	growth Rate	vest	growth Rate	vest
		Tranche 3 (15% of rights			Tranche 4 (20% of rights		Tranche 5 (25% of rights
	.	granted)		.	granted)		granted)
Maximum % or		18% or			15% or		20% or
above	.	greater	100%	.	greater	100%	greater	100%
Between						Pro-rata		Pro-rata
threshold %		More than	Pro-rata		More than	vesting	More than	vesting
and maximum		14% less than	between 50%		12%, less	between 50%	10%, less	between 25%
%	.	18%	and 100%	.	than 15%	to 100%	than 20%	to 100%
						Pro-rata
		More than	Pro-rata		More than	vesting
		10%, less	between 25%		10%, less	between 25%
	.	than 14%	and 50%	.	than 12%	to 50%
Threshold %	.	10%	25%	.	10%	25%	10%	25%
Less than the		Less than			Less than		Less than
threshold %	.	10%	0%	.	10%	0%	10%	0%

Centuria Capital Group 13 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Absolute TSR Hurdle

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

		Compound	Portion of		Compound	Portion of	Compound	Portion of
		annual	Rights that		annual	Rights that	annual	Rights that
	.	growth Rate	vest	.	growth Rate	vest	growth Rate	vest
		Tranche 3 (40% of rights			Tranche 4 (50% of rights		Tranche 5 (75% of rights
	.	granted)		.	granted)		granted)
Maximum % or		18% or			18% or		15% or
above	.	greater	100%	.	greater	100%	greater	100%
Between						Pro-rata		Pro-rata
threshold %		More than	Pro-rata		More than	vesting	More than	vesting
and maximum		15% less than	between 50%		15% less than	between 50%	10% less than	between 25%
%	.	18%	and 100%	.	18%	to 100%	15%	to 100%
						Pro-rata
		More than	Pro-rata		More than	vesting
		12%, less	between 25%		12%, less	between 25%
	.	than 15%	and 50%	.	than 15%	to 50%
Threshold %	.	12%	25%	.	12%	25%	10%	25%
Less than the		Less than			Less than		Less than
threshold %	.	12%	0%	.	12%	0%	10%	0%

Rights Granted

The following Rights were granted to senior management:

Key management			Fair value at
personnel	No. of rights granted	Vesting conditions	grant date
Tranche 3 (grant date of 1 February 2016) (i)
Mr John E. McBain	216,496	EPS Hurdle	$0.87
	72,165	FUM Growth Hurdle	$0.87
	192,441	Absolute TSR Growth Hurdle	$0.19
Mr Jason C. Huljich	135,000	EPS Hurdle	$0.87
	45,000	FUM Growth Hurdle	$0.87
	120,000	Absolute TSR Growth Hurdle	$0.19
Mr Nicholas R. Collishaw	135,000	EPS Hurdle	$0.87
	45,000	FUM Growth Hurdle	$0.87
	120,000	Absolute TSR Growth Hurdle	$0.19
Total	1,081,102

(i) The performance objectives for performance rights granted under Tranche 3 were met in full by 30 June 2018. As a result, these rights will vest on 31 August 2018.

Centuria Capital Group 14 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Rights Granted (continued)

Key management			Fair value at
personnel	No. of Rights granted	Vesting conditions	Grant Date
Tranche 4(grant date of 1January 2017)
Mr John E. McBain	153,409	EPS Hurdle	$0.88
	102,273	FUM Growth Hurdle	$0.88
	255,682	Absolute TSR Growth Hurdle	$0.16
Mr Jason C. Huljich	76,875	EPS Hurdle	$0.88
	51,250	FUM Growth Hurdle	$0.88
	128,125	Absolute TSR Growth Hurdle	$0.16
Mr Nicholas R. Collishaw	76,875	EPS Hurdle	$0.88
	51,250	FUM Growth Hurdle	$0.88
	128,125	Absolute TSR Growth Hurdle	$0.16
Mr Simon W. Holt	35,642	EPS Hurdle	$0.88
	23,761	FUM Growth Hurdle	$0.88
	59,403	Absolute TSR Growth Hurdle	$0.16
Total	1,142,670
Key management			Fair value at
personnel	No. of Rights granted	Vesting conditions	Grant Date
Tranche 5 (grant date of 1 November 2017)
Mr John E. McBain	125,762	FUM Growth Hurdle	$1.24
	377,287	Absolute TSR Growth Hurdle	$0.62
Mr Jason C. Huljich	79,055	FUM Growth Hurdle	$1.24
	237,165	Absolute TSR Growth Hurdle	$0.62
Mr Nicholas R. Collishaw	75,640	FUM Growth Hurdle	$1.24
	226,921	Absolute TSR Growth Hurdle	$0.62
Mr Simon W. Holt	43,834	FUM Growth Hurdle	$1.24
	131,502	Absolute TSR Growth Hurdle	$0.62
Total	1,297,166

Subject to the Boards’ 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 7th anniversary of the date of the grant.

Centuria Capital Group 15 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Rights Granted (continued)

The Group’s overall objective is to reward executive directors and senior management based on the Group'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.

	30 June	30 June	30 June	30 June	30 June
5 year summary	2018	2017	2016	2015	2014
Statutory profit after tax attributable to Centuria Capital
Group securityholders ($'000)	54,765	17,323	12,303	8,566	9,078
Operating profit after tax ($'000)	45,087	15,489	11,344	6,280	5,904
Share price at start of year	$1.23	$1.05	$0.93	$0.80	$0.82
Share price at end of year	$1.40	$1.23	$1.05	$0.93	$0.80
Interim dividend	4.1cps	2.3cps	2.25cps	2.0cps	1.25cps
Final dividend	4.1cps	5.2cps	3.0cps	2.75cps	1.50cps
Statutory basic earnings per Centuria Capital Group
security	19.8cps	11.5cps	15.8cps	11.0cps	11.6cps
Operating basic earnings per Centuria Capital Group
security	16.3cps	10.3cps	14.8cps	8.1cps	7.6cps

Rights vested

During the year, 1,081,102 performance rights granted on 1 January 2015 under Tranche 2 to senior management vested. There were no performance rights under Tranche 2 that lapsed during the year.

Centuria Capital Group 16 30 June 2018

Directors' report

Audited remuneration report (continued)

Remuneration of senior management (continued)

Statutory remuneration table

The following table discloses total remuneration of executive directors and senior management in accordance with the Corporations Act 2001 :

		**Short-termemployee **	benefits	Post employment benefits	Other long-termbenefits	Share-based payments	Total
	Year	Salaries ($)	Bonus ($)	Superannuation ($)	Long service leave ($)	$	$
Mr John E. McBain	2018	804,951	1,118,750	20,049	33,495	620,019	2,597,264
Note (i)	2017	725,999	775,000	24,000	37,052	246,618	1,808,669
Mr Jason C. Huljich	2018	679,076	1,025,000	20,049	(38,845)	187,742	1,873,022
	2017	544,134	282,000	19,616	12,264	149,358	1,007,372
Mr Nicholas R. Collishaw	2018	345,340	-	8,160	-	184,229	537,729
Note (ii)	2017	544,134	782,000	19,616	-	149,358	1,495,108
Mr Simon W. Holt	2018	459,201	412,500	20,049	-	63,926	955,676
Note (iii)	2017	416,009	210,750	19,616	-	8,396	654,771
Total	2018	2,288,568	2,556,250	68,307	(5,350)	1,055,916	5,963,691
	2017	2,230,276	2,049,750	82,848	49,316	553,730	4,965,920

Note (i) Mr McBain's bonus for the year ended 30 June 2017 included a one-off $200,000 transaction bonus which was paid following the successful completion of the 360 Capital acquisition. Note (ii) Mr Collishaw's bonus for the year ended 30 June 2017 included a one-off $500,000 incentive payment which he was entitled to receive as part of his employment contract upon successful listing of a listed property fund once the fund reaches $500 million of assets under management. This incentive was paid during the year ended 30 June 2017. Also, Mr Collishaw's role changed from Executive Director and CEO- Listed Property Funds to Non-Executive Director effective 1 January 2018. Note (iii) Mr Holt's bonus for the year ended 30 June 2017 included a one-off $80,000 transaction bonus which was paid following the successful completion of the 360 Capital acquisition .

Centuria Capital Group 17 30 June 2018

Directors' report

Audited remuneration report (continued)

Key terms of employment contracts

Chief Executive Officer

Mr John E. McBain, was appointed as Chief Executive Officer of the Group in April 2008. Mr John E. McBain is employed under contract. The summary of the major terms and conditions of his 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 Group may terminate this employment contract by providing six months written notice or provide payment in lieu of the notice period plus an additional six months. Any payment in lieu of notice will be based on the total fixed compensation package; and

• The Group may terminate the employment contract at any time without notice if serious misconduct has occurred. When termination with cause occurs the CEO is only entitled to remuneration up to the date of termination.

Other senior management (standard contracts)

All senior management are employed under contract. The Group may terminate their employment agreement by providing between three and six months written notice or providing payment in lieu of the notice period (based on the total fixed compensation package), and in the case of Mr Jason C. Huljich by payment of an additional six months.

Non-executive director remuneration

Objective

The Board seeks to set aggregate remuneration at a level that provides the Group 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 aggregate amount determined is then divided between the directors as agreed. An aggregate maximum amount of not more than $2,000,000 per year was approved at the 2017 Annual General Meeting.

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.

Centuria Capital Group 18 30 June 2018

Directors' report

Audited remuneration report (continued)

Non-executive director remuneration (continued)

Directors' Fees (continued)

Directors' Fees (continued)
			Post-employment
		Shot-term benefits	benefits
		Board fees	Superannuation	Total
	Year	$	$	$
Mr Garry S. Charny	2018	205,479	19,521	225,000
	2017	190,000	15,675	205,675
Mr Peter J. Done	2018	164,384	15,616	180,000
	2017	156,000	11,308	167,308
Mr John R. Slater	2018	118,722	11,278	130,000
	2017	142,000	10,070	152,070
Ms Susan Wheeldon-Steele	2018	87,671	8,329	96,000
	2017	71,160	6,760	77,920
Mr Nicholas R. Collishaw	2018	54,795	5,205	60,000
(i)	2017	-	-	-
Total	2018	631,051	59,949	691,000
	2017	559,160	43,813	602,973

Note (i) Mr Collishaw's role changed from Executive Director and CEO- Listed Property Funds to Non-Executive Director effective 1 January 2018.

Director and senior management equity holdings and other transactions

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.

as at the date of this report.
	Balance at 1		Balance at 30	Changes prior	Balance at
Name	July 2017	Movement	June 2018	to signing	signing date
Mr Garry S. Charny	196,573	40,741	237,314	-	237,314
Mr Peter J. Done	900,000	183,676	1,083,676	-	1,083,676
Mr John R. Slater	2,400,000	489,075	2,889,075	-	2,889,075
Ms Susan Wheeldon-Steele	-	-	-	-	-
Mr Nicholas R. Collishaw	2,263,136	156,250	2,419,386	-	2,419,386
Mr John E. McBain	5,035,745	686,985	5,722,730	-	5,722,730
Mr Jason C. Huljich	4,499,054	823,091	5,322,145	-	5,322,145
Mr Simon W. Holt	250,000	51,021	301,021	-	301,021

Centuria Capital Group 19 30 June 2018

Directors' report

Audited remuneration report (continued)

Director and senior management equity holdings and other transactions (continued)

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 Group and key management personnel:

• Wolseley Corporate Pty Ltd, a related party of Mr Garry S. Charny, was paid $611,796 (inclusive of GST) (2017: $478,500) for corporate advisory fees.

• Tailwind Consulting Pty Ltd, a related party of Mr John R. Slater was paid a total of $198,000 (inclusive of GST) (2017: $198,985) for consultancy services. In addition, Tailwind Consulting paid the Group $5,280 for rental of office space (2017: $2,200).

• Mr Nicholas R. Collishaw was paid a total of $62,570 (inclusive of GST) (2017: $nil) for consultancy services.

This report is made in accordance with a resolution of Directors.

==> picture [77 x 56] intentionally omitted <==

Mr Garry S. Charny Director Sydney

==> picture [79 x 54] intentionally omitted <==

Mr Peter J. Done Director Sydney

Sydney 14 August 2018

Centuria Capital Group 20 30 June 2018

==> picture [90 x 67] intentionally omitted <==

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 of Centuria Capital Group for the financial year ended 30 June 2018 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

KPM_INI_01 KPMG

Nigel Virgo Partner Sydney 14 August 2018

21

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Centuria Capital Group

ABN 22 095 454 336

Financial report 30 June 2018

Contents

Contents	Page
Consolidated statement of comprehensive income	23
Consolidated statement of financial position	24
Consolidated statement of changes in equity	25
Consolidated statement of cash flows	27
Notes to the consolidated financial statements	28
A About the report	28
A1 General information	28
A2 Significant accounting policies	28
A3 Use of judgements and estimates	28
A4 Segment summary	29
B Business performance	30
B1 Segment profit and loss	30
B2 Revenue	32
B3 Expenses	33
B4 Finance costs	34
B5 Taxation	34
B6 Earnings per security	37
B7 Dividends and distributions	38
C Assets and liabilities	39
C1 Segment balance sheet	39
C2 Receivables	41
C3 Financial assets	41
C4 Investment properties held for sale	43
C5 Investment properties	44
C6 Intangible assets	45
C7 Payables	47
C8 Borrowings	47
C9 Commitments and contingencies	49
C10 Contributed equity	50
D Cash flows	51
D1 Operating segment cash flows	51
D2 Cash and cash equivalents	52
D3 Reconciliation of profit for the period to net cash flows from operating activities	52
E Group Structure	53
E1 Business combination	53
E2 Interests in material subsidiaries	55
E3 Parent entity disclosure	56
F Other	57
F1 Share-based payment arrangements	57
F2 Guarantees to Benefit Fund policyholders	58
F3 Financial instruments	58
F4 Remuneration of auditors	67
F5 New Accounting Standards and Interpretations effective 1 July 2018	67
F6 Other new Accounting Standards and Interpretations	69
F7 Events subsequent to the reporting date	69
Directors' declaration	70
Independent auditor's report to the members	71

Centuria Capital Group 22 30 June 2018

Consolidated statement of comprehensive income

For the year ended 30 June 2018

For the year ended 30 June 2018
Notes Revenue B2 Expenses B3 Fair value movements of financials instruments and property Finance costs B4 Net movement in policyholder liability Profit before tax Income tax expense B5 Profit after tax Profit after tax is attributable to: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests Profit after tax Other comprehensive income Total comprehensive income for the year Total comprehensive income for the year is attributable to: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests Total comprehensive income/(loss) Profit after tax attributable to: Centuria Capital Limited Centuria Capital Fund (non-controlling interests) Profit after tax attributable to Centuria Capital Group securityholders Earning per Centuria Capital Group security Basic (cents per stapled security) B6 Diluted (cents per stapled security) B6 Earnings per Centuria Capital Limited share Basic (cents per share) Diluted (cents per share)	2018 $'000 2017 $'000 134,513 127,429 (67,617) (120,327) 10,103 15,394 (15,989) (7,366) 9,053 16,589
	70,063 31,719 (13,873) (5,424)
	56,190 26,295 24,540 5,500 30,225 11,823 1,425 8,972
	56,190 26,295
	- -
	56,190 26,295
	24,540 5,500 30,225 11,823 1,425 8,972
	56,190 26,295
	24,540 5,500 30,225 11,823
	54,765 17,323
	Cents Cents 19.8 11.5 18.1 11.4 8.9 3.7 8.1 3.6

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Centuria Capital Group 23 30 June 2018

Consolidated statement of financial position As at 30 June 2018

Notes Cash and cash equivalents D2 Receivables C2 Financial assets C3 Investment properties held for sale C4 Investment properties C5 Other assets Intangible assets C6 Assets Total assets Liabilities Payables C7 Liability to 360 Capital Group Provisions Borrowings C8 Interest rate swaps at fair value Benefit Funds policyholder's liability Provision for income tax B5(b) Deferred tax liabilities B5(c) Total liabilities Net assets Equity Equity attributable to Centuria Capital Limited Contributed equity C10 Reserves Retained earnings Total equity attributable to Centuria Capital Limited Equity attributable to Centuria Capital Fund (non-controlling interests) Contributed equity C10 Retained earnings Total equity attributable to Centuria Capital Fund (non-controlling interests) Total equity attributable to Centuria Capital Group securityholders Equity attributable to external non-controlling interests Contributed equity Retained earnings Total equity attributable to external non-controlling interests Total equity	2018 $'000 2017 $'000 101,914 74,382 21,164 16,380 644,832 535,459 63,400 - 147,100 257,100 2,036 1,551 157,663 157,663
	1,138,109 1,042,535 32,405 33,895 41,161 56,456 1,597 1,301 245,739 236,103 23,411 19,324 349,677 348,014 (161) 3,171 3,119 2,320
	696,948 700,584
	441,161 341,951
	98,770 77,323 1,896 1,551 28,005 11,694
	128,671 90,568
	244,930 170,672 18,183 4,844
	263,113 175,516
	391,784 266,084
	32,927 45,367 16,450 30,500
	49,377 75,867
	441,161 341,951

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Centuria Capital Group 24 30 June 2018

Consolidated statement of changes in equity For the year ended 30 June 2018

Balance at 1 July 2017 Profit/(loss) for the period Total comprehensive income for the year Equity based payment Dividends and distributions paid/accrued Stapled securities issued Cost of equity raising Deconsolidation of controlled property funds Balance at 30 June 2018	Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests Contributed equity $'000 Reserves $'000 Retained earnings $'000 Total $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total attributable to Centuria Capital Group Securityholders $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total equity $'000 77,323 1,551 11,694 90,568 170,672 4,844 175,516 266,084 45,367 30,500 75,867 341,951
	- - 24,540 24,540 - 30,225 30,225 54,765 - 1,425 1,425 56,190
	- - 24,540 24,540 - 30,225 30,225 54,765 - 1,425 1,425 56,190 535 345 - 880 - - - 880 - - - 880 - - (8,229) (8,229) - (16,764) (16,764) (24,993) - (6,880) (6,880) (31,873) 21,494 - - 21,494 77,146 - 77,146 98,640 - - - 98,640 (582) - - (582) (2,888) - (2,888) (3,470) - - - (3,470) - - - - - (122) (122) (122) (12,440) (8,595) (21,035) (21,157)
	98,770 1,896 28,005 128,671 244,930 18,183 263,113 391,784 32,927 16,450 49,377 441,161

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Centuria Capital Group 25 30 June 2018

Consolidated statement of changes in equity

For the year ended 30 June 2018

Balance at 1 July 2016 Profit/(loss) for the period Total comprehensive income for the year Acquisition of subsidiaries with Non-controlling interests Equity based payment Dividends and distributions paid/accrued Stapling dividend and return of capital reinvested Stapled securities issued Cost of equity raising Return of capital Balance at 30 June 2017	Centuria Capital Limited Centuria Capital Fund (non-controlling interests) External non-controlling interests Contributed equity $'000 Reserves $'000 Retained earnings $'000 Total $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total attributable to Centuria Capital Group securityholders $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total equity $'000 88,058 1,459 28,452 117,969 - - - 117,969 9,883 (185) 9,698 127,667
	- - 5,500 5,500 - 11,823 11,823 17,323 - 8,972 8,972 26,295
	- - 5,500 5,500 - 11,823 11,823 17,323 - 8,972 8,972 26,295 - - - - - - - - 45,367 29,835 75,202 75,202 356 92 - 448 - - - 448 - - - 448 - - (8,927) (8,927) - (6,979) (6,979) (15,906) - (8,122) (8,122) (24,028) (39,205) - (13,331) (52,536) 52,536 - 52,536 - - - - - 28,826 - - 28,826 124,174 - 124,174 153,000 - - - 153,000 (712) - - (712) (6,038) - (6,038) (6,750) - - - (6,750) - - - - - - - - (9,883) - (9,883) (9,883)
	77,323 1,551 11,694 90,568 170,672 4,844 175,516 266,084 45,367 30,500 75,867 341,951

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Centuria Capital Group 26 30 June 2018

Consolidated statement of cash flows For the year ended 30 June 2018

Consolidated statement of cash flows For the year ended 30 June 2018
Notes Cash flows from operating activities Management fees received Rent received Interest received Distributions received Interest paid Income taxes paid Payments to suppliers and employees Proceeds from sale of property held for development Payments for property held for development Applications - Benefits Funds Redemptions - Benefits Funds Net cash provided by operating activities D3 Cash flows from investing activities Proceeds from sale of related party investments Purchase of investments in related parties Loans to related parties for purchase of properties Repayment of loans by related parties Purchase of other investments Proceeds from sale of investments Loans provided to other parties Loans repaid by other parties Proceeds from sale of investment property Payments in relation to investment properties Benefit Funds (acquisitions)/disposals of investments in financial assets Cash balance on acquisition of subsidiaries Cash balance on consolidation of property funds Collections from reverse mortgage holders Payments for property, plant and equipment Purchase of subsidiaries Return of investment to external non-controlling interests Deconsolidation of controlled property funds cash balance Net cash used in investing activities Cash flows from financing activities Proceeds from issues of securities to securityholders of Centuria Capital Group Equity raising costs paid Proceeds from borrowings Repayment of borrowings Capitalised borrowing costs paid Distributions paid to securityholders of Centuria Capital Group Proceeds from issues of securities to external non-controlling interests Distributions paid to external non-controlling interests Net cash provided by financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year	2018 $'000 2017 $'000 74,090 35,422 23,349 16,440 9,985 10,146 22,760 7,976 (14,162) (5,918) (16,817) (7,042) (53,440) (45,008) - 65,175 - (12,844) 21,942 27,711 (30,777) (40,561)
	36,930 51,497
	62,494 20,763 (123,760) (150,138) (5,865) (13,669) 2,000 7,072 (52,723) (1,186) - 40,387 (25,980) - 25,980 - 22,000 - (8,840) (1,300) 13,202 (55,021) - 10,619 - 6,937 2,113 1,209 (788) (115) - (104,419) (5,366) - (766) -
	(96,299) (238,861)
	98,639 153,000 (3,710) (6,750) 37,748 163,604 (14,185) (114,108) (446) (1,937) (24,310) (4,092) - 5,526 (6,835) (17,820)
	86,901 177,423
	27,532 (9,941) 74,382 84,323
	101,914 74,382

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Centuria Capital Group 27 30 June 2018

A About the report

A1 General information

The shares in Centuria Capital Limited, (the 'Company') and the units in Centuria Capital Fund ('CCF') are stapled to trade together as a single stapled security (‘Stapled Security’) on the ASX as ‘Centuria Capital Group’ (the 'Group') under the ticker code 'CNI'.

The Group is a for-profit entity and its principal activities are the marketing and management of investment products, including property investment funds and friendly society investment bonds, and co-investment in property investment funds.

Statement of compliance

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards 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).

The consolidated financial statements of the Group comprising the Company (as ‘Parent’) and its controlled entities for the year ended 30 June 2018 were authorised for issue by the Group’s Board of Directors on 14 August 2018.

Basis of preparation

The consolidated financial statements have been prepared on the basis of historical cost, except for financial assets at fair value through profit and loss, other financial assets, investment properties and derivative financial instruments 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.

Assets and liabilities have been presented on the face of the statement of financial position in decreasing order of liquidity and do not distinguish between current and non-current items.

Rounding of amounts

The Group is an entity of a kind referred to in ASIC Legislative Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ Report and financial statements. Amounts in the Directors’ Report and financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated.

A2 Significant accounting policies

The accounting policies and methods of computation in the preparation of the consolidated financial statements are consistent with those adopted in the previous financial year ended 30 June 2017 unless specifically outlined below or in the relevant notes to the consolidated financial statements.

When the presentation or classification of items in the consolidated financial statements has been amended, comparative amounts are also reclassified, unless it is impractical.

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported.

These financial statements contain all significant accounting policies that summarise the recognition and measurement basis used and which are relevant to provide an understanding of the financial statements. Accounting policies that are specific to a note to the financial statements are described in the note to which they relate.

A3 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 expense that are not readily apparent from other sources. 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.

Centuria Capital Group 28 30 June 2018

About the report

A3 Use of judgements and estimates (continued)

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

• Note C5 Investment properties

• Note C6 Intangible assets

• Note F3 Financial instruments

A4 Segment summary

As at 30 June 2018 the Group has four reportable operating segments. These reportable operating segments are the divisions which report to the Group's Chief Executive Officer and Board of Directors for the purpose of resource allocation and assessment of performance.

The reportable operating segments are:

Operating segments	Description
PropertyFunds Management	Management of listed and unlistedpropertyfunds
Investment Bonds Management	Management of the Benefit Funds of Centuria Life Limited and management
	of the Over Fifty Guardian Friendly Society Limited. The Benefit Funds
	include a range of financial products, including single and multi-premium
	investments.
Co-Investments	Direct interest inpropertyfunds and other liquid investments
	Overheads for supporting the Group's operating segments and management
Corporate	of a reverse mortgage lending portfolio

For the year ended 30 June 2018, Reverse Mortgages is no longer considered a separated operating segment on the basis that it is not significant to the Group and has been included in the Corporate operating segment.

In addition, the Group also provides disclosures in relation to a further four non-operating segments, which are:

Non-operating segments	Description
Non-operating items	Comprises transaction costs, mark-to-market movements on property and
	derivative financial instruments,and all other non-operatingactivities
Benefit Funds	Represents the operating results and financial position of the Benefit Funds
	which are required to be consolidated in the Group’s financial statements in
	accordance with accountingstandards
Controlled Property Funds	Represents the operating results and financial position of property funds
	which are controlled by the Group and consolidated under accounting
	standards
Eliminations	Elimination of transactions between the operating segments and the other
	three non-operatingsegments above

Where relevant, comparative financial information has been restated to ensure consistency in presentation of financial information across the applicable comparative periods.

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

Refer below for an analysis of the Group's segment results:

• Note B1 Segment profit and loss

• Note C1 Segment balance sheet

• Note D1 Operating segment cash flows

Centuria Capital Group 29 30 June 2018

B Business performance

B1 Segment profit and loss

For the year ended 30 June 2018 Notes Revenue B2 Expenses B3 Fair value movements of financial instruments and property Finance costs B4 Net movement in policyholder liabilities Profit/(Loss) before tax Income tax expense B5 Profit/(Loss) after tax Profit/(loss) after tax attributable to: Centuria Capital Limited Centuria Capital Fund Profit/(loss) after tax attributable to Centuria Capital Group securityholders Non-controlling interests Profit/(loss) after tax	Property Funds Management Investment Bonds Management Co- Investments Corporate Operating profit Non operating items Benefits Funds Controlled Property Funds Eliminations Statutory profit $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 66,428 10,792 20,705 2,845 100,770 - 20,179 21,801 (8,237) 134,513 (17,474) (5,816) (134) (10,117) (33,541) (610) (29,751) (11,597) 7,882 (67,617) - - - - - 8,604 3,670 3,347 (5,518) 10,103 (9) (1) (8,680) (1,918) (10,608) - (3) (5,490) 112 (15,989) - - - - - - 9,053 - - 9,053
	48,945 4,975 11,891 (9,190) 56,621 7,994 3,148 8,061 (5,761) 70,063
	(14,724) (1,502) (174) 4,866 (11,534) 809 (3,148) - - (13,873)
	34,221 3,473 11,717 (4,324) 45,087 8,803 - 8,061 (5,761) 56,190
	34,221 3,473 406 (11,208) 26,892 (2,267) - 47 (132) 24,540 - - 11,311 6,884 18,195 11,070 - 6,589 (5,629) 30,225
	34,221 3,473 11,717 (4,324) 45,087 8,803 - 6,636 (5,761) 54,765 - - - - - - - 1,425 - 1,425
	34,221 3,473 11,717 (4,324) 45,087 8,803 - 8,061 (5,761) 56,190

Centuria Capital Group 30 30 June 2018

Business performance

B1 Segment profit and loss (continued)

For the year ended 30 June 2017 Notes Revenue B2 Expenses B3 Fair value movements of financial instruments and property Finance costs B4 Net movement in policyholder liabilities Profit/(Loss) before tax Income tax expense B5 Profit/(Loss) after tax Profit/(loss) after tax attributable to: Centuria Capital Limited Centuria Capital Fund Profit/(loss) after tax attributable to Centuria Capital Group securityholders Non-controlling interests Profit/(loss) after tax	Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating profit Non operating items Benefits Funds Controlled Property Funds Eliminations Statutory profit $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 29,497 9,791 8,661 2,399 197 50,545 - 17,552 70,935 (11,603) 127,429 (13,685) (5,390) (152) (545) (7,696) (27,468) (2,939) (38,366) (61,237) 9,683 (120,327) - - - - - - 4,434 7,831 3,852 (723) 15,394 (39) - (2,249) (1,831) (630) (4,749) - (1) (2,616) - (7,366) - - - - - - - 16,589 - - 16,589
	15,773 4,401 6,260 23 (8,129) 18,328 1,495 3,605 10,934 (2,643) 31,719 (4,732) (1,753) (837) (7) 4,490 (2,839) 1,020 (3,605) - - (5,424)
	11,041 2,648 5,423 16 (3,639) 15,489 2,515 - 10,934 (2,643) 26,295
	11,041 2,648 1,956 16 (6,955) 8,706 (3,297) - 1,704 (1,613) 5,500
	- - 3,467 - 3,316 6,783 5,812 - 258 (1,030) 11,823
	11,041 2,648 5,423 16 (3,639) 15,489 2,515 - 1,962 (2,643) 17,323 - - - - - - - - 8,972 - 8,972
	11,041 2,648 5,423 16 (3,639) 15,489 2,515 - 10,934 (2,643) 26,295

Centuria Capital Group 31 30 June 2018

Business performance

B2 Revenue

Management fees from property funds Property acquisition fees Property performance fees Property sales fees Management fees from Benefit Funds Proceeds from sale of property held for development Interest revenue Rent and recoverable outgoings Distribution/dividend revenue Premiums - discretionary participation features only Other income	2018 $'000 2017 $'000 29,705 18,294 4,070 6,948 26,738 1,239 2,971 966 3,706 2,992 - 59,250 11,108 12,871 21,553 11,098 29,621 9,633 2,711 3,961 2,330 177
	134,513 127,429

Recognition and measurement

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) Property acquisition fees, sale fees and performance fees

Property acquisition fees are recognised when an investment property has been acquired in a fund managed by the Group.

Sales and performance fees derived from managed funds are recognised upon satisfaction of all conditions precedent to the sale of an investment property.

(iii) 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.

(iv) Interest revenue

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

(v) Rent and recoverable outgoings

Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease.

Recoverable outgoings are recognised on an accrual basis.

(vi) Distribution/dividend revenue

Distribution/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).

Centuria Capital Group 32 30 June 2018

Business performance

B2 Revenue (continued)

(a) Transactions with related parties

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

Management fees from Property Funds managed by Centuria Distributions from Property Funds managed by Centuria Property acquisition fees from Property Funds managed by Centuria Sales fees from Property Funds managed by Centuria Management fees from Over Fifty Guardian Friendly Society Performance fees from Property Funds managed by Centuria Interest income on loans to Property Funds managed by Centuria Fees from Debt funds managed by Centuria Distributions and interest from Debt Funds managed by Centuria

2018 $ 2017 $ 29,704,620 18,293,876 14,467,430 5,452,630 4,070,177 6,947,527 2,970,550 966,160 3,552,177 2,991,534 26,737,500 1,239,839 501,525 513,622 1,054,857 - 108,825 -

83,167,661 36,405,188

(i) Terms and conditions of transactions with related parties

Investments in property funds 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.

B3 Expenses

B3 Expenses
Employee benefits expense Consulting and professional fees Property outgoings and fund expenses Corporate restructure and transaction costs Administration fees Impairment of seed capital Cost of property held for development sold Claims - discretionary participation features only Other expenses	2018 $'000 2017 $'000 21,260 17,468 4,558 3,097 8,531 6,578 230 2,749 2,316 2,570 380 190 - 50,670 23,144 31,708 7,198 5,297
	67,617 120,327

Centuria Capital Group 33 30 June 2018

Business performance

B3 Expenses (continued)

(a) Transactions with key management personnel

(i) Transactions with directors

For transactions with directors, refer to details included in the Audited remuneration report on page 20.

(ii) Key management personnel compensation

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

Short-term employee benefits Post-employment benefits Other long-term employment benefits Share-based payments	2018 $ 2017 $ 5,475,869 4,803,187 128,256 126,660 (5,350) 49,316 1,055,916 553,731
	6,654,691 5,532,894

Detailed information on key management personnel is included in the Audited remuneration report.

B4 Finance costs

B4 Finance costs
Operating interest charges Bank loans in Controlled Property Funds interest charges Reverse mortgage facility interest charges (Gain)/loss on derivatives on fair value hedges Loss/(gain) on financial assets fair value hedges Other finance costs	2018 $'000 2017 $'000 8,567 2,871 5,490 2,616 1,741 1,832 1,115 (6,566) (1,115) 6,566 191 47
	15,989 7,366

Recognition and measurement

The Group's finance costs include:

• Interest expense recognised using the effective interest method.

• The net gain or loss on hedging instruments that are recognised in profit or loss.

B5 Taxation

Current tax expense in respect of the current year Adjustments to current tax in relation to prior years Deferred tax expense relating to the origination and reversal of temporary differences Deferred tax charged directly to equity Income tax expense	13,203 9,227 (102) -
	13,101 9,227 772 (4,126) - 323
	13,873 5,424

Centuria Capital Group 34 30 June 2018

Business performance

B5 Taxation (continued)

(a) Reconciliation of income tax expense

The prima facie income tax expense on profit before income tax reconciles to the income tax expense in the consolidated financial statements as follows:

Profit before tax Less: profit not subject to income tax Income tax expense calculated at 30% Add/(deduct) tax effect of amounts which are not deductible/(assessable) Tax offset for franked dividends Non-allowable expenses - seed capital impairment Non-allowable expenses - other Recognition of previously unbooked capital losses Adjustments to current tax in relation to prior years Income tax expense	2018 $'000 2017 $'000 70,063 31,719 (20,222) (10,863)
	49,841 20,856 14,952 6,257 (1,032) (313) 114 57 181 706 (240) (1,193) (102) (90)
	13,873 5,424

Income tax expense

The tax rate used in the above reconciliation 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.

(b) Current tax assets and liabilities

Current tax assets/(liabilities) attributable to: Benefit Funds Securityholders	2018 $'000 2017 $'000 690 (387) (529) (2,784)
	161 (3,171)

(c) Movement of deferred tax balances

(c) Movement of deferred tax balances
Financial year ended 30 June 2018 Deferred tax assets Provisions Financial derivatives Capital losses Transaction costs Text Deferred tax liabilities Indefinite life management rights Accrued income Unrealised gain/(loss) on financial assets Prepayments Fair value measurements in mortgage assets	Opening balance $'000 Movement $'000 Closing balance $'000 2,207 436 2,643 4,020 - 4,020 27,640 (826) 26,814 374 (28) 346 (27,638) - (27,638) (290) - (290) (5,027) (1,522) (6,549) (6) - (6) (3,600) 1,141 (2,459)
	(2,320) (799) (3,119)

Centuria Capital Group 35 30 June 2018

Business performance

B5 Taxation (continued)

(c) Movement of deferred tax balances (continued)

(c) Movement of deferred tax balances (continued)
Financial year ended 30 June 2017 Deferred tax assets Provisions Financial derivatives Capital losses Transaction costs Test Deferred tax liabilities Indefinite life management rights Accrued income Unrealised gain/(loss) on financial assets Prepayments Fair value measurements in mortgage assets	Opening balance $'000 Movement $'000 Closing balance $'000 1,795 412 2,207 2,730 1,290 4,020 203 27,437 27,640 - 374 374 - (27,638) (27,638) (2,509) 2,219 (290) (4,316) (711) (5,027) (6) - (6) (4,020) 420 (3,600)
	(6,123) 3,803 (2,320)

(d) Capital tax losses

At 30 June 2018, the Group has $nil (2017: $373,750) tax effected unrecognised capital tax losses.

Recognition and measurement

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

(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 and the corresponding tax bases.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and tax offsets, to the extent that it is probable that sufficient future taxable profits will be available to utilise them.

However, deferred tax assets and liabilities are not recognised for:

• taxable temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a business combination which affects neither taxable income nor accounting profit;

• taxable temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising from goodwill

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.

Centuria Capital Group 36 30 June 2018

Business performance

B5 Taxation (continued)

Recognition and measurement (continued)

(ii) Deferred tax (continued)

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 companies 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 their separate financial statements using a 'standalone tax payer' approach. Under the tax funding arrangement between members of the tax-consolidated group, amounts are recognised as payable to or receivable by each member in relation to the tax contribution amounts paid or payable between Company and the members of the the tax-consolidated group.

Centuria Capital Fund (CCF) and its subsidiaries are not part of the tax-consolidation group. Under current Australian income tax legislation, Trusts are not liable for income tax, provided their securityholders are presently entitled to the taxable income of the Trust including realised capital gains each financial year.

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.

(iv) Current and deferred tax for the period

Income taxes relating to items recognised directly in equity are recognised directly in equity and not in the statement of comprehensive income. In the case of a business combination, the tax effect is included in the accounting for the business combination.

B6 Earnings per security

B6 Earnings per security
	2018	2017
	Cents	Cents
Basic (cents per stapled security)	19.8	11.5
Diluted (cents per stapled security)	18.1	11.4

The earnings used in the calculation of basic and diluted earnings per security is the profit for the year attributable to Centuria Capital Group securityholders as reported in the consolidated statement of comprehensive Income.

The weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security is as follows:

					2018	2017
Weighted Weighted	average average	number of ordinary number of ordinary	securities (basic) securities (diluted)	(i)	277,224,977 301,789,890	150,835,465 152,619,939

(i) The weighted average number of ordinary securities used in the calculation of diluted earnings per security is determined:

• as if 30 June 2018 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 2018 was the end of the performance period are deemed to have been issued at the start of the financial year.

• as if 20,098,470 unexercised options with an exercise price of $1.30 per option have been converted to ordinary securities at the start of the financial year.

Centuria Capital Group 37 30 June 2018

Business performance

B7 Dividends and distributions

B7 Dividends and distributions
Dividends/distributions paid during the year Stapling dividend (fully franked) Final year-end dividend (fully franked) Final year-end distribution Interim dividend (fully franked) Interim distribution Dividends/distributions declared during the year Final dividend (fully franked) (i) Final distribution (i) Dividends/distributions paid/declared to Centuria Capital Group securityholders (ii)	2018 2017 Cents per security Total $'000 Cents per share Total $'000 - - 17.27 13,331 2.40 5,453 3.00 2,316 2.80 6,361 - - 1.70 5,184 1.50 1,158 2.40 7,314 0.80 618 1.00 3,048 2.40 5,453 3.10 9,449 2.80 6,361
	13.40 36,809 27.77 29,237

(i) The Group declared a final dividend/distribution in respect of the year ended 30 June 2018 of 4.1 cents per stapled security which included a dividend of 1.00 cents per share and a distribution of 3.10 cents per security. The final dividend had a record date of 29 June 2018 and was subsequently was paid on 27 July 2018. The total amount payable of $12,497,000 has been provided as a liability in these financial statements.

(ii) In addition to the dividends and distributions paid to Centuria Capital Group securityholders, the Group paid distributions of $6,880,000 to external non-controlling interests.

(a) Franking credits

(a) Franking credits
		2018	2017
		$'000	$'000
Amount of franking credits subsequent financial years	available to shareholders of the Company for (i)	15,682	5,919
(i) Before taking into account the impact of the final dividend payable on 27 July 2018.

Centuria Capital Group 38 30 June 2018

C Assets and liabilities

C1 Segment balance sheet

C1 Segment balance sheet
Financial year ended 30 June 2018 Notes Assets Cash and cash equivalents D2 Receivables C2 Financial assets C3 Investment properties held for sale C4 Investment properties C5 Other assets Intangible assets C6 Total assets Liabilities Payables C7 Liability to 360 Capital Group Provisions Borrowings C8 Interest rate swap at fair value Benefit Funds policy holders' liability Provision for income tax B5(b) Deferred tax liability B5(c) Total liabilities Net assets	Property Funds Management Investment Bonds Management Co- Investments Corporate Operating balance sheet Benefits Funds Controlled Property Funds Eliminations Statutory balance sheet $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 22,189 6,170 11,531 36,499 76,389 20,148 5,377 - 101,914 6,209 1,318 6,334 3,290 17,151 6,400 (378) (2,009) 21,164 - - 277,919 48,059 325,978 330,505 - (11,651) 644,832 - - - - - - 63,400 - 63,400 - - - - - - 147,100 - 147,100 62 244 - 1,730 2,036 - - - 2,036 157,663 - - - 157,663 - - - 157,663
	186,123 7,732 295,784 89,578 579,217 357,053 215,499 (13,660) 1,138,109
	1,908 729 12,783 11,426 26,846 1,916 5,652 (2,009) 32,405 - - 6,562 - 6,562 - 34,599 - 41,161 885 - - 712 1,597 - - - 1,597 - - 123,552 8,429 131,981 - 115,758 (2,000) 245,739 - - - 22,939 22,939 - 472 - 23,411 - - - - - 349,677 - - 349,677 (490) 82 - 937 529 (690) - - (161) 923 (94) - (3,860) (3,031) 6,150 - - 3,119
	3,226 717 142,897 40,583 187,423 357,053 156,481 (4,009) 696,948
	182,897 7,015 152,887 48,995 391,794 - 59,018 (9,651) 441,161

Centuria Capital Group 39 30 June 2018

Assets and liabilities

C1 Segment balance sheet (continued)

Financial year ended 30 June 2017 Notes Assets Cash and cash equivalents D2 Receivables C2 Financial assets C3 Investment properties C5 Other assets Intangible assets C6 Total assets Liabilities Payables C7 Liability to 360 Capital Group Provisions Borrowings C8 Interest rate swap at fair value Benefit Funds policy holders' liability Provision for income tax B5(b) Deferred tax liability B5(c) Total liabilities Net assets	Property Funds Management Investment Bonds Management Co- Investments Reverse Mortgages Corporate Operating balance sheet Benefits Funds Controlled Property Funds Eliminations Statutory balance sheet $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 11,403 4,451 29,211 1,252 9,417 55,734 9,869 8,779 - 74,382 8,809 1,117 2,766 (25) 675 13,342 2,924 889 (775) 16,380 - - 151,354 46,186 - 197,540 340,271 10,460 (12,812) 535,459 - - - - - - - 257,100 - 257,100 124 38 - - 1,389 1,551 - - - 1,551 157,663 - - - - 157,663 - - - 157,663
	177,999 5,606 183,331 47,413 11,481 425,830 353,064 277,228 (13,587) 1,042,535
	922 957 8,167 1,235 12,542 23,823 22 10,825 (775) 33,895 - - 7,938 - - 7,938 - 48,518 - 56,456 624 - - - 677 1,301 - - - 1,301 (6) - 98,125 9,147 - 107,266 - 131,487 (2,650) 236,103 - - - 18,190 - 18,190 - 1,134 - 19,324 - - - - - - 348,014 - - 348,014 3,485 199 (123) 1,720 (2,497) 2,784 387 - - 3,171 422 (18) - (1) (2,724) (2,321) 4,641 - - 2,320
	5,447 1,138 114,107 30,291 7,998 158,981 353,064 191,964 (3,425) 700,584
	172,552 4,468 69,224 17,122 3,483 266,849 - 85,264 (10,162) 341,951

Centuria Capital Group 40 30 June 2018

Assets and liabilities

C2 Receivables

C2 Receivables
Receivables from related parties (refer to note C2(a)) Other receivables	2018 $'000 2017 $'000 11,682 8,896 9,482 7,484
	21,164 16,380

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.

(a) Receivables from related parties

The following amounts were owed by related parties of the Group at the end of the financial year:

Management fees owing from property funds manged by Centuria Acquisition fee receivable from Centuria 80 Grenfell Fund Acquisition fee receivable from Centuria Sandgate Road Fund Distribution receivable from Centuria Industrial REIT Recoverable expenses owing from property funds managed by Centuria Distribution receivable from Centuria Metropolitan REIT Receivable from Over Fifty Guardian Friendly Society Limited Interest receivable from Centuria Sandgate Road Fund Distribution receivable from Centuria Diversified Property Fund Distribution receivable from Centuria Scarborough House Fund Redemption funds receivable from Centuria Diversified Property Fund Receivables from debt funds managed by Centuria Interest receivable from Centuria 80 Grenfell Fund

2018 $ 2017 $ 3,483,289 2,627,836 1,765,177 - - 2,125,000 2,346,074 1,607,724 1,486,241 1,016,155 1,250,856 662,672 758,951 524,360 - 305,933 28,378 - 613 26,455 435,781 - 64,000 - 62,799 -

11,682,159 8,896,135

Recognition and measurement

Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method, less an allowance for impairment. Due to the short-term nature of these financial rights, their carrying amounts are estimated to represent their fair values.

C3 Financial assets

Investments in trusts, shares and other financial instruments at fair value Investment in related party unit trusts at fair value (refer to Note C3(a)) Loans receivable from related parties (refer to Note C3(b)) Reverse mortgage receivables (i) Reverse mortgages - hedged item fair value adjustment	2018 $'000 2017 $'000 362,799 324,497 228,109 153,807 5,865 10,969 28,289 27,675 19,770 18,511
	644,832 535,459

(i) Whilst some mortgages are likely to be repaid during the next 12 months, the Group does not control the repayment date.

Centuria Capital Group 41 30 June 2018

Assets and liabilities

C3 Financial assets (continued)

(a) Investments in related party unit trusts carried at fair value through profit or loss

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

Financial assets held by the Group Centuria Industrial REIT Centuria Metropolitan REIT Centuria Diversified Property Fund Centuria Bottleyard Fund Centuria Rouse Hill Debt Fund Centuria Zenith Fund Centuria Scarborough House Fund Centuria SOP Fund Centuria Woden Green Estate Development Fund Centuria ATP Fund Centuria 203 Pacific Highway Fund Centuria 19 Corporate Drive Fund Centuria 2 Wentworth Street Fund Centuria 8 Central Avenue Fund 2 Centuria Australian Shares Bond Centuria Balanced Bond Centuria High Growth Bond Financial assets held by the Benefit Funds Centuria 8 Australia Avenue Fund Centuria Metropolitan REIT Centuria Industrial REIT Centuria Iskia Development Fund Centuria Bottleyard Fund Centuria SOP Fund Centuria Rouse Hill Debt Fund

2018 2017 Fair value $ Units held Ownership Fair value $ Units held Ownership 124,317,757 48,372,668 19.48% 81,877,894 33,148,975 15.64% 68,555,158 27,643,209 11.39% 38,858,876 15,481,624 8.68% 7,050,751 5,250,001 18.88% - - 0% 1,548,500 1,630,000 14.17% - - 0% 1,515,527 1,515,527 18.20% - - 0% - - 0% 6,050,000 5,000,000 6.35% 102,826 102,826 0.22% 4,365,826 4,622,826 10.03% - - 0% 3,198,461 3,204,061 10.52% - - 0% 1,252,500 1,252,500 20.53% - - 0% 650,000 500,000 0.81% - - 0% 104,000 100,000 0.33% - - 0% 90,213 76,452 0.48% - - 0% 65,000 50,000 0.18% - - 0% 31,500 25,000 0.04% - - 0% 24,260 10,000 0.18% - - 0% 19,254 9,821 0.09% - - 0% 18,785 10,000 0.27% 203,090,519 84,514,231 82.34% 136,606,569 63,491,259 74.13% - - 0% 1,562,198 1,458,635 7.69% 17,454,984 7,038,300 2.90% 13,168,321 5,246,343 2.94% 2,601,467 1,012,244 0.41% 2,470,000 1,000,000 0.48% 1,850,000 1,850,000 15.83% - - 0% 1,425,000 1,500,000 13.04% - - 0% 951,400 1,000,000 3.28% - - 0% 735,716 735,716 8.83% - - 0% 25,018,567 13,136,260 44.29% 17,200,519 7,704,978 11.11% 228,109,086 97,650,491 126.63% 153,807,088 71,196,237 85.24%

Centuria Capital Group 42 30 June 2018

Assets and liabilities

C3 Financial assets (continued)

(b) Loans receivable from related parties

The following short-term loans were receivable from related parties of the Group at the end of the financial year:

year:
Centuria 80 Grenfell Street Fund Centuria Sandgate Road Fund	2018 $ 2017 $ 5,865,000 - - 10,968,500
	5,865,000 10,968,500

Recognition and measurement

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.

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.

Reverse mortgage loan receivable financial assets are recorded at amortised cost using the effective interest method less impairment.

C4 Investment properties held for sale

In June 2018, the Group decided to sell the following properties held within Centuria Retail Fund:

Property Windsor Marketplace, Windsor NSW City Centre Plaza, Rockhampton QLD Total fair value	2018 $'000 2017 $'000 2018 Capitalisation rate % Most recent independent valuer cap rate % 2018 Discount rate % Last independent valuation date 2018 Valuer 23,400 - 6.25% 6.50% 7.00% Nov 2017 Director 40,000 - 7.50% 7.00% 7.50% Jun 2018 Independent 63,400 - 13.75% 13.50% 14.50%

The fair values listed above do not include estimated selling costs which are expected to be incurred upon disposal.

Recognition and measurement

Investment properties are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. These investment properties are carried at fair value. The valuation techniques to determine the fair value of investment properties held for sale are the same as the valuation techniques of investment properties described in Note C5(a).

Centuria Capital Group 43 30 June 2018

Assets and liabilities

C5 Investment properties

Opening balance Acquisition of investment properties Capital improvements and associated costs Make good contributions Gain/(loss) on fair value Change in deferred rent and lease incentives Deconsolidation of Havelock House Fund Sale of investment property Investment properties reclassified as held for sale Closing balance ^	2018 $'000 2017 $'000 257,100 - - 249,700 3,985 2,232 - (675) (3,041) 3,630 2,456 2,213 (28,000) - (22,000) - (63,400) -
	147,100 257,100

Closing balance ^

^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $9,387,000 (30 June 2017: $10,140,000).

Property 111 St George Terrace, Perth WA City Centre Plaza, Rockhampton Qld Havelock House, West Perth WA Windsor Marketplace, Windsor NSW 441 Murray Street, Perth WA Total fair value	2018 $'000 2017 $'000 2018 capitalisation rate % Most recent independent valuer cap rate % 2018 Discount rate % Last independent valuation date 2018 Valuer 147,100 142,500 7.00% 7.00% 7.25% Nov 2017 Director - 46,000 -% -% -% - 28,000 -% -% -% - 22,100 -% -% -% - 18,500 -% -% -% 147,100 257,100 7.00% 7.00% 7.25%

Recognition and measurement

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are initially recorded at cost which includes stamp duty and other transaction costs. Subsequently, the investment properties are measured at fair value with any change in value recognised in profit or loss. The carrying amount of investment properties includes components relating to deferred rent, lease incentives and leasing fees.

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

Key estimate and judgements

(a) Valuation techniques and significant unobservable inputs

The fair value of the investment properties were determined by the Directors of the Responsible Entity of the relevant funds or by an external, independent valuer having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Centuria Capital Group 44 30 June 2018

Assets and liabilities

C5 Investment properties (continued)

(a) Valuation techniques and significant unobservable inputs (continued)

The valuations were prepared by considering the following valuation methodologies:

• Capitalisation approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property's market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property.

• Discounted cash flow approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property.

• Direct comparison approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property's market value.

The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and within the appropriate time.

(b) Fair value measurement

The fair value measurement of investment properties has been categorised as a Level 3 fair value as it is derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs).

Significant unobservable inputs	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input	Fair value measurement sensitivity to significant decrease in input
Capitalisation rate	Decrease	Increase
Discount rate	Decrease	Increase
C6 Intangible assets Indefinite life management rights Goodwill Balance at the beginning of the period Acquired goodwill Acquired management rights			2018 $'000 2017 $'000 92,128 92,128 65,535 65,535
			157,663 157,663
			2018 $'000 2017 $'000 157,663 53,025 - 12,510 - 92,128
			157,663 157,663

Goodwill and management rights are solely attributable to the Property Funds Management cash generating unit 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 five years.

Centuria Capital Group 45 30 June 2018

Assets and liabilities

C6 Intangible assets (continued)

Recognition and measurement

(i) Indefinite life management rights

Management rights acquired in a business combination are initially measured at fair value and reflect the right to provide asset and fund management services in accordance with the management agreements.

(ii) Goodwill

Goodwill acquired in a business combination is measured at cost and subsequently measured at cost less any impairment losses. The cost represents the excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired.

(iii) Impairment

Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash generating units or CGUs). Non-financial assets other than goodwill that were previously impaired are reviewed for possible reversal of the impairment at each reporting date.

Key estimates and judgements

The key assumptions used in the value in use calculations for the Property Funds Management cash-generating unit are as follows:

Revenue

Revenues in 2019 are based on the Board approved budget for 2019 and are assumed to increase at a rate of 7.5% (2017: 7.5%) per annum for years 2020-2022. The directors believe this is a prudent and achievable growth rate based on past experience.

Expenses

Expenses in 2019 are based on the budget for 2019 and are assumed to increase at a rate of 5.0% (2017: 5.0%) per annum for the years 2020-2022. The directors believe this is an appropriate growth rate based on past experience.

Discount rate

Discount rates are determined to calculate the present value of future cash flows. A pre-tax rate of 10.28% (2017: 10.59%) 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 2022, a growth rate of 3% (2017: 3%), in line with long term economic growth, has been applied to determine the terminal value of the asset.

Sensitivity to changes in assumptions

As at 30 June 2018, the estimated recoverable amount of intangibles including goodwill relating to the Property Funds Management cash-generating unit exceeded its carrying amount by $175.2 million (2017: $76.8 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:

carrying value:
	Revenue
	growth rate	Pre-tax	Expenses
	(average)	discount rate	growth rate
Assumptions used in value in use calculation	7.50%	10.28%	5.00%
Rate required for recoverable amount to equal carrying value	(2.50)%	18.68%	15.50%

Centuria Capital Group 46 30 June 2018

Assets and liabilities

C7 Payables

C7 Payables
Sundry creditors (i) Dividend/distribution payable Accrued expenses	2018 $'000 2017 $'000 10,880 15,322 12,813 12,351 8,712 6,222
	32,405 33,895

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

Recognition and measurement

Payables are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. Due to the short-term nature of these financial obligations, their carrying amounts are estimated to represent their fair values.

C8 Borrowings

Fixed rate secured notes (refer to Note C8(a)) Floating rate secured notes (refer to Note C8(a)) Reverse mortgage bill facilities and notes (refer to NoteC8(c)) Bank loans in Controlled Property Funds (refer to Note C8(d)) Borrowing costs capitalised	2018 $'000 2017 $'000 83,000 60,000 40,000 40,000 8,429 9,147 115,758 128,837 (1,448) (1,881)
	245,739 236,103

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

(a) Secured notes

The Group issued Tranche 1 of secured corporate notes to the value of $100,000,000 on 21 April 2017. This consisted of an issue of $40,000,000 floating rate secured notes and $60,000,000 7% fixed rate secured notes. The Group issued Tranche 2 to the value of $23,000,000 7% fixed rate secured notes on 11 September 2017. These notes mature on 21 April 2021 and are secured against assets within certain subsidiaries of the Centuria Capital Fund Group.

(b) Corporate facility (secured)

The Company had a multi option facility with National Australia Bank which matured on 28 February 2018. The facility limit was $30,500,000.

Total facility available Bank guarantee utilised 1 Unused facility available at the end of the period	2018 $'000 2017 $'000 - 30,500 - (8,032)
	- 22,468

1 Bank guarantee is not included in the borrowings note above

Centuria Capital Group 47 30 June 2018

Assets and liabilities

C8 Borrowings (continued)

(c) Reverse mortgage bill facilities and notes (secured)

As at 30 June 2018, the Group had $8,429,000 (2017: $9,147,000) non-recourse notes on issue to ANZ Bank, secured over the remaining reverse mortgages held in Senex Warehouse Trust No.1 (a subsidiary of the Group) due to mature on 30 September 2018. In July 2018, the notes maturity was extended to 30 September 2019.

The facility limit as at 30 June 2018 is $10,000,000 (2017: $15,000,000) 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. In July 2018, the facility limit was reduced to $9,400,000.

Facility Limit Amount used at reporting date Amount unused at reporting date	2018 $'000 2017 $'000 10,000 15,000 (8,429) (9,147)
	1,571 5,853

(d) Bank Loans - Controlled Property Funds (secured)

Each controlled property fund has debt facilities secured by first mortgage over each of the fund’s investment property and a first ranking fixed and floating charge over all assets of each of the funds. Details of the amounts drawn and the maturity of each facility are as follows:

			Facility	Funds	Draw	Borrowing	Draw
Current/non-current			limit	available	down	costs	down
Fund	classification	Maturity date	$'000	$'000	$'000	$'000	$'000
30 June 2018
Centuria 111 St
Georges Terrace Fund	Current	30 June 2019	83,800	4,320	79,480	(130)	79,350
Centuria Retail Fund	Current	31 July 2018**	37,400	992	36,408	-	36,408
			121,200	5,312	115,888	(130)	115,758
30 June 2017
Centuria 111 St
Georges Terrace Fund	Non-current	30 June 2019	81,500	10,839	70,661	(128)	70,533
Centuria Retail Fund	Current	30 June 2018	37,400	1,823	35,577	(76)	35,501
Centuria Havelock
House Fund	Current	31 May 2018	13,000	1,000	12,000	(14)	11,986
Centuria 441 Murray
Street Fund	Current	30 June 2018	12,000	1,159	10,841	(24)	10,817
			143,900	14,821	129,079	(242)	128,837

** Subsequent to 30 June 2018, the maturity date of Centuria Retail Fund's debt facility was extended to 31 August 2018. The investment properties in the Centuria Retail Fund are classified as held for sale as at 30 June 2018 and the bank facility will be rolled over until properties are sold.

Recognition and measurement

Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest rate method.

Centuria Capital Group 48 30 June 2018

Assets and liabilities

C9 Commitments and contingencies

(a) Operating leases

(i) Group as a leasee

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

Future minimum rentals payable under operating leases are as follows:

Future minimum rentals payable under operating leases are as follows:
Not longer than 1 year Longer than 1 year and not longer than 5 years	2018 $'000 2017 $'000 865 831 158 1,023
	1,023 1,854

(ii) Group as a lessor

The Group leases out its investment properties under operating leases.

The future minimum lease payments receivable under non-cancellable leases are as follows:

Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years	2018 $'000 2017 $'000 13,574 16,212 39,120 48,310 27,176 45,432
	79,870 109,954

(b) Contingencies

The Group has bank guarantees of $532,304 for commercial leases with respect to its Sydney and Melbourne office premises. These bank guarantees are cash collateralised.

The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities on the statement of financial position.

The Directors of the Group are not aware of any other contingent liabilities in relation to the Group, other than those disclosed in the financial statements, which should be brought to the attention of securityholders as at the date of completion of this report.

Recognition and measurement

When the terms of a lease transfer substantially all the risks and rewards of ownership to the Group, the lease is classified as a finance lease. All other leases are classified as operating leases.

(i) Group as a leasee

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

(ii) Group as a lessor

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.

Centuria Capital Group 49 30 June 2018

Assets and liabilities

C10 Contributed equity

C10 Contributed equity
Centuria Capital Limited Balance at beginning of the period Equity based payment Return of capital reinvested in CCF Stapled securities issued Cost of equity raising Balance at end of period Centuria Capital Fund (non-controlling interests) Balance at beginning of the period Equity based payment Stapling dividend and return of capital reinvested Stapled securities issued Cost of equity raising Balance at end of the period	2018 2017 No. of securities $'000 No. of securities $'000 229,815,736 77,323 76,631,699 88,058 875,401 535 563,034 356 - - - (39,205) 74,102,037 21,494 152,621,003 28,826 - (582) - (712)
	304,793,174 98,770 229,815,736 77,323
	2018 2017 No. of securities $'000 No. of securities $'000 229,815,736 170,672 - - 875,401 - - - - - 77,194,733 52,536 74,102,037 77,146 152,621,003 124,174 - (2,888) - (6,038)
	304,793,174 244,930 229,815,736 170,672

Fully paid ordinary securities carry one vote per security and carry the right to distributions.

On 29 June 2017, the Group issued 20,098,470 options to subscribe for stapled securities. The options have an exercise price of $1.30 per stapled security and expire on 29 June 2022.

Recognition and measurement

Incremental costs directly attributed to the issue of ordinary shares are accounted for as a deduction from equity, net of any tax effects.

Centuria Capital Group 50 30 June 2018

D Cash flows

D1 Operating segment cash flows

(i)

For the year ended 30 June 2018

Cash flows from operating activities Management fees received Distributions received Interest received Payments to suppliers and employees Income tax paid Interest paid Net cash provided by operating activities Cash flows from investing activities Proceeds from sale of related party investments Purchase of investments in related parties Loans to related parties for purchase of properties Repayment of loans by related parties Purchase of other investments Proceeds from sale of investments Loans provided to other parties Loans repaid by other parties Collections from reverse mortgage holders Cash balance on acquisition of subsidiaries Purchase of subsidiaries Payments for plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of securities Equity raising costs paid Proceeds from borrowings Repayment of borrowings Capitalised borrowing costs paid Distributions paid Net cash provided by financing activities Net increase in operating cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	2018 $'000 2017 $'000 81,370 43,589 15,529 5,301 2,268 665 (36,342) (33,061) (15,353) (6,084) (9,281) (3,343)
	38,191 7,067
	64,009 20,763 (123,762) (145,697) (5,865) (13,669) 4,650 7,072 (52,723) (620) - 47,757 (25,980) - 25,980 - 2,113 1,209 - 10,619 - (104,419) (788) (115)
	(112,366) (177,100)
	98,639 153,000 (3,710) (6,750) 25,375 155,000 (718) (82,403) (446) (1,936) (24,310) (4,092)
	94,830 212,819
	20,655 42,786 55,734 12,948
	76,389 55,734

(i) The operating segment cash flows support the segment note disclosures of Centuria Capital Group and provide details in relation to the Operating Segment cash flows performance of the Group. The Operating Segment cash flows exclude the impact of cash flows attributable to Benefit Funds and Controlled Property Funds. Refer to page 27 of the consolidated financial statements for the full statutory cash flow statement of the Group.

Centuria Capital Group 51 30 June 2018

Cash flows

D2 Cash and cash equivalents

Included in cash and cash equivalents attributable to shareholders is $27,267,854 (2017: $15,572,198) relating to amounts held by Centuria Life Limited, Senex Warehouse Trust No.1 and the Benefit Funds which is not readily available for use by the Group.

D3 Reconciliation of profit for the period to net cash flows from operating activities

Profit for the year Add (deduct) non-cash items: Depreciation and amortisation Impairment of seed capital Share-based payment expense Amortisation of borrowing costs Profit on sale of investment property Fair value movement of financial assets Interest revenue from reverse mortgages Unrealised gain/(loss) on investment properties Amortisation of lease incentives Costs paid for debt issuance Provision for doubtful debts Changes in net assets and liabilities: (Increase)/decrease in assets: Receivables Prepayments Property held for development Increase/(decrease) in liabilities: Other payables Tax provision Deferred tax liability Provisions Policyholder liability Net cash flows provided by/(used in) operating activities

2018 $'000 2017 $'000 56,190 26,295 370 365 380 - 662 447 58 167 (2,000) - (13,894) (4,171) (2,453) (2,377) 5,790 (3,631) 1,650 3,423 446 - 100 - (7,526) 5,762 (67) 117 - 35,716 (2,660) (11,009) (3,113) 2,186 820 (3,803) 515 146 1,662 1,864

36,930 51,497

Recognition and measurement

For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks. 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.

Centuria Capital Group 52 30 June 2018

E Group Structure

E1 Business combination

(a) Current year

During the current year, there were no business combinations.

(b) Prior Year

(i) Stapling

The stapling of the Company and Centuria Captial Fund (CCF) was approved at an Extraordinary General Meeting of the shareholders of the Company on 10 October 2016. Following approval of the stapling, shares in the Company and units in CCF were stapled to one another on 17 October 2016 and are traded as a single security on the ASX.

CCF was established by the transfer of the Company’s interest in Centuria Metropolitan REIT (‘CMA’) and other Co-investments to CCF in exchange for $52,535,795 in equity of CCF. Assets transferred to CCF were transferred at fair value. As the co-investments were already held at fair value, there was no impact on the consolidated net assets. CCL distributed $52,535,795 of its units in CCF to its shareholders through a $13,331,181 dividend and a capital distribution of $39,204,614.

In relation to the stapling of the Company and CCF, the Company is identified as the parent of the Group with the acquisition accounted for as a change in ownership without a loss of control. The issued units of CCF are not owned by the Company and are presented as non-controlling interests in the Group even though units in CCF are held directly by the shareholders of the Company.

The equity in the net assets of CCF and the profit/(loss) arising from those net assets have been separately identified in the statements of comprehensive income and financial position. CCF’s contributed equity and retained earnings/accumulated losses are shown as a non-controlling interest in the consolidated financial statements in accordance with accounting standards.

(ii) 360 Capital acquisition

On 23 November 2016, the Group announced the purchase of all of the shares in Centuria Property Funds No. 2 Limited (formerly 360 Capital Investment Management Limited) (‘CPF2L’) and associated management rights over listed and unlisted property investment funds for which CPF2L is the responsible entity from 360 Capital Group Limited (‘360 Capital’). Also as part of the acquisition, the Group agreed to acquire various stakes in those listed and unlisted funds.

The acquisition of shares in CPF2L and the interests in the listed and unlisted property investment funds (collectively, the ‘Transaction’) was settled on 9 January 2017.

This acquisition was funded by a combination of debt, equity and existing cash reserves, including $150,000,000 capital raised from new and existing institutional investors, and a vendor loan amounting to $50,000,000.

The acquisition also included a call option and a put option over stakes in the four unlisted property investment funds managed by CPF2L with a maximum option period of 2 years following completion of the acquisition.

This acquisition is part of the Group’s strategy in growing its property funds management platform and increasing recurring revenues through additional co-investment in managed funds.

Centuria Capital Group 53 30 June 2018

Group Structure

E1 Business combination (continued)

(b) Prior Year (continued)

(ii) 360 Capital acquisition (continued)

Details of the purchase consideration, the net assets acquired and goodwill recognised are as follows:

Purchase consideration Cash paid on 9 January 2017 Loan from 360 Capital Group (repaid on 21 April 2017) Call and put option liability Contingent consideration Total purchase consideration	2017 $'000 169,836 50,000 60,123 1,763
	281,722

As at 30 June 2018, the call and put option liability is $41,024,000 (2017: $54,693,000) and the contingent consideration is $123,000 (2017: $1,763,000). On 18 July 2018, the call and put option deed in relation to Centuria 111 St Georges Terrace Fund options was extended to 26 June 2019 from the original date of 9 January 2019.

The assets and liabilities recognised as a result of the acquisition are as follows:

Cash and cash equivalents Investment Properties Receivables Payables Borrowings Derivative Financial Instruments Co-investment in Centuria Industrial REIT (CIP) Co-investment in Centuria Urban REIT (CUA) Management rights (indefinite life) Net identifiable assets acquired Less: non-controlling interests Add: goodwill attributable to the acquisition of 360 Capital Net assets acquired	Fair value $'000 17,608 249,700 2,748 (6,509) (128,495) (757) 81,414 30,725 92,128
	338,562 (69,350) 12,510
	281,722

Transaction related costs

Transaction related costs of $9,591,064 were incurred of which $2,707,750 were included in expenses in profit or loss and $6,883,314 were recognised directly in contributed equity.

Contingent consideration

The contingent consideration arrangement requires the Group to guarantee the distribution yield on co-investment stakes in unlisted property funds subject to put and call options to 7.5%. The contingent consideration liability recognised reflects the Group's expectation of the fair value of the amounts to be paid over the contingent period. The distributions are expected to be less than the guaranteed return.

Recognition and measurement

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 Group 54 30 June 2018

Group Structure

E2 Interests in material subsidiaries

The Group's principal subsidiaries at 30 June 2018 are set out below. Unless otherwise stated, they have issued capital consisting solely of ordinary shares or units that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The subsidiaries of the Group were incorporated in Australia which is also their principal place of business. The parent entity of the Group is Centuria Capital Limited.

Name of subsidiary	Ownership interest %	Ownership interest %
	2018	2017
Centuria Capital Fund Centuria Life Limited Over Fifty Seniors Equity Release Pty Ltd Senex Warehouse Trust No. 1 Centuria Property Funds Limited Centuria Property Funds No. 2 Limited Centuria Properties No. 3 Limited Centuria Institutional Investments No. 3 Pty Limited A.C.N. 062 671 872 Pty Limited Centuria Strategic Property Limited Centuria Funds Management Limited Centuria Investment Holdings Pty Limited Centuria Finance Pty Ltd Centuria Property Services Pty Limited Belmont Road Management Pty Limited Belmont Road Development Pty Limited Centuria Capital No. 2 Fund Centuria Capital No. 2 Office Fund Centuria Capital No. 2 Industrial Fund Centuria Capital No. 3 Fund Centuria Belmont Road Development Fund Centuria Diversified Property Fund***	0% (100% NCI) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 27% n/a	0% (100% NCI) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 27% 54%

During the year ended 30 June 2017, as part of the 360 Capital Transaction, the Group gained control over four unlisted property funds including Centuria 111 St Georges Terrace Fund, Centuria Retail Fund, Centuria Havelock House Fund and Centuria 441 Murray Street Fund. In 2017, these funds have been consolidated in these financial statements. As at 30 June 2018, Centuria Havelock House Fund and Centuria Murray Street Fund have been deconsolidated from these financial statements.

*** As at 30 June 2018, Centuria Diversified Property Fund has been deconsolidated from these financial statements.

Recognition and measurement

(i) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. 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.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Centuria Capital Group 55 30 June 2018

Group Structure

E2 Interests in material subsidiaries (continued)

Recognition and measurement (continued)

(i) Basis of consolidation (continued)

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.

E3 Parent entity disclosure

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

Result of parent entity Profit or loss for the year Total comprehensive income for the year Financial position of parent entity at year end Total assets Total liabilities Net assets	2018 $'000 2017 $'000 13,147 15,557 13,147 15,557 104,332 76,921 (11,830) (11,128)
	92,502 65,793

The parent entity presents its assets and liabilities in order of liquidity. The assets of the parent entity mainly consist of cash, short term receivables, investments in subsidiaries and deferred tax assets. The liabilities of the parent entity mainly consist of short term payables.

Total equity of the parent entity comprising of: Share capital Share-based incentive reserve Retained earnings/(loss) Total equity	98,770 77,323 1,896 1,551 (8,164) (13,081)
	92,502 65,793

(a) Guarantees entered into by the parent entity

The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries during the financial year.

(b) Commitments and contingent liabilities of the parent entity

The parent entity has bank guarantees of $532,304 for commercial leases with respect to its Sydney and Melbourne office premises. These bank guarantees are cash collateralised.

The above guarantees are issued in respect of the parent entity and do not constitute an additional liability to those already existing in interest bearing liabilities on the statement of financial position.

The Directors of the Company are not aware of any other contingent liabilities in relation to the parent entity, other than those disclosed in the financial statements.

Centuria Capital Group 56 30 June 2018

F Other

F1 Share-based payment arrangements

(a) LTI Plan details

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 security of the Group 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 Group 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 Group.

Further details of the LTI Plan are included in the Audited remuneration report from page 9 to page 20.

Performance rights outstanding at the beginning of the year Performance rights granted during the year Performance rights lapsed during the year Performance rights vested during the year Performance rights outstanding at the end of the year	2018 Number 5,103,963 2,113,780 (458,129) (1,390,927)
	5,368,687

The performance objectives for 1,672,133 of the performance rights issued under Trance 3 were met in full by 30 June 2018. As a result, these rights will vest on 31 August 2018.

(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:

	.	Tranche 3	.	Tranche 4	.	Tranche 5
Expected vesting date	.	31 August 2018	.	31 August 2019	.	31 August 2020
Share price at the grant date	.	$0.96	.	$1.02	.	$1.46
Expected life	.	2.6 years	.	2.7 years	.	2.8 years
Volatility	.	20%	.	20%	.	20%
Risk free interest rate	.	1.85%	.	1.94%	.	1.96%
Dividendyield	.	5.4%	.	5.7%	.	5.7%

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

Performance Condition	.	Tranche 3	.	Tranche 4	.	Tranche 5
EPS	.	$0.87	.	$0.88	.	N/A
Growth in FUM	.	$0.87	.	$0.88	.	$1.24
Absolute TSR	.	$0.19	.	$0.16	.	$0.62

During the year, share based payment expenses were recognised of $1,478,291 (2017: $448,247).

Centuria Capital Group 57 30 June 2018

Other

F1 Share-based payment arrangements (continued)

Recognition and measurement

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.

F2 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 light 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.

F3 Financial instruments

(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.

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.

Centuria Life Limited (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.

Centuria Capital Group 58 30 June 2018

Other

F3 Financial instruments (continued)

(a) Management of financial instruments (continued)

From time to time, the Group outsources certain parts of the investment management of the Benefit Funds to specialist investment managers including co-ordinating access to domestic and international financial markets, and managing 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 minimise 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 factual or anticipated exposures relating to investments. The use of financial derivatives in respect of Benefit Funds is governed by the Funds' 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.

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, Centuria Funds Management Limited and Centuria Property Fund No.2 Limited have AFS 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 Funds' 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.

Centuria Capital Group 59 30 June 2018

Other

F3 Financial instruments (continued)

(c) Fair value of financial instruments (continued)

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

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 2018 to determine the fair value.

(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 2018 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 2018 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.

			Carrying
	Measurement	Fair value	amount	Fair value
30 June 2018	basis	hierarchy	$'000	$'000
Financial assets
Cash and cash equivalents	Amortised cost	Level 1	101,914	101,914
Financial assets at fair value	Fair value	Level 1	495,837	495,837
Receivables	Amortised cost	Level 2	21,164	21,164
Financial assets at fair value	Fair value	Level 2	99,721	99,721
Financial assets at fair value	Fair value	Level 3	1,215	1,215
Reverse mortgages receivables	Amortised cost	Level 3	28,289	28,289
Reverse mortgages - hedged item fair value
adjustment	Fair value	Level 3	19,770	19,770
			767,910	767,910

Centuria Capital Group 60 30 June 2018

Other

F3 Financial instruments (continued)

(c) Fair value of financial instruments (continued)

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

			Carrying
	Measurement	Fair value	amount	Fair value
30 June 2018	basis	hierarchy	$'000	$'000
Financial liabilities
Payables	Amortised cost	Level 2	32,405	32,405
Liability to 360 Capital Group	Amortised cost	Level 2	41,161	41,161
Benefit Funds policy holders' liability	Amortised cost	Level 2	349,677	349,677
Borrowings	Amortised cost	Level 2	245,739	246,854
Interest rate swaps at fair value	Fair value	Level 2	472	472
Interest rate swaps at fair value	Fair value	Level 3	22,939	22,939
			692,393	693,508
			Carrying
	Measurement	Fair value	amount	Fair value
30 June 2017	basis	hierarchy	$'000	$'000
Financial assets
Cash and cash equivalents	Amortised cost	Level 1	74,382	74,382
Receivables	Amortised cost	Level 2	16,380	16,380
Financial assets at fair value	Fair value	Level 1	142,894	142,894
Financial assets at fair value	Fair value	Level 2	345,164	345,164
Financial assets at fair value	Fair value	Level 3	1,215	1,215
Reverse mortgages receivables	Amortised cost	Level 3	27,675	27,675
Reverse mortgages - hedged item fair value
adjustment	Fair value	Level 3	18,511	18,511
			626,221	626,221
space
Financial liabilities
Payables	Amortised cost	Level 2	33,895	33,895
Liability to 360 Capital Group	Amortised cost	Level 2	56,456	56,456
Benefit Funds policy holders' liability	Amortised cost	Level 2	348,014	348,014
Borrowings	Amortised cost	Level 2	236,103	237,019
Interest rate swaps at fair value	Fair value	Level 2	1,134	1,134
Interest rate swaps at fair value	Fair value	Level 3	18,190	18,190
Total			693,792	694,708

The Group determines Level 2 fair values for financial assets and liabilities without an active market based on broker quotes. 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.

The Level 3 financial asset held by the Group is the fair value of the residential 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 items are designated in a fair value hedging relationship, with the fair value movements on the swaps offset by the fair value movements in the mortgage receivables. 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 credit risk movements.

Centuria Capital Group 61 30 June 2018

Other

F3 Financial instruments (continued)

(c) Fair value of financial instruments (continued)

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

Year ended 30 June 2018 Balance at 1 July 2017 Loan repaid Accrued interest Attributable to interest rate risk Attributable to credit risk Balance at 30 June 2018 Year ended 30 June 2017 Balance at 1 July 2016 Loan repaid Accrued interest Attributable to interest rate risk Attributable to credit risk Balance at 30 June 2017	Other mortgage backed assets at fair value $'000 Reverse mortgages fair value $'000 Fixed-for-life interest rate swaps $'000 Total $'000 1,215 46,187 (18,191) 29,211 - (1,695) 471 (1,224) - 2,453 (1,466) 987 - 1,114 (1,114) - - - (2,639) (2,639)
	1,215 48,059 (22,939) 26,335
	Other mortgage backed assets at fair value $'000 Reverse mortgages fair value $'000 Fixed-for-life interest rate swaps $'000 Total $'000 1,214 51,561 (20,753) 32,022 - (1,208) 311 (897) 1 2,400 (1,422) 979 - (6,566) 6,566 - - - (2,893) (2,893)
	1,215 46,187 (18,191) 29,211

Key estimates and judgements

The fair value of the 50 year residential mortgage loans and 50 year 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 based on the ABS 2013-2015 mortality table with adjustments for the demographic profile of the mortgage holders. Mortality improvements are assumed starting at 3% p.a. at age 70 and tapering down to 1% p.a. from age 90. Joint life mortality is based on last death for loans with joint borrowers.

Recognition and measurement

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. The hedge is considered ineffective if it falls outside the range of 80% to 125%.

Centuria Capital Group 62 30 June 2018

Other

F3 Financial instruments (continued)

(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 2018, the highest loan to value ratio (LVR) of a loan in the reverse mortgage loan book is 107% (2017: 113%), and there are 58 out of 222 (2017: 52 out of 232) reverse mortgage loans where the LVR is higher than 50%.

(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.

(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 table summarises 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.

Centuria Capital Group 63 30 June 2018

Other

F3 Financial instruments (continued)

(e) Liquidity risk (continued)

Non-derivative financial liabilities Consolidated 2018 Borrowings Payables Liability to 360 Capital Group Benefit Funds policyholder's liability Total 2017 Borrowings Payables Liability to 360 Capital Group Benefit Funds policyholder's liability Total	On demand Less than 3 months 3 months to 1 year 1-5 years 5+ years $'000 $'000 $'000 $'000 $'000 Total $'000 - 38,213 90,160 148,460 - 276,833 - 32,405 - - - 32,405 - - 41,161 - - 41,161 349,677 - - - - 349,677
	349,677 70,618 131,321 148,460 - 700,076
	- 898 69,004 202,788 - 272,690 - 33,454 - - - 33,454 - - - 56,456 - 56,456 348,014 - - - - 348,014
	348,014 34,352 69,004 259,244 - 710,614

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.

Derivative financial liabilities Consolidated 2018 Interest rate swaps Total 2017 Interest rate swaps Total	On demand Less than 3 months 3 months to 1 year 1-5 years 5+ years $'000 $'000 $'000 $'000 $'000 Total $'000 - - 393 1,214 46,588 48,195
	- - 393 1,214 46,588 48,195
	- 9 376 838 45,990 47,213
	- 9 376 838 45,990 47,213

(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.

Centuria Capital Group 64 30 June 2018

Other

F3 Financial instruments (continued)

(f) Market risk (continued)

(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.

	Weighted
	average
	effective
	interest rate	Variable rate	Fixed rate	Total
	%	$'000	$'000	$'000
2018
Financial assets
Cash and cash equivalents	1.63%	75,522	26,392	101,914
Other financial assets held by Benefit Funds	2.91%	205,035	26,229	231,264
Reverse mortgage receivables	8.72%	1,316	26,973	28,289
Total financial assets	13.26%	281,873	79,594	361,467
Financial liabilities
Borrowings	5.23%	(162,739)	(83,000)	(245,739)
Total financial liabilities	5.23%	(162,739)	(83,000)	(245,739)
Net interest bearing financial assets/(liabilities)	18.49%	119,134	(3,406)	115,728
	Weighted
	average
	effective
	interest rate	Variable rate	Fixed rate	Total
	%	$'000	$'000	$'000
2017
Financial assets
Cash and cash equivalents	1.23%	61,286	13,396	74,682
Other financial assets held by Benefit Funds	3.67%	238,443	1,515	239,958
Reverse mortgage receivables	8.75%	1,124	26,551	27,675
Total financial assets	13.65%	300,853	41,462	342,315
Financial liabilities
Borrowings	4.67%	(176,103)	(60,000)	(236,103)
Total financial liabilities	4.67%	(176,103)	(60,000)	(236,103)
Net interest bearing financial assets/(liabilities)	18.32%	124,750	(18,538)	106,212

Centuria Capital Group 65 30 June 2018

Other

F3 Financial instruments (continued)

(f) Market risk (continued)

(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.

	Average contracted	Average contracted	Notional	principal
	rate		amount		Fair value
Pay fixed for floating contracts
designated as effective in fair	2018	2017	2018	2017	2018	2017
value hedge	%	%	$'000	$'000	$'000	$'000
Controlled property funds interest
rate swaps	2.33%	2.73%	99,600	106,100	(472)	(1,133)
Benefit funds interest rate swaps	2.02%	2.94%	3,000	20,000	5	(79)
50 years swaps contracts	7.48%	7.47%	10,677	11,373	(22,939)	(18,910)
	11.83%	13.14%	113,277	137,473	(23,406)	(20,122)

(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 balance 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 (2017: 100) basis points higher or lower and all other variables were held constant, the impact to the Group would have been as follows:

Change in variable Consolidated Interest rate risk +1% space Consolidated Interest rate risk -1%	Effect on profit after tax 2018 $'000 2017 $'000 568 (1,574)
	(405) 1,908

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.

Centuria Capital Group 66 30 June 2018

Other

F4 Remuneration of auditors

Amounts received or due and receivable by KPMG:

Amounts received or due and receivable by KPMG:
Audit and review of the financial report Other services including AFSL and compliance plan audits Cyber security review Taxation services	2018 $ 2017 $ 347,165 308,000 52,275 76,810 89,175 - - 30,000
	488,615 414,810

F5 New Accounting Standards and Interpretations effective 1 July 2018

AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers are new standards which are effective for annual periods beginning after 1 July 2018. Whilst earlier application was permitted, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

The Group is required to adopt AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 July 2018 and has assessed the estimated impact that the initial application of these standards will have on its consolidated financial statements.

Based on the Group’s assessment, the Group does not believe that these new accounting standards will have a material impact on the Group’s equity as at 1 July 2018. This impact is assessed based on analysis performed to date. The actual impacts of adopting the standard at 1 July 2018 may vary because the new accounting policies are subject to change until the Group presents its first financial statements at the date of initial application.

(a) AASB 9 Financial Instruments

AASB 9 Financial Instruments sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement .

(i) Classification – Financial assets

AASB 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics.

AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). The standard eliminates the existing AASB 139 categories of held to maturity, loans and receivables and available for sale.

Based on its assessment, the Group does not believe that the new classification requirements will have a material impact on its accounting for all receivables and financial assets (which are already carried at fair value) except for reverse mortgage loan receivables.

Reverse mortgage loan receivables are currently recorded at amortised cost using the effective interest method less impairment. On transition to AASB 9, whilst these receivables will be reclassified to FVTPL, the Group does not expect a material change in their measurement and a result there is no expected impact on the Group’s equity at 1 July 2018. The implication of the change from amortised cost to FVTPL for future reporting periods may include increased volatility in the Group’s results as gains or losses arising from variations in fair value measurement assumptions will be reported through the profit and loss.

Centuria Capital Group 67 30 June 2018

Other

F5 New Accounting Standards and Interpretations effective 1 July 2018 (continued)

(a) AASB 9 Financial Instruments (continued)

(ii) Impairment – Receivables

AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward-looking ‘expected credit loss’ (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to the Group’s receivables which continue to be measured at amortised cost. The new impairment model will not apply to the Group’s reverse mortgage loan receivables which will be classified as FVTPL as described above under AASB 9.

Based on its assessment, the Group does not believe that the new impairment model will have a material impact on its equity upon transition as at 1 July 2018.

(iii) Classification – Financial liabilities

There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed.

(iv) Hedge accounting

The new hedge accounting rules generally allow for more hedge relationships to be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group does not expect a significant impact as a result of the hedging changes on transition on 1 July 2018.

(v) Transition

Changes in accounting policies resulting from the adoption of AASB 9 will generally be applied retrospectively, however as there are no expected material impact on carrying amounts of financial assets and financial liabilities, there will no transitional implications on the Group’s equity at 1 July 2018 nor it’s comparatives.

(b) AASB 15 Revenue from Contracts with Customers

The new revenue standard, AASB 15 Revenue from customers applies to all contracts with customers to deliver goods or services as part of the entity’s ordinary course of business excluding insurance contracts, financial instruments and leases which are addressed by other standards. It replaces existing revenue recognition guidance, including AASB 118 Revenue and AASB 111 Construction Contracts .

AASB 15 replaces the considerations of risks and rewards under AASB 118 to the concept of when control passes to the customer as the trigger point for the recognition of revenue.

The Group’s revenue streams which are in scope under the new standard include management fees from property funds, property acquisition fees, property sales fees and property performance fees. Rental income, interest income, distribution and dividend income and fair value movements in investment properties are excluded from the scope of this standard.

Based on its assessment, the Group does not believe that the new standard will have a material transitional impact on the Group’s equity as at 1 July 2018.

Performance fees are currently recognised upon satisfaction of all conditions precedent to the sale of an investment property and when significant risks and rewards have transferred. Whilst there is no expected material transitional impact from adoption of AASB 15, future performance fees will be recognised at an earlier point in time. In assessing the timing and measurement of performance fees to be recognised, consideration will be given to the facts and circumstances with respect to each investment property including external factors such as its current valuation, passage of time and outlook of the property market. Performance fees will only be recognised when they are deemed to be highly probable and the amount of the performance fees will not result in a significant reversal in future periods.

Centuria Capital Group 68 30 June 2018

Other

F6 Other new Accounting Standards and Interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.

(a) AASB 16 Leases

(i) Nature of change

AASB 16 Leases was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

The accounting for lessors will not significantly change.

(ii) Impact

The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments as outlined in note C9(a). However, the Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s profit and classification of cash flows.

Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16.

(iii) Mandatory application date

Mandatory for financial years commencing on or after 1 January 2019, but available for early adoption. Therefore mandatory application to the Group would be year ending 30 June 2020.

At this stage, the Group has not concluded whether it intends to adopt AASB 16 before its mandatory date.

F7 Events subsequent to the reporting date

There has not arisen in the interval between 30 June 2018 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 Group 69 30 June 2018

Directors' declaration

In the opinion of the Directors' of Centuria Capital Limited:

• (a) the consolidated financial statements and notes set out on pages 22 to 69 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) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its performance for the financial year ended on that date, 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.

Note A1 confirms that the consolidated financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of Directors.

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Mr Garry S. Charny Director Sydney

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Mr Peter J. Done Director Sydney

Sydney 14 August 2018

Centuria Capital Group 70 30 June 2018

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Independent Auditor’s Report

To the stapled security holders of Centuria Capital Group

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of Centuria Capital Limited (the Company) as the deemed parent presenting the stapled security arrangement of the Centuria Capital Group (the Stapled Group Financial Report).

In our opinion, the accompanying Stapled Group Financial Report is in accordance with the Corporations Act 2001 , including:

• giving a true and fair view of the Stapled Group’s financial position as at 30 June 2018 and of its financial performance for the year ended on that date; and

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

The Financial Report comprises:

• Consolidated statement of financial position as at 30 June 2018

• Consolidated statement of comprehensive income, Consolidated statements of changes in equity, and Consolidated statement of cash flows for the year then ended

• Notes including a summary of significant accounting policies

• Directors’ Declaration.

The Stapled Group comprises Centuria Capital Limited and the entities it controlled at the year-end or from time to time during the financial year and Centuria Capital Fund and the entities it controlled at the year-end or from the time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of the Stapled Group and Company in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

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Key Audit Matters

The Key Audit Matters we identified are:

• Recoverable amount of Goodwill and Indefinite Life Intangible Assets

• Valuation of Investment Properties and Investment Properties Held for Sale

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period.

These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

• Hedge Accounting and Valuation of Derivatives

Recoverable amount of Goodwill and Indefinite Life Intangible Assets ($157.7m)

Refer to Note C6 to the Financial Report

The key audit matter

How the matter was addressed in our audit

At 30 June 2018, the Stapled Group’s intangible assets comprise goodwill and management rights. A key audit matter was the Stapled Group’s annual testing of goodwill and management rights for impairment. We focused on the significant forward-looking assumptions the Stapled Group applied in their value in use model including:

• [Forecast operating cash flows, growth rates ] and terminal growth rates, which may reduce available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Stapled Group’s strategy; and

• [Discount rate - these are complicated in nature ] and vary according to the conditions and environment the specific cash generating unit (“CGU”) is subject to from time to time. The Stapled Group’s model is sensitive to changes in the discount rate. Accordingly, we involve our valuation specialist with the assessment.

Our procedures included:

• Assessing the value in use method applied by the Stapled Group in the annual test of goodwill for impairment against the requirements of the accounting standards;

• • Assessing the Stapled Group’s determination of their CGUs based on our understanding of the operations of the Stapled Group’s business, and how independent cash flows were generated, against the requirements of the accounting standards;

• • Comparing the forecast cash flows contained in the value in use model to Board approved forecasts;

• Assessing the Stapled Group’s ability to accurately forecast by comparing historical forecasts to actual results;

• Evaluating the sensitivity of the model by varying key assumptions, such as forecast growth rates, terminal growth rates and discount rates within a reasonably possible range, to identify those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures;

72

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• Assessed the consistency of the forecasts and growth rates to the Stapled Group’s stated plan and strategy and past performance of the Stapled Group, based on our experience regarding the feasibility of these in the economic environment in which they operate; and

• Involving our valuation specialists, we analysed the discount rate against publicly available data of a group of comparable entities and assessed the valuation approach and methodology against market and industry practices and accounting standards.

Valuation of Investment Properties ($147.1m) and Investment Properties Held for Sale ($63.4m)

Refer to Notes C4 and C5 to the Financial Report

The key audit matter The valuation of investment properties and investment properties held for sale is a key audit matter as they are significant in value to the Stapled Group (being 18% of total assets) and contain assumptions with estimation uncertainty.

These estimates lead to additional audit effort due to differing assumptions based on asset classes, geographies and characteristics of individual investment properties.

The Stapled Group’s policy is investment properties and investment properties held for sale are valued at fair value and the fair value is determined by the Stapled Group using internal methodologies and through the use of external valuation experts.

We focussed on the following significant assumptions contained in the Stapled Group’s valuation methodology for investment properties:

• capitalisation rates;

• market rental yield;

• vacancy levels;

• projections of capital expenditure; and

How the matter was addressed in our audit

Our procedures included:

• Understanding the Stapled Group’s process regarding the valuation of investment properties;

• Assessing the methodologies used in the valuations of investment properties for consistency with accounting standards and Stapled Group policies;

• Assessing the scope, competence and objectivity of external experts engaged by the Stapled Group and internal valuers;

• Worked with our real estate valuation specialists and read published reports and industry commentary to gain an understanding of prevailing market conditions;

• On a portfolio basis, taking into account the asset classes, geographies and characteristics of individual investment properties, challenged, with reference to published reports or industry commentary, significant assumptions including: capitalisation rates, market rental yields, weighted average lease expiry and vacancy levels, capital adjustments and assessed the difference between the capitalisation rate and discounted cash-flow valuation approaches; and

• leasing incentives.

73

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• On a sample basis, assessed the appropriateness of specific valuation assumptions through comparison to market analysis published by industry experts, recent market transactions, inquiries with the Stapled Group and historical performance of the investment properties.

Hedge Accounting and Valuation of Derivatives ($22.9m)

Refer to Note F3(c) to the Financial Report

	• On a sample basis, assessed the appropriateness of specific valuation assumptions through comparison to market analysis published by industry experts, recent market transactions, inquiries with the Stapled Group and historical performance of the investment properties.
Hedge Accounting and Valuation of Derivatives ($22.9m)
Refer to Note F3(c) to the Financial Report
The key audit matter	How the matter was addressed in our audit
The Stapled Group issues reverse mortgages and enters into an interest rate swap derivative contract to manage the interest rate risk associated with the reverse mortgage. The Stapled Group applies hedge accounting on the interest rate swap derivative contract. The hedge accounting and valuation of derivatives was identified as a key audit matter due to the complexity in auditing the hedging arrangement. This is a result of the complex hedge accounting requirements and the significant judgments made by the Stapled Group in the valuation of the derivative such as the credit spread which required our specialist involvement.	Involving our specialist, our procedures included: • Reading the hedge documentation and assessing the accounting for the hedge arrangement and effectiveness against the requirements of the Australian Accounting Standards; • Comparing the Stapled Group’s determination of the weighted average maturity used in the credit spread model against the historical maturity and age of reverse mortgage borrower; • Evaluating the sensitivity of the hedge model by varying the weighted average maturity used in the credit spread model to identify bias or inconsistency in application; • Assessing the credit spread by comparing the relevant Australia Corporate Curve from Bloomberg to the Australian Dollar Swap Curve; and • Independently valuing the swap portfolio and comparing it to the Stapled Group’s valuation.

Other Information

Other Information is financial and non-financial information in Centuria Capital Group’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of the Company are responsible for the Other Information.

The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report. The Key Financial Metrics, Chairman’s Report, Chief Executive’s Report, Unlisted Property, Listed Property, Centuria Life and Centuria in the Community are expected to be made available to us after the date of the Auditor’s Report.

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Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors of the Company are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error

• assessing the Stapled Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Stapled Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and

• to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.

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Report on the Remuneration Report

Opinion

In our opinion, the Remuneration Report of Centuria Capital Limited for the year ended 30 June 2018, complies with Section 300A of the Corporations Act 2001 .

Directors’ responsibilities

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 responsibilities

We have audited the Remuneration Report included in pages 9 to 20 of the Directors’ report for the year ended 30 June 2018.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

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KPMG
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Nigel Virgo
Partner
Sydney
14 August 2018
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76

Additional stock exchange information

The securityholder information set out below was applicable as at 31 July 2018.

Distribution of securities

Analysis of numbers of securityholders by size of holding:

Analysis of numbers of securityholders by size of holding:
Holding 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Number of holders Number of securities 857 427,820 4,212 10,360,747 849 5,896,641 897 24,987,635 143 263,120,331
	6,958 304,793,174

There were 311 holders of less than a marketable parcel of securities holding 62,724 securities.

Top 20 Securityholders

The names of the twenty largest holders of securities are listed below:

CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PERSHING AUSTRALIA NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 CITICORP NOMINEES PTY LIMITED GH 2016 PTY LIMITED RESOLUTE FUNDS MANAGEMENT PTY LTD A/C> CICERONE CAPITAL PTY LTD BUTTONWOOD NOMINEES PTY LTD BRYSHAW MANAGEMENT PTY LTD PARITAI PTY LIMITED AVANTEOS INVESTMENTS LIMITED <2412987 JRSWJH A/C> UBS NOMINEES PTY LTD PARSONAGE PROVIDENT P/L HWM (NZ) HOLDINGS LIMITED NATIONAL NOMINEES LIMITED NATIONAL EXCHANGE PTY LTD ERSKINE IMPORT PTY LTD MR ROGER WILLIAM DOBSON

Number held Percentage of issued securities 45,405,404 14.90 41,376,869 13.58 38,415,438 12.60 29,554,574 9.70 24,349,842 7.99 10,140,483 3.33 9,536,034 3.13 3,977,679 1.31 3,512,057 1.15 3,166,791 1.04 2,725,002 0.89 2,544,293 0.83 2,408,164 0.79 2,252,901 0.74 2,200,830 0.72 2,052,745 0.67 1,607,512 0.53 1,401,563 0.46 1,370,000 0.45 1,318,062 0.43

229,316,243 75.24

Centuria Capital Group 77 30 June 2018

Shareholder

Substantial holders

Substantial holders in the Group are set out below.

Substantial holders in the Group are set out below.
ESR CAYMAN LTD MAGIC TT PTY LTD ELLERSTON CAPITAL LIMITED	Number held Percentage 45,405,404 14.90% 42,677,495 14.00% 26,425,800 8.67%
	114,508,699 37.57%

Voting rights

All ordinary securities carry one vote per security without restriction.

Centuria Capital Group 78 30 June 2018

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Centuria Capital Fund Financial Report 1 for the year ended 30 June 2018

Centuria Capital Fund comprises of Centuria Capital Fund ARSN 613 856 358 (the 'Fund') and its subsidiaries. The Responsible entity of the Fund is Centuria Funds Management Limited (the 'Company') ACN 607 153 588, AFSL 479 873.

1This Fund was established on 20 July 2016. The comparative information in these consolidated financial statements reflect the results of operations and financial affairs of the Fund from its inception to 30 June 2017.

Centuria Capital Fund Financial Report - 30 June 2018

Contents

Contents
	Page
Directors' Report	1
Auditor's Independence Declaration	6
Consolidated financial statements	7
Independent auditor's report to the members	38
Additional stock exchange information	40

These consolidated financial statements are the financial statements of the consolidated entity consisting of Centuria Capital Fund and its subsidiaries. A list of the major subsidiaries is included in note E2. The consolidated financial statements are presented in the Australian currency.

Centuria Capital Fund is a trust, registered and domiciled in Australia.

Its registered office is: Centuria Capital Fund Level 39, 100 Miller Street 100 Miler Street North Sydney NSW 2060

The consolidated financial statements were authorised for issue by the Directors of the Responsible Entity on 14 August 2018. The Directors have the power to amend and reissue the consolidated financial statements.

Directors' Report

The directors of Centuria Funds Management Limited (the 'Company') as the Responsible Entity for Centuria Capital Fund (the 'Fund') present their report together with the consolidated financial statements of the Fund and its controlled entities (the 'Group') for the financial year ended 30 June 2018 and the auditor’s report thereon.

ASX listed Centuria Capital Group consists of Centuria Capital Limited ('CCL') and its controlled entities including the Fund. The shares in CCL and the units in the Fund are stapled, quoted and traded on the Australian Securities Exchange ('ASX') as if they were a single security under the ticker code 'CNI'.

Directors and directors' interests

Directors of Centuria Funds Management Limited during or since the end of the financial year are:

Directors of Centuria Funds Management Limited during or since the end of the financial year are:	Directors of Centuria Funds Management Limited during or since the end of the financial year are:	Directors of Centuria Funds Management Limited during or since the end of the financial year are:
Mr Garry S Charny, BA. LL.B.Independent Non-Executive Director and Chairman
Experience and expertise	Garry was appointed to the Board on 8 August 2016, and appointed as Chairman of the Board on the same date. He is Managing Director and founding principal of Wolseley Corporate, an Australian based corporate advisory and investment house which transacts both domestically and internationally. He has had a broad range experience in both listed and unlisted companies across a diverse range of sectors including property, retail, technology and media. He formerly practised as a barrister in the fields of commercial and equity.
Other directorships	Garry is Chairman of Wolseley Corporate. He is also Chairman of Spotted Turquoise Films, an international Film and Television company based in Sydney and Los Angeles. He is Chairman of Shero Investments, a Sydney based investment company.
Special responsibilities	Chairman of the Board Member of the Audit, Risk Management and Compliance Committee
Interests in CNI	Ordinary stapled securities	237,314
Mr Peter J. Done, B.Comm, FCA.Independent Non-Executive Director
Experience and expertise	Peter was appointed to the Board on 8 August 2016. Peter was a partner of KPMG for 27 years until his retirement in June 2006. He has extensive knowledge in accounting, audit and financial management in the property development and financial services industries, corporate governance, regulatory issues and Board processes through his many senior roles.
Other directorships	None.
Special responsibilities	Chairman of the Audit, Risk Management and Compliance Committee
Interests in CNI	Ordinary stapled securities	1,083,676

Centuria Capital Fund 1 30 June 2018

Directors' Report

Directors and directors' interests (continued)

Directors and directors' interests (continued)	Directors and directors' interests (continued)	Directors and directors' interests (continued)
Mr John R. Slater, Dip.FS (FP), F Fin.Independent Non-Executive Director
Experience and expertise	John was appointed to the Board on 8 August 2016. John was a senior executive in the KPMG Financial Services practice from 1989 to 1999 and acted as State director of the Brisbane practice. He has also served on the Investment Committees of KPMG Financial Services, Berkley Group and Byron Capital. In 2008, John founded boutique Financial Advisory firm Riviera Capital, subsequently sold in 2016 and has a wealth of financial services experience.
Other directorships	None.
Special responsibilities	Member of the Audit, Risk Management and Compliance Committee
Interests in CNI	Ordinary stapled securities	2,889,075
Ms Susan Wheeldon-Steele, MBA.Independent Non-Executive Director
Experience and expertise	Susan was appointed to the Board on 31 August 2016. Susan is the Head of Performance at Google where she works with major national and global companies to develop and deliver growth strategies that future proof and build clients’ businesses and brands in a constantly changing environment. She has previous experience in retail property asset management at AMP Capital Shopping Centres, as Head of Brand & Retail, responsible for delivering alternative revenue from 38 retail assets across Australia and New Zealand with combined annual sales in excess of $5 billion.
Other directorships	None.
Special responsibilities	None.
Interests in CNI	Ordinary stapled securities	Nil.
Mr Nicholas R. Collishaw, SAFin, FAAPI, FRICS.Non-Executive Director
Experience and expertise	Nicholas was appointed to the Board on 8 August 2016. Nicholas was appointed CEO - Listed Property Funds at Centuria Property Funds on 1 May, 2013. Effective 1 January 2018, Nicholas resigned as CEO - Listed Property Funds and became a Non-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.
Other directorships	None.
Special responsibilities	CEO - Listed Property Funds - resigned 1 January 2018
Interests in CNI	Ordinary stapled securities	3,086,227
	Performance rights granted	858,811

Centuria Capital Fund 2 30 June 2018

Directors' Report

Directors and directors' interests (continued)

Mr John E. McBain, Dip. Urban Valuation. Executive Director and Chief Executive Officer

Mr John E. McBain,Dip. Urban Valuation.Executive Director and Chief Executive Officer	Mr John E. McBain,Dip. Urban Valuation.Executive Director and Chief Executive Officer	Mr John E. McBain,Dip. Urban Valuation.Executive Director and Chief Executive Officer	Mr John E. McBain,Dip. Urban Valuation.Executive Director and Chief Executive Officer
Experience and expertise	John was appointed to the Board and Chief Executive Officer on 8 August 2016. John was a founding director and major shareholder in boutique property 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 Group Board on 10 July, 2006 and was appointed Chief Executive Officer in 2008. In 2011 the company was renamed Centuria Capital. 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.
Other directorships	John is also a director of QV Equities Limited, a licensed investment company listed on the ASX.
Special responsibilities	Chief Executive Officer
Interests in CNI	Ordinary stapled securities	5,191,995
	Performance rights granted	1,495,515
Mr Jason C. Huljich, B.	Comm.Executive Director and Head of Real Estate and Funds Management
Experience and expertise	Jason was appointed to the Board on 8 August 2016. Jason leads Centuria’s Property Funds Management business, which is responsible for both listed and unlisted property funds, the property services business, property acquisition and disposal and special property and debt opportunities. He is also an Executive Director of Centuria Capital Group. In this role he provides strategic leadership, ensuring the effective operation of Centuria’s property business. He has extensive experience in the commercial property sector, with specialist skills in property investment and funds management. He is also the immediate past President of the Property Funds Association (PFA), which represents the $125 billion direct property investment body in Australia, and continues to serve on their national executive.
Other directorships	None.
Special responsibilities	Head of Real Estate and Funds Management
Interests in CNI	Ordinary stapled securities		5,186,039
	Performance rights granted		872,740

Company secretary

Anna Kovarik was appointed to the position of Company Secretary on 5 July 2018.

Anna holds a Masters of Information Technology, a BA (Hons) in Systems Management and was awarded a distinction in the Global Executive MBA program at the University of Sydney. She is qualified as a solicitor in both the UK and NSW and was a senior associate at Allens law practice in Sydney.

Prior to joining Centuria, Anna held the position of Group Risk Manager at Mirvac Group and was previously Head of Group Insurance for AMP and General Counsel and Company Secretary at AMP Capital Brookfield.

Mr James Lonie held the position of company secretary from 16 June 2017 until his resignation on 5 July 2018.

Centuria Capital Fund 3 30 June 2018

Directors' Report

Principal activities

The principal activity of the Group during the financial year was holding direct interest in property funds and other liquid investments.

Significant changes and state of affairs

Significant changes in the state of affairs of the Group during the financial year, in addition to the operating and financial review below were as follows

• Contributed equity attributable to Centuria Capital Fund increased by $74,258,000 from $170,672,000 to $244,930,000 as a result of equity raisings. Details of changes in contributed equity is are disclosed in Note C8 to the consolidated financial statements.

• On 11 September 2017, the Group issued Tranche 2 of 7% fixed rate secured notes to the value of $25,000,000. These notes mature on 21 April 2021 along with $100,000,000 of fixed and floating rate secured notes which were issued during the year ended 30 June 2017.

• The Group increased its stake in Centuria Metropolitan REIT by 2.7% to 11.4% and Centuria Industrial REIT by 3.8% to 19.5%.

• The Group acquired a 9.3% strategic stake in Propertylink Group (PLG).

Results of operations

The Group's profit from continuing operations for the year ended 30 June 2018 was $31,763,000 (2017: $15,936,000).

Earnings per unit

Earnings per unit
Basic EPS (cents/security) Diluted EPS (cents/security)	2018 2017 Statutory Statutory
	10.9 8.6 10.0 8.5

Distributions

Distributions paid or declared by the Group to the Fund's unitholders during the current financial year were:

	Cents.	Cents.	Total amount	Date
Distributions paid during the year	per security .		$'000	paid/payable
Final 2017 Trust distribution (66% tax deferred)	2.80	.	6,361	24 August 2017
Interim 2018 Trust distribution (estimated 60% tax
deferred)	2.40		7,314	31 January 2018
Distributions declared during the year
Final 2018 Trust distribution (estimated 60% tax
deferred)	3.10		9,499	27 July2018
Total amount	8.30	.	23,174

Responsible Entity interests

The following fees were paid and/or payable to the Responsible Entity and its related parties during the financial year:

Management and custodian fees paid to Centuria Property Funds No. 2 Limited Management fees paid to Centuria Funds Management Limited	2018 $ 2017 $ 1,228,459 766,113 200,000 189,589
	1,428,459 955,702

Centuria Capital Fund 4 30 June 2018

Directors' Report

Events subsequent to the reporting date

There has not arisen in the interval between 30 June 2018 and the date hereof any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Fund, that would 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

Under the Fund's constitution the Responsible Entity, including its officers and employees, is indemnified out of the Fund’s assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund.

The Responsible Entity has not indemnified or agreed to indemnify any auditor or other officer of the Fund, or any related body corporate.

Rounding of amounts

The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated.

This report is made in accordance with a resolution of Directors.

==> picture [78 x 57] intentionally omitted <==

Mr Garry S Charny Director

==> picture [76 x 52] intentionally omitted <==

Mr Peter J. Done Director

Sydney 14 August 2018

Centuria Capital Fund 5 30 June 2018

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

To the Directors of Centuria Funds Management Limited, the Responsible Entity of Centuria Capital Fund

I declare that, to the best of my knowledge and belief, in relation to the audit of Centuria Capital Fund for the financial year ended 30 June 2018 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

KPM_INI_01 KPMG

Nigel Virgo Partner Sydney 14 August 2018

6

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Centuria Capital Fund

Financial report 30 June 2018

Contents

Contents	Page
Consolidated statement of comprehensive income	8
Consolidated balance sheet	9
Consolidated statement of changes in equity	10
Consolidated statement of cash flows	12
Notes to the consolidated financial statements	13
A About the report	13
A1 General information	13
A2 Significant accounting policies	13
A3 Use of judgements and estimates	13
B Business performance	14
B1 Revenue	14
B2 Expenses	14
B3 Finance costs	15
B4 Taxation	15
B5 Earnings per security	15
B6 Distributions	16
C Assets and liabilities	17
C1 Receivables	17
C2 Financial assets at fair value	17
C3 Investment properties held for sale	19
C4 Investment properties	20
C5 Trade and other payables	21
C6 Borrowings	22
C7 Commitments and contingencies	23
C8 Contributed equity	23
D Cash flows	24
D1 Reconciliation of profit for the period to net cash flows from operating activities	24
E Group Structure	25
E1 Business combination	25
E2 Interests in subsidiaries	26
E3 Parent entity disclosure	27
F Other	28
F1 Financial instruments	28
F2 Remuneration of auditors	34
F3 New Accounting Standards and Interpretations effective 1 July 2018	34
F4 Other new Accounting Standards and Interpretations	35
F5 Events subsequent to the reporting date	36
Directors' declaration	37
Independent auditor's report to the members	38

Centuria Capital Fund 7 30 June 2018

Consolidated statement of comprehensive income

For the year ended 30 June 2018

Notes Revenue B1 Expenses B2 Fair value movements of financials instruments and property Finance costs B3 Net Profit Profit/(loss) is attributable to: Centuria Capital Fund Non-controlling interests Profit after tax Other comprehensive income Total comprehensive income for the year Total comprehensive income/(loss) for the year is attributable to: Centuria Capital Fund Non-controlling interests Total comprehensive income/(loss) Profit/(loss) attributable to: Unitholders of Centuria Capital Fund Earnings/(loss) per Centuria Capital Fund unit Basic (cents per unit) B5 Diluted (cents per unit) B5	2018 $'000 2017 $'000 48,797 20,657 (11,764) (9,793) 8,900 9,937 (14,170) (4,865)
	31,763 15,936 30,224 11,668 1,539 4,268
	31,763 15,936
	- -
	31,763 15,936
	30,224 11,668 1,539 4,268
	31,763 15,936
	30,224 11,668
	Cents Cents 10.9 8.6 10.0 8.5

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Centuria Capital Fund 8 30 June 2018

Consolidated balance sheet As at 30 June 2018

Notes Assets Cash and cash equivalents Receivables C1 Financial assets at fair value C2 Investment properties held for sale C3 Investment properties C4 Total assets Liabilities Payables C5 Liability to 360 Capital Group Borrowings C6 Interest rate swaps at fair value Total liabilities Net assets Equity Equity attributable to Centuria Capital Fund Contributed equity C8 Retained earnings Total equity attributable to unitholders of Centuria Capital Fund Equity attributable to non-controlling interests Contributed equity Retained earnings Total equity attributable to non-controlling interests Total equity	2018 $'000 2017 $'000 16,909 36,775 5,987 7,798 365,732 239,381 63,400 - 147,100 257,100
	599,128 541,054 18,437 18,327 41,161 56,456 239,310 226,962 472 1,134
	299,380 302,879
	299,748 238,175
	244,930 170,672 5,518 (7,821)
	250,448 162,851
	32,927 45,367 16,373 29,957
	49,300 75,324
	299,748 238,175

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

Centuria Capital Fund 9 30 June 2018

Consolidated statement of changes in equity For the year ended 30 June 2018

Balance at 1 July 2017 Profit/(loss) for the year Total comprehensive income for the year Distributions paid/accrued Stapled securities issued Cost of equity raising Deconsolidation of controlled property funds Balance at 30 June 2018	Centuria Capital Fund Non-controlling interests Contributed equity $'000 Retained earnings $'000 Equity attributable to Centuria Capital Fund unitholders $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total equity $'000 170,672 (7,821) 162,851 45,367 29,957 75,324 238,175
	- 30,224 30,224 - 1,539 1,539 31,763
	- 30,224 30,224 - 1,539 1,539 31,763 - (16,763) (16,763) - (6,528) (6,528) (23,291) 77,146 - 77,146 - - - 77,146 (2,888) - (2,888) - - - (2,888) - (122) (122) (12,440) (8,595) (21,035) (21,157)
	244,930 5,518 250,448 32,927 16,373 49,300 299,748

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Centuria Capital Fund 10 30 June 2018

Consolidated statement of changes in equity

Balance at 20 July 2016 Profit/(loss) for the year Total comprehensive income for the year Acquisition of subsidiaries with non-controlling interests Fair value loss on acquisition (impact of transaction as part of stapled group) Distributions paid/accrued Units issued as part of stapling Stapled securities issued Cost of equity raising Balance at 30 June 2017	Centuria Capital Fund Non-controlling interests Contributed equity $'000 Retained earnings $'000 Equity attributable to Centuria Capital Fund unitholders $'000 Contributed equity $'000 Retained earnings $'000 Total $'000 Total equity $'000 - - - - - - -
	- 11,668 11,668 - 4,268 4,268 15,936
	- 11,668 11,668 - 4,268 4,268 15,936 - - - 45,367 29,507 74,874 74,874 - (12,510) (12,510) - - - (12,510) - (6,979) (6,979) - (3,818) (3,818) (10,797) 52,536 - 52,536 - - - 52,536 124,174 - 124,174 - - - 124,174 (6,038) - (6,038) - - - (6,038)
	170,672 (7,821) 162,851 45,367 29,957 75,324 238,175

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Centuria Capital Fund 11 30 June 2018

Consolidated statement of cash flows

For the year ended 30 June 2018

Notes Cash flows from operating activities Interest received Rent received Distributions received Payments to suppliers Interest paid Other income Net cash provided by operating activities D1 Cash flows from investing activities Proceeds from sale of related party investments Purchase of investments in related parties Loans to related parties for purchase of properties Repayment of loans by related parties Purchase of other investments Cash balance on acquisition of subsidiaries Loans provided to other parties Loans repaid by other parties Sale of investment property Payments in relation to investment properties Cash balance on consolidation of unlisted funds Deconsolidation of controlled property funds cash balance Return of investment to external non-controlling interests Net cash used in investing activities Cash flows from financing activities Proceeds from issues of units to unitholders of Centuria Capital Fund Equity raising costs paid Proceeds from borrowings Repayment of borrowings Capitalised borrowing costs paid Loan advanced to related party Distributions paid to unitholders of Centuria Capital Fund Distributions paid to non-controlling interests Proceeds from issues of units to non-controlling interests Net cash provided by financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financialyear Cash and cash equivalents at 20 July 2017 Cash and cash equivalents at end of year	2018 $'000 2017 $'000 1,933 740 23,639 12,360 15,155 2,901 (16,267) (9,948) (12,386) (3,037) 192 -
	12,266 3,016
	61,037 15,763 (125,339) (138,698) (5,865) (13,669) 6,020 - (52,944) (1,186) - 21,556 (17,400) - 17,400 - 22,000 - (8,840) (1,300) - 6,937 (766) - (5,366) -
	(110,063) (110,597)
	77,146 124,174 (2,888) (6,038) 37,746 150,300 (13,467) (50,000) (446) (1,931) - (73,239) (13,676) (618) (6,484) (3,818) - 5,526
	77,931 144,356
	(19,866) 36,775 36,775 - - -
	16,909 36,775

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Centuria Capital Fund 12 30 June 2018

A About the report

A1 General information

The units in the Fund and the shares in CCL are stapled to trade together as a single stapled security (‘Stapled Security’) on the ASX as 'Centuria Capiutal Group' under the ASX ticker code of CNI.

The Fund and its controlled entities (the 'Group') is a for-profit entity and its principal activities are holding direct interest in property funds and other liquid investments.

Statement of compliance

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards 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).

The consolidated financial statements of the Group comprising the Fund (as ‘Parent’) and its controlled entities for the year ended 30 June 2018 were authorised for issue by the Board of Directors of Centuria Funds Management Limited as the Responsible Entity on 14 August 2018.

This Fund was established on 20 July 2016. The comparative information in these consolidated financial statements reflect the results of operations and financial affairs of the Fund from its inception to 30 June 2017.

Basis of preparation

The consolidated financial statements have been prepared on the basis of historical cost, except for financial assets at fair value through profit and loss, investment properties and derivative financial instruments, 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 Group's functional currency, unless otherwise noted.

Assets and liabilities have been presented on the face of the Statement of financial position in decreasing order of liquidity and do not distinguish between current and non-current items.

Rounding of amounts

The Fund The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars unless otherwise indicated.

A2 Significant accounting policies

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported.

These consolidated financial statements contain all significant accounting policies that summarise the recognition and measurement basis used and which are relevant to provide an understanding of the financial statements. Accounting policies that are specific to a note to the financial statements are described in the note to which they relate.

A3 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 expense that are not readily apparent from other sources. 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.

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

• Note C4 Investment properties

• Note F1 Financial instruments

Centuria Capital Fund 13 30 June 2018

B Business performance

B1 Revenue

B1 Revenue
Interest revenue Rent and recoverable outgoings Distribution revenue Other income	2018 $'000 2017 $'000 8,713 4,246 21,547 11,073 18,358 5,337 179 1
	48,797 20,657

Recognition and measurement

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) Interest revenue

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

(ii) Rent and recoverable outgoings

Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease.

Recoverable outgoings are recognised on an accrual basis.

(iii) Distribution revenue

Distribution 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).

(a) Transactions with related parties

Distributions from Property Funds managed by Centuria Interest income on loan to Centuria Finance Pty Limited Interest income on loans to Property Funds managed by Centuria Distributions and interest from Debt Funds managed by Centuria	2018 $ 2017 $ 14,200,093 5,337,362 7,084,552 3,505,718 501,525 513,622 108,825 -
	21,894,995 9,356,702

B2 Expenses

B2 Expenses
Consulting and professional fees Property outgoings and fund expenses Corporate restructure and transaction costs Other expenses	2018 $'000 2017 $'000 321 301 11,395 8,293 - 1,177 48 22
	11,764 9,793

Centuria Capital Fund 14 30 June 2018

Business performance

B2 Expenses (continued)

(a) Transactions with related parties

Management and custodian fees paid to Centuria Property Funds No. 2 Limited Management fees paid to Centuria Funds Management Limited B3 Finance costs Operating interest charges Bank loans in Property Funds interest charges Other finance costs	2018 $ 2017 $ 1,228,459 766,113 200,000 189,589
	1,428,459 955,702
	2018 $'000 2017 $'000 8,679 2,110 5,490 2,616 1 139
	14,170 4,865

Recognition and measurement

The Group's finance costs include:

• Interest expense recognised using the effective interest method.

• The net gain or loss on hedging instruments that are recognised in profit or loss.

B4 Taxation

Under current tax legislation, Trusts are not liable for income tax, provided their securityholders are presently entitled to the taxable income of the Trust including realised capital gains each financial year.

B5 Earnings per security

B5 Earnings per security
	2018	2017
	Cents	Cents
Basic earnings per unit	10.9	8.6
Diluted earnings per unit	10.0	8.5

The earnings used in the calculation of basic and diluted earnings per unit is the profit for the year attributable to unitholders of the Fund as reported in the consolidated statement of comprehensive income.

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

					2018	2017
Weighted Weighted	average average	number of ordinary number of ordinary	units (basic) units (diluted)	(i)	277,224,977 301,789,890	134,951,618 136,736,092

(i) The weighted average number of ordinary securities used in the calculation of diluted earnings per security is determined:

• as if 30 June 2018 was the end of the performance period of the grants of Rights under the LTI plan issued by Centuria Capital Group. All Rights that would have vested if 30 June 2018 was the end of the performance period are deemed to have been issued at the start of the financial year.

• as if 20,098,470 unexercised options with an exercise price of $1.30 per option have been converted to ordinary securities at the start of the financial year.

Centuria Capital Fund 15 30 June 2018

Business performance

B6 Distributions

B6 Distributions
Distributions paid during the year Final year-end distribution Interim distribution Distributions declared during the year Final distribution (i) Distributions paid/declared distributions paid to Centuria Capital Fund unitholders (ii)	2018 2017 Cents per unit Total $'000 Cents per security Total $'000 2.80 6,361 - - 2.40 7,314 0.80 618 3.10 9,449 2.80 6,361
	8.30 23,124 3.60 6,979

(i) The Group declared a final distribution in respect of the year ended 30 June 2018 of 3.10 cents per security. The final distribution had a record date of 29 June 2018 was subsequently paid on 27 July 2018. The total amount payable of $9,449,000 has been provided as a liability in these financial statements.

(ii) In addition to the distributions paid to Centuria Capital Fund unitholders, the Group paid distributions of $6,528,000 to non-controlling interests.

Centuria Capital Fund 16 30 June 2018

C Assets and liabilities

C1 Receivables

C1 Receivables
Receivables from related parties (refer to Note C1(a)) Other receivables	2018 $'000 2017 $'000 4,189 6,623 1,798 1,175
	5,987 7,798

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.

(a) Receivables from related parties

The following amounts owed by related parties of the Group at the end of the financial year:

Intercompany receivables from Corporate entities within Centuria Capital Group Distribution receivable from Centuria Industrial REIT Distribution receivable from Centuria Metropolitan REIT Interest receivable from Centuria Sandgate Road Fund Distribution receivable from Centuria Scarborough House Fund Receivables from Debt Funds managed by Centuria Interest receivable from Centuria 80 Grenfell Street Fund Redemption funds receivable from Centuria Diversified Fund Distribution receivable from Centuria Diversified Property Fund

2018 $ 2017 $ - 4,020,101 2,346,074 1,607,724 1,250,856 662,672 - 305,933 613 26,455 64,000 - 62,799 - 435,781 - 28,378 -

4,188,501 6,622,885

Recognition and measurement

Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method, less an allowance for impairment. Due to the short-term nature of these financial rights, their carrying amounts are estimated to represent their fair values.

C2 Financial assets at fair value

Investments in trusts and other financial assets Investment in related party unit trusts (refer to Note C2(a)) Loans receivable from related parties (refer to Note C2(b))	2018 $'000 2017 $'000 58,977 1,153 203,091 136,544 103,664 101,684
	365,732 239,381

Centuria Capital Fund 17 30 June 2018

Assets and liabilities

C2 Financial assets at fair value (continued)

(a) Investments in related party unit trusts carried at fair value through profit or loss

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

Financial assets held by the Group Centuria Industrial REIT Centuria Metropolitan REIT Centuria Diversified Property Fund Centuria Bottleyard Fund Centuria Rouse Hil Debt Fund Centuria Zenith Fund Centuria Scarborough House Fund Centuria SOP Fund Centuria Woden Green Estate Development Fund Centuria ATP Fund Centuria 203 Pacific Highway Fund Centuria 19 Corporate Drive Fund Centuria 2 Wentworth Street Fund Centuria 8 Central Avenue Fund 2

2018 2017 Fair value Units held Ownership Fair value Units held Ownership $ % $ % 124,317,757 48,372,688 19.48% 81,877,894 33,148,945 15.54% 68,555,158 27,643,209 11.39% 38,858,876 15,481,624 8.68% 7,050,751 5,250,001 18.88% - - 0% 1,548,500 1,630,000 14.17% - - 0% 1,515,527 1,515,527 18.20% - - 0% - - 0% 6,050,000 5,000,000 6.35% 102,826 102,826 0.22% 4,365,826 4,622,826 10.03% - - 0% 3,198,461 3,204,061 10.52% - - 0% 1,252,500 1,252,500 20.53% - - 0% 650,000 500,000 0.81% - - 0% 104,000 100,000 0.33% - - 0% 90,213 76,452 0.48% - - 0% 65,000 50,000 0.18% - - 0% 31,500 25,000 0.04% 203,090,519 84,514,251 82.34% 136,544,270 63,461,408 73.49%

Centuria Capital Fund 18 30 June 2018

Assets and liabilities

C2 Financial assets at fair value (continued)

(b) Loans receivable from related parties

The following short-term loans were receivable from related parties of the Group at the end of the financial year:

year:
Centuria Finance Pty Limited Centuria Sandgate Road Fund Centuria 80 Grenfell Street Fund	2018 $ 2017 $ 97,799,425 90,714,873 - 10,968,500 5,865,000 -
	103,664,425 101,683,373

Recognition and measurement

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.

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.

C3 Investment properties held for sale

In June 2018, the Group decided to sell the following properties held within Centuria Retail Fund:

Property Windsor Marketplace, Windsor NSW City Centre Plaza, Rockhampton Total fair value	2018 $'000 2017 $'000 2018 Capitalisation rate % Most recent independent valuer cap rate (%) 2018 Discount rate % Last independent valuation date 2018 Valuer 23,400 - 6.25% 6.50% 7.00% Nov 2017 Director 40,000 - 7.50% 7.00% 7.50% Jun 2018 Independent 63,400 - 13.75% 13.50% 14.50%

The fair values listed above do not include estimated selling costs which are expected to be incurred upon disposal.

Recognition and measurement

Investment properties are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. These investment properties are carried at fair value. The valuation techniques to determine the fair value of investment properties held for sale are the same as the valuation techniques of investment properties described in Note C4(a).

Centuria Capital Fund 19 30 June 2018

Assets and liabilities

C4 Investment properties

Opening balance Acquisition of investment properties Capital improvements and associated costs Make good contributions Gain/(loss) on fair value Change in deferred rent and lease incentives Deconsolidation of Havelock House Fund Sale of investment property Investment properties reclassified as held for sale Closing balance^	2018 $'000 2017 $'000 257,100 - - 249,700 3,985 2,232 - (675) (3,041) 3,630 2,456 2,213 (28,000) - (22,000) - (63,400) -
	147,100 257,100

Closing balance^

^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $9,387,000 (30 June 2017: $10,140,000).

Property 111 St George Terrace, Perth WA City Centre Plaza, Rockhampton Qld Havelock House, West Perth WA Windsor Marketplace, Windsor NSW 441 Murray Street, Perth WA Total fair value	2018 $'000 2017 $'000 2018 Capitalisation rate % Most recent independent valuer cap rate (%) 2018 Discount rate % Last independent valuation date Independent valuer firm 147,100 142,500 7.00% 7.00% 7.25% Nov 2017 Director - 46,000 -% -% -% - 28,000 -% -% -% - 22,100 -% -% -% - 18,500 -% -% -% 147,100 257,100 7.00% 7.00% 7.25%

Recognition and measurement

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are initially recorded at cost which includes stamp duty and other transaction costs. Subsequently, the investment properties are measured at fair value with any change in value recognised in profit or loss. The carrying amount of investment properties includes components relating to deferred rent, lease incentives and leasing fees.

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

Key estimate and judgements

(a) Valuation techniques and significant unobservable inputs

The fair value of the investment properties were determined by the Directors of the Responsible Entity of the relevant funds or by an external, independent valuer having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Centuria Capital Fund 20 30 June 2018

Assets and liabilities

C4 Investment properties (continued)

(a) Valuation techniques and significant unobservable inputs (continued)

The valuations were prepared by considering the following valuation methodologies:

• Capitalisation approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property's market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property.

• Discounted cash flow approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property.

• Direct comparison approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property's market value.

The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and within the appropriate time.

(b) Fair value measurement

The fair value measurement of investment properties has been categorised as a Level 3 fair value as it is derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs).

Significant unobservable input	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input
Capitalisation rate	Decrease	Increase
Discount rate	Decrease	Increase

C5 Trade and other payables

C5 Trade and other payables
Sundry creditors (i) Distribution Payable Accrued expenses	2018 $'000 2017 $'000 8,069 10,467 9,959 6,898 409 962
	18,437 18,327

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

Recognition and measurement

Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. Due to the short-term nature of these financial obligations, their carrying amounts are estimated to represent their fair values.

Centuria Capital Fund 21 30 June 2018

Assets and liabilities

C6 Borrowings

C6 Borrowings
Fixed rate secured notes (refer to Note C6(a)) Floating rate secured notes (refer to Note C6(a)) Bank loans in Property Funds (refer to Note C6(b)) Borrowing costs capitalised	2018 $'000 2017 $'000 85,000 60,000 40,000 40,000 115,758 128,837 (1,448) (1,875)
	239,310 226,962

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

(a) Corporate notes (secured)

The Group issued Tranche 1 of secured corporate notes to the value of $100,000,000 on 21 April 2017. This consisted of an issue of $40,000,000 floating rate secured notes and $60,000,000 7% fixed rate secured notes. The Group issued Tranche 2 to the value of $25,000,000 7% fixed rate secured notes on 11 September 2017. These notes mature on 21 April 2021 and are secured against assets within certain subsidiaries of the Group.

(b) Bank Loans - Property Funds (secured)

Each controlled property fund has debt facilities secured by first mortgage over each of the fund’s investment property and a first ranking fixed and floating charge over all assets of each of the funds. Details of the amounts drawn and the maturity of each facility are as follows:

			Facility	Funds	Draw	Borrowing	Draw
Current/non-current			limit	available	down	costs	down
Fund	classification	Maturity date	$'000	$'000	$'000	$'000	$'000
30 June 2018
Centuria 111 St
Georges Terrace Fund	Current	30 June 2019	83,800	4,320	79,480	(130)	79,350
Centuria Retail Fund	Current	31 July 2018**	37,400	992	36,408	-	36,408
			121,200	5,312	115,888	(130)	115,758
30 June 2017
Centuria 111 St
Georges Terrace Fund	Non-current	30 June 2019	81,500	10,839	70,661	(128)	70,533
Centuria Retail Fund	Current	30 June 2018	37,400	1,823	35,577	(76)	35,501
Centuria Havelock
House Fund	Current	31 May 2018	13,000	1,000	12,000	(14)	11,986
Centuria 441 Murray
Street Fund	Current	30 June 2018	12,000	1,159	10,841	(24)	10,817
			143,900	14,821	129,079	(242)	128,837

** Subsequent to 30 June 2018, the maturity date of Centuria Retail Fund's debt facility was extended to 31 August 2018. The investment properties in the Centuria Retail Fund are classified as held for sale as at 30 June 2018 and the bank facility will be rolled over until properties are sold.

Recognition and measurement

Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest rate method.

Centuria Capital Fund 22 30 June 2018

Assets and liabilities

C7 Commitments and contingencies

(a) Operating leases

(i) Group as a lessor

The Group leases out its investment properties under operating leases.

The future minimum lease payments receivable under non-cancellable leases are as follows:

Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years	2018 $'000 2017 $'000 13,574 16,212 39,120 48,310 27,176 45,432
	79,870 109,954

(b) Contingencies

The Group had no contingent liabilities at 30 June 2018.

Recognition and measurement

When the terms of a lease transfer substantially all the risks and rewards of ownership to the Group, the lease is classified as a finance lease. All other leases are classified as operating leases.

(i) Group as a lessor

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.

C8 Contributed equity

Balance at beginning of the period Stapling dividend and return of capital reinvested Equity based payment Stapled securities issued Cost of equity raising Balance at end of the period	2018 2017 No. of securities $'000 No. of securities $'000 229,815,736 170,672 - - - - 77,194,733 52,536 875,401 - - - 74,102,037 77,146 152,621,003 124,174 - (2,888) - (6,038)
	304,793,174 244,930 229,815,736 170,672

Fully paid ordinary securities carry one vote per security and carry the right to distributions.

On 29 June 2017, the Group issued 20,098,470 options to subscribe for units. The options have an exercise price of $1.30 per unit and expire on 29 June 2022.

Recognition and measurement

Incremental costs directly attributed to the issue of ordinary units are accounted for as a deduction from equity, net of any tax effects.

Centuria Capital Fund 23 30 June 2018

D Cash flows

D1 Reconciliation of profit for the period to net cash flows from operating activities

activities
Profit for the year Add (deduct) non-cash items: Unrealised gain on investment property Fair value loss on acquisition Fair value movement of financial instruments Interest income on related party loan Costs paid for debt issuance Profit on sale of investment property Amortisation of borrowing costs Amortisation of lease incentives Changes in net assets and liabilities: (Increase)/decrease in assets: Decrease/(Increase) in Receivables Increase/(decrease) in liabilities: Increase/(Decrease) in Other Payables Net cash flows provided by operating activities	2018 $'000 2017 $'000 31,763 15,936 5,790 (3,631) - (12,510) (12,691) 6,204 (7,085) - 446 - (2,000) - 52 167 1,650 3,058 (683) (2,345) (4,976) (3,863)
	12,266 3,016

Recognition and measurement

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.

Centuria Capital Fund 24 30 June 2018

E Group Structure

E1 Business combination

(a) Current year

During the current period, there were no business combinations.

(b) Prior year

(i) Stapling

The stapling of the Fund and CCL was approved at an Extraordinary General Meeting of the shareholders of CCL on 10 October 2016. Following approval of the stapling, shares in the CCL and units in Fund were stapled to one another on 17 October 2016 and are traded as a single security on the ASX.

The Fund was established by the transfer of the CCL's interest in Centuria Metropolitan REIT (‘CMA’) and other co-investments to the Fund in exchange for $52,535,795 in equity of the Fund. Assets transferred to the Fund were transferred at fair value.

(ii) 360 Capital acquisition

On 23 November 2016, the Centuria Capital Group announced the purchase of all of the shares in Centuria Property Funds No. 2 Limited (formerly 360 Capital Investment Management Limited) (‘CPF2L’) and associated management rights over listed and unlisted property investment funds for which CPF2L is the responsible entity from 360 Capital Group Limited (‘360 Capital’). Also as part of the acquisition, the Centuria Capital Fund Group agreed to acquire various stakes in those listed and unlisted funds.

The acquisition of shares in CPF2L and the interests in the listed and unlisted property investment funds (collectively, the ‘Transaction’) was settled on 9 January 2017.

This acquisition was funded by a combination of debt, equity and existing cash reserves, including $150,000,000 capital raised by Centuria Capital Group from new and existing institutional investors, and a vendor loan amounting to $50,000,000.

The acquisition also included a call option and a put option over stakes in the four unlisted property investment funds managed by CPF2L with a maximum option period of 2 years following completion of the acquisition.

Details of the purchase consideration, the net assets acquired and goodwill recognised are as follows:

Purchase consideration Cash paid on 9 January 2017 Loan from 360 Capital Group (repaid on 21 April 2017) Call and put option liability Contingent consideration Total purchase consideration	2018 $'000 66,046 50,000 60,123 1,763
	177,932

As at 30 June 2018, the call and put option liability is $41,024,000 (2017: $54,693,000) and the contingent consideration is 123,000 (2017: $1,763,000). On 18 July 2018, the call and put option deed in relation to Centuria 111 St Georges Terrace Fund options was extended to 26 June 2019 from the original date of 9 January 2019.

The assets and liabilities recognised as a result of the acquisition are as follows:

Centuria Capital Fund 25 30 June 2018

Group Structure

E1 Business combination (continued)

(b) Prior year (continued)

(ii) 360 Capital acquisition (continued)

Cash and cash equivalents Investment Properties Receivables Payables Borrowings Derivative Financial Instruments Co-investment in Centuria Industrial REIT (CIP) Co-investment in Centuria Urban REIT (CUA) Net identifiable assets acquired Less: non-controlling interests Fair value loss on acquisition (impact of transaction as part of stapled group)	Fair value $'000 6,937 249,700 1,851 (6,603) (128,495) (757) 81,414 30,725
	234,772 (69,350)
	165,422
	12,510

(i) Transaction related costs

Transaction related costs of $7,213,809 were incurred of which $1,717,669 are included in expenses in profit or loss and $6,037,140 are recognised directly in contributed equity.

(ii) Contingent consideration

The contingent consideration arrangement requires the Group to guarantee the distribution yield on co-investment stakes in unlisted property funds subject to put and call options to 7.5%. The contingent consideration liability recognised reflects the Group's expectation of the fair value of the amounts to be paid over the contingent period. The distributions are expected to be less than the guaranteed return.

Recognition and measurement

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.

E2 Interests in subsidiaries

The Group's principal subsidiaries at 30 June 2018 are set out below. Unless otherwise stated, they have issued capital consisting solely of ordinary units that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The subsidiaries are incorporated in Australia which is also their principal place of business.

Name of subsidiary	Ownership interest %	Ownership interest %
	2018	2017
Centuria Capital No. 2 Fund Centuria Capital No. 2 Office Fund Centuria Capital No. 2 Industrial Fund Centuria Capital No. 3 Fund Centuria Diversified Property Fund ***	100% 100% 100% 100% n/a	100% 100% 100% 100% 54%

Centuria Capital Fund 26 30 June 2018

Group Structure

E2 Interests in subsidiaries (continued)

During the period 30 June 2017, as part of the 360 Capital Transaction, the Group gained control over four unlisted property funds including Centuria 111 St Georges Terrace Fund, Centuria Retail Fund, Centuria Havelock House Fund and Centuria 441 Muarry Street Fund. In 2017, these funds have been consolidated in these financial statements. As at 30 June 2018, Centuria Havelock House Fund and Centuria Murray Street Fund have been deconsolidated from these financial statements.

*** As at 30 June 2018, Centuria Diversified Property Fund has been deconsolidated from these financial statements.

Recognition and measurement

(i) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Fund and entities controlled by the Fund (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.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

E3 Parent entity disclosure

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

Result of parent entity Profit or loss for the year Total comprehensive income for the year Financial position of parent entity at year end Total assets Total liabilities Net assets	2018 $'000 2017 $'000 18,214 3,894 18,214 3,894 253 174,049 (9,584) (6,462)
	(9,331) 167,587

The parent entity presents its assets and liabilities in order of liquidity. The assets of the parent entity mainly consist of cash, short term receivables and financial assets. The liabilities of the parent entity mainly consist of short term payables.

short term payables.
Total equity of the parent entity comprising of: Share capital Retained earnings/(loss) Total equity	244,930 170,672 (1,634) (3,085)
	243,296 167,587

(a) Guarantees entered into by the parent entity

The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries during the financial year

(b) Commitments and contingent liabilities of the parent entity

The parent entity had no commitments for acquisition of property, plant and equipment nor any contingent liabilities as at 30 June 2018.

Centuria Capital Fund 27 30 June 2018

F Other

F1 Financial instruments

(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.

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 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 minimise 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.

(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.

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.

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.

(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.

(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.

(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).

Centuria Capital Fund 28 30 June 2018

Other

F1 Financial instruments (continued)

(c) Fair value of financial instruments (continued)

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

• 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.

There were no transfers between Level	1, 2 and 3 in the period.
			Carrying
	Measurement	Fair value	amount	Fair value
30 June 2018	basis	hierarchy	$'000	$'000
Financial assets
Cash and cash equivalents	Amortised cost	Level 1	16,909	16,909
Financial assets at fair value	Fair value	Level 1	252,157	252,157
Receivables	Amortised cost	Level 2	5,987	5,987
Financial assets at fair value	Fair value	Level 2	113,575	113,575
			388,628	388,628
space
Financial liabilities
Payables	Amortised cost	Level 2	18,437	18,437
Liability to 360 Capital Group	Amortised cost	Level 2	41,161	41,161
Borrowings	Amortised cost	Level 2	239,310	240,424
Interest rate swaps at fair value	Fair value	Level 2	472	472
			299,380	300,494
			Carrying
	Measurement	Fair value	amount	Fair value
30 June 2017	basis	hierarchy	$'000	$'000
Financial assets
Cash and cash equivalents	Amortised cost	Level 1	36,775	36,775
Financial assets at fair value	Fair value	Level 1	120,737	120,737
Receivables	Amortised cost	Level 2	7,798	7,798
Financial assets at fair value	Fair value	Level 2	118,644	118,644
			283,954	283,954
space
Financial liabilities
Payables	Amortised cost	Level 2	18,327	18,327
Liability to 360 Capital Group	Amortised cost	Level 2	56,456	56,456
Borrowings	Amortised cost	Level 2	226,962	227,878
Interest rate swaps at fair value	Fair value	Level 2	1,134	1,134
Total			302,879	303,795

The Group determines Level 2 fair values for financial assets and liabilities without an active market based on broker quotes. 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.

Recognition and measurement

The Group enters into derivative financial instruments such as interest rate swaps to manage its exposure to interest rate risk.

Centuria Capital Fund 29 30 June 2018

Other

F1 Financial instruments (continued)

(c) Fair value of financial instruments (continued)

Recognition and measurement (continued)

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.

(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 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.

(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 following table summarises 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.

Centuria Capital Fund 30 30 June 2018

Other

F1 Financial instruments (continued)

(e) Liquidity risk (continued)

Non-derivative financial liabilities Consolidated 2018 Borrowings Other payables Liability payable to 360 Capital Group Total 2017 Borrowings Other payables Liability payable to 360 Capital Group Total	On Demand Less than 3 months 3 months to 1 year 1-5 years 5+ years $'000 $'000 $'000 $'000 $'000 Total $'000 - 37,902 89,340 140,600 - 267,842 - 18,437 - - - 18,437 - - 41,161 - - 41,161
	- 56,339 130,501 140,600 - 327,440
	- 619 68,124 194,109 - 262,852 - 18,327 - - - 18,327 - - - 56,456 - 56,456
	- 18,946 68,124 250,565 - 337,635

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.

Derivative financial liabilities Consolidated 2018 Interest rate swaps Total 2017 Interest rate swaps Total	On Demand Less than 3 months 3 months to 1 year 1-5 years 5+ years $'000 $'000 $'000 $'000 $'000 Total $'000 - - 268 216 - 484
	- - 268 216 - 484
	- 9 376 838 78 1,301
	- 9 376 838 78 1,301

Centuria Capital Fund 31 30 June 2018

Other

F1 Financial instruments (continued)

(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, 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.

(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.

2018 Financial assets Cash and cash equivalents Related party loan Total financial assets Financial liabilities Borrowings Total financial liabilities Net interest bearing financial assets/(liabilities) 2017 Financial assets Cash and cash equivalents Total financial assets Financial liabilities Borrowings Total financial liabilities Net interest bearing financial assets/(liabilities)	Weighted average effective interest rate Variable rate $'000 Fixed rate $'000 Total $'000 1.41% 16,909 - 16,909 7.50% 97,799 - 97,799 8.91% 114,708 - 114,708 5.28% (154,310) (85,000) (239,310) 5.28% (154,310) (85,000) (239,310) 14.19% (39,602) (85,000) (124,602) Weighted average effective interest rate Variable rate $'000 Fixed rate $'000 Total $'000 1.28% 36,675 100 36,776
	1.28% 36,675 100 36,776
	4.70% (166,962) (60,000) (226,957)
	4.70% (166,962) (60,000) (226,957)
	5.98% (130,287) (59,900) (190,181)

Centuria Capital Fund 32 30 June 2018

Other

F1 Financial instruments (continued)

(f) Market risk (continued)

(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.

	Average contracted	Average contracted	National	principal
	rate		amount		Fair value
Pay fixed for floating contracts
designated as effective in fair			2018	2017	2018	2017
value hedge	2018	2017	$'000	$'000	$'000	$'000
Interest rate swaps	2.33%	2.73%	99,600	106,100	(472)	(1,133)
	2.33%	2.73%	99,600	106,100	(472)	(1,133)

(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 balance 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 basis points higher or lower and all other variables were held constant, the impact to the Group would have been as follows:

		Change in variable	Change in variable	Effect on profit	Effect on profit
				2018	2017
		2018	2017	$'000	$'000
Consolidated
Interest rate risk	+1%		+1%	2,272	(267)
space
Consolidated
Interest rate risk	-1%		-1%	(2,337)	267

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.

Centuria Capital Fund 33 30 June 2018

Other

F2 Remuneration of auditors

Amounts received or due and receivable by KPMG:

Audit and review of the financial report

2018	2017
$	$
14,863	33,000

F3 New Accounting Standards and Interpretations effective 1 July 2018

AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers are new standards which are effective for annual periods beginning after 1 July 2018. Whilst earlier application was permitted, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

The Group is required to adopt AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 July 2018 and has assessed the estimated impact that the initial application of these standards will have on its consolidated financial statements.

Based on the Group's assessment, the Group does not believe that these new accounting standards will have a material impact on the Group’s equity as at 1 July 2018. This impact is assessed based on analysis performed to date. The actual impacts of adopting the standard at 1 July 2018 may vary because the new accounting policies are subject to change until the Group presents its first financial statements at the date of initial application.

(a) AASB 9 Financial Instruments

AASB 9 Financial Instruments sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement.

(i) Classification – Financial assets

AASB 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics.

AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). The standard eliminates the existing AASB 139 categories of held to maturity, loans and receivables and available for sale.

Based on its assessment, the Group does not believe that the new classification requirements will have a material impact on its accounting for all receivables and financial assets (which are already carried at fair value).

(ii) Impairment – Receivables

AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward-looking ‘expected credit loss’ (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to the Group’s receivables which continue to be measured at amortised cost.

Based on its assessment, the Group does not believe that the new impairment model will have a material impact on its equity upon transition as at 1 July 2018.

(iii) Classification – Financial liabilities

There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB 1139 Financial Instruments: Recognition and Measurement and have not been changed.

Centuria Capital Fund 34 30 June 2018

Other

F3 New Accounting Standards and Interpretations effective 1 July 2018 (continued)

(a) AASB 9 Financial Instruments (continued)

(iv) Hedge accounting

The new hedge accounting rules generally allow for more hedge relationships to be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group does not expect a significant impact as a result of the hedging changes on transition on 1 July 2018.

(v) Transition

Changes in accounting policies resulting from the adoption of AASB 9 will generally be applied retrospectively, however as there are no expected material impact on carrying amounts of financial assets and financial liabilities, there will no transitional implications on the Group’s equity at 1 July 2018 nor it’s comparatives.

(b) AASB 15 Revenue from Contracts with Customers

The new revenue standard, AASB 15 Revenue from customers applies to all contracts with customers to deliver goods or services as part of the entity’s ordinary course of business excluding insurance contracts, financial instruments and leases which are addressed by other standards. It replaces existing revenue recognition guidance, including AASB 118 Revenue and AASB 111 Construction Contracts.

AASB 15 replaces the considerations of risks and rewards under AASB 118 to the concept of when control passes to the customer as the trigger point for the recognition of revenue.

Rental income, interest income, distribution and dividend income and fair value movements in investment properties are excluded from the scope of this standard.

Based on its assessment, the Group does not believe that the new standard will have a material transitional impact on the Group’s equity as at 1 July 2018.

F4 Other new Accounting Standards and Interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.

(a) AASB 16 Leases

(i) Nature of change

AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

The accounting for lessors will not significantly change.

(ii) Impact

The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments as outlined in note C7(a). However, the Group’ has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s profit and classification of cash flows.

Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16.

Centuria Capital Fund 35 30 June 2018

Other

F4 Other new Accounting Standards and Interpretations (continued)

(a) AASB 16 Leases (continued)

(iii) Mandatory application date

Mandatory for financial years commencing on or after 1 January 2019, but available for early adoption. Therefore mandatory application to the Group would be year ending 30 June 2020.

The Group does not intend to adopt AASB 16 before its mandatory date.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

F5 Events subsequent to the reporting date

There has not arisen in the interval between 30 June 2018 and the date hereof any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Fund, 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 Fund 36 30 June 2018

Directors' declaration

In the opinion of the Directors' of Centuria Funds Management Limited as the Responsible Entity of Centuria Capital Fund:

• (a) the consolidated financial statements and notes set out on pages 7 to 36, are in accordance with the Corporations Act 2001 , including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its performance for the financial year ended on that date, 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.

Note A1 confirms that the consolidated financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of Directors.

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Mr Garry S Charny Director

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Mr Peter J. Done Director

Sydney 14 August 2018

Centuria Capital Fund 37 30 June 2018

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Independent Auditor’s Report

To the unitholders of Centuria Capital Fund

Opinion

We have audited the Financial Report of Centuria Capital Fund (the Fund).

In our opinion, the accompanying Financial Report of the Fund is in accordance with the Corporations Act 2001 , including:

• giving a true and fair view of the Fund’s financial position as at 30 June 2018 and of its financial performance for the year ended on that date; and

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

The Financial Report of the Fund comprises:

• Consolidated statement of financial position as at 30 June 2018

• Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended

• Notes including a summary of significant accounting policies

• Directors’ Declaration

The Fund consists of Centuria Capital Fund and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of the Fund and Centuria Funds Management Limited (the Responsible Entity) in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

Other Information

Other Information is financial and non-financial information in Centuria Capital Fund’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of the Responsible Entity are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

38

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We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors of the Responsible Entity are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error

• assessing the Fund’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Fund or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and

• to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at:

http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf. This description forms part of our Auditor’s Report.

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KPMG
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Nigel Virgo Partner

Sydney

14 August 2018

39

Additional stock exchange information

The unitholder information set out below was applicable as at 31 July 2018.

Distribution of units

Analysis of numbers of unitholders by size of holding:

Analysis of numbers of unitholders by size of holding:
Holding 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Total holders Units 857 427,820 4,212 10,360,747 849 5,896,641 897 24,987,635 143 263,120,331
	6,958 304,793,174

There were 311 holders of less than a marketable parcel of units holding 62,724 units.

Top 20 unitholders

The names of the twenty largest unitholders are listed below:

CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PERSHING AUSTRALIA NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 CITICORP NOMINEES PTY LIMITED GH 2016 PTY LIMITED RESOLUTE FUNDS MANAGEMENT PTY LTD A/C> CICERONE CAPITAL PTY LTD BUTTONWOOD NOMINEES PTY LTD BRYSHAW MANAGEMENT PTY LTD PARITAI PTY LIMITED AVANTEOS INVESTMENTS LIMITED <2412987 JRSWJH A/C> UBS NOMINEES PTY LTD PARSONAGE PROVIDENT P/L HWM (NZ) HOLDINGS LIMITED NATIONAL NOMINEES LIMITED NATIONAL EXCHANGE PTY LTD ERSKINE IMPORT PTY LTD MR ROGER WILLIAM DOBSON

Number held Percentage of issued units 45,405,404 14.90 41,376,869 13.58 38,415,438 13.60 29,554,574 9.70 24,349,842 7.99 10,140,483 3.33 9,536,034 3.13 3,977,679 1.31 3,512,057 1.15 3,166,791 1.04 2,725,002 0.89 2,544,293 0.83 2,408,164 0.79 2,252,901 0.74 2,200,830 0.72 2,052,745 0.67 1,607,512 0.53 1,401,563 0.46 1,370,000 0.45 1,318,062 0.43

229,316,243 76.24

Centuria Capital Fund 40 30 June 2018

Unitholder

Substantial holders

Substantial holders in the Group are set out below:

Substantial holders in the Group are set out below:
ESR CAYMAN LTD MAGIC TT PTY LTD ELLERSTON CAPITAL LIMITED	Number held Percentage of units held 45,405,404 14.90% 42,677,495 14.00% 26,425,800 8.67%
	114,508,699 37.57%

Voting rights

All ordinary units carry one vote per security without restriction.

Centuria Capital Fund 41 30 June 2018